Engineering Innovation
In the face of a challenging economy, custom packaging equipment manufacturer Douglas Machine Inc. is using lean innovation to minimize frustration and maximize production.
BY ANDREA STRAND
For assembly workers at Douglas Machine Inc., it was like an ongoing scavenger hunt without prizes. Each of the company’s custom food and beverage packaging machines consists of more than 2,000 parts and requires about four months for assembly. Without a standardized organization system, locating the right parts was frustrating. Workers would search for pieces that could be lying anywhere in the plant and that might not even be in stock. “It was a bit of a jigsaw puzzle,” president and COO Rick Paulsen says. “To sort through all of the parts to find the part you need takes a lot of time, and if there is a part missing, how long do you look?”
To correct this problem, company managers implemented lean principles to organize their parts through an initiative called “Right Part, Right Time.” Right Part, Right Time keeps tools and parts at a worker’s fingertips and makes them easy to find. Tools for each assembly station are organized according to relative usage, with “Level 1” tools being used all the time, “Level 2” tools about once a day, and “Level 3” tools less than once a day. Assembly of an entire machine has been broken into smaller sub-assemblies, which makes each assembly station smaller and more manageable, with a less daunting number of tools and parts. Parts are kept on racks and are always in the same place for easy locating.
Workers are also responsible for replenishing their own parts in a kanban system. Part of lean, kanban is a Japanese word literally meaning “signboard” or “billboard.” If a part runs out, an assembly worker posts a refill sign next to the empty container. Assembly stations and their tools are color-coded, making it easy for someone to return a misplaced green wrench or a red ruler to its correct green or red assembly station. Instead of workers looking for a part or wondering whether there aren’t any more, “it keeps them focused on assembling,” continuous improvement engineer Troy Issendorf says. “That’s the whole key here.”
Having the right parts also means having the right equipment to produce them. Many of the parts that go into a Douglas machine are outsourced to other businesses, but some took too long to receive. “It would take us a couple of weeks to get parts back,” Issendorf remembers. And without a certain part, the assembly process can only go so far. Near one end of the plant, a board displays the daily progress for each cell, or assembly station. A green magnet means the cell is meeting production standards, red indicates that a cell is behind on production and yellow signals lack of necessary materials. Some yellow magnets are still on display, but Paulsen is hopeful that they will slowly disappear in coming months because of the kanban system and the company’s ability to engineer more of its own machine parts. To that end, it has recently invested in a laser cutter to produce steel parts on site. “It can cut any shape, even a picture of your face,” Issendorf says of the machine. Now parts that used to take weeks to receive can, if needed, be available to assembly workers within a matter of hours.
An intangible benefit of this organizational process has been seen in the reactions from clients and visitors to the facility. The epoxy floors and white walls and ceiling differentiate Douglas from the concrete seen in many manufacturing plants. Its walkways are wide and straight, for no-nonsense efficiency in getting from place to place. The color-coded sub-assembly stations look like orderly car repair shops split into teams by color. With a specific place for every part and every tool, the organization is comparable to a medical operating room. “It’s kind of our showcase in terms of ... being able to communicate to [customers] that we are a progressive company and we’re doing what we can to be more efficient, which is helping them in terms of keeping costs in line,” Paulsen says of Douglas Machine’s new color-coordinated look.
On a tangible scale, because the initiative splits up the production process (which usually runs about four months per machine) into smaller sub-assemblies, Paulsen says, workers can better gauge their day-to-day progress on a project, which has the company on track to manufacture 200 machines in 2008.
This and subsequent improvements in efficiency have led to recent annual growth rates of approximately 10 percent. Its lean successes have also made for an increase of 30 percent to 60 percent in production activity and a leadtime reduction of between 20 percent and 50 percent, all within the past year.
Hometown to World-Renowned
Douglas Machine has been engineering and manufacturing custom-made machines to package foods and beverages in plastics and paper since 1964. “The founders of the company were very creative people who were very interested in building a product,” Paulsen says. Original founder Bud Thoen and his cousins and cofounders Vern and Paul Anderson had a vision of creating a custom packaging machine business to parcel the varied shapes and sizes of bottles, cans and containers at the grocery store. During that time, the Andersons were working in the packaging industry in the Twin Cities, and they wanted to have a custom packaging equipment manufacturing business in their hometown of Alexandria. The business began when Thoen purchased an old machine shop that had been used to repair farm equipment. In 1966, Vern joined Bud and together they made the company’s first major sale: a wrapper-to-carton-packer conveyor machine for Butterfinger and Baby Ruth candy bars, brands then owned by Curtiss Candy Company. By 1967, Douglas was operating in a 4,960-square-foot facility. Paul joined the entrepreneurial team in 1969. The success of their business, founded on custom innovation and quality customer service, has since inspired an outgrowth of five more end-of-the-line packaging equipment companies in Alexandria, making the relatively small town a packaging hub that employs a total of nearly 1,000 workers.
Today, Douglas works with a who’s who of America’s food and beverage companies. “I’m sure you’ve touched products that have been on our packaging machines every time you go to the grocery store,” Paulsen says. “We work with every Fortune 100 food or beverage company. You name them, we built the machine for them.” Current customers include General Mills, PepsiCo, Procter & Gamble and Nestlé, to name a few. With a mission to provide boththe best custom product and the finest customer service, Douglas Machine has grown from its first major sale of $6,476 to Curtiss Candy Company to a corporation owned by its 525 employeesand worth $90 million in sales.
Overcoming the Economy
Like most companies, Douglas has had to cope with the skyrocketing costs of petroleum and steel, which have gone from $617 in April 2007 to more than $900 per metric tonne for a hot rolled steel coil, and $798 to $1,042 per metric tonne for medium steel sections from April ’07 to April 2008, with prices expected to rise even more into 2009. To keep its prices competitive, Douglas Machine has used a variety of lean processes to improve productivity. Paulsen says lean has a lot to do with the company’s increase in sales. “[Lean] has allowed us to be much more competitive. We’ve been able to offset other cost increases with our productivity,” he says.
At the center of this new lean priority has been Chris Haugen, vice president of manufacturing. Haugen came to Douglas in 2006 from 3M’s Abrasive Division, where he had developed expertise in efficient manufacturing processes. Last fall, the continuous improvement team expanded further with the addition of two continuous improvement engineers, Issendorf and Mary Bakker, hired specifically to increase the pace of continuous improvement initiatives. To spread knowledge and awareness of lean across the whole company, about 25 additional employees in managerial or leadership positions have completed lean certification training through Enterprise Minnesota.
More Creating
While Douglas has built an international reputation for building custom packaging machinery, the company is now investigating ways to reach more customers with the same innovation. In an age where your cell phone can also be your camera, your camcorder and your computer, clients are looking for packaging machines that are equally nimble. This goal stems in part from Douglas Machine’s market research and personal anecdotes from its customers. “Customers are demanding more flexibility to run a variety of product sizes and pack patterns, quicker changeovers to run different SKUs, and greater reliability in a smaller machine footprint,” Paulsen says. To cater to customers’ evolving needs, about one in five Douglas Machine employees is involved in machine design or R&D. “It’s a heavily engineered product,” Paulsen says.
The company uses a very disciplined process for new product development or existing product enhancement, the success of which has enabled it to use lean processes in machine assembly. In the packaging industry, the traditional approach is order-based machine development, but Douglas has established its own Research and Development group that’s held accountable to new product development instead. In addition, Douglas uses a Difficult Projects Review to decide which projects to pursue and which to decline to quote on. “The traditional way many packaging companies—including Douglas—did [product development] in the past, was on the fly,” Paulsen says. “Now, we have a very disciplined approach.”
The Ninth Addition
By far, Douglas Machine’s most ambitious (and as yet mysterious) project has been the creation of an operation called the Ninth Addition. The company has converted a warehouse into a separate production center for a fleet of new flexible bags packaging machines. The client has declined to publicize what is being packaged, but the large quantity of machines being produced has given Douglas Machine an opportunity to deploy lean concepts on a massive scale. Inside the converted warehouse are sub-assembly stations, called garages. Each of the five colorcoded garages (four mechanical and one electrical) is used to assemble a different section of the packaging machine and includes all of the tools and instruction packets necessary for that specific sub-assembly. Parts are also organized by sub-assembly in containers called “pit stops.” Because different sub-assemblies take different amounts of time to produce, Bakker has conducted time studies for each. Those studies and the kanban system, also carried over into this project, tell workers what sub-assembly they should be building and when. Bakker says Ninth Addition workers have “a very clear definition of which tasks they should be working on at any given time,” which makes for a much less hectic environment.
Once the sub-assemblies are completed, they are put together to form a machine, which is tested for accuracy and then shipped to the customer. But with finished machines weighing in at more than four tons each, getting them out the door—or even moving them around on the floor—is not an easy task. In trying to eliminate no-value-added components from its current production system, Bakker says one of the company’s most recent developments has been testing the possibility of floating the machines on a bed of air, like a hovercraft. “We’ve only been at this for a week and there are still some kinks,” she says as one machine momentarily floats like an air hockey puck before thumping back down onto the floor. “But moving our machines is one of the things we are trying to make really efficient, so that it doesn’t take any time at all.” Because Douglas has so many R&D employees, many ideas for innovation such as this one are turned into realities.
Culture Shock
At the outset, lean’s focus on standardization had many longtime Douglas workers worried about maintaining the company’s custom reputation. “The culture that has always been very near and dear to Douglas’s heart is that we’re a custom company,” Haugen says. “When it changed from more of a build-to-order to more of an assembly line process, it was a huge paradigm that the company had to overcome.” Paulsen agrees. “We have a lot of long-, long-term employees here,” he says. “Because the organization itself hasn’t had a lot of change through the years, we’ve got more employees that are less open to change than some big organizations. I think it’s a bigger challenge for us than for some organizations.”
Douglas Machine’s Kaizen events, which helped transform the assembly stations, were a particular point of skepticism with some employees. “I think people were sitting back, wondering, ‘What is this going to be?’ They weren’t sure that they would see any improvements,” Haugen says. But after noticing a difference, workers became excited about participating in future Kaizen events. “When they can actually see that it looks different than when they started, they can take a lot of pride in the fact that they made the change,” Haugen says.
Leaning into Custom
So far, the benefits have outweighed the challenges of implementing lean in Douglas Machine’s custom environment. Today, walking onto the production floor of Douglas Machine is kind of like arriving at an Olympic arena. The flags of more than 30 countries (representing the homes of more than 7,000 currently installed Douglas Machine products) wave from the white ceiling beams, under which different events are taking place with the ultimate goal of speed and efficiency. There is no lack of excitement, either. In the testing area, machine operators time an army of 700 Aquafina water bottles, which hurtle through a new shrink-wrap machine in under a minute, while four-packs of Dannon yogurt scurry through a cardboard wrapper. The new laser cutter creates parts with flexibility. And assembly workers build the next generation of packaging machines with agility and organization. The company started with places where there was more potential for lean to be effective. Douglas has already seen documented increases in sales and production, greater ease and speed in assembling, and less waiting around for the right parts.
But in creating these unique machines, the lean team is still trying to find out where more standardization and efficiency can be realized. “Sometimes it’s hard to see the standardization potential in custom,” Haugen says. “But you can always standardize something.” Paulsen says that the company is early in its journey, but he is confident in seeing future successes through more Kaizen events and lean projects. “My philosophy is, I’d rather see slow, steady progress than dramatic, flash-of-the-hands kinds of things that may go well or may not,” he says. “If we can just have slow, steady progress, just like we are doing in many areas, and see some successes, that is good.”