How springmakers apply lean principles to today’s market challenges
By Wallie Dayal, Dayal Resources

It makes no difference at all whether it is called “lean manufacturing” or “lean production” or “just plain common sense.” For springmakers, necessity has been, and is, the mother of invention. Nothing less than resourceful agility is required in the increasingly tight space between supplier and customer. Today, no springmaker can afford production that is less than superbly efficient, to produce anything but the best quality product with minimal waste or rely on a supply chain that is not finely honed. But it does not end there.

For German springmakers, it was an advantage that the media informed the public in great detail about price increases in the steel industry. As a result, neither customer nor supplier could possibly claim ignorance. These increases affected everyone and highlighted interdependence.

When wire suppliers insist on minimum order quantities, what should a springmaker do when the minimum order quantity makes no economic sense at all? When customers offer sympathy instead of a willingness to absorb increases in wire prices, how should the springmaker pay his bills?

Today’s realities are daunting, but it is a blessing that most customers still value the quality of their trusted suppliers. After all, without quality springs the products in which they find application would suffer and pose safety risks. Perhaps the only constructive way to master these latest challenges in the spring industry is by maintaining relationships, sharing tips and insights, and by collaborating – even perhaps with competitors.

Anna Longoni, Member of the Board of Directors

Mollificio Lombardo spa, Carvico, Italy

Next year, the 70 employees of Mollificio Lombardo will celebrate the company’s 75th anniversary. While this year has been a good year and revenues will be close to $9 million, managers of this family business have no illusions about the challenges to which the global economy subjects every springmaker.

In an environment of increasing raw material prices, Mollificio Lombardo is blessed with a number of regular customers whose needs are predictable. This simplifies the procurement process and supports advance purchases to avoid any bottlenecks. Rare specialized orders of wire could pose a potential problem, especially if they are for an important customer. However, this has not been a frequent problem. The Longonis have close relationships with many of their Italian competitors. Some of them make specialized springs for each other. Longoni believes that if, on a rare occasion, it would become necessary to borrow wire that is unavailable on the market, these relationships would be able to bridge the gap.

On the other hand, increased material prices tend to put pressure on springmakers’ margins in cases where customers signed contracts at the beginning of the year. These customers may express profound sympathy about the increase in wire price, but the additional expense remains with the springmaker. “Perhaps,” says Longoni, “it is also a question of our size. We are too small to wield power and influence with either our suppliers or our customers.”

At the same time, Longoni feels fortunate about the loyal customer base that depends on Mollificio Lombardo’s quality product and good service, especially as it is quite difficult to gain new customers in Italy where competition from other springmakers is stiff. A few customers communicate with their springmaker through a Web portal. This is very useful and lets Mollificio Lombardo know what the customer needs and expects. Of course, it also represents an extra step in the workday, as the customer representative must check the customer’s portal at least once a day.

Ever since the company received its ISO 9001 certification in 1995, waste has been at an absolute minimum. Every step in the manufacturing process is regularly reviewed to keep it that way. And approximately every six months, the company’s managing director and production manager officially review the springmaking production cycles for time expended, output, quality and waste. Problems that are identified are addressed immediately. Sometimes, new and more efficient standards are a byproduct of these surveys.

While Italy is a member of the European Union and benefits from the shorter distances in Europe, its springmakers and other industries are burdened with uniquely Italian laws that make reducing the workforce extremely difficult in Italy. When the workload slackens, it is a challenge to keep the workforce motivated. On the other hand, peaks in workload can be handled with surprising ease.

The Longoni family keeps its springmaking operation lean without the help of consultants. But the challenges of the future are daunting. The mere thought of potentially losing customers who have relocated to low-cost regions of the world could cause sleepless nights for any springmaker. But that fear may be unfounded. Customers value the benefits of quality and service. “It is fortunate that value continues to be more important to spring customers than a few price points,” says Longoni.

Ralph H. Eibach, Managing Director

Heinrich Eibach GmbH, Finnentrop, Germany

A key competitive element of niche springmaker Heinrich Eibach GmbH is its ability to give the customer what he wants when he wants it. That is why material procurement at the company is a finely honed process. The company keeps minimum yet sufficient quantities of heavily used wire on hand at all times. The same is true for wire with long delivery cycles. Other materials are ordered just-in-time to customer specifications.

But it has happened that Eibach had to decline a customer request because the customers’ needs and the minimum order quantity of the raw material were vastly different. The customer request required one kilo of wire, and it made no sense to order the minimum order quantity of 1.5 tons of wire to satisfy the request.

“As a rule,” says Eibach, “wire suppliers do not strictly adhere to the quantity ordered, especially in the case of wire orders of less than one ton. It is not uncommon that 560 kg of wire are delivered instead of the 500 kg ordered.” Heinrich Eibach GmbH accepts the excess and pays for it as well. In an environment of rising commodity costs, this has turned out to be an advantage in almost all cases.

Joseph Varoqui, Chairman & CEO CGR Group

Comptoir Général du Ressort, Cedex, France

A quarter of a century has passed since Varoqui visited Toyota in Japan. At the time, he was managing a bus manufacturing plant for Renault. What he saw in Japan intrigued him, but he could not stop wondering why the Japanese were so willing to explain every detail of their lean manufacturing operation.

Today, Varoqui runs CGR operations in France, Spain, Poland and Mexico. Lean manufacturing (Europeans call it “lean production”) is second nature to him. It is the process on which he relies to meet CGR’s mission of helping his company grow and his customers become more productive. It is how CGR attains high quality and a very low defect rate. He concedes, “Our challenging times incessantly demand that we try harder, and try again and again.” But to him this is not a chore. On the contrary, far from being distraught about the continuing need to improve, he simply says, “Anyone can always improve; that is not the right question. The real question is: ‘How much can we improve?’ ”

CGR operations monitor progress on a daily basis using the QRQC process. This process, Quick Response Quick Correction, borrowed from the automotive industry, is paying dividends. Five years ago, the recorded defect rate may have been 2,000 parts per million. Last year it was recorded at 150 ppm, and this year it is around 15 incidents per million parts. As a result of this dramatic decrease, controlling defects at CGR is no longer process management. At this low rate of defects, that would consume more resources than it could possibly return. Nevertheless, CGR does not ignore one single incident; it has simply transformed its process approach to incident management.

Like all springmakers, CGR struggled with skyrocketing material prices two years ago. The price of steel wire that had previously cost between 500 and 3,000 euros per ton increased by 400-500 euros per ton (an increase of about $500-$630 per ton). Naturally, customers were not too eager to accept a price increase. Tough negotiations ensued, and some customers temporarily oriented new business to competitors. Margins suffered. Although 2004 and 2005 were painful, they could have been much worse had it not been for foresight. Varoqui was able to stock up on steel wire inventory before those dramatic price increases became effective. But the rise in stainless steel, thanks to the steep rise in nickel, caught him by surprise as well.

Today, he believes that the worst of the commodity price rises are history. Once again, he buys his wire just-in-time and feels no need to stock up. Instead, he places a great deal of emphasis on strategically aligned relationships with his suppliers. Actually, it goes beyond that: CGR’s wire suppliers are “quasi-integrated” because monitoring of quality does not stop at CGR’s doors; it extends to suppliers and includes logistics charts, as well. That keeps over-deliveries and under-deliveries in check and creates strong interdependence. CGR does not order wire by ton or kilogram. Orders are placed by truckload and are thus defined by truck capacity.

Far from seeing the challenge of lean manufacturing as a never-ending race for decreasing returns, Varoqui thrives on it. To him it means production with fewer resources and less effort. Perfection is not the ultimate goal. As soon as near perfection is attained on the aspect of production that is in focus, it is then time to shift to another aspect of production and restore it to near perfection. In this manner, continuous improvement can be achieved while sidestepping the painful attainment of the last percentile to perfection that consumes more resources than it produces.

Like many Europeans, Varoqui has practiced lean manufacturing for decades and applied these principles to changes in the business environment over the years. But he wasn’t long into his lean journey before he figured out why Japanese manufacturers were so willing to explain their method and give away their competitive advantage: There is a big difference between talking the talk and walking the walk.

Reinhold Becker, Technical Manager

Wilhelm Becker GmbH & Co. KG, Mettmann, Germany

In 2010, technical metal goods supplier Wilhelm Becker GmbH & Co. KG will celebrate its 100-year anniversary. Initially, the company supplied springs to the weaving, textile and white goods industries. Over the years, its production facility and customer base expanded to several times its original size. Nowadays, Wilhelm Becker produces springs in two facilities extending over 125,000 sq. ft. and serves the automobile, garage, furniture and electrical industries. It is one of the most respected local employers and is located on a street named after its founder. Since 1993, Reinhold Becker (no relation to the founder) has been leading the company’s nearly 200 employees. And last year, the company achieved $25 million annual revenue. Thanks to globalization, Wilhelm Becker springs can now be found on four continents. Regina Golchert, marketing manager, likes to say, “We spring-load the world.”

As a supplier to the auto industry and due to the trickle-down effect of competition, Wilhelm Becker embraced lean production at the same time the auto industry in Western countries integrated these concepts that emanated from Japan. They provided an opportunity for fine-tuning the production of high-quality springs. Ultimately, they contributed not only to satisfying customers, but also to making them happy and loyal. At this company, applying new ideas and logistics was welcomed because management found lean manufacturing concepts logical and helpful – even useful in private life. No one could argue against quality.

In fact, quality is the first and foremost driver at Wilhelm Becker. Reinhold Becker would never purchase inferior raw material and thereby risk compromising the quality of springs. For him, quality is not an afterthought or post-production check. The primary responsibility of each of the 200 employees revolves around quality, which even precedes production. Twelve quality assurance employees focus on it full time. As a first step, they identify and test all possible eventualities and problems of a production run prior to any production. Training is ongoing and thorough. Machine operators are experts who are keenly aware of quality standards and tolerances. Each one is authorized to stop production immediately if he notices a deviation. Should this happen in spite of pre-production testing, the quality team would spring into action immediately, identify the source of the problem and eliminate it as quickly as possible. Due to careful pre-
production planning, this happens very rarely, and waste is minimal at Wilhelm Becker. Primarily, waste consists only of the samples that were prepared for up-front testing. Moreover, keeping waste to an absolute minimum is a matter of pride among the one-step springmaking specialists.

Wilhelm Becker is a strong proponent of excellent long-term relationships with suppliers. Verbal and written communications go back and forth constantly. Unlike customer communication, the supplier communication channel is not yet automated, but this does not appear to be an urgent need.

Although raw material prices have risen sharply, Whilhelm Becker’s cooperation with suppliers has always been mutually profitable, and the company’s orders for spring steel have been filled as needed. As a precaution, the company built up inventory for a short while to ensure supply two years ago. Today, Wilhelm Becker is focusing on maintaining its good relationships with suppliers. “Having a good relationship with suppliers is very important,” says Becker. “The faithful customer will be served first in times of bottlenecks.”

For German springmakers, it was an advantage that the media informed the public in great detail about price increases in the steel industry. As a result, neither customer nor supplier could possibly claim ignorance. These increases affected everyone and highlighted interdependence. It was this interconnectedness that often drove the resulting negotiations in the direction of workable solutions. The prospect of mutual advantages and a willingness to cooperate proved to be the keys. Moreover, proximity of European countries fostered the awareness that lasting success demands cooperation.

As is the case for many springmakers, Wilhelm Becker’s customers are the driving force behind its international reach. Customers need quality springs even in new low-cost production centers at remote locations. Reinhold Becker is optimistic about the future. His springmaking portfolio is well diversified, and a downturn in one part of the business would most likely be offset by an upswing in another. He sees lean production concepts as an opportunity to stay ahead of the curve. Wilhelm Becker thrives on the never-ending challenge of evaluating and considering fresh options and new approaches.

These insights represent only a small sample of springmakers’ struggles in the age of globalization. Although each springmaking operation is uniquely shaped by its proprietor, many challenges are similar from one shop to another.

Overall, springmakers are “can-do” people. They have proven their mettle in the toughest of times, and their resolve and energy will guide them in the future. Most springmakers know what it takes to stay afloat without any advice from outsiders. In the final analysis, it is their attitude and resourcefulness that fosters success and prosperity, even against the odds.

Wallie Dayal is president of Dayal Resources Inc., a Chicago-based firm that helps initiate and support American-European business. She is a business consultant, speaker and writer. Readers may contact Dayal by Web site at www.dayalresources.com