PAL Manufacturing Case Study

Background on the problems at PAL
PAL had several problems that needed to be addressed:
1. Lead times on cylinders were at 12 weeks and increasing
2. There was a rolling backorder of cylinders
3. Customer due dates were not being met
4. Flow of cylinder components through the shop was inconsistent
5. Work in process was too high
6. Inventory numbers were also too high

Internally driven solutions unsuccessful
To keep on track, we were forced to micro-manage the system every day to trouble shoot and make sure product was getting out on time, and we still missed delivery dates.

Solution alternatives considered
The only alternative we could think of was to sub-contract at certain points in the system in order to keep up and meet deadlines. However, we knew the downside of sub-contracting included:

• Additional costs
• Building in sub-contracting lead-time
• Less process flexibility

Need for outside help identified
We knew that most of our competitors had decreased their lead-time; we in turn had to find a way to do the same. We were also losing customers due to missed or delayed deliveries. We needed to make significant changes in a timely manner to retain our established good reputation and market share. This motivated PAL to seek assistance from OEM Consultants Inc.

Cost Benefit Analysis
We soon realized that the money spent to acquire the services of OEM was an investment in our future to stay competitive.

What OEM identified for change:
There were several target areas:
1. Cylinder assembly
2. Shop floor work orders and how they are managed
3. Cylinder line flow
4. Removing waste from shop (5S)

OEM’s recommended plan of attack included:
• Implementing 5S throughout the shop as a first step
• Set up supermarkets for certain areas (cut tube & shaft and finished tube & shaft)
• Build rolling carts for product to flow through the shop with ease and speed
• Review cylinder line flow and evaluate tact times
• Label everything

OEM implemented several methods for undertaking this project:
• 5S – Clean and organize areas
• Install white boards in most areas to show tasks and progress
• Position main white board to track progress on delivery times, lead times, inventory numbers, tact times
• Kanban systems were set-up in various areas
• Current state and future state maps were displayed to update and include everyone in company objectives

Education and training
The first step in education was to train shop leaders and office staff regarding the benefits of LEAN. Once we had their buy-in, the next step was to introduce LEAN principles to the team members on the shop floor.

Time lines
To keep everybody on track, OEM put strict timelines in place. We also had daily/weekly update meetings with each department.

How OEM’s strategies worked for PAL:
• Inventory cost reduction from $250,000 to $150,000
• Reduced lead time from 10 weeks to 6 weeks
• Increased on-time deliveries from 30% to 70%
• More satisfied customers because of on-time deliveries

OEM’s intervention has had a positive impact on the process at PAL
The time OEM spent working with us was a huge eye opener and extremely valuable. It revealed to everyone involved how much better we could become in the manufacturing process. With a little hard work and a lot of discipline we could be the leader in hydraulic cylinders. As it stands right now, our lead-time is consistently at 5 to 6 weeks and our on-time deliveries are at about 80%. LEAN is a never-ending journey and we are always looking for ways to improve. With the help OEM has given us, we are well on our way.