Manufacturers Find Fat Rewards for Going Lean

FOR MOST OF ITS 55-year history, Jezek Tool & Machine Co. LLC operated its manufacturing business in a traditional manner—producing as much product as possible in a single job run so the company could cover its inventory, setup and other costs.

But today’s globally competitive, low-margin market does not allow companies to take that approach anymore, say experts. Instead, manufacturers like Jezek are turning to lean operating methods pioneered in Asia that can slash costs by 60 percent or more by cutting waste and wringing value out of just about every process in a business.

“Staying in business means satisfying our customers,” says Mike Muschiatti, vice president of Jezek, a family-owned company in Elizabeth that makes components like precision screws and bolt housings for the aerospace, computer and other industries. “Our customers don’t want to hold inventory, so fewer of them come to us with big orders. Instead, we get a lot of just-in-time requests that seek a short turnaround with low-volume runs, perhaps 50 parts per order or less at times.”

Muschiatti’s father, Al, worked at Jezek for about 40 years before buying the company in November 2002. During that time manufacturers shunned low-volume orders, and a request for a quick turnaround usually carried a premium charge because it meant someone else’s order would have to be pushed back.

Each job took a long time because an individual run typically meant moving around supplies and engaging in complicated, time-consuming equipment setups that had to be customized for a particular product.

Manufacturers would try to produce as much product as possible in each run as a way to amortize, or spread, the fixed setup and other costs over a high volume of finished goods, effectively reducing their per-item costs.

But as Muschiatti and other manufacturers have discovered, customers today don’t want to tie up their capital by paying for goods that may sit on shelves for months until they’re sold. Instead companies use increasingly sophisticated mathematical tools to predict their own customers’ demand, and then place bare-bone orders designed to narrowly meet the anticipated sales. Wal-Mart is perhaps the most famous example of this approach, turning over its entire multibillion dollar stock of inventory an estimated eight times a year.

“A lean manufacturing approach aims to eliminate waste in every part of a business’ processes,” says David Paino, a senior consultant with BMA Inc., a Cherry Hill consulting firm.

Paino helped a small company in Marlton that remanufactures phones and other business equipment to design and implement a lean approach.

“We redesigned their shop floor to make it more effective and showed them how to cut their inventory,” he says. “Essentially, we showed them how to do more with the same level of resources, which helped the company to reduce costs and increase its profits.”

But implementing a lean approach is only a first step, he adds.

“Lean is a journey, not a destination,” says Paino. “A company should periodically revisit its operations with an eye to cutting out more waste and finding better ways to accomplish things.”

If that sounds like an Eastern philosophy, it’s because a Japanese car company, Toyota, is generally credited with developing the concept, says Gerald Najarian, an account manager with the New Jersey Manufacturing Extension Program (NJMEP), a Morris Plains-based nonprofit that provides consulting to small-to-medium-sized manufacturers.

“The U.S. figured out how to squeeze all the inefficiencies out of the manufacturing process itself, but did not tackle the associated issues like replenishing inventory and reducing the wait time between receiving an order from a customer and delivering the finished goods,” he says. “We think a company should operate like a NASCAR pit crew—functioning like a kind of ballet that gets the vehicle in and out in an unbelievably minimal amount of time.”

The challenge goes beyond simply implementing a lean approach, notes NJMEP President Robert Loderstedt.

“Once the new processes are in place, it’s easy to become complacent,” he says. “Instead, a company has to constantly review its lean approaches and keep finding new ways to clear out waste and add efficiency. It’s a never-ending cycle.”

It’s a lesson that Jezek Tool’s Muschiatti takes to heart.

“Today, it’s the small manufacturers like us who get pressured,” he says. “We try to cut costs by using efficient production processes, and conserve capital by, for example, not ordering raw material until the day we need it. But I still have to pay my supplier upfront, and then I can’t bill my customers until the goods are manufactured and delivered to them. We may have to wait another 30 to 40 days after that until they actually write a check to us. Any way we can reduce those waiting times is helpful.”