Tier One Lean manufacturing Principles

At Tier One we deliver exceptional value for our customers guided by Lean Manufacturing Principles. These principles allow us to eliminate waste in the supply chain by taking a multi-faceted approach that touches every area of our business:

- Reduce your inventory through smaller lot sizes
- Deliver frequently, lowering carrying cost and floor space needs
- Minimize logistic cost by using pull systems and kanbans
- Design guidance – for cost effective manufacturing
- Competitive pricing on low volume runs

Below is an article recently written by Diane Ploch of CONNSTEP Inc. on Tier ONE. LLC and our transformation into being a truly Lean Manufacturing company.

Less is more for new company
One new company recently discovered that less is more when it comes to paperwork, reports and tracking of inventory. They are applying lean thinking to their business and accounting practices and reaping the benefits of reduced paperwork and quick turnaround, as well as cooperation and innovative thinking from their employees.

Tier One is a company that evolved from two departments of a larger manufacturer relocating out of state. Kendro Laboratory Products, in Newtown, has been a producer of centrifuges for the medical and research industries for over 50 years and wanted to consolidate its assembly operations into a larger plant in North Carolina where the company makes refrigerators and freezers. As a result, management decided to outsource machining and some assembly from its Newtown operations, which handled the production of rotors, motors, and other highly engineered parts and assembly for the centrifuges. This would have meant outsourcing various parts to a number of different shops, which would still require assembly. Instead, some industrious employees from Kendro’s machining departments proposed the start-up of their own company that would continue to build and assemble these products and components and act as a vendor to Kendro.

Thus, Tier One was born, officially becoming its own business in August 2003. Former Director of Operations at Kendro, Michael Iassogna, is one of Tier One’s principals. He said it was a win-win situation because about 50 people got to keep their jobs in Connecticut, while providing Kendro with complete products produced by people experienced in machining and assembling them.

LEAN THINKING WAS CONTAGIOUS
Tier One’s journey to lean business and accounting practices actually began with lean manufacturing at Kendro. While running the machine shop in the early 90s, Iassogna helped implement cellular manufacturing, even though he knew little about the formal concepts of lean. Then, as plant manager, with the help of what he learned from reading about lean, he worked on setting up a flow line in the centrifuge assembly area, establishing one-piece flow with a kanban pull system.

When Don Stankus took over the management of the machine shop, Iassogna asked him to bring more lean concepts into practice, which led Kendro to enlist the help of CONNSTEP in June 2002.
Lean Manufacturing Specialist George Straznitskas put a team together with Stankus to focus on leaning the production of one high-volume rotor model. The challenge was dealing with the varieties of that one rotor, which was offered in seven different colors with two different covers. Implementing lean concepts and a pull system, the machining and assembly team reduced the average number of rotors per batch from 60 to 16. Kendro worked with two major suppliers (an anodizer and a laser engraver) to convince them that working with smaller batches was more efficient. As a result, a smaller batch of rotors can now be produced in a more timely fashion, while including the variety of colors and covers as needed in a particular customer order.

About the time that lean project ended in May 2003, Kendro was ready to relocate and the Tier One principals felt they needed to quickly identify and implement a new MRP system and infrastructure for the company they were creating. Or so they thought. They again turned to CONNSTEP for help and began working with Business Systems Specialist Fred Stern. He ran a three-day workshop with Iassogna, Stankus, the Chief Financial Officer and two key players who handled planning, scheduling and buying. The goal was to map out the all the steps involved in producing and shipping a rotor and analyzing what paperwork and tracking was needed. The processes and procedures were based on what had been done under the Kendro operation and provided a framework for what Tier One would be doing.

“Fred actually challenged us to become even more lean than I probably would have imagined that we could be this quickly,” said Iassogna. “After three days, his comment to us was ‘why do you want an MRP system? Why don’t you just run it all through kanban?’ So we — after careful consideration and somewhat on a leap of faith — said let’s give it a try. We saw this as a viable solution to run our company and a great opportunity to change the culture of the new business and think outside the box.”

PAPERWORK WAS REDUCED “We realized how much work our planners, buyers, schedulers, and supervisors had been doing just so our data in the previous MRP system remained accurate so reports could be printed,” said Iassogna. By the time the reports were distributed a month later, the information had little significance for the current work in progress. One planner/scheduler said she only fed the computer and never got information out of it. Stern suggested instead that some of the indicators and information in those reports could be provided on a daily or weekly basis. So, paperwork associated with job reporting was eliminated for Tier One.

Stankus explained that the requirement used to be that employees accounted for their whole day on paper — job by job, minute by minute. “The whole mindset is different,” he said. “You work on what’s important as a team now versus what’s individually important to make rate on all the jobs all day. I see the culture change already in the shop with people — just working and pitching in wherever they can help.”

The areas of quoting and costing were examined to see how they should be handled by Tier One. In the past, these processes were done with Excel spreadsheets, which met the needs of the business. The attitude was don’t fix what’s not broken. Since these areas did not require an MRP system to generate the needed information, the Excel spreadsheets were kept.

Also, Standard Operating Procedures (SOPs) are now on-line and accessible from computers on the shop floor. Stankus said that work was completed under the CONNSTEP lean project that was run while the machine operaton was still a part of Kendro. He said That team member Steve Belair generated the idea and helped get 350 SOPs online, which allows for real-time updates.

INFORMATION FLOW STREAMLINED Tier One did need a computer system to handle accounting, customer invoicing, payables and customer relationship management; but Stern explained that the system did not need to be a full-blown MRP system. Since the CFO had worked on the Peachtree system in the past, that’s what Tier One chose. Iassogna explained that the purchase of raw material is entered into the Peachtree system, which gets the financial transaction on record into the building. Selling the finished product records the financial transaction as going out of the building. “We’re not doing anything in the middle,” said Iassogna. “We’re not managing inventory, not moving parts from inventory to jobs to finished goods — that’s where Fred has helped us state the financials in a different way.” Stern explained, “If you know what’s coming in and you know what’s going out, the ‘stuff’ in the middle essentially doesn’t change, you don’t really have to count it.” At the end of the month, one journal entry is made to move pruchases that were not used in cost of goods sold into inventory. Inventory can be verified by visually looking at Kanban levels.

Of course, certain things still need to be documented and reported, but Tier One has found that those things do not need to be part of an MRP system. For instance, quality is monitored and inspection notes are made on each production job. Iassogna explained that there was always a job ticket that traveled with a job through the shop floor. “We’re continuing to do that,”he said. “We’re just not putting it into the computer system.”

“Tier One is a new company and will continue to explore and refine their information and financial requirements in the following months and years,” said Stern. “They may find, for example, that one of the new lean-oriented software systems is required to continue their journey.” The next step for Tier One was to get more training in the area of lean accounting. the management team attended the Lean Accounting Tools and Methods Workshop presented by consultant Bruce Baggeley and hosted by CONNSTEP in September. Lean accounting will allow them to create a financial measurement and reporting system that is in tune with their lean efforts. By understanding and embracing the principles of lean business thinking and lean accounting, Tier One is moving one step closer to truly becoming a lean enterprise.

Written by Diane Ploch with technical assistance from Mike Iassogna and Don Stankus of Tier One. Reproduced with permission from CONNSTEP Inc. ADVANTAGE

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