Becoming Lean to Survive
Several factors led Buck leadership to determine in 2001 that the company had to drastically change if it wanted to keep manufacturing in the United States. The cost of doing business had risen dramatically in California, Buck’s home since the 1940s. Additionally, a sudden and unexpected sales drop of a key product and the recession that followed the 9-11 terrorist attacks led to three unprofitable years. Simultaneously, competitors in China were becoming better at manufacturing quality knives, and Buck managers calculated a 30% cost differential between their company and its overseas competitors.
" The business reason for launching lean was survival," said CEO C.J. Buck, a descendent of company founders. "Tweaking was not going to keep up with the bleeding."
The company created a five-year plan to reduce costs by at least 30% that included three key elements: moving to a state with lower energy, labor, and regulatory costs; buying a new ERP system; and creating a lean-oriented culture. The first two goals had long-term timeframes, but the company started on lean right away. They employed consultants, sent a group of 25 employees for off-site lean training, and began targeting production for improvement. At the time Buck operated with a mass-production model with disconnected functional areas. Finished-goods and WIP were everywhere.
"At any time, one of the production areas easily had two-to-three months of inventory,‖ said William Keys, director of lean manufacturing. ―Five batches here, 10 batches there. And a batch ranged anywhere from 25 to 50 knives. We literally had thousands of knives in WIP inventory."
Their first step was to convert from mass production to assembly cells. Keys said the first cell was created during the initial lean training and was successful. Leaders started with one group, and then that group trained another group and helped them to convert into a cell. This continued over several months until most of the production floor had been converted. By this time, the company began focusing more on its out-of-state move and devoted less time to expanding lean principles to other areas of the company. The cells continued to function successfully, and the company would occasionally hold teaching events. Although managers had much to do related to the relocation, lean thinking continued to influence their decisions.