Special Report
STRATEGIES
FOR REMAINING COMPETITIVE AS A
MANUFACTURER IN THE USA
MAXIMIZING DOMESTIC MANUFACTURER VIABILITY
THROUGH MANUFACTURING OPERATIONS
BUILDING BRAND EQUITY WITH INTEGRITY
ANALYZE, EXECUTE, SUSTAIN
Special Report
2019
Introduction
In order to survive today, companies must respond to the cost
pressures of globalization by producing more economically and
more efficiently than ever. Domestic manufacturers can survive
only if they take the right steps to refine their processes and
sharpen their business focus. That is the view held by most
manufacturing experts. It is said that today’s factory has to focus
on what it does best. Products need to be made resourcefully and
need to be differentiated from that of the competition. This must
include the development of products and processes with the
customer experience in mind. Eliminate waste, create
efficiency…these four words describe the foundation of efficient
Overhead
Materials
Labor
Cost
It is no secret that as
the number of foreign
manufacturers grows,
it will be important for
U.S. producers to be
small, smart and
extremely agile.
operations. Some waste exists in every system. From
manufacturing and assembly, to supply chain and customer
service, some waste is hidden within all processes. The need
for an operations strategy that reflects and supports the
corporate strategy is crucial for the success of the company.
Many US manufacturing operations have included as part of
their strategy Lean Six Sigma initiatives which are the most
widely recognized approach to defining, measuring,
analyzing, improving and controlling processes and product
costs to drive out waste and improve and sustain efficiency.
Product costs are controlled by five elements: material,
labor and overhead.
Although, in most cases, material costs make up by far the
largest portion of costs, followed by labor and overhead,
each has a strong influence on the other. For example, a
company can have the lowest material costs in the country
by way of the best performing supply chain, but if the
product is manufactured using inefficient processes, or no
process is in place to monitor and control labor, cost can
creep above that of the competition. The positive
connection between the five elements can be explained in
the following principles:
Improving process effiencies
will reduce manufacturing costs
High performing supply chains
will reduce material costs
Effective monitoring of labor
will reduce labor cost and improve employee satisfaction
Enhanced customer focus
will increase customer loyalty and sales revenue
Correctly aligned leadership
will increase the bottom line
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Special Report
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Principle #1. Improving process inefficiencies will reduce manufacturing costs.
A primary focus of lean manufacturing is to eliminate process
inefficiencies; that is, eliminate anything that does not add value to
the final product. In this respect, excessive lead times are an
inefficiency that carries with it a high cost, one of which is excess
inventory. Excessive lead time not only reduces the ROI on
manpower, raw material and finished inventories, but it is a major
obstacle in the pursuit of customer satisfaction and revenue growth.
Excess inventories often
cover up quality
problems like rework
and defects, manpower
and/or production
scheduling conflicts,
and/or supplier and
vendor problems.
A company was looking for a competitive edge to generate sales
revenue which was declining due to the recent economic downturn.
As a leading supplier to the home furnishings industry, product pricing
and quality were already as competitive as possible. The only part of
the sales closure trio to improve upon was service by
Lean Manufacturing Strategies
reducing the lead time between order receipt and shipment.
The company needed to implement a strategy to reduce
these lead times and allow the manufacturer to be more
responsive to customer demands. By developing and
Create
executing manufacturing flow and process improvements, I
Flow
led the team, using Lean Six Sigma tools and initiatives, as we
Eliminate
Improve
Waste
Processes
reduced lead times on built to order products up to 50%,
from 12 weeks to 6 weeks. With the implementation of
Increased
these strategies, sales increased, and, shorter lead times
Profits
were sustained; the company quickly established a
reputation for having the quickest order turn time in the
industry.
Lead Time Weeks vs Sales $ Increase
$20
$15
$12
12
$15
$14
$13
10
$10
8
6
$5
$0
4th Qtr
1st Qtr
2nd Qtr
3rd Qtr
Sales ($Millions)
Lead Time (Weeks)
Linear (Sales ($Millions))
Linear (Lead Time (Weeks))
Question: Are you experiencing customer dis-satisfaction and unacceptable
revenue growth due to lengthy and excessive order fulfillment lead times?
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Special Report
2019
Principle #2. A high performing Supply Chain will reduce material costs.
Supply chain management factors heavily into lean manufacturing and a
tight partnership with suppliers is necessary. The key to lean procurement is
visibility. Lean suppliers are able to respond to changes. Suppliers must be
able to "see" into their customer’s operations and customers must be able
to "see" into their supplier’s operations. This is achieved with the
implementation of a two-way flow of information, helping both customer
and supplier fix and/or avoid problems and share savings.
Suppliers must
be able to "see"
into their
customer’s
operations and
customers must
be able to "see"
into their
supplier’s
operations.
For example, the supply chains among several manufacturing facilities within
the same geographic region were each operating independently of one
another. Although all facilities had basically the same vendors, the laid-in
costs were markedly different. These raw material cost differences
manifested themselves most noticeably during the monthly P&L
Competition & Price Pressures
COGS analysis. Each supplier was brought into the loop of our lean
activities. Through these discussions it very quickly became
obvious that the supplier in many cases was not aware of
COST
REDUCTION
how their product was used. Plant tours were arranged
between the suppliers and the factories. Purchasing agents
VALUE
SEAMLESS
met with customer service personnel, thereby matching a
ADDED
SUPPLY
SERVICES
CHAINS
face with a name. Our IT staff met with their IT staff to set
up e-procurement and automated procurement. Eprocurement processes transactions such as strategic sourcing, bidding, and reverses actions using
web-based applications. Automated procurement uses software that removes the human element
from multiple procurement functions and integrates with financials. Trucking companies were
brought into the equation, and as a trio, were able to negotiate long term, money saving contracts
for the delivery of materials. As the person responsible for the P&L, I was able to develop a culture
of continuous improvement. Through negotiation, coordination, consolidation, and systematizing
the Supply Chain between facilities and suppliers, we were able to negotiate savings of $100K in
material and realized a reduction of $75K in labor costs within the first year.
55
Material Costs Improvement as a % of Gross Sales
45
%
35
25
15
1st Qtr '05 2nd Qtr '05 3rd Qtr '05 4th Qtr '05 1st Qtr '06 2nd Qtr '06 3rd Qtr '06 4th Qtr '06
Factory A
Factory B
Factory C
Factory D
Question: Are you losing bottom line dollars due to a supply chain not
performing at maximum efficiency?
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Special Report
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Principle #3. Monitoring employee performance will improve employee
satisfaction and reduce labor costs.
Human capital is a critical part of a plant's success and needs to be
Lean always
nurtured through leadership training and other education programs.
works when the
Ineffective monitoring and mentoring of employees through the lean
process negatively impacts the entire process and product quality in
proper leadership
particular. The employer has to constantly create enthusiasm with all
strategy is used to
employees and always pat them on the back for their contribution, no
implement it.
matter how small or how large. Lean always works when the proper
leadership strategy is used to implement it. As manufacturers use their
new cost efficiencies to wring more output from fewer employees, care must be taken to select the
correct labor reduction.
Stages of Team Dynamics
This became a severe issue at one company where the increasing
rate of returns due to production quality issues was negatively
Performing
impacting sales growth. The return rate of product measured in
credit dollars was 6% of net sales. The Best-in-Class industry average
was 3%. Due to recent sales revenue decreases, management
Norming
Forming
decided to offset the decreasing sales by reducing the labor force.
Unfortunately, the first trims included most of the QA/QC personnel
because they were not directly involved in the daily production
throughput of product and considered as a cost center. Upon joining
Storming
the company, one of my first assignments was to address the quality
issues. By building and leading a cross-functional team which
developed, implemented and maintained a successful quality control program based on newly
established employee and supplier performance metrics, the team resolved the poor product
quality issues. Sales increased 12% in less than 1 year without any increase in labor headcount. Our
efforts also resulted in the unanticipated recognition of the California facility, by the corporate
executive committee, as Quality Factory of the Year for two consecutive years. The program was
recognized by the corporate office as a Best Practice and rolled out to the licensee facilities, and I
was recognized as Manufacturing Manager of the Year.
M
i
l
l
$
i
o
n
s
60
50
40
30
20
10
0
Returns and Labor as a % of Gross Sales ($Millions)
6% 7%
1st Qtr
Returns %
5% 7%
2nd Qtr
Labor %
$51.1
$48.0
$46.9
$45.9
4% 7%
3%
7%
3rd Qtr
4th Qtr
Sales $ ($Millions)
Question: Could your revenue be improved through a sustainable quality control
and assurance program without increased labor costs?
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Special Report
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Principle #4. Successful Companies Listen to the Voice of the Customer
Listening to the voice of customers is vital for every organization. Every
interaction that the business has with a customer enables a way to
Customers who see
build loyalty or lose it. Customers' voices allow organizations to keep
results using their
track of the large number of interactions that transpire between
interactions with
customers and their company. This will permit them to learn effective
businesses will
ways of making their customers happy and keep them coming back.
Customers who see results using their interactions with businesses will
become loyal to the
become loyal to the company. This will promote positive experiences
company.
that they may share with others through conversations. The faster a
reply comes from a company, the more likely that the business will
maintain a good relationship featuring its customers.
For example, a company was about to lose a $15
million per year major customer who was not happy
Fix It,
Improve It,
with the new product line intended to replace a line
Make
Changes
that sold $3 million per year through the customer.
The sales reps met with the buyer and brought the
wants and needs information back to the factory to
produce new prototypes. After multiple attempts to
CONTINUOUS
Ask
Sell the
get acceptable prototypes made and delivered to the
CUSTOMER
Customers if
Improved
RELATIONSHIIP
they like the
customer, only to have them rejected by the buyer,
Prdocut
IMPROVEMENT
new product
we invited him and his team to our factory where we
met as a single product development team. After
several days, we developed a unique line of product
that we agreed to manufacture as a proprietary
Assess
Progress (Is it
product for this customer. We also made a few minor
Selling?)
changes to the original product line and the customer
agreed to keep it, in addition to the propriety product,
on their showroom floor. After selling both product
lines for 6 months, our sales to this customer were tracking $22 million for the year, an increase of
approximately 46%.
Question: Is your company missing revenue opportunites not hearing the Voice
of the Customer?
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Special Report
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Principle #5. Correctly Aligned Leadership Minimizes Risks and Maximizes
Performance for Success
At the most basic level, a leader is someone who leads others. A leader is a
person who has a vision, a drive and a commitment to achieve that vision,
A leader is a
and the skills to make it happen. Leaders see a problem that needs to be
person who has a
fixed or a goal that needs to be
vision, a drive and
TRAITS
SKILLS
achieved. Whatever the solution or
a commitment to
goal, the leader always has a clear
Planning
Integrity
achieve that
target in mind. This is a big picture
vision, and the
Motivating
Positive
sort of thing, not the process
skills to make it
improvement that reduces errors by
Communicating
People-Person
happen.
2%, but the new manufacturing
?
?
process that completely eliminates
the step that caused the errors. It is the new product that
makes people say “why didn’t I think of that”.
LEADERSHIP
The company was restructuring the management team and
reshaping the geographic sales regions of the Corporation. In May, I was promoted into the newly
created position as Director of Operations - West Region, with P&L responsibilities for 4
manufacturing facilities in 3 states, I was charged with making these facilities the best that they
could be. My first step was to visit each facility, and in discussion with the respective plant
management and staff, review the P&L’s, comparing the most recent results to budget. At this
introductory meeting, a comprehensive plan was implemented so that I could monitor the
performance of each facility. I had developed these Key Performance Indicators in my most recent
VP-Ops position and used them to manage the $70 million budget of the local facility. In March,
following the end of the fiscal year in December, during an Executive Committee meeting, the
facilities under my responsibilities were recognized for several corporate awards including Best
Quality Factory, Most Profitable Factory, Most Safe Factory, Most Efficient Factory, and Most
Improved Factory. The KPI program that I developed and used to manage these facilities was also
recognized as a Best Practice and rolled out to and implemented by all 8 licensee facilities.
100
90
80
70
60
50
40
30
20
10
0
Gross Sales ($Millions)
25
Factory A
Factory B
Gross Profit ($Millions)
20
Factory A
15
Factory B
10
Factory C
Factory C
5
0
2004
2005
2006
2004
2005
2006
Question: What leadership traits and skills does your organization need to make
your company World Class?
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Special Report
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Conclusion
Firms that fail to fully exploit the strategic power of operations will be
It is important to
hampered in the competitive abilities and vulnerable to attack from those
competitors who do exploit their operations strategy. To do this effectively,
remember that the
operations must be involved throughout the whole of the corporate
adoption of LEAN
strategy. Corporate executives have sometimes assumed that strategy has
as a manufacturing
only to do with marketing initiatives. Erroneously, they assumed that
operations have the flexibility to respond positively to changing demands.
discipline is the
These assumptions place unrealistic demands upon the operations function.
start of a journey,
In the run up to the global economic downturn of 2008 and 2009, to a large
one that can be
extent, manufacturers had given up on improvement initiatives such as
Lean. Initiatives were still prevalent but core principles had not been
very profitable.
adhered to. A “build it and we can sell it” attitude had been adopted with a
narrow focus on pure output maximization. Executive management was
focused on decreasing headcount and supporting corporate sustainability issues. In years past the focus
around head count was all on an aging workforce and preserving tribal knowledge in more automated
work flows.
Since the collapse, manufacturers have responded to business changes with aggressive cuts to inventory
and head count. With the recent cuts in employment, today it is all about learning to do more with
fewer people by increasing flexibility, cross training, and ensuring safety requirements are not sacrificed.
Doing more with less requires leadership and better communication at all levels which results in
increased job performance and more accurate information. Analyzing more accurate information
gathered with the use of tools such as Key Performance Indicators and Sales & Operations Planning,
managers today can examine what has changed and determine how to intelligently ramp up production
and inventory, with an eye toward recapturing core Lean principles.
It is important to remember that the adoption of Lean as a manufacturing strategy is the start of a
journey, one that can be very profitable. Certain changes will take longer to effect than others. When
Lean is implemented and used properly it can become an effective tool to drive continuous
improvement. Once integrated into the culture of the business it becomes the standard for daily
operations. Decisions revolve around optimizing all activity and keeping waste to a minimum.
Companies that do this better than the competition will be the winners regardless of economic
conditions.
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Special Report
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About the Author:
Dan Trojacek has had 30 plus very successful and rewarding years as a
manufacturing operations executive in the home furnishings industry. His
career began while working for a Fortune 500 company when he was promoted
at the age of 21, within his first year of employment, to the Branch Manager
position in Salt Lake City. He was, and remains, the youngest person in that
Company’s history to have held that position.
His recent positions have included work as a self-employed Manufacturing
Consultant within the Bedding and Furniture and related industries, as well as
the Director of Operations, Vice President of Operations, and Director of Manufacturing at California
Faucets Inc., Spring Air Mattress and Atlas Spring Manufacturing, respectively. He has also held the
Branch Manager position at Diamond Mattress and at various locations across the United States with
Leggett & Platt Incorporated.
Mr. Trojacek has a history of aligning manufacturing operations with sales objectives via rigorous
process improvement and sustainment, and building and leading underperforming teams that drive
company growth. He has successfully managed operations ranging from start-ups to multiple facilities in
multiple states, with budgets exceeding $100 million for privately held as well as Fortune 500
companies.
Dan earned his Bachelor’s degree in Business Administration from Sierra University. His broad leadership
experience in complex manufacturing operations is complemented by his Certifications as a Lean Six
Sigma Master Black Belt (CLSSMBB) from Villanova University, and a Manager of Quality and Operational
Excellence (CMQ&OE) from the American Society for Quality (ASQ). In pursuit of outstanding customer
satisfaction and operational excellence, Dan has numerous professional development certificates
supporting his passion for Lean manufacturing, including a Lean Six Sigma Sensei and Six Sigma Black
Belt. Additional certificates include a Master Certificate in Supply Chain Management from the
University of San Francisco, Supply Chain Professional via APICS, Supplier Quality Professional via ASQ,
and Strategic Organizational Leadership and Essentials of Business Analysis from Villanova University.
In Vice President, Regional Management, and Branch Management positions for the past 30 years, Mr.
Trojacek has brought his extensive operations expertise, team-building skills and talent for defining and
executing growth plans to businesses with award winning results.
Contact Information:
Dan Trojacek
Mission Viejo, CA
BUILDING BRAND EQUITY WITH INTEGRITY
949-632-5898
dantrojacek@gmail.com
http://www.linkedin.com/in/dantrojacek
http://dantrojacek.wordpress.com/
http://twitter.com/dantrojacek
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