Success through lean manufacturing
Indiana businessman adapts to make his trailer firm
more efficient after losing a business
As Published in The Marketplace magazine
Eleven years ago, Steve Brenneman had two thriving businesses.
After starting Aluminum Trailer Company in 1999, he bought a small door manufacturing firm in Napanee, Ind.
He built the latter company from $1.5 million in sales in 2000 to about $40 million by 2007.
It was selling exterior doors to the recreational vehicle industry, bought a new extrusion press from Spain, and “really got it humming, just before the downturn.”
A year later, the 2008 recession engulfed the door company. By the time the dust settled, 250 employees had lost their jobs and the firm’s assets had been sold off.
Looking back, Brenneman could see numerous mistakes, and similar issues at trailer maker ATC as well.
“Part of our problem was, we had been doing it the primitive, old-fashioned way, which was pretty common in Elkhart County,” Brenneman told a seminar about his business journey at MEDA’s annual convention.
“You look around, and we were doing it the same way everyone else was.”
After a month off, he started adopting lean methods, the North American embodiment of the Toyota production system.
Aluminum Trailer Company (ATC) had $10 million in sales in 2009. Orders had dropped by two-thirds from two years earlier. “We were really in survival mode.”
The trailer firm had less fixed costs than the door business. The manager running ATC had a finance background “and was able to keep us alive, but it was really scary.”
ATC’s bread and butter is building trailers for car haulers and race car hobbyists, which accounts for about one third of sales.
Once Brenneman decided to embark on a lean manufacturing journey, he moved to dramatically improve work flow. The change in philosophy required four years of training and efforts to fix things.
Lean manufacturing is often referred to as a five S system: sort, set in order, shine, standardize and sustain.
Beyond sweeping and cleaning up, the transition required a complete change in thinking by staff. That included reorganizing the shop floor so things that are touched every day are in arm’s reach. “Easy to reach, and easy to put back where they belong.”
He then began making “spaghetti diagrams,” tracing a worker’s movements throughout the factory. The goal was to simplify and get rid of spaghetti-like paths that staff needed to make to get what they need to do their jobs. “You don’t want spaghetti. Spaghetti’s bad.”
By introducing kits and standard workflow, output per worker increased by 40 per cent.
ATC also introduced a spreadsheet of tasks an operator would do in the best way possible.
A nine-month rollout of standard work processes with teams led to a further 60 per cent improvement in worker productivity. “Really powerful stuff, but really difficult to do. I would not recommend starting your lean journey with this.”
Next, ATC developed standard, stackable containers to make things easier for its suppliers and for workers on the shop floor. Parts arrive in the order that they will be used in the assembly process, saving skids, shrink wrap and other containers.
“This is a system where the worker can focus on creating value for the customer.”
Lean manufacturing discipline extends to tracking financial results as well. ATC does a profit and loss statement each Monday for the previous week.
At the start of the lean manufacturing journey, ATC had $1.5 million in inventory on $10 million in output. It has grown to $65 million in sales from three plants. Raw material inventory levels remain at $1.5 million.
Bringing suppliers into the lean manufacturing journey included simplifying and reducing the number of interactions. They built aluminum carts with part numbers on them, so the supplier would know which wheel, axel or lug nut needed to be replenished. Workers didn’t need to make calls asking for parts.
Since 2014, ATC has reduced tire inventory by 40 per cent while doubling sales volume. “Those things really add up,” Brenneman said. “That means more cash to do things with, rather than sit in inventory.’’
“We see our work doing things that we think reflect our Anabaptist values, like striving for justice, and making sure we treat people fairly and give them a valued wage. We talk at my company a lot about vocation.”
While he admits lean processes involve a counter-intuitive way of thinking about things, he thinks they are consistent with his Anabaptist heritage. Neatness and organizing, humble inquiry, curiosity about whether things can be done better and questioning the status quo are all traits that run through Anabaptist history.
So is making things simple and clear, he said, contrasting the simplicity of a recipe from the More-With-Less Cookbook with the complexity of a high-end gourmet cookbook. Putting recipes from the two texts up on a screen, he told how he found the former highly intuitive and the latter highly frustrating.
A common perception of lean processes is that it requires employees to work harder. “There is a more steady workflow, but it is an even flow,” that eliminates some tasks, he said.
Putting supplies beside the line, for instance, eliminates the need for employees to walk across the plant to get a new set or gloves or a Sharpie marker.
The corporate transformation has resulted in a lot of employee turnover. Before embarking on the lean journey, ATC had a highly skilled, mostly Amish workforce that were paid on piece work, based on their production. “That’s how all Elkhart County is.”
The piece rate pay structure, commonly used by area recreational vehicle manufacturers, didn’t work well when ATC got into a focus on lean manufacturing.
Over a seven-year period, Brenneman lost about 70 per cent of his employees. “Our workforce wasn’t real keen on that, because they didn’t believe in it.”
Faced with employee objections that daily clean up was a waste of time, ATC eliminated piece rate and went to hourly wages. Ironically, had workers stayed the course and accepted the changes, they would have made more money doing piece work than on the hourly wage that is now the norm at ATC. Still, if Brenneman had to do it over again, he might have introduced change at a more moderate pace.
Rethinking how things get done will impact his career as well. Brenneman has hired an experienced chief executive officer to run the firm. “I have discovered over the past two years that I am really an entrepreneur, I’m not a business operator.”
ATC has surpassed 300 employees, and Brenneman finds managing at that level challenging. “I don’t have experience with that, and the level we are at, it’s risky to use the model of ‘fail fast’ when a business gets to a certain size.”
He plans to take six months to a year off recharging, touring businesses and determining what he wants to do next in his entrepreneurial career.
The trailer firm is better placed to weather the next economic downturn, protecting plant as well as office jobs. “We have taken some of our success and turned it into stability.”
Given that ATC’s competition doesn’t pay attention to lean manufacturing, his company has a greater competitive advantage, he said. ◆