John Gledhill seemingly had a good problem on his hands. As VP of Continuous Improvement at Quanex, a leading supplier of window and door components, he was to increase EBITDA for its recent acquisition: Woodcraft, a top supplier of doors and components to Original Equipment Manufacturers (“OEMs”) in the kitchen and bathroom cabinet industry. An established industry leader, the new acquisition presented no burning platforms, no hemorrhaging losses, no runaway trains. Yet, upon closer inspection, John would learn that helping an already successful company go from good to great comes with its own unique set of challenges…
RECENT HISTORY AND SYMPTOMS
The Woodcraft acquisition closed on November 1st, 2015. The deal was an especially good fit seeing that Quanex had limited growth opportunities for merger and acquisition and had been looking for strategic adjacencies to expand. Seeing that both companies sold to OEMs, the new formation also enabled Quanex to apply its operational skills in a similar business situation it was already familiar with.
Since being founded in 1945 in St. Cloud, Minnesota, Woodcraft had experienced moderate growth. Starting in 1978, with the help of private investment groups, it began purchasing and building additional facilities and by 2012 owned and operated 13 production facilities and seven distribution locations throughout the United States, Canada and Mexico. “Woodcraft had previously been owned by private equity people and financial investors – not operating investors,” John said, laying out a fundamental difference in approach. “They had been squeezed for cash and capital and had not necessarily done a lot of things we would like to do as an operator.” Overall, capital expenditures were not especially high on the priority list and as Woodcraft grew older, so did their equipment. What’s more, economic conditions had led to growing customer demands in both speed and quality.
As soon as the acquisition was consummated, a team of people began to look at integration on all levels. “Obviously, the finance people have a lot to do, and there was a major safety initiative to bring them up to Quanex’s extremely high levels of safety,” he said. In addition to the financial and safety issues, there were those of Continuous Improvement, more specific to John’s role. “We had to get all the systems converted and then figure out how to add value to the business and make more money through continuous improvement – that‘s where I came in,” he said. “We knew from our due diligence before the purchase that there was great opportunity. So, now as an Operational Investor, we wanted to consummate those opportunities, the flagship plant in St. Cloud being the place to start.”
The main plant was split into two halves: one for the stock business and the other for the custom business. The latter was made up primarily of the small cell “Kitchen-At-A-Time” (or KAAT) business, focusing solely on made-to-order products with short lead times — a perfect reflection of the market’s evolution from mass production to mass customization over the last 10 to 15 years. “You don‘t build hundreds of thousands of the same size of stock anymore – the market is highly customized so that homeowners select a unique set of cabinets for their kitchen,” John explained. “With Kitchen-At-A-Time, we deliver just-in-time a mixed model set of doors for home kitchens. And with that comes very demanding delivery requirements from less than 24 hours to 48 hours, and in many cases, incorporating 40+ species of wood and hundreds of styles of molding — operationally, an extremely complex challenge.”
“The problem was that over 15 years KAAT had been a huge business success, providing the market what it wanted. But 15 years later it no longer was just a little cell, but half the factory, and it was struggling…We had a lot more business than before and it was time for a 2.0 or 3.0 version of this little cell,” he said. “I mean, holy mackerel! We were making thousands of doors every day!”
If It Aint Broken…
Much of the challenge grew out of determining exactly what to change. “Even though it was not a full-scale turnaround situation or even especially broken, we were still trying to fix it. Seeing the struggles with cost and quality, we decided on a reboot, a thorough front-to-back update.” John said, “There was simply a lot of opportunity… “a word John would repeat over and over when detailing the operational challenges.
A vibe of “if it aint broken, why fix it “naturally carried over to a Woodcraft staff who had long guided a very successful ship on its own prior to the merger. “The staff knew the business really, really well and could tell you everything about wood and how to build a door,” said John, always quick to commend the Woodcraft staff. But the initial attitude was understandably more one of skepticism than willingness. “People felt ‘if it aint broke, we don’t need to fix it.’ No one was really thinking of anything new anyway because it has always been done the same way…. All said, John still recognized a desperate need to improve quality, reduce labor and improve velocity for improved on-time delivery.
ROOT CAUSES & RALLYING CRY TO ACTION
By the end of 2015, a few months into the acquisition, Woodcraft was under serious pressure to improve the quality and delivery of their products. A large focus of their needed improvement was in their KAAT products, which had grown from only being 20% of their business at their St. Cloud cabinet door facility to over 50% in just a few short years. Whereas Woodcraft was accustomed to large lot sizes for their wholesale order, the Kitchen-At-A-Time work was highly custom, requiring numerous changeovers and specialized handling of materials being run across aged, slow machinery. In early 2016 John tried to rally the troops with some new methodologies.
“We chartered a project for improvement, but no one really had the time to work on it and skills were lacking,” John lamented. “We did identify some specific problems, including a bottleneck operation, as a result of a Value Stream Map, which confirmed more rigorously our original observations about velocity and inventory.” Yet, by the end of March the team was still searching for answers. “We could not really generate a future state vision and did not have the horsepower to do enough with the analysis,” he said. “We were very honest with each other – no shame, no harm, no foul. It was just a massive project that required a lot of skills, resources, and insights, and we just weren‘t gonna get it done!” Seeing great opportunities slipping by, John recognized the need to seek outside help.
To that end, Woodcraft reached out to SBTI, teaming up with VP Bob Jeske with whom he and Quanex CEO Bill Griffiths, had shared a more than 20-year professional relationship. After going over the basics, John requested a proposal focusing on quality, cost and a new Lean Management System. “We had noticed as operators that some of the best Lean practices had not been applied and initiated the engagement in May 2016 with SBTI’s Jason Moore on the ground as a consultant, installing a Lean Management System. We had a cost reduction opportunity through productivity improvement and wanted to get some quality improvement to help with costs.”
After initial assessments, they focused on improving operations at the bottleneck in the Stile and Rail (S&R) department. Most of the root causes determined by the work they did together centered on improving:
• Overall Equipment Effectiveness (OEE) – machines were running inefficiently
• A poor factory layout – too much walking around
“There was too much carrying of parts, looking for parts, picking parts, moving parts from one machine to another. There were a number of old crummy machines with long set up times, and a lot of small orders,” John explained. “The bad layout and the inventory made it hard to pick the parts and put the parts together, and we had half the parts on one side of the building and half on the other side of the plant.”
Together with SBTI, the team initiated a number of short-term improvement projects, including a Kaizen event to improve flow. While focusing on the identified bottleneck area a series of other steps directed at getting more production included:
(1) Improving the layout by moving machines closer together to create small cells
(2) Redesigning staffing to keep people at the machines, reduce walking around
(3) Improving the computer scheduling system to simplify grouping, order picking
(4) Acquiring new equipment
“In short, we made these changes, while looking at quality. Our team was talented and experienced, but it didn‘t know what it didn‘t know. SBTI helped us look at things differently, to think outside the box, and to drive harder for things inside the box, where we just needed to buckle down and get it done.” John said. Among other initiatives, a DMAIC study not only improved quality but engaged the team, helping the team arrive at a higher level of analysis than before and open the windows into a whole new vista of opportunity it had never thought about.
Like other successful transformations, the more the team was engaged, worked together and actually participated in the positive changes, the more the skepticism of an “aint broke, why fix it” mentality changed to one of embracing the new opportunities. There were multiple parts to the engagement, such as installing the Lean Management System so there were now several charts and tier meetings, but everyone was engaged with the voice of the process as called out by the visual management in the Lean Management System. Much of the team’s positivity grew out of the tangible results from new methodologies – the Kaizen events and new layout simply improved productivity. “We continue to work on process capability because that is a huge undertaking — a lot of machines, different parts, dimensions and tolerances — so that remains a work in progress but the team is excited and engaged!” John said with a laugh. “I met some of them recently and they asked ‘What are we doing next?’ bubbling over with ideas – quite the opposite from a year ago….”
As to what allowed the team to buy in, John cited time and respect for the process and each other. “It just took time for people to realize that we were genuinely interested in helping, we weren’t blaming or criticizing, but treating them with respect. After we got some tangible improvements, then they realized ‘Wow! We can be better!” he said. “So often people are not listened to, and problems never get surfaced to management. So…by working together and listening and participating in Kaizen projects and having a lot of team meetings, I think we really lit a fire!”
Over six months, Woodcraft realized the following remarkable results:
• 33% production improvement with the stile and rail department
• 10% productivity improvement at the pin-clamp assembly area
• 15% productivity improvement in the inspection area
• Elimination of overtime and Saturday work
By bringing in a fresh set of eyes with skills and methodologies that they did not have and leveraging their strengths into improvements in productivity and much more, the team was able to grasp a vision of what the future could be — going from good to great in the process!