November 5, 2008
by Corinne Lynds
Three years ago, Chester Nagy was facing a number of challenges. “Our factory was very old, with very old-school ways of doing things,” says the president of Plains Fabrication & Supply, a Calgary-based steel fabrication company. It was struggling with labour shortages, cash-flow issues and organizational challenges that were crippling the bottom line. “I wanted to make some changes but wasn’t sure where to begin.”
Nagy turned to the Alberta government’s lean assessment program, which helped kick-start his plant’s productivity improvements. Now the company is breaking ground on a new, state-of-the-art manufacturing operation to produce sweetener packages, heaters, separators, pressure vessels, skid packages and other custom fabrication.
He heard about the program offering to do free lean assessments for local businesses from a competitor, and was intrigued. He contacted Clif Skrypnyk, director of manufacturing systems at Alberta Employment, Immigration and Industry, and set up a preliminary meeting.
“Clif came down and we discussed what I wanted to do, and he explained all about what lean is,” says Nagy. “It turns out this was exactly what I was looking for, I just didn’t know what to call it, or how to go about it.”
Plains Fabrication & Supply soon arranged for Skrypnyk to come back and complete the lean assessment. “It takes roughly four hours,” he explains. “First we spend a half hour or so meeting with senior management, then we spend one and a half to two hours doing a walk about at the plant to look for potential areas of improvement. After that we sit down with senior management and give them our recommendations.”
This initial assessment is by no means detailed or complex, but rather it’s designed to give management some perspective on what quick changes could be made to glean immediate returns.
The assessment revealed a staggering 50% of the shop floor was wasted space. Noting many potential areas for improvement in Skrypnyk’s assessment, Nagy was eager to get started making the necessary changes.
When an assessment is complete, Skrypnyk says the potentially lean company has a couple of choices: “It can implement lean on its own and use us as coaches and mentors, or hire an outside lean consulting firm.”
The company decided to go it alone with some guidance and training from the Alberta government.
The first recommendation was to enrol the staff in a four-hour Lean 101 workshop to insure everyone was on the same page. Skrypnyk and three members of the Alberta lean team provide the training for up to 34 people at $80 per hour.
He trained all 160 of Plains Fabrication & Supply employees in five back-to-back, half-day training courses.
With the training done, the steel fabricator began its lean transformation by focusing first on the small vessels area of its workshop. Nagy and his newly created lean team analyzed crane pickups, lead time, floor space, layout time and travel distances as they searched for areas to improve. Once the flow was reorganized and the area cleaned up, massive productivity improvements were achieved (see Lean successes).
Before the improvements, small pressure vessels had a 44-day lead time. It now takes just five days.
Lean improvements are still being implemented, which is helping to grow the business.
“Three years ago our growth margin was 15.7 per cent. Now we’re sitting at about 32%,” says Nagy. “We’re doing just over 50% of the volume we used to do, but we’re making twice as much [profit].”
This flows from a changeover in product lineup and a scaling back of the less productive areas at the plant. However, the time for paring down is over. The company is now firmly back on track in terms of growth.
“We went from about $24 million five years ago [with nearly twice the volume], to just under $15 million last year, and this year we already have $20 million sold.”
After more than 20 years in its 80-year-old building, the company is breaking ground on a new facility that’s based on lean flow.
“We have 90,000-square feet at our old plant, the most we ever produced was $24 million,” says Nagy. “This new space is actually 65,000-square feet and our estimated revenue capability is $40 million.”
In the spirit of continuous improvement, further enhancements will be made at the new facility. Creating a better work environment and being more environmentally aware will put Plains Fabrication & Supply well on the way to meeting its goal of becoming a world-class organization.