By many measures, Bermo is a very successful company. Founded in 1947, this mid-sized family owned business provides stampings, fabrications and assemblies primarily for the agriculture, transportation and electronics industries.
The company has been ISO certified since 2004 and TS certified since 2009. A strong and proactive customer service organization has resulted in many long term customers. The company continues to evolve in terms of manufacturing technologies and practices, replacing older technology with more productive equipment to gain improvements in quality, cost or product breadth. Expansions into related product areas are carefully considered and monitored closely. Engineers work with customers to improve the manufacturability of their designs. The company provides just in time inventory for many customers yet is able to keep inventory turns at a respectable eight to ten turns per year. Delivery performance is around 98%. Despite all this apparent success however, the company is not satisfied. They face strong competition from domestic and overseas suppliers and are constantly looking for ways to build or improve their competitive advantage.
Bermo began their Lean Journey in 2008 using The Toyota Way as a starting point. They spent a year and a half working with the usual tools like 5S and conducting many Kaizen Blitzes. Performance measures tended to focus on the implementation of tools rather than relevant business performance measures like inventory turns and lead time. Although the use of these Lean tools did result in some localized improvements, they did not provide the overall improvements that the company was looking for. Lead times in particular, did not improve and in some cases became longer. Most of Bermo’s customers are large, lean and sophisticated companies with well-established supply chains. They have the power to demand rapid deliveries of small quantities on short notice. Failure to provide the product on time will frequently cause the customer’s line to stop temporarily. Needless to say, these customers do not tolerate interruptions in supply for long.
Two options to satisfy customers’ demand for immediate shipment are higher inventory levels or frequent production runs with smaller batch sizes. In theory, high inventory achieved through longer production runs results in lower unit costs due to the fact that setup costs are spread across a higher quantity of parts. The expected lower costs rarely materialize, however. Higher inventory levels are at risk from changes in product design and latent quality problems. The need for longer production runs decreases the flexibility required to respond to changes in customer demand. Furthermore, when hot jobs show up and are inserted into the schedule, the benefits of longer production runs are lost and frustration levels increase. Smaller batch sizes, however, increase the number of jobs and associated complexity. More production runs can increase unit costs. It quickly became clear to a few key people that decreasing lead time was a key success factor to continued improvements. Dramatically shorter lead times increase flexibility, reduce complexity on the shop floor and begin to expose many of the hidden problems that are common in production. “It’s easy to get side tracked with the many tools and theories of lean. We are finding that the best way to monitor one’s lean journey is to simply measure lead time and the value added percentage within that lead time.” said Brett Saburn, CI Coordinator. BERMO adopted the Value Added Ratio, the ratio between direct labor content and the overall elapsed time for the job, as a very visible indicator of lead time. Typically, a job might spend as much as 90% of its time sitting around without being worked on and that wait time is clearly waste. The measure is easy to calculate – divide the direct labor by the amount of time between the first and last clock times. Lead time improvement is more relevant to the success of the business than previous measures. Lean tools, like setup time reduction and 5S, are used to drive improvement instead of solutions in search of problems.
Large scale change in an organization also requires cultural changes and Bermo has adopted some effective ideas here as well. One of the benefits of lead time reduction is less frustration on the shop floor. One of the measures in place is morale. During the daily meeting, the members of the department decide if the previous day was good, OK, or bad and indicates this by a green, yellow or red mark on the chart. Yellow and red marks get comments and suggestions. These suggestions are turned into idea for solutions. This measure and others are all shown on the department’s idea board so improvements are visible to all.
Additional evidence of successful improvements can be seen throughout the factory. In a typical instance at a press brake, setup time reduction has resulted in the four tools most commonly required for setup and adjustment are magnetically attached to the front of the press, while any additional tools are mounted on a shadow board out of the way on a cart. The adoption of cellular manufacturing is also an excellent way to improve performance. It is more difficult to implement in a job shop where different jobs will cross a wide variety of facilities. Bermo is working steadily to implement cells where appropriate.
Bermo credits their progress to a number of other factors as well. They are implementing the Entrepreneurial Operating System, or EOS. The structure provided by that system has improved accountability for everything from small changes on the shop floor to strategic initiatives. They are also quick to praise the peer to peer networking available through the Manufacturers and Leaders Alliance programs. They take full advantage of the educational seminars and training programs as well. Folks are Bermo are clearly not satisfied with their position, but they have made considerable progress along the way.