Be it heart attack, car crash, or nearly losing a family heirloom, "near-death" experiences can clear the way to a whole-hearted embrace of new behaviors.
Such was the environment at Buck Knives, Inc. as we celebrated our first century in business five years ago. Buck Knives started as a hobby in 1902, evolved into a father-son partnership by 1947, and finally became a small manufacturing operation. Cash was tight, so we stretched for all we were worth to create the working capital to grow. We staged material purchases, balanced payables and receivables and because our products were almost custom-made we had very small batches.
In one respect, we operated "lean" from the very beginning. Until 1961, when we incorporated with twelve people, each knife was made using worn-out file blades as raw material. As the corporation grew we embraced efficiency through volume purchases, high inventories, and large batches. The knife market was not "global," imports were "junk," and margins were good.
In the 1980s mass merchants began to replace our traditional dealer network. This new breed of large customer caused our margins to shrink, but the growth was wonderful.
In the 1990s those same mass merchants began importing higher quality knives under American brand names, and price compression began in earnest. Our growth had stopped and by 1999 Buck was losing money. In 2000 we even liquidated a couple of subsidiaries to maintain our cash flow. The surge of knife legislation following the cowardly destruction of the World Trade Center on September 11, 2001 impacted us directly.
Like other manufacturers, we were following the Toyota success story and the apparent ease with which the company opened factories on American soil as GM and Ford were closing them. We had "leanishly tweaked" ourselves for a decade, but improvement savings were eaten up in cost increases. We were at the point of failure.
In the fall of 2001 we knew we had to take dramatic action. We created a five-year strategic plan that called for us to adopt the Toyota Production System (TPS), also sometimes known as "Lean Manufacturing," or "Lean." We also relocated our company outside expensive southern California to more business-friendly northern Idaho.
Toyota had used the building blocks of manufacturing to create a production system that essentially eliminated waste, increased quality, and was highly responsive to customers. How did that transformation take place?
In brief, after World War II, Toyota's Taiichi Ohno looked at Ford's system and was impressed with what the American war machine put into the field. But he noticed it treated people like robots, concealed much waste, and was not very responsive to the marketplace. Toyota was looking to make a dent in a gigantic foreign marketplace. To succeed, it created a process that resulted: in the highest quality, at the lowest cost, and with the shortest lead times.
How does Lean accomplish those three goals?
- High quality is achieved by systematically tapping the experiences and intellects of everyone in contact with the product to achieve high quality the first time: from engineering to the shop floor, from sales to the supply chain. The company creates a safe environment and welcomes suggestions for improvements that focus on root causes of errors. Rewarding improvements ensures sustainable, continuous improvement. Employees no longer park their hearts and minds at the door.
- Lowering costs is often assumed to be synonymous with lowering quality but that is just not true. In fact, eliminating waste can reduce costs and increase quality. Taiichi Ohno listed seven different forms of waste:
- Over-production: Making more products than you need.
- Waiting: Holding products only adds to your inventory costs.
- Transportation: Delivering products costs much more than it should. (This waste prompted the building of Toyota factories in the U.S. to be closer to the marketplace.)
- Inventory: Holding inventory costs adds no value for the customer.
- Motion: Moving a product through your factory takes too many unnecessary gyrations.
- Over-processing: Performing more operations to the product than the customer would not pay for if given the option.
- Scrap: We all get this one.
Toyota became adept at producing more reliable automobiles at lower costs, which eventually allowed it to increase prices.
- The third goal for Lean is shortest lead times. Achieving this goal means looking at the business in a holistic sense instead of with an isolated focus. For Buck this kind of thinking has led to "value streams." We have broken down the departmental barriers between fabrication, assembly, and shipping to create an accountability line that includes all aspects for getting a specified family of products manufactured and out the door. We partner with our supply chain in the same way. We work with vendors on design and choice of materials. As they save money so do we.
Adopting Lean has changed the fabric of our company. If we had we not used that strategy, we would not be the growing profitable company we are today.
© 2007 Charles B. (CJ) Buck. All rights reserved.
Charles B. (CJ) Buck President and CEO Buck Knives, Inc.