Lean Gamble Infuses $5million+ to Local Economy

Forest City, NC—Custom injection molder United Southern was in a financial crisis less than two years ago, as were many small and medium size injection molders due to intense competition from abroad. In 2005, the Forest City manufacturer of products such as automobile bumper components and child safety seats lost business, forcing layoffs. In truth, meeting monthly payroll sometimes challenged them. Then its President, Todd Bennett, made a bold move—a calculated gamble. The company made a serious commitment to lean enterprise transformation.

The gamble paid off. Recently the company experienced its largest profit margin and sales/revenue growth in 37 years. United Southern received a 1B4NC award from NC State University’s Industrial Extension Service (IES); its partner in the ongoing lean transformation, for contributing more than $5 million in economic impact to the area. lB4NC is an IES promise: to create $1 billion in economic impact for North Carolina by 2010. Since January 2006, IES’ economic impact for the state of NC is $334 million.

“To use a doctor’s analogy, with this ‘cure’ you can either be nauseous for awhile or you can die, but we saw lean working and I knew I had to do it,” said Bennett.

Changes Yield Unarguable Results

United Southern’s total immersion into lean enterprise, including adoption of a lean management system that permeates the entire company—not just the manufacturing floor—changed everything. Their results prove those changes work. In the in the third quarter of their 2007 fiscal year, USI’s pre-tax profit soared to almost double the custom injection molding industry gold standard. They winnowed down their scrap from 5.7 percent to 3.8 percent and continue to reduce scrap. In one facility they reduced scrap an average of $25,000 per month for eight consecutive months while revenues and volume increased. They recently became a tier two supplier for Mercedes, BMW, and Lexus.

The 1B4NC award from NC State University includes cost savings, sales increases and investments generated by implementing lean manufacturing processes. In 2007, United Southern received a Progressive Manufacturing Award for its lean initiative from Managing Automation magazine, based on an independent judging panel. The company was one of 50 recipients nationwide.

United Southern Industries manufactures custom injection molded, engineered thermoplastic resins such as automobile bumper components, lawn tractor grills, child safety seats and home products. The company includes two manufacturing divisions and one assembly division located in Forest City. They provide jobs for about 250 people and generate $30 million in annual sales.

Their Radical Journey

United Southern tapped into the services of NC State University to help them increase productivity, efficiency, quality and profitability. They partner on many projects, learning through lean processes to eliminate many steps in the manufacturing process.

“The entire process, including employee training, cost about $125,000 over a year. The resulting efficiencies will save more than $600,000 in 2008,” said Bennett.

Embracing lean methods at the senior enterprise level for almost two years now, United Southern operates in small groups using “zone control.” A little-understood and stringent lean stability management tool, it incorporates daily report outs and the dedication of everyone, including top management. Every management employee learns to run a molding zone before teaching.

NC State University’s Sam McPherson is a longtime lean practitioner, a former injection molding regional and plant manager, who works closely with United Southern. He admitted it was a radical move.

“We needed to stabilize operations and this was a radical approach at this point in their lean transformation,” he said. “I knew zone control would generate the savings and stability needed in the shortest period of time. Zone control surfaces problems quickly, makes you prioritize and forces you to move forward. Leadership and excellent teamwork are critical, and United Southern has those, so I felt confident they were ready for this challenge.

All employees got involved, and that synergy created a leap frog effect. The business started coming back, and employees were jazzed and started speaking up, adding to the renaissance.

“Sam’s bold and strongly believes that senior leaders need to lead by example,” said Bennett. “He challenged my commitment and told me to be the driver. He told me that he would be a teacher-leader and I would teach and lead my organization. He said to lead our transformation from upfront and not rely on external consultants or staff-level change agents. So now it’s an everyday commitment.

“Each one of our executive team has spent 200-250 hours in lean training and an additional 200 hours of homework assignments, reading and PDCA (plan-do-check-act) meetings, leading zones or kaizen projects— that’s 10 executive staff doing this.”

Embracing Toyota’s Lean System Accelerates Change

In the past couple of months United Southern moved to a lean management system based on Toyota’s strategic planning system. They formed a strategic policy deployment team that aligns and links United Southern’s manufacturing and corporate functions to short-term strategic priorities. Called Hosin Kanri (cascading strategic deployment), this tool helps United Southern’s employees master leadership concepts, and engage in enterprise management and Toyota-based lean technologies.

“We are making an unprecedented commitment to train and implement strategy deployment, and I expect to encounter resistance, uncertainty, transparency of real problems and confusion. This is a critical moment in our lean journey. We merged two operating systems (batch and queue production and lean) that are diabolically opposing each other,” said Bennett.

“Sales in the first quarter are up from $6.8mm to $9.9mm, and we have recovered from a $620K loss to a net profit while decreasing labor budget by 1.5% without laying anyone off. Our year-to-date business performance is significantly better than FY 2006. This is great progress,” said Bennett.

The Hoshin planning team developed an overall FY2008 strategic plan and cascaded responsibility for specific goals down through the company. The company conducts a monthly status review that includes five critical goals, nonperforming areas and countermeasures and a plan for the next month.

“It’s exciting to see these monthly status reports, and each leader demonstrates an incredibly accurate grasp of their situation, providing well developed countermeasures to resolve issues. The meetings also make sure each leader understands all the functional areas so they see how and where their responsibilities fit,” said NC State University’s McPherson.

What’s next?

Bennett says the company intends compete for the North Carolina Shingo Prize in 2009 (the world class benchmark for companies engaged in lean manufacturing). “It’s not the award, it’s the journey; it’s a beacon, a rite of passage and it gives us the credentials,” said Bennett. “It’s our competitive advantage. We are attracting world-class customers, employees and suppliers now and that will only improve as we continuously improve. In the 100 yard dash, I’d put us at about the 30 yard mark now. I know it comes down to me, so I’m living and breathing it.”