Navigatingthe
Economic Storm
Presentation Outline• Company Background• Journey to Lean and World Class• Economic Downturn• Measures Taken• Opportunities• Results• Lessons Learned• Moving Forward
Company Background• Provider of Machining, Welding, Fabrication
and Assembly of components to Off-road OEM’s
• Locations in Canada and China• 33 Years in business• Total of 250 full time employees in 3 locations• Non-union, privately held• Extremely competitive environment
Our Customer’s
The Challenge
The Challenge• Pressure from customers to continuously
reduce costs• Service/Product offered becoming commodity
type business• Growing global competition• Shortage of skilled labor • Changing customer demands-faster, better,
lower price.
Strategic Plan
• Develop a clear company direction.• Retained external resources.• Wide input to develop the plan • Created our Mission, Vision &Value
Statements• Defined a strategy for growth.
To contribute to the success of our customers through world- class practices, with a focus on performing value-added activities and eliminating waste
CGL Mission
Why Lean?• Recognized a need for Continuous
Improvement
• Philosophy and tools that made sense
• Support from practioners and associations
Lean Implementation Plan• Developed a three year
plan defining the approach to apply the Lean Toolsand Philosophies to everything we do.
• Training for management a priority
• Tied into the Strategic Plan
Lean Tools• 5S
-Company wide training-5S Office Fridays
• Value Stream Mapping-Started with management in administrative areas,
order entry, RFQ process.
• TPM-Training for maintenance personnel, implementation
in cell areas.
One Piece Flow• Customer requested 20% reduction in price
for a family of parts that CGL supplied for several years
• Created a cell that combined welding and machining
• Eliminated 1000 km of annual lift truck travel.
• We met our customer request
Lean Tools• Kanbans
- Gradually introduced to cells and specific areas that we where experiencing ongoing problems with the traditional purchasing practices.
Visual Management
Lean Tools• Management Buy-In
– Recognize and reward required behaviors– Management Performance Reviews– Role of Supervision critical
• Marketing Perspective– Builds credibility with Global firms– Systematic way to maintain competitiveness– Facility leaves favorable impression
Critical Factors for Success• Training
-Started with the management group to create continuity and support for the rest of the team –paradigm shift needed.
-Lean simulation exercises-Value Stream Mapping-5S-Benchmark tours – internal/external
Critical Factors for Success
• Communications– Regularly scheduled meetings at all levels– Company Newsletter– Town hall Meetings – English language training
Achievements • Development and implementation of five
production cells, establishing one piece flow.• Developed a Lean based supplier certification
manual.• Greater than 40% reduction in inventories.• Freed up floor space for production that was
previously used to house excessive inventories.
Achievements Cont’d
• Over 500 days no lost time injuries.• Created pull systems that allow for smoother flow
of materials and information• Third party recognition, AME, EMC, IQPC,
Industry Canada.• Customer and prospect feedback “Best machining
facility ever seen”
January 2008• Struggling with margins, but the place looks
great.• Complacent, fat and comfortable• Steel prices increase 40% at start of the year• Escalating employee turnover rate• C.I not a priority• Sales still good
The Storm
Economic Downturn
• December 2007 marks the start of the Global recession.
• Sales forecast for 2008 - $32 Million• Employees – 161
• Direct – 108• Indirect - 53
Downturn
September 2008 -• Second biggest customer announces closure
of Canadian operation. • 30% of sales in jeopardy.• New players, new relationships
US Dollar Weakens
• MEMORANDUM• To: CGL Manufacturing Key Contributors• From: Dave, Doug and Mike• Date: December 18, 2008• Re: A Storm is Coming - Expectations for CY2009 •• Team:• A storm is coming as our economy dips further into a recession and we must be prepared. To date our customer orders have remained steady
but they will drop as construction, forestry and material handling customers continue to cut capital expenditures.• In order to prepare for this storm and ensure we remain profitable we must and will do the following:• Reduce costs – material costs, operational costs , manpower both direct and indirect• Reduce inventory – inventory is tied up cash, we need to free up cash• Improve productivity – achieving the productivity targets is critical for profitability• Reduce spending – do we really need everything we buy?• Ensure we have the right people, with the right skill sets, in the right positions at the right time.• Each of you plays a critical role in the operation, profitability and success of CGL – that is why you are a Key Contributor.• Lets all use the Christmas break as an opportunity to recharge our batteries and to spend time with family and friends. In January, we need to
return to work prepared to be entrepreneurial, lean and focused on eliminating waste and cost from the organization.• We will need your support as we look at all aspects of our business and make difficult decisions about where we are going and how we can
make CGL a better, strong and more profitable supplier for our customers. Change is inevitable, change is critical to success, change will benefit us all as we stay focused on being a profitable supplier of choice for our customers.
• On January 5, 2009 each of you is required to return to work armed with three suggestions to reduce operational costs. Your suggestions should require little to no capital or resources to implement. Please e-mail them to us so we can tabulate them – we will hold a meeting with the Key Contributors to review and prioritize your suggestions.
• For clarification, operational costs include:• Freight• Scrap• Shop Supplies• Repairs and Maintenance• Tooling – Consumables, Durables, Fixtures• Inventory• Manpower / Benefits• Material Costs• Computer and Office Expenses• Travel and Entertainment• Thank you for your hard work and commitment to CGL. All the best to you and your families this holiday season. We have a great team and
we are looking forward to a successful and profitable 2009.• Dave, Doug and Mike
PRESIDENTDave Deskur
Supply Chain ManagerRod Lilke
VP FinanceDoug Smith
Sales & MarketingManager
John McClennan
AdministrativeAssistant/
ReceptionistJessica Deskur
Engineering Manager
Dave Thompson
Quality Assurance Manager
Peter Cashin
Plant ManagerCharles Stewart
Warehouse Supervisor
Kevin Jackson
ShippersReceivers
Picker
I.T. CoordinatorsRachel Chinchilla
Dave Layzell
Accounts PayableSusan Lapello
EstimatorRay Walters
Tool Room
Quality PlannerKen English
Welding & FabricationSupervisor
Quality TechniciansGreg White
Thanh NguyenAaron Wenger
Welding & FabricationOperators
Production Supervisors
Machine Shop
Machine Operators
CGL Board of Directors ChairBert Penzendorfer
Inside Sales Administrators
Lee EmeryDonna Lizotte
Manufacturing Engineers
MaintenanceTechnicians
ProductionManagerMinh Ton
Plant Cleaner
BuyersTahir Ali
Becky Bridges
Material Handlers
New ProgramSet Up and
Programming
Painters
Tooling Supervisor
Terry Holmes
Tool CribAttendants
Current ProgramSet Up
VP OperationsMichael Ritchie
Human ResourcesManager
Karen Winter
Quality PlannerLorne Robinson
Organizational StructureJanuary 2009
DownturnJanuary 2009 –
• Sales forecast – $16M• First round of layoffs – 29
• Direct – 91• Indirect – 42
132
DownturnFebruary 2009 –• Sales forecast – $16M• Second round of layoffs - 25
• Direct – 75• Indirect – 32
107
Austerity Measures• Wage freeze across the board• Management wage cuts 10-20%• Work share program• Overhead cost cutting
– Social events– Benefits– Lawn Care– Freight– Travel restrictions
Where is the Bottom??
• Unreliable customer forecasts• How much deeper can we cut?• Weekly review with Senior Management
Group• Sales• Costs
Downturn
March 2009 –Sales forecast – 12M• Third round of layoffs
• Direct - 67• Indirect - 23
90
Layoff Selection Process• Skill set, capable of multitasking • Attitude• Leadership• Strong problem solving skills• Creative • Change agents• Best soldiers
Layoffs• Deep cuts• 25 year relationships• Challenged our Values• $600,000 in severances
PRESIDENTDave Deskur
VP FinanceDoug Smith
AdministrativeAssistant/
ReceptionistJessica Deskur
Engineering Manager
Dave ThompsonQuality Assurance Manager
Peter Cashin
Accounts PayableSusan Lapello
Tool Room
Welding & FabricationSupervisor
Quality TechniciansGreg White
Thanh Nguyen
Welding & FabricationOperators
Production Supervisors
Machine Shop
Machine Operators
Inside Sales AdministratorsDonna Lizotte
Manufacturing Engineers
MaintenanceTechnicians
ProductionManagerMinh Ton
Plant Cleaner
BuyersTahir Ali
Becky BridgesMaterial Handlers
Painters
VP OperationsMichael Ritchie
Quality PlannerLorne Robinson
Organizational Structure April 2009
Control Costs• Determine our new breakeven• Build a costing model • All purchase orders and purchase requests
required President or VP signoff. “John Henry for every penny”
• Make everyone an accountant• “Need” or a “Want”?
Costing Model• One page income statement• Key drivers
– Labor hours/sales– Overhead– Material
• Weekly review with Managers and Supervisors
“All Hands on Deck”
• Remaining team needed to wear several hats
• Identify issues and respond quickly• Developed “FOCUS” Program. Quick
response to issues on the shop floor.
Communication• Ease fear and anxiety, have we hit the
bottom?• Younger team members never experienced
an economic downturn• Bi-weekly town hall meetings• Employee communications meetings• Weekly meetings with managers to ensure
focus
Behaviors• Customers
o Downsizing lead to insecurity in buyers. Information poor.
• Employeeso Fearo Survival mode
• Supplierso Concern if we would be here tomorrow.
• Banko Abandonment
Closure of Excel SteelJuly - 2009 • Contracted business to former supplier• Leveraged buying opportunity for steel• Lower cost for materials• Less overhead requirements• Focus on core business
New Strategy
• Reinvent ourselves• Get close with the customer• Identify new opportunities that the
competition has left behind• Map all processes that where effected
by the downsizing. Remove waste.
Network• Identified the jobs that where low
margin• Created a network with two
smaller shops that where struggling.
Raymond Closes Canadian Operation
September – 2009• Largest customer announces move to US.• 40% of Sales• 33 yrs• New players, new relationships
The BankMarch - 2010• 2009 showed a loss due to severances• 33 year relationship • Lost interest in manufacturing sector• Find new financial institute• Better support and terms
Opportunities
• Competition reduced• New customer added, $8M new sales• New product lines when customers
reorganized their operations• Formed partenerships with other shops
Programs Introduced• Daily walks with the management team and
supervisors. • FOCUS• Asachi meetings• Lean/Six sigma black belt training • Shop floor audits to identify potential issues
and gather feedback for the team
Asaichi Meetings
Current Situation• Employees – 118 Direct -90, Indirect -28 • Sales forecast – 35 Million• All staff on full time• Recall • Managers salaries returned• Margins have improved• Former long term employees have found new
employment
President and CEODavid Deskur
VP FinanceDoug Smith
Engineering Manager
Dave Thompson
Quality Assurance Manager
Peter Cashin
Plant ManagerErick Trigueros
Warehouse Team Leader
Dan Cao
Shipper / Receiver
Chau Huynh
Accounts PayableSusan Lapello
Tool RoomCun Sang Dip
WeldingSupervisor
Hong Phuong
Quality TechniciansGreg White
Than Nguyen
Welders & FabricationOperators
SupervisorMachine Shop
Chi Luong
Machine Operators
Inside Sales AdministratorDonna Lizotte
Manufacturing Engineers
Than VuongDan Quan
MaintenanceTechnician
Wing Ng
ProductionManagerMinh Ton
Plant CleanerEd Nguyen
Purchasing Supervisor
Tahir Ali
Material HandlersGiang Ngo
Set Up and Programming
Eric Lee
PainterLy Tran
Maintenance Team Leader
Jim Green
Tool CribTeam LeaderBrian Keeble
Director of OperationsBrian Holland
Administrative AssistantsJune Kehl
Quality PlannerLorne Robinson
Vice President and General Manager
Michael Ritchie
Lessons learned• Communicate, make sure everyone knows where
they stand.• The devil is in the details• Leadership is Key
– Managers and Supervisors need to constantly deliver same message and walk the talk.
• Listen more to the team, high anxiety and fear effects their ability to perform
Lessons Learned(cont’d)
• Spend time improving, eliminating waste.• Remove minutia• Plan for the worst, be a good boy scout.• Surround yourself with third party support that is
brutally honest.• Keep close with the team. • Tomorrow will come• Change is good, from change comes opportunity
Moving Forward
• Expand on new customer opportunities• Leverage continuous improvement to
maintain our edge• Identify and mentor up and coming stars• Rebuild and conquer