Since founding UltraSource in 1991 I’ve learned private growth takes patience. And even the best leaders can’t plan for everything. They just know how to react. Our Lean story is about a transformation--from thin film supplier--to ultra-efficient electronics partner, and the shakeups along the way that inspired me to adapt my business for the future. I hope it inspires you.
First, a primer
While Lean Manufacturing has been around for some time, here’s a quick primer and something to keep in mind before heading down the road to Lean yourself.
Lean Manufacturing, or TPS, was developed by Toyota Motor Corporation as a means to solve its operational and organizational problems and eliminate waste wherever it could be found. It’s a factory-wide philosophy that each and every human and mechanical process can be improved to better serve the customer. The net result is a constantly evolving operation that strives to replace wasteful practices wherever and whenever possible with ultra-efficient, documented procedures.
While the benefits are clear, Lean is notoriously difficult to implement because effective execution requires a deep-seated understanding of the TPS principles and how those principles apply to the organization. More importantly, it involves cultural and process change, which in any company can be a nightmare without a focused, dedicated, hands-on management team who embraces the movement and understands what the true benefits are.
In 2004, UltraSource employed 60+ people in a 25,000 square foot facility in Hollis, NH. In an effort to increase its market share, I hired a new Director of Sales, restructured our sales team, hired a new marketing firm, and put increased focus on branding, marketing, and sales in order to take advantage of certain market opportunities that had developed. The end result of this coordinated sales effort was a very successful increase in business as sales bookings surged by 30% in 2005.
In 2004-2005, in parallel with the increased sales focus, I installed a full management team, hiring a Manufacturing Manager, QA Manager, HR Manager, and Engineering Manager to fill out the executive team. Over $1M of capital equipment was acquired, and 30 new employees were hired in all areas of the company. A new Enterprise Resource Planning (ERP) software system was purchased and a consultant was hired to assist in the implementation. Simultaneously, I started construction on a new, state-of-the-art manufacturing cleanroom.
The expected result of all of this coordinated growth was that the new management team would lead the company into a new era of revenue, productivity, and profits. On-time-delivery (OTD) would rise to +95%, per employee productivity would surge, and record breaking profits would follow. What actually happened is what happens to many manufacturing companies that experience robust growth – by mid 2005 OTD had fallen below 50%, per employee productivity had plummeted, and profitability became sporadic and elusive. Essentially, the operations of the company had become inefficient due to a lack of focus on executing productive, value-added processes that could provide our customers with the service and quality they expected. The root causes and solutions to these problems were complex and I was at a loss as to how to turn things around.
The book I first picked up was The Toyota Way by Jeffrey Liker. Jeffrey Liker is a Professor of Industrial and Operations Engineering at the University of Michigan in Ann Arbor, MI and has spent many years studying and writing about TPS.
At first the TPS principles described in the book were difficult for a “Lean novice” like me to digest but many of the chapters in the book described organizational problems that my management team and I were dealing with every day. I read the book several times and slowly began to increase my understanding of TPS and Lean Manufacturing. Over the next few months, I read many more books on Lean Manufacturing and began to understand how “Anti-Lean” my Company had become. There was no “leveled production” or “one piece flow.” Instead there was a steady stream of build-to-order requirements and work-in-process (WIP) everywhere. In addition, confusion existed in many departments and synchronized communications were difficult to execute. I began to understand that I had to dramatically transform the company culture from Anti-Lean to Lean – but how?
By October 2005, I had convinced my staff that a “Lean transformation” was an absolute necessity. The first major project chosen for a Lean transformation was to revamp the flow of product through the Order Entry, Planning, Engineering, and CAD departments. This project was managed through a “Kaizen” format, the first of its kind at the company. Kaizen is a Lean tool for organizing, discussing, brainstorming, and executing swift organizational improvements.
In November 2005, the planned January 2006 ERP implementation was put on hold because it was understood that the pending Lean transformation would significantly alter the flow of product through the factory and thus render much of the ERP process invalid. During this time there were also many discussions with employees in all areas of the business to ready them for the forthcoming organizational changes.
After much management debate and discussion, the second major significant transformation was implemented during the holiday shutdown by reorganizing the company’s main production area into an organized “cell” or production line.
Unfortunately, in order to regain consistent profitability while waiting for the Lean transformation to take hold, the business also needed a significant reduction in operations costs. This need for a reduction in operations costs forced an employment layoff that was executed at the beginning of January 2006. The company also executed a plan to significantly reduce other expenses.
During this time, the executive team was reduced to only four members as a result of voluntary and involuntary staff reductions. In February 2006, I became the acting Manufacturing Manager.
Heartbreak in the Face of Adversity
On March 29, 2006, Will Mraz, my best friend and the company’s Vice President, CFO, and co-owner was killed in a tragic car accident. In the wake of uncertainty, employees began to give their notices and left me feeling unsure of the company’s future.
All of these factors combined to create an environment that could have pushed the company into further operating chaos. But interestingly, and thankfully, the Lean transformation and cultural change had begun to take hold and the stage was set for dramatic operational improvement. It was amazing--the remaining employees sensed it-- rolled up their sleeves, and committed themselves to the dual tasks of running the business and improving the business via Lean.
The first six months of 2006 were very difficult. Every day seemed to bring new challenges that had yet been previously experienced. Deep rooted problems such as lack of cross-training, absenteeism, wild swings in customer order levels, unstable manufacturing processes, equipment breakdowns, lack of preventative maintenance, and communication gaps between departments appeared and worked to derail previous improvements. This was the toughest time for me because consistent operational improvement had not yet been realized and despite “drinking the Kool-aid” employees could not easily see the benefits of the new ideas and methods. This was a time of hard work and positive communication to keep everyone energized and working on the right things. Slowly and systematically, things became better organized in manufacturing. Cross-training was implemented, manufacturing goals were communicated visually, and the flow of materials was visually charted and leveled out.
During this time, many of the Lean principles and ideas were implemented in various degrees:
· Cross-training was executed in manufacturing and inspection in order to minimize disruptions from vacations and sick time
· Specific operational procedures were developed to help level the workload through the factory and avoid “overburdened” conditions
· Posters and visual communications became the centerpieces in many areas in order to help employees understand how expected performance translated into actual performance
· Management worked with engineering to strengthen various problematic processes and this in-turn increased yields and productivity
· There was significant work done to teach employees how to work together as a team and achieve common goals
· Structured daily accountability meetings became a standard tool for ensuring that Lean processes were being followed and improvement objectives were being met
Lean Takes Hold
The benefits of the Lean transformation began to be felt company-wide by June 2006. The corporate communication board, which contained many graphs tracking key performance metrics, was showing improvements in many places. The root causes to the manufacturing and operational challenges were beginning to be well understood and many improvements had been implemented. These improvements were beginning to make it easier to produce high quality product in a productive manner. Manufacturing waste was being consistently reduced and “widespread lean” was starting to take place throughout manufacturing.
In June 2006, Shawn Martin was promoted from the sales group to Manufacturing Manager. At the same time, five (5) manufacturing employees were promoted to team leader roles to help manage their departments on a daily basis. This increase in daily management and supervision coupled with the Lean systems developed over the previous six months had a wildly successful effect. New shipping records were set in two of the first four months of this new Lean management model. And by late 2006, daily piece part output from the main production line was increased by approximately 475% over 2005 levels 1 year earlier!
As 2006 progressed, Lean thinking also took hold in many other areas. The facility was cleaned and organized via a 5S effort. The manufacturing cleanroom was reorganized to allow for better product flow. Due to increased focus and communication, the Manufacturing Engineering Department was also able to make targeted improvements in manufacturing. The quality group benefited from improved product flow from manufacturing which increased its productivity as well.
The adoption of Lean Manufacturing techniques at UltraSource has had a profound effect on our entire operation. The success in manufacturing served as an example for what was possible in other areas of the business and the business turned a tremendous corner in growth at a critical time. It saved me, saved the company and is now a critical part of our lifelong journey to constantly improve our customer service.
Established in 1991, UltraSource, Inc. is dedicated to the design and manufacturing of custom thin film interconnects and devices. A thin film circuit is best described as a small ceramic chip that contains patterned circuit lines and other interconnect features to provide an assembly platform for electrical or optical components. The chips can range in complexity from the very simple (only 1 or 2 lines) to very complex, containing many fine lines, plated-through holes, multiple layers, resistors, capacitors, inductors, pre-deposited solder, etc.
The company’s business model is a “build-to-order” or “engineer-to-order” job shop that employs sophisticated processes to manufacture its products. Most of the manufacturing takes place in class 1,000 and class 10,000 cleanrooms using much of the same equipment and processes that are used to manufacture semiconductor microchips. Order volumes range from low quantity prototype orders to high volume orders in excess of 1 million pieces.
UltraSource specializes in providing unique, multilayer solutions to RF and Microwave circuit design challenges. Their UltraProcess has led to the development of several state-of-the-art circuit solutions including: UltraBridges—a robust and cost effective alternative to air bridges; UltraCapacitors—integrated capacitors for dense circuit areas; and UltraInductors—high Q spiral inductors with low parasitic inductance. UltraSource is a recognized supplier to leading military and commercial contractors who manufacture guidance, radar, avionics, optoelectronics, microwave, and wireless communication systems.
22 Clinton Drive
Hollis, NH 03049
Toll Free: 800.742.9410