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Strategic outsourcing helpstire manufacturer deliver efficiency

Roundinginto shape

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Electronically reprinted from July/August 2016

COVERSTORY

Parts and repair outsourcing is one strategy that helped Toyo Tire build a big success story in a small town.

By Bob Vavra

Content Manager, Plant Engineering A tire is a part unto itself. In reality, it’s four parts on a car, which is itself a carefully orchestrated collection of valves and rods, spark plugs and pipes. We don’t see a tire as a collection

of parts.Jim Hawk knows better.The president of Toyo Tire USA in White,

Ga., Hawk sees it all—the rubber and poly-ester and chemicals; the machines that mold and form those basic parts into something useful and vital. It’s also the sum of the people and the machines that keep Toyo running at a high volume and high productivity in the last place in America you might look for a tire plant.

There are more than a half million tires sitting at the back of Toyo Tires’ 3-million sq. ft. manufacturing facility, and in 90 days, they’ll be replaced by another half-million tires. Hawks has all of those tires to keep track of, as well as all the things that go into making tires efficiently each day.

“One of the things I keep driving at with our people is OEE (overall equipment effectiveness),” said Hawk. “We’ve got a lot of built-in (time) losses. We’re going to do changeovers. We’re going to do PM (preventive main-tenance). We’re going to do equipment upgrades.”

Rounding into shape

In the race to drive efficiency and effec-tiveness out of a process where more than half the costs are material and equipment costs, Hawk looked at every option for ways to manage costs without slowing down the process. One was outsourcing his parts department.

In the centerWhite, Ga., is easy to miss, even when you’re driving right through the center of

Toyo Tire USA president Jim Hawk has led the development of a tire manufacturing hub, using an efficient operation that uses both robotics and people to deliver quality. All images courtesy: CFE Media

town. Its listed population is less than 700, and you can go through the town on High-way 411 in under a minute, even doing the posted 40 mph speed limit. You have to look a little closer to see White’s value for Toyo Tire.

There’s a railroad line running through the front yard. There’s Interstate 75 just a few miles from the front door, and I-75 is

the gateway to the burgeoning Mid-South automobile manu-facturing plants in Georgia, Tennessee, and the Carolinas. And there’s the Port of Savan-nah (“our secret weapon,” Hawk said), which provides a sea lane for parts and materials.

There are things that are less obvious, like Georgia’s Quick Start training program that helps put engineers into Toyo’s plants and helps drive the spec-tacular growth the facility has enjoyed.

In 2004, today’s Toyo plant was a farm field. Three large expansions later, Toyo now o cc upies a mass ive manu-facturing, distr ibution, and employment footprint. It has accompl ished this with an increasingly autonomous man-agement style from the home office in Osaka, Japan.

“It’s a very internationally-minded com-pany,” Hawk said. “From the beginning, they did not intend to run it as a Japanese plant. In the beginning, we were just trans-ferring products and then we built the first phase of operation. It was about training and getting machines running. Since then, it’s gotten more difficult. We’ve installed our own machines, and we develop new

Parts management at Toyo Tire was outsourced to a third-party vendor to both create greater efficiencies and to free skilled staff within Toyo to concentrate on value-added work.

The raw rubber is fed from spools into the first stage of a process that will pro-duce a finished tire, which are stored for distribution in part of Toyo’s 3-million sq. ft. plant in White, Ga.

specifications for the new machines. We test rigorously.”

At the coreToyo is a tire manufacturer, so its core com-petencies are the art and science of tire-making. It’s a little of both. The tread design is the art—finding the right combination of patterns that provide both performance and aesthetics. However vital to your vehicle’s operation—just try driving tomorrow with-out one—a tire is a bit of a utility product. The tread is what’s fun and attractive. Where the rubber meets the road for a tire is where the rubber meets the road. That part has to work.

So it is no surprise Toyo values its engi-neering and maintenance staff. Part of that value is related to their being able to perform valuable tasks each day. Searching for parts to repair doesn’t add value.

“The way we talk about it is that there are core and non-core functions,” said Jeff Owens, CEO of Peoria, Ill.-based ATS, which has been Toyo’s parts management partner since 2011. “If your customer is going to buy the product and if the work your people do is going to influence that buying decision, then that’s a core process. If it’s back behind the scenes, and there’s a way to do it more efficiently, then it’s a candidate to be looked at.”

“Every manufacturing company has to decide what’s a core function,” Owens added. “What I find, as companies get older, there are more things that get to be non-core. We’re great at non-core things.”

That philosophy was exactly what Hawk wanted to align with. “You want to know how this process started? I saw their ad in (Plant Engineering) talking about their work with Cooper Tire,” Hawk said.

ATS now manages more than 12,000 SKU. Over 4 years, the relationship has evolved as ATS has learned Toyo’s business from the inside and been able to provide insight into other ways to streamline the operation. “Our f irst contract was our repairable par ts management (RPM) contract,” said Owens. “As we grew the RPM program we noticed challenges in the storeroom with accuracy and staffing.

“Local and onsite repairs were anoth-er issue that rose to the surface,” Owens added. “ATS used data to show the value of a dedicated team that would focus on onsite repairs. The data pointed towards sub-optimal ser vice quality from local suppl iers . There was a lso s igni f icant time being spent by the maintenance team doing repairs; t ime that was needed to focus on downtime and PM activities.”

ATS now has 10 staff on-site at Toyo, integrated into the dai ly operations of the facility. “We have to be adaptable. We have to fit into that family,” Owens said. “When that doesn’t exist, it’s a nonpro-ductive relationship, and it doesn’t work.”

Hawk sees that outsourcing the manage-ment, procurement, and repair functions could deliver real value. “It lets us do what we are really good at,” Hawk said. “It goes way beyond stocking parts. It’s

COVERSTORY

“ (Outsourcing parts management)

lets us do what we are really good

at. It goes way beyond stocking

parts. It’s about the accuracy of the

inventory. We put intelligence into

the process.”Jim Hawk, Toyo Tire USA

about the accuracy of the inventory. We put intelligence into the process.”

A changing industryThe smell of hot rubber and the surge of heat come at you as you first step into the manufacturing area at Toyo Tire’s facility. Making tires is a hot process with heavy objects, which is why much of the tire manufacturing at Toyo is automated. The intensity of the process is unforgettable.

Tire-making has been in Jim Hawk’s blood his whole life. He was born in Akron, Ohio, long known as America’s tire capital, until that business went away from Akron and took jobs with it. That includes his father’s job; he worked for General Tire for 3 months shy of 40 years before he was let go.

The t ire business in America today is very dif ferent than in those days of Akron in the 1960s and 1970s. For one thing, automobile manufacturing is spread more widely across the country, and tire manufacturers have sprouted throughout the Mid-South to take advantage of the growth in that market.

Rubber & Plastics News reported online in 2014 that $2.75 billion was invested in tire manufacturing in the Midwest and South, including Toyo’s expansion in White. South Carolina has been a prime location to locate tire manufacturing. A key reason is to locate closer to the end user—in this case, both the new car and aftermarket customers.

Tires can be made anywhere, so the com-plicated calculations of labor costs versus transportation costs, as well as balancing logistics and parts management, all figure into where to locate a plant. The formula is only one part of developing successful manufacturing. The rest is in running the most efficient operation possible—utilizing people and machines to take full advantage of all of the inherent advantages a place like White offers.

Hawk has been in the business a long time and says he still has more to do. “It’s been a track meet for the last 10 years,” said Hawk. “We’ve made major, major investments, but I’m not going to retire until we can imple-ment a gain-sharing program for employees. We want to create pay bonuses based on savings.” PE

COVERSTORY

ATS employees are embed-ded in the Toyo Tire facil-ity, managing the parts, storeroom management and repair processes for Toyo.

Posted with permission from July/August 2016. Plant Engineering, www.plantengineering.com CFE Media. Copyright 2016. All rights reserved.For more information on the use of this content, contact Wright’s Media at 877-652-5295

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DRIVE™ MRO Asset Management Solution

© 2016 Advanced Technology Services, Inc. CS102016

Customer Challenge“Keep your eyes on the road.” Good advice for businesses as well as drivers. Toyo Tire U.S.A. realized that to keep its 3,000,000 square-foot manufacturing facility in White, Georgia at the forefront of the tire industry, it needed to focus on its core competencies—and factory parts wasn’t one of them.

Before 2012, parts management for Toyo Tire’s factory equipment was handled by company employees, assisted by local vendors. New equipment and new specifications, however, were making those tasks increasingly difficult. In most cases, parts were simply replaced; little thought was given to repair or refurbishment of expensive or hard-to-replace components.

ATS SolutionThat year, the President of Toyo Tire U.S.A. reached out to Advanced Technology Services (ATS) after reading one of its success stories from the tire industry. Soon Toyo Tire began outsourcing its repairable parts management tasks to ATS. By initiating a parts repair program comprised of a new onsite repair lab combined with offsite resources, ATS took a more scientific approach to parts management. In particular, ATS began performing root cause analysis of failed parts, in order to improve reliability and lower replacement costs.

In its first year, ATS was able to capture over 1,200 parts for repair, producing a savings for Toyo Tire of $1 million in reduced and avoided cost. But the improvements didn’t stop there. Based on these initial successes, ATS was also given the opportunity to take over the factory’s parts storeroom which had been handled by a local vendor.

ATS instituted changes ranging from better inventory controls to hiring and training new storeroom staff. For the first time, clerks were uniformed and working the same shifts as techs, so maintenance needs could be anticipated. In collaboration with Toyo’s initiative, high-use, low-value parts were moved to vending machines outside the storeroom, making it easier for techs to work faster by quickly grabbing routine parts themselves.

Bottom-Line SuccessBy continually expanding its relationship with ATS, Toyo Tire has realized substantial savings. Parts repair savings and avoidance over the first three years (2013-2015) totaled $5.7 million from a total of 5446 parts. Storeroom inventory accuracy rose from the low 80 percent range, before ATS management began, to 94%. At the same time, stock SKUs have risen 15% while inventory adjustments due to inaccurate controls have dropped by nearly 71%.

Toyo Tire Generates $5.7 Million in Savings and Avoidance Over 3 Years by Expanding Relationship with ATS.

AT A GLANCE

Start your research today by contacting an ATS expert.855.834.7604 | info@advancedtech.com

“Outsourcing parts management lets us do what we are really good at. It

goes beyond stocking parts. It’s about the accuracy of the inventory. We put

intelligence into the process.” –Jim Hawk, President, Toyo Tire U.S.A.

TOYO TIRE CASE STUDY

• Storeroom management, repairable parts management and on-site parts repairs outsourced to ATS

• 5,446 parts repaired over 3 years resulting in $5.7 million in savings and avoidance

• Inventory accuracy improved to 94%

• Inaccurate controls reduced by 71%

Learn More

Start your research today by contacting an ATS expert. 855.834.7604 | info@advancedtech.com | Learn More

A powerful and unique opportunity can be found in today’s factory parts storeroom and can be leveraged with a single, industry leading solution—ATS DRIVE. DRIVE is a multifaceted, value-driven MRO Asset Management Solution. It is designed to positively impact the performance of not just your storeroom, but also your manufacturing equipment, your production output – and ultimately your bottom line.

Storeroom Management • Inventory Management • Repairable Parts Management • Supply Chain & Procurement

© 2016 Advanced Technology Services, Inc.

Start your research today by contacting an ATS expert. 855.834.7604 | info@advancedtech.com | Learn More