When this New Jersey-based injection suffered a critical loss of business, it turned to its state Manufacturing Extension Partnership program for help. Now the company is a competitor on the world market.
Culture change can come in many forms. While itβs often driven by the need to improve poor production techniques or simply by new leadership, sometimes it takes place when a company learns the hard way that its business strategy is about to self-destruct. This is what happened to Sebastian Murray, president of FPI Thermoplastic Technologies, a Morristown, NJ-based plastic injection molding company, after a 1999 meeting with a key customer turned his world upside down.
Sebastian Murray (above right ), president of FPI Thermoplastic Technologies. He's shown with long-time workers in the company's Morristown, NJ, facility (center), and Bob Loderstedt (above left), president of the New Jersey Manufacturing Extension Partnership (NJMEP), based in Newark. |
Then came the letdown. When Murray and his brother Sam, a co-owner, were summoned to the retailerβs headquarters in 1999, they assumed the call was to attend a standard update meeting. When they arrived, however, Murray says he had a bad feeling when the group βdidnβt meet in the layout room,β referring to the retailerβs store-like setting where product placement is determined for upcoming selling seasons. An executive took them to a cubicle instead, says Murray, βand told us, βIβm sorry to inform you weβre eliminating your product from our shelves and will be sourcing everything we buy from you, from China.ββ
Even today, Murray struggles to describe the shock of hearing the news and how he and his brother tried to convince the executive to reconsider. He calls the encounter βprobably the most undignified moment of my life.β The two headed home, exasperated because they believed they could have beaten the Chinese pricing if given the chance, and scared because, in the blink of an eye, a third of their business disappeared.
As the severity of the blow sunk in, the Murrays realized they were ill-prepared to deal with its consequences. Since taking over the business from their father in 1995, the brothers had experienced only growth. They had never needed to make significant changes in strategy, in their 85,000-sq.-ft., 1940s-era facility or in FPIβs tenured workforce. They had also never worked anywhere else. As a result, the loss of income βwas a major threat to our business,β says Sebastian, and not only because of the brothersβ inexperience. In addition, competition from other injection molders, especially from overseas, was intensifying. Now fully responsible for the livelihoods of the plantβs workers and extended families, the two agonized over exactly what to do. But their luck had not run out. Help soon appeared, literally on the companyβs doorstep.
βBy happenstance,β says Murray, βbecause we were this supposedly successful company, the director of our county chamber of commerce came here days after our trip with a group of local business people to see how we could work together.β Among the bankers, college officials and others in the group was a representative of the New Jersey Manufacturing Extension Partnership (NJMEP), part of the federally funded MEP program run by the Dept of Commerceβs National Institute of Standards and Technology that helps states develop and improve their manufacturing bases (see sidebar). The rep happened to have plastics-industry experience, βSo of all the people there, I connected with him,β says Murray.
The rep outlined how MEPβs low-cost, broker model of manufacturer partnership programs could be a win for both FPI and the state of New Jersey. He said NJMEP was prepared to offer direct assistance in as many as six key business areas, using both on-staff experts and pre-approved outside consultants. The state could also help with low-cost refinance packages. And it could step in immediately. Murray was sold. After the meeting he contacted Bob Loderstedt, NJMEPβs Newark-based president, and engaged the group to help them prevent an FPI meltdown. When Loderstedt arrived at FPI, he says he saw plenty of good things about the company that the Murrays simply needed help to recognize and develop.
βThis is not about incompetent management,β says Loderstedt. βAnd the plant was not archaic. Itβs about what often happens to manufacturing companies at some point in their evolution, where they forget to continually diversify the customer base. Itβs about talented people who become tactically involved in the business and donβt periodically step back to look at it and take measurements. When we came in,β he says, βwe saw a good manufacturing company with good products, that had the ability to innovate, but got whacked over the head with a two-by-four (at its customer meeting). So we listened, and we said, βYou need us to help you step back and say, What do we do? Where do we go?β
Loderstedt says the MEP approach worked for FPI and works for other small manufacturers because it costs less than independent consultants, it does not push particular programs or services, and because it takes a holistic approach to solving a manufacturerβs problems. βMany times, consultants will focus only on getting cost out of the operation,β he says. βWe do more than that.β NJMEPβs strategy, over time, addresses six key areas of operation: strategic and financial; product-succession planning; human resources; manufacturing; IT; and distribution and marketing. Loderstedt determined that FPIβs most pressing problems were strategic and financial.
Sebastian Murray, president of FPI Thermoplastic Technologies. |
At the same time, NJMEP worked with FPI to improve cash flow and cut unnecessary expenses. An outside warehouse operation that was costing the company $40,000 a month was the first to go. βWe shut that down and sold our excess inventory,β says Murray. βWe then put in place inventory-control methods in this building that further improved cash flow. Right away we improved our inventory turns from once every three months to once every two months.β
Eliminating the warehouse also meant production strategy needed to change. But the Murrayβs had no concept of how good or bad their operation really was. They had never measured work processes or results, and didnβt know exactly what could be accomplished by their workers or equipment.
βOne of the first questions Bob asked was, βWhat are your sales per employee?ββ says Murray. βSo we had to figure out what that was. Then he told us there were industry standards for this, so we found the plastics-industry standards and checked them, which we hadnβt before, and found that sales ran from $75,000 per employee to $125,000 per employee. Ours were below $75,000 per employee, which meant our sales were lousy and we had too much labor.β
The solution NJMEP recommended was to phase out the companyβs traditional batch-production methods and replace them with lean-based operations.
βBob and his group brought in some lean consultants, we studied the plant floor and focused on two major operations here,β says Murray. βThese were our point-of-purchase [p-o-p] cosmetic displays and our fire safety and security group [smoke-detector assemblies and related products]. We changed product flow and labor for these two operations and quickly cut costs by 15% on the p-o-p line and 10% on the other. Because of these improvements, we were able to expand those customers dramatically,β he says, noting that FPI now makes major new products with both of them.
Murray credits the implementation of lean manufacturing as having the most significant impact on FPIβs salvation. It was also the companyβs great good fortune to have a long-time staff that understood the companyβs dilemma and was able to make the changes work. βWe accomplished lean through our operations group,β says Murray, βwhere we have individuals who have been with us 15 to 20 years in a supervisory capacity. It was just a matter of rolling up our sleeves, going to the floor and implementing change, and managing it on a daily basis with competent people.β
Murray also credits the companyβs union (the International Chemical Workers) for helping smooth the delicate process of transitioning employees to the modern work methods. βTheyβre part of our program and strategy,β he says. The union helped its members weather the inevitable cutbacks at the company, when FPI trimmed its 1999 staff level of 180 to under 130. As its improvement efforts began to bear fruit, FPI was able to rehire many of those who were laid off. Now, the employment level is up to 150, and sales per employee at an all-time company high of $133,000.
While the shift to lean was the key factor in FPIβs rebirth, another important element was its ability to develop new business. βWe knew that in order to survive, we had to compete with China and the Far East,β says Murray, meaning it had to be able to quickly deliver high volumes of product at the lowest cost. Murray decided to push the company in three new directions: It took on additional complex work (by performing assembly functions for its fire and safety customers as well as molding product); it increased the fast-turnaround work required by retail chains (and now weekly ships its injection-molded lipstick displays to some 30,000 drug-chain outlets); and sought to serve food-industry customers, a new market for the company. But the products FPI would make for the food industry
βThis business required us to automate,β says Murray, βand to institute robotics.β Thanks to its NJMEP connection, FPI was able to refinance its debt, which allowed the company to invest in automated molding machines and robotic arms that remove molded product from machinery and place it in position for employee finishing and QC. βWe used to do this all by hand,β says Murray. βBut by eliminating this component, we lowered the cost, improved the cycle time and improved quality.β
An FPI worker assembles smoke-detectors for a customer. The company had long molded the plastic shells, but recently added assembly to its services in order to become more competitive. |
FPI is now well into product-succession planning, the third of MEPβs six-sided strategy. βTheyβve demonstrated the capability to work with clients to develop new products as well as to extend existing product lines,β says Loderstedt. βIn fact, they are probably as close as they can get right now to leading their clients as opposed to following. No one really gets that far ahead, but they understand continuous improvement and that they have to continue to be low-cost if theyβre going to keep their large accounts. They sit, they listen, they talk, and they come up with ideas.β They also measure.
βThe most important thing we werenβt doing before was measuring,β says Murray. βNow, we measure every aspect of this business: sales, receivables, labor, efficiency, every aspect daily. And itβs not just me and Sam. Weβve spread that concept throughout the operation. All the supervisors and all the managers know to make these daily measurements.β
Murrayβs next goal is to complete FPIβs ISO 9001-2000 certification, which he expects will occur in December, then to focus on encouraging FPIβs customers and suppliers to make the same kinds of improvements FPI has. Loderstedt says NJMEP also βhas some assessment tools that are not that costly that can tweak their thinking about HR, and how theyβll want to maintain, motivate and attract employees as the business goes. Youβre never done,β he says, βbut we can point to areas where weβve had impact, and other areas where we need to start discussions.β An issue in the plastics business that will keep him firmly focused on continuous improvement, says Murray, is the volatility of oil prices. βBecause plastic resin is tied to the price of oil, rising raw material costs is now our biggest threat.β
Murray stresses that virtually all of the companyβs future plans include their relationship with NJMEP. βNJMEP taught Sam and I how to run this business,β he says, βand our relationship will be ongoing. We go from one project to the next.β He says he speaks regularly with Loderstedt. βIf you do it right,β says Loderstedt, βyouβre continually in touch. We believe in transformation. We donβt want to be transaction based. We wonβt go into a company, introduce value-stream mapping, then go away. It may be a project a year or every few months, but we are helping to transform that business.β
Loderstedt says the Murrays are a good example of how small manufacturers can benefit from MEP. βThe most important transition that occurred here is that they have grown professionally,β he says. βI would put Sebastian up against any CEO in small manufacturing. He understands how you have to touch the business and have the systems in place. Now, Sebastian is driving the business,β he says, βwhereas before, the business drove him.β