Long-Term Customer Profit Reinforcement:
Hartfiel Automation and Douglas Machine
Success by collaborating to help customers achieve their goals
Taking a long-term view of customer service and how that translates into a new approach to customer-supplier partnerships brought Hartfiel Automation of Minneapolis, MN and Douglas Machine, based in Alexandria, MNcloser together several years ago. They’ve crafted a new, team-based approach that nets resounding lower overall costs and gives them an edge in snaring (and retaining) contracts.
“In 2001, our customer Douglas Machine approached us and asked us to reduce costs. They were trying to gain a major piece of business — a large number of machines to be built over an extended period of time,” said Myron Moser, Hartfiel’s president and CEO. “What we later called Customer Profit Reinforcement (CPR) was born of necessity. We were asked to help find ways to reduce assembly time and cost. Douglas’s goal was to develop a process for building machines in a level production process, instead of our traditional approach of building one or a few at a time when they got orders.”
Joe Salo, director of flexible packaging for Douglas Machine, explains “Since 1992, we have been developing secondary packaging equipment for the snack foods industry and have installed over 1700 machines. Traditionally, we would develop equipment and determine commercialization terms on a cost-plus basis. That process — they’d call us and we’d design a machine for them — worked well until several years ago. Now it is more competitive, and our customer uses market pricing to decide which suppliers they will choose. In most cases they are the one establishing the market price. They ask us if we can build a machine to the cost they set.”
“We put together a team of our experts, and Douglas Machine selected their team. We merged these two teams into a joint task force. The task force went over every aspect of the machines Douglasplanned to build, looking for creative design, assembly, and purchasing ideas,” Moser said. “They also went to the Douglasassembly area and crawled all over the machines.
“We came up with a grading system to ease the implementation of any changes,” he continued. An “A” grade meant a simple purchasing change to reduce cost, “B” meant that a design change was needed, and “C” called for an entire redesign of that area.
Now the two companies regularly look for ways to hone this long-term, collaborative approach. Salo commented that it’s critical for providing customers newer, better designs more quickly. Debugging costs typically associated with a new equipment launch also dropped dramatically, he said.
A New Mindset
This collaboration model requires a new mindset, according to Salo. “We could pay more for new parts or designs up front, but by looking at the total cost for purchasing and installing it, we are learning how to design a new generation of equipment,” he said. Simpler part designs with simpler installation instructions (such as cage-clamp terminals versus screw-in terminals) enable the manufacturer to train temp workers in a very short time to wire a machine frame when business flexes upward, while retaining its core employees during leaner times.
“We all need to leave our egos at the door, when we are working to create value — what the customer decides,” Salo said. “We need to build a culture that we are all part of the same team, not focusing on who comes in from the outside.” Over time, this partnership will result in a reduction of the supplier base. It costs money to work with a large number of suppliers.
“We need to work with suppliers we can trust in this new process,” continued Salo. “We not only look for quality products and competitive pricing. We also want to work with suppliers that do business in an ethical manner — not promising what they cannot deliver, or salespeople extracting information without going through proper protocols. Also, if something goes wrong, such as a component that fails, we look at how they handle it. Does the supplier immediately react to alleviate the problem or supply parts that are needed? We evaluate their work ethic as part of the value they bring. Suppliers that rise to the top brainstorm with us, sometimes offering solutions that may not even benefit from. You develop a mutual trust with them and have confidence in their ability.”
A Different Kind of Teamwork
Confidence in the trustworthiness of a supplier reflects organization-wide focus on the customer and their requirements, according to Myron Moser. “We can’t do ‘business as usual,’” Moser said. “We train our sales teams to find a way that will help our customers reach their goals faster.” To nurture needed understanding and action, Hartfiel developed what it calls a Master Professional Sales Person program. Moser said the class helps to build the four characteristics of top salespeople in their industry:
- Doctors of human relations: Ethical, honest, sincere ways to build trust with others — to be trustworthy
- Product knowledge giants: Train them to be specialists in their products as well as their competitors’ products
- Master investigators: How to ask the best questions of the right people
- Minute misers: A simple, utilitarian way of spending time in the right place (Hartfiel has tools for helping salespeople to understand how to effectively spend their time).
Now used in all their four U.S.branches and ICS (a Canadian firm that Hartfiel manages and which has two branches in Canada), CPR focus is reflected in the company’s 23 sales teams’ day-to-day activities. CPR is being rolled out globally through the rest of the MDN (Mac Distributor Network), of which Hartfiel is a member. The MDN has 200 locations in 45 countries; personnel in all locations will be trained to apply CPR.
At Hartfiel, each team consists of technical inside and outside salespeople. Hartfiel’s criteria to be a technical inside or outside salesperson: at least a two-year degree in fluid power or an engineering degree plus experience.
“There’s been a great deal of change in our business and marketplace during the past several years. Instead of selling (which is ‘me-centered’), we focus on helping our customers to succeed,” Moser said. “You need to develop a sense of genuine curiosity about your customer, not just to understand their current position, but where they want to go, and how you can help them get there faster.” Organization-wide Change Cultivating this mindset throughout the organization is critical to success, Moser added. “Generally, you can boil it down to people gaining a feeling of competence for being good at something,” he said. “It’s not just the salespeople who should have this training and understanding. Our managers are working on identifying the Masters, the best in credit, purchasing, warehouse, and other functions. The idea is that if you have the right people in the right jobs and you can provide training to raise their performance, you are helping them to live a life of no regret.” He noted that clarity is needed about what is “good” as people strive to improve their performance.
“Our job is to find, get, keep, and grow excellent people,” Moser continued. “We also set benchmarks of accountability, to encourage our people to measure their growth,” Moser continued. Monthly state-of-the-company talks with employees and a profit sharing plan are among the means for building employee engagement at Hartfiel.
Suppliers and Beyond
CPR training extends to Hartfiel’s suppliers. “From our key suppliers we want the best value and also the technical assistance where we need it,” said Moser. “It’s a much more collaborative approach.”
Next steps include refining the CPR process. Hartfiel has developed software that will help the company and its customers determine where the opportunities are for improving cost and other factors. Eventually customers will be able to run their own reports by plant, machine, etc. to determine where they will target improvements.
“Lessons Learned”
Moser shared “lessons learned” about creating more successful partnerships with customers:
• Train employees on how your business works so they can help you make it better. The more they understand how the business works, the better they can help their customers.
• Truly try to understand customers’ goals, threats, and opportunities.
• Customer collaboration effectiveness cannot be done half-heartedly; it takes a senior leadership decision and commitment.
Closer collaboration with customers brings lower costs, less downtime, and other benefits, according to Moser. “Our goal was to clearly understand our customers’ business.
If we can clearly understand their goals and threats (what obstacles are in their way), we can usually find ways to help them reach their goals faster, and it has started to work,” he said. “It really fits with lean processes — improving quality, reducing waste and cost, etc.
“We’ve used the CPR approach with 55 companies and identified $108 million in opportunities as a result,” Moser said. “Of that amount, over $43 million has been implemented. We still have plenty of opportunities for applying CPR, getting better at helping our customers and ourselves. When you define what good looks like, it takes a lot of repeated effort to change, and it is not done easily or quickly.”
Asked about learnings from closer ties with Hartfiel and other suppliers, Joe Salo offered this counsel:
• Don’t assume that what somebody else is doing is wrong. You need to do more listening than talking with suppliers, for example.
• Put away your ego. You don’t know where the next good idea will come from. Gather ideas from many people.
• Communicate directly in a frank and upfront way, asking questions of each other when needed.
• Look for mutual benefit — for your customers and suppliers as well as your own company.
“Our suppliers and this closer approach have been a key part of our success in a challenging market — reducing cost and lead-times,” Salo said. “This helps us to maintain and grow market share. Suppliers’ help in new product development is important, too. We have a fixed percentage of our revenue that is applied to new products intended for the next three to five years of our business (we implemented that in the past eight years). It has been significant in retaining and gaining market share. We need our supplier relationships to continue getting better at it.”
For example, suppliers’ input has supplemented Douglas Machine’s new approach to building machines. They used to build the frame, then install mechanical components, then electrical components, etc. with time-consuming hand-offs. Now they can do pre-assembly, subassembly, etc. to enable them to move the line according to a set takt time. “Now we build a machine up to 70 percent on a bench before it gets to a frame, completely different from our previous approach,” Salo said. “It’s much more efficient. We’ve removed the waste of walking around the machine to get to a part or an assembly. Now people do the majority of work on assemblies at their bench.”
Although he’s happy with initial progress in better supplier links, Salo commented, “It’s good when we see our suppliers’ ideas implemented on our machines, but we’re still teenagers. We believe in continuous improvement (CI). We will never be mature to a point that we can be fully satisfied. Right now some of our CI is focused on lead-times, direct labor, and non-traditional areas of concern. For example, we have been receiving small components to our manufacturing lines with maybe 50 in a box, each one wrapped in a piece of plastic. We are considering whether to ask the supplier about putting 50 in one plastic bag to save time and cost for them and for us. Also, we are talking with a company that builds motors for us. The motors are shipped in crates with individual sections. We have worked out a design for crates that become a rack at an assembly station. When the empty goes back to the supplier, they refill it. Hartfiel and other suppliers are helping us to come up with new ideas. Every day, there are new ideas for reducing waste, to benefit us and our suppliers and customers.”
Innovation Lean Development – Sharpen Your Lean Development Process
Taking a fresh look at innovation, lean consultants at office furniture manufacturer Steelcase continue to share great news: Much of the waste in product/process development can be identified, measured, and prevented in the early design concept phase. Lean consultants Mark Swets and Tim Schipper1 shared learnings “how to” suggestions on creating and nurturing “a better way” for lean innovation implementation during an AME educational event in Grand Rapids, MI.
Steelcase began its lean manufacturing in 1996, extending this initiative enterprise-wide in 2003, explained Swets and Schipper. By 2005, an office lean team was launched. The company continues to extend and improve its lean practices throughout the organization, including innovation and new product development.
Value — Not Heroics — Needed
Rework spawned by complexity, variability, and other “enemies of value” hampers traditionally-managed development projects, Swets said. Results include the need for time-consuming heroics for unsnarling problems. Value stream mapping (VSM) uncovers wastes such as inaccurate project requirement specs, late involvement of suppliers and manufacturing, lack of prototyping and field testing, too many projects done concurrently, etc.
There is a better way, according to Schipper. He cited the principles of lean product development:
• Be innovative — look for multiple solutions to the development challenges facing the team, and keep the solutions sets open as long as possible during development.
• Multiple learning cycles — divide development phases into multiple short bursts of learning, with each learning cycle focused on a set of problems with clearly-stated objectives and a list of questions to answer.
• Rapid prototyping — within a learning cycle, test your solutions by building rapid prototypes that can test the solutions and validate whether or not the problem has been solved.
• Knowledge capture — at the end of the learning cycle, captures the answers to the question, “What did we learn?” Capture the learning in the learning cycle documentation.
• Stabilize the process — eliminate the flow interrupters caused when outside influences stop the development process. Recurring problems are called systemic, and should be eliminated. Identify these problems and eliminate them with problem solving and kaizens to the process itself.
• Apply lean management principles lean development is not only for the teams. Management needs to ask for and look for evidence that the team is doing all of the items above. Regular gemba walks by management reinforce lean development behaviors and practice on the team.
Rapid Learning Cycles
Using VSM, product development team participants at Steelcase highlight process steps that contribute value or cause waste. Their findings are used to measure new solutions against “as is” baselines, to make fact-based decisions, and to show where opportunity exists to remove recurring problems in development2.
Schipper also called for the use of an innovation “cube” or multi-faceted approach that pulls information and insights from key sources. The first “arm of innovation” describes what the user needs and values, while the second arm catalogs, generates, and captures ideas and solutions. Techniques to bring in outside thinking comprise the third arm.
In turn, these learnings can be used to define and refine new business models — new initiatives, markets ripe for expansion, new service models, new products, etc. Rapid learning cycles — quickly developing and testing the new initiatives — will generate understanding of needed next steps. Contrast this approach with traditional stage-gate project management that is characterized by hand-offs and delays (see “Learning Cycles and Traditional Project Management”).
Repeatable, Systematic Steps
Strategies recommended by Swets for creating an effective pace in development include using visual controls. Track project tasks on “accountability boards” that reflect weekly progress (phase deliverables against objectives). The learning cycle will provide the pitch for product development. The development team and management check on the pace at the end of each learning cycle, reviewing what was learned and what remains to be done. Put learning cycles into development phases, Swets counseled. For example, as a project moves from the concept phase into the development phase, multiple learning cycles can incorporate plan/design/build/test/review steps and related results. As the project enters the implementation phase, project participants graduate to tool and pilot activities, finally achieving flawless execution (no rework!). During each learning cycle (iteration) along the way, project participants have gained needed knowledge by asking:
• Where are we?
• Are we there yet?
• How do we get there?
Identifying gaps and learning how to progress to the next level requires patient attention to documented progress and challenges. It’s not jumping ahead to the next step to “save time.” It’s all about faster execution that results from the elimination of future rework and design changes during execution3. Learning cycles reflect a clear understanding of objectives and problems as well as identification of potential solutions and related resources. They are fueled by a continuous flow of rapid learning during prototype building and testing/review. Creating prototypes used to test learning cycle questions is a way to reduce risks in development. At the end of each learning cycle, project participants: 1) capture knowledge, 2) integrate with other subsystems as needed, 3) plan the next cycle, and 4) consider any flow interrupters. The final step for each learning cycle is an integration event. Swets and Schipper said this event should include:
• Key lessons documentation
• Determine whether objectives have been reached
• Keep a milestone checklist as a goal
• Map out the next learning cycle
• Plan and ask for resources for the next cycle.
Repeatable, systematic steps within these cycles are achieved within a planning framework. Steps in the learning cycle process are shown in “Learning Cycle Process” below. Planning across multiple disciplines (marketing, design, supporting teams, sub-teams by elements) incorporates regular management checkpoints.
Innovation at All Stages
Schipper and Swets called for a mindset that’s open to innovation throughout all stages of process/product development. The plans and strategies they outlined for workshop participants are tools that can be employed and refined over time. To gain the most mileage from new innovation strategies, they suggested:
• Look for creative ideas and solutions by closing gaps discovered in various development stages.
• Enable this discovery by using innovation techniques and lean development learning cycles.
• Minimize rework and defects by innovating across domains (customer, supply chain, operations, and design).
For example, project team members can ask “What?” questions designed to highlight ways to drive design that meets customer needs, maximizes value (user needs and attributes), and minimizes design wastes (complexity, precision, variability, immaturity, etc.). Don’t forget the
“How?” questions that will generate cross-functional team involvement in the early concept stage of the project, generate multiple concepts, and help to measure concepts against value and waste.
Are We Making Progress?
Using lean innovation strategies nets significant benefits, said Swets and Schipper. Among the rewards, as compared to traditional development practices:
• Multiple projects finishing in 8 to12 months
• Hitting cost targets more regularly
• Projects canceled earlier
• More testing and user validation completed.
The pace of discovery is maintained by outlining objectives and questions at the start of each learning cycle and then answering these questions (and documenting learnings) within the cycle. Think of crossing the finish line in a race, then pausing to reflect on what you’ve just learned in that race, and considering how to apply what you’ve learned to the next race. Now you’ve got the lean innovation idea. Run with it!
Footnotes:
1. Mark Swets and Timothy Schipper wrote the book, Innovative Lean Development: How to Create, Implement, and Maintain a Learning Culture Using Fast Learning Cycles published by Taylor & Francis; Productivity Press in 2009. They can be contacted at info@innovativeleandevelopment.com.
2. Mark Swets and Timothy Schipper, “Single-Point Lesson,” Target First Issue 2010, pp. 46-47.
3. Swets, Mark and Timothy Schipper, Innovative Lean Development: How to Create, Implement, and Maintain a Learning Culture Using Fast Learning Cycles, Taylor& Francis; Productivity Press, 2009.
