The Best of Manufacturing
BY ANDREA LAHOUZE AND SARAH ASP OLSON
From innovations in green technology and robotics to lean at its finest, Minnesota is filled with manufacturing superstars. We’ve gathered 13 of the top companies, concepts and cutting-edge innovations in a list we’re calling “The Best of Manufacturing.” Read on to meet the comeback kid of the year, a green pioneer, a leader in economic development and many more who are shining bright on Minnesota’s manufacturing scene.
Outstanding Growth in a Rural Area
Superior Industries: Mary Erholtz, marketing manager for Morris-based Superior Industries, is the first to admit it is hard for companies to grow in rural Minnesota.
“Of course, labor is the biggest issue,” she says. “It is difficult to attract people to an area like Morris. It’s also a smaller labor pool.”
But Superior, a company specializing in conveyer equipment, has beaten the odds and continues to thrive, a phenomenon Erholtz attributes to the company’s training programs that help with retention, and the people. “[We have] great people who care about the business and [care about] growing it.”
Last year, the approximately 500-employee company opened a Southwest location in Prescott Valley, Ariz. And Erholtz says the company has no plans to stop expansion.
“It’s been about an 18 percent annual growth rate every year [over the last 10 years],” she says. “We’re going to continue to do that by expanding locations. We’re currently looking into the Southeast, mirroring what we did in the Southwest.”
Reinvention
Hanson Companies: In 1970, Minnesota was home to 29 thriving silo manufacturers. Today, there is only one. Lake Lillian-based Hanson Companies, formerly Hanson Silo, has been in business for 92 years, but now, silo sales are only a small portion of its offerings. Since the waning of small-farm agriculture beginning in the 1980s, it has been slow going for the family business.
“Our main customer was the small farms,” says Matt Hanson, fourth-generation president. “So we either had to change and diversify, or we would end up like the rest of the silo businesses, and most of them are gone.”
To make sure it stayed afloat, Hanson Companies sold the silo unloader portion of its business in 2005 to focus on its growing bunker silo and powder coat painting services, which debuted in 1995. Because larger farms are becoming the norm across the agriculture industry, Hanson Companies decided to add bunker silos to its products. Bunker silos are made of precast concrete, making them very cost-effective for the high-volume storage solutions required by larger farms.
Third-generation owner Gregg Hanson believes the change was necessary. “After 92 years, if you aren’t reinventing yourself and keeping your nose to the wind, you will run out of gas,” he says. “For us, we basically took a third-generation business and turned it back into a firstgeneration business.”
Today, silo sales make up about 5 percent of Hanson Companies’ sales. But it has found new niches in bunkers and painting and has the largest powder coat painting system in the state— one that automatically paints objects as large as 40 feet long, 10 feet high and 100 feet wide. Thanks to its new services, the business is staying strong. Down to 50 workers from the 100 employees it required to run in the past, Hanson Companies has seen a 25- to 30-percent increase in sales since 2005.
Non Traditional Use of Lean
Drive to Excellence Program: Using an array of lean technologies to develop a standardized purchasing policy, the State of Minnesota has already realized a whopping $160 million in savings of taxpayer money.
In 2004, former Commissioner of the Minnesota Department of Administration Dana Badgerow was recruited back to her position to help the state eliminate waste in its ever-tightening budget by streamlining its service and buying processes. With 27 years of experience at Honeywell, most recently as vice president of global operations and customer access, Badgerow was confident that lean could work in a nonmanufacturing setting.
She was right. The first project—part of an effort called Drive to Excellence— sought to streamline an office-supply catalog for state government agencies that was bursting with 25,000 items from which to choose.
“We were not acting as a single enterprise when we went to buy things,” Badgerow says. “I mean, how many different types of mechanical pencils do you really need?” Buying laptop and desktop computers in bulk gave the state incredible discounts of as much as 44 percent. Vendor negotiations alone saved $50 million.
Badgerow says the state government’s success with lean training has been “absolutely incredible.” To date, the Drive team has completed four of 13 preliminary projects, including the consolidation of building codes among state government agency buildings, streamlining the IT system across the agencies (for which it was praised by Computerworld magazine), the creation of a Web site detailing Minnesota’s disability programs (www.mndisability.gov) and planning for the expected retirement of between 10 percent and 45 percent of state workers within three to five years. The program’s success has also made it a nominee for both the State Governance Transformation Award and the 2008 CSG Innovations Award from the Council of State Governments in Lexington, Ky.
Use of Robotics and Animation
Alexandria Extrusion Company: At Alexandria Extrusion Company, workers now have six helping hands. The aluminum extrusion company, which has value-added operations in computer numerical control (CNC) machining and fabrication, is now using robots to load products into the CNC machines. Starting in 2004 with one robotic work cell, which includes all of the equipment and materials required to create a product from start to finish, it now has six, each with three machines controlled by one person. Although use of robotics is not uncommon in the industry, Alexandria Extrusion Company is unique in its application of robotics and automation to its short-run projects. “We’ll have the automation working in runs that are 8 to 10 hours long, and then we’ll set up again and go to a different product. That’s probably the different twist,” COO Al Sholts says.
Using the latest technology has always been part of Alexandria Extrusion Company’s mission. Over the past seven years, the company has been dedicated to reinvesting 7 percent of its revenue every year in new equipment and automation technology. With the company’s increased production, revenue has shot up to an annual $57 million, meaning $4 million goes straight to implementing the latest technology. “Our marketplace is not just U.S. manufacturers,” Sholts says. “We have a lot of global, low cost country manufacturing as well. In order to compete properly, we need to continue to advance.”
Sholts estimates that CNC machining production rates have increased by 15 to 30 percent with the addition of the robotic work cells. The environment is better for workers as well, who no longer have to deal with strains and pains from manually loading CNC machines. “It is very ergonomically friendly, because the robot does all of the movements,” Sholts says. “Very operator-friendly and very safety-oriented.”
Use of the Lean Enterprise Certification Program
Personix: Many manufacturers would be hard pressed to let employees take more than a week away from production to take a class. But Shoreview-based company Personix couldn’t wait to send employees back to the classroom.
A business unit of Fortune 500 member Fiserv Inc., Personix is headquartered in Houston, and offers business-critical communications to the financial services, healthcare, telecommunications, investment services and retail markets. The company provides high-volume laser printing, mailing, electronic document delivery solutions, plastic card manufacturing and personalization to more than 9,000 clients around the world. The Shoreview facility focuses on card personalization.
This year, 48 company workers—a mix of nominees and volunteers—gained expertise in lean lingo and techniques in a program called the Lean Enterprise Certification Program (LECP). Enterprise Minnesota Business Development Specialist Rick Kvasager introduced LECP as a way to foster leadership and a common lean language among employees. John Berger, corporate director of process improvement at Personix, says the goal was to “[establish] a critical mass of employees who had a common language to express their ideas and knew how to use the lean tools to create value.”
The program required six days of classroom training in lean principles and two days of firsthand experience on a Kaizen team, after which participants studied for a final three-hour exam to earn certification in lean enterprise.
Studying for the test was a challenge, as many employees had not dusted off their study skills since their school days. “Anxiety was common as the test approached, but the trainers did a great job talking people off the ledge and preparing them for the test,” Berger says.
The LECP training was well worth the time taken away from production. More than half of the Kaizen events that took place during the training resulted in direct savings for Personix. Changing the company’s production of custom gift cards from a batch-and-queue style to one-piece flow was particularly successful. By balancing the flow of the production line, updating the procedures for inspection and shipping, and matching the production rate of the various machines, Personix was able to lower the production cycle time from two days to two minutes, while also reducing the amount of work in progress (WIP). Savings from this Kaizen event alone are expected to be an annual $75,000.
The company plans to continue training within its daytime workforce and is currently working with Enterprise Minnesota to create an online program for the 100 or so employees working off shifts.
Regional Comeback
The Iron Range: After 25 years, the Iron Range is getting its groove back. Long plagued by the booms and busts of the American steel markets cycle, the Range today is poised to exploit demand for steel in the skyrocketing economies of India and China. In the works are more than a dozen new mining and energy projects that will open up an estimated 7,000 construction jobs, 2,500 well-paying, permanent mining jobs, and many more multiplier effect jobs as restaurants and other attractions open to meet the needs of the new workers.
“This is going to spark a rebirth of the Iron Range,” Peter McDermott, president of the Grand Rapids-based Itasca Economic Development Corporation, says of the new projects. “When you look at a map and see the large number of projects, you say, ‘This is unbelievable.’ Even if half of them happen, even if a third of them happen, it’s going to be a very big deal.”
Incubation of Young Talent
Dunwoody College of Technology: Dunwoody College of Technology’s “Graduate to the Good Life” motto says it all. Since 1914 and through the Great Depression, the college has been unique in its practical training of students in skills the industry needs today so that each student can immediately trade cap and gown for a well-paying job in their field of study. Dunwoody works with local companies including Hunt Electric, Rimage, Kraus-Anderson Construction Company, Haas Automation Inc., Morrie’s Automotive Group and Harper Corporation of America to discover what they will need from employees, and then modifies or creates programs to fit those needs. Programs that no longer meet an economic need in the community are nixed to ensure every Dunwoody degree will lead to a relevant job.
The curriculum development system has seen many successes. At the moment of graduation in June 2007, 65 percent of the students already had jobs, and 97 percent of students were employed in their field of study within six months. In its Machine Tool Technology program, that number rose to a perfect 100 percent, with an average of 10.4 job offers per student.
Use of Synchronous Flow in Manufacturing
Avicenna Technology, Inc.: Like many companies faced with huge gains in demand, Montevideo-based laser welding and manufacturing company Avicenna Technology, Inc. was, in 2006, thinking of buying a new building and hiring more workers when Enterprise Minnesota field specialist Rick Kvasager noticed that flow, not building capacity, was its challenge. The production line was so bogged down with inventory waiting for inspection that other steps were running at half their capable speeds to accommodate it.
Working with the proceeds of a grant from the Southwest Initiative Foundation in Hutchinson, Avicenna teamed up with Enterprise Minnesota to implement Synchronous Flow Manufacturing (SFM), a management technique that uses metrics for each step of production to help pinpoint a production line’s strong and weak points. SFM also leverages lean techniques used to achieve minimal inventory and production time, thereby increasing available cash.
Says General Manager Chad Carson: “[SFM] has been the single most important change in [the] company.” The numbers back him up. In addition to avoiding a costly expansion by implementing SFM, Avicenna has also experienced a 45-percent increase in its revenue.
Dedicated Green Business
Central Container: For Minneapolis-based packaging supplier Central Container, being green is more than just a fad, it’s a core principle. “It’s the right thing to do,” says Steven Braun, the company’s vice president of sales and marketing. “We’re from Minnesota, and people in the Midwest take these issues seriously.”
Aside from being the socially responsible thing to do, the company has found that going green is economically viable in today’s marketplace. Central Container has attracted new clients who are drawn to green practices; in addition, the company has seen significant savings on overhead costs.
“In one year, we reduced our scrap on our board by 25 percent,” says Ed Polin, president of Central Container. “[That’s a] $5,400-permonth savings.”
Along with leaning up and recycling, Central Container aims to cut down on fuel costs by filling trucks to capacity and running machines at off-peak periods and not letting them idle.
“There are a lot of things we know we can improve on,” says Braun. “It really becomes a state of mind for people. When you start thinking lean and thinking green, you start to see more opportunities.”
Economic Development Leader
Nancy Straw: Since 1986, the number of manufacturing jobs in West Central Minnesota has ballooned from 4,000 to more than 10,000. Nancy Straw, the woman at the helm of the West Central Initiative (WCI)—a company with one area of focus dedicated to creating and retaining jobs in a nine-county area—has been a big part of that growth.
Straw, a farm girl at heart, has dedicated her career to serving the needs of rural communities in Minnesota. And even though WCI has blossomed under her leadership, Straw makes it a point to never stop learning.
“I’ve learned a lot about the real importance of true partnerships with other organizations and individuals and how much more can be accomplished when people work collectively,” she says.
Way to go Green
Leadership in Energy and Environmental Design (LEED): It’s a green world out there, and in manufacturing, it just keeps getting greener.
“People want to be good stewards of the environment,” says Ron Lyrek, president of Interscapes, Inc., a company known for its commitment to sustainability and green business practices. “They don’t want to be part of destruction or harming the planet, they want to be involved in making … a positive contribution. Companies are wanting to do the same thing.”
One of the best ways companies can show their commitment to going green is by participating in green building practices, such as Leadership in Energy and Environmental Design (LEED).
Developed by the U.S. Green Building Council, LEED lays out a set of guidelines for sustainable construction. To be LEED certified, a new commercial property, home or neighborhood must meet certain criteria, such as having recycling capabilities and using sustainable building materials. As the demand for sustainable buildings goes up, Lyrek has seen the manufacturing industry respond.
“There’re more and more companies that are jumping on the [green] bandwagon,” he says. “More cutting-edge cabinet shops, subcontractors and general contractors are definitely getting … LEED training. I think there’s a demand that has not been met for the LEED spaces.”
One such contractor, Richfield-based Adolfson & Peterson Construction, has picked up LEED and run with it.
“We work with a number of clients and their design firms to build their buildings sustainably,” says Adolfson & Peterson President Scott Weicht. It’s the expectation of our clients, and it’s a growing market. As a responsible corporate citizen, it is critical for us to actively [influence] a positive change of our environment.”
Both Lyrek and Weicht agree that LEED— and other sustainable building practices—has had a profound impact on the building industry all along the supply chain.
“LEED built a framework so people could understand what is expected and understand what sustainability meant,” says Weicht. “It has shaped the entire industry and helped the entire industry understand that each and every firm can actually have a positive effect.”
Program for Minnesota Manufacturers
GAP: Since Enterprise Minnesota began implementing the Growth Acceleration Program (GAP) in July 2007, 41 manufacturing companies in Minnesota have seen growth as a result.
“[GAP has] given businesses the opportunity to bring in outside resources to assist them in growing their business,” says Glenn Pence, Enterprise Minnesota director of sales.
The $750,000 grant was funded through the Minnesota Department of Employment and Economic Development (DEED) and is administered by Enterprise Minnesota. The two-year program has given companies with fewer than 100 employees an annual $25,000 grant to put toward nearly any project aimed at growth of the overall business.
Economic News
Manufacturing is Back! Sure, fuel costs are sky high, but there’s always a silver lining. The slim cost advantage manufacturers once found in China is now much smaller and is partially offset by rising energy prices. Take steel, for example. According to CIBC World Markets Inc., China’s steel exports to the United States are now falling by more than 20 percent on a year-over-year basis—the worst performance in almost a decade. This is great news for U.S. manufacturers who are picking up the slack.
“There is growing pressure to get that production back in North America to avoid the soaring shipping costs,” says Hank Cox, vice president of media relations for the National Association of Manufacturers.
But it’s not just the price of oil that is fueling manufacturing’s return to the United States.
“The explosive surge of China’s manufacturing has crested and entered a new phase,” says Cox. “Labor costs are rising in China as the workers demand a bigger piece of the action. The Chinese government is requiring all companies to let workers join the national union and is also imposing stricter environmental and safety rules.”
Cox continues, “Perhaps even more significantly, the Chinese government appears to have made a decision to stop propping up low-skill manufacturing in favor of more advanced industries. Thousands of factories in China have been shuttered in recent months. For these and other reasons, a variety of U.S. companies are announcing their intent to shift manufacturing back to the United States.”