Dustin S. Klein
Quick, what's the cutting speed for turning a three-inch diameter shaft rotating at 200 rpm? How do you calculate the average annual turnover of inventory?
If you plan to be certified by the Society of Manufacturing Engineers as a certified manufacturing engineer, you'd better be able to recite those answers in your sleep.
SME's Web site (www.sme.org) offers three practice quizzes for its official certification exams-manufacturing technologists, engineers and integrators. And should you need to bone up on manufacturing know-how, there are links to resources on just what today's manufacturer should know.
Registration for SME's exams is also available online, as is more information about SME's programs.
By the way, the cutting speed for turning a three-inch diameter shaft rotating at 200 rpm is 157 sfpm. And you calculate the average annual turnover of inventory by dividing the annual cost of sales by the average inventory value. Who says you can't learn anything on the job?
It was no small task.
Harold Miller, owner of Solon-based Marplex Inc., was asked by Rubbermaid Inc. to develop a training program to teach the company's hundreds of managers and thousands of employees how to comply with the Americans With Disabilities Act.
Marplex devised a day-long "train the trainer" workshop for Rubbermaid's human resource managers from around the country. The intensive workshop taught the HR managers how to use the ADA materials to train managers and employees at each of their own locations.
The method worked, says Miller, because Rubbermaid knew what it wanted to do-teach its entire workforce about the ADA.
But many companies don't have as clear an objective when it comes to training. They just know they need to train their employees. That, Miller warns, can make it difficult to implement successful programs.
"A good objective," he says, "establishes what the students should be able to do the day after the training is completed - run a specific machine or produce a product for eight hours without making more than two mistakes."
Even with a clear objective, however, a trainer can't do much unless he knows how many people have to be trained, where they're located and how much money the employer is willing to spend. "If it's a major corporation with employees scattered all over, it limits what you can do," says Miller.
Computers and the Internet have made it easier for training companies such as Marplex - which has been training manufacturers since 1962 - to train employees who aren't located in one building, or even one city. They've also removed some of the time constraints and helped accommodate students requiring different levels of attention.
"Everyone doesn't learn at the same pace," says Miller. "That's the problem with classroom training. And some people are uncomfortable in the classroom situation. Self-study is a very successful method and can easily be enforced by regular testing."
But even when those issues are resolved, there's always a larger issue-the price. Training can be an expensive venture, says Miller. A large company that wants to train hundreds or thousands of employees may have to shell out up to $50,000 for a comprehensive program.
Meaningful contributions aren't limited to the Pillar Award honorees. Here are some other noteworthy programs that the judges highlighted from the pool of nominees:
- The Lubrizol Corp.'s involvement in the Christmas in April program has helped several disabled and elderly Lake County residents maintain their homes. Says Mikey Darcy, executive director of Christmas in April Northcoast, "Because of their volunteerism, we were able to make repairs to two homes completely sponsored by the Lubrizol Corporation with financial and volunteer support." For the past nine years, the company has also donated $2,500 from the Wickliffe plant and another $2,000 from the Painesville facility to help those financially strapped individuals.
- Since 1993, the Arras Group has partnered with Greater Cleveland Habitat for Humanity in its effort to help build new homes in Northeast Ohio. Among its efforts, the Cleveland-based marketing agency has developed communication materials for GCHFH and donated $30,000 in 1994 to help build a home in Cleveland's Hough neighborhood. Owner James Hickey has closed the offices numerous times so that the company's 30 employees could work on-site to help build houses. Earlier this year, the Arras Group donated $2,500 to sponsor the first annual GCHFH Simple, Decent Golf Outing.
- Alcoa Corp.'s financial contributions have aided Templum House in its fight against spousal abuse. Two grants, totaling $15,000, were given to Templum's Youth Empowerment Program, which helps children who witness domestic violence.
- Bob Fairchild, owner of Fairchild Chevrolet, and his wife, Cindy, have been active volunteers in the city of Lakewood. They recently co-chaired a major fund-raising campaign that generated $13,000 for H20's (Help to Others) Summer Service Camp for 150 middle school students. Among local organizations the car dealership's efforts have helped are Lakewood Toy Lending Library-donating $300 and toys to get it off the ground; Lakewood Adult Education and Recreation Department-donating $21,000 since 1987 to purchase 4,500 T-shirts for youngsters; and Lakewood City Schools.
- More than 10,000 children have attended major sporting events over the past two years thanks to FOX Sports Ohio. FOX's Kids Zone was created to provide opportunities for kids who otherwise wouldn't have the means to see sporting events in person. Among the groups that have participated are Boys & Girls Clubs, Big Brothers Big Sisters, United Link, Deep Woods Center, Neighborhood Centers Association, United Way, Key Club, Neighbors Together, Just Friends and the Salvation Army.
Can't seem to find a supplier for the extrusion machine you've been looking to buy? Well, you may want to click onto Industry.net. Among the site's many offerings is a comprehensive source supplier directory which allows visitors to search worldwide for suppliers of more than 10 million different products.
Industry.net also offers articles on new applications for existing technology and tidbits about what's new in areas such as factory automation, supply chain development and ERP/MRP systems. There's also a loaded reference shelf stocked with federal and state safety compliance regulations and interpretations; engineering equations and formulas, and a drawing requirements manual.
And, if you can't find what you're looking for there, Industry.net's archives contain articles on dozens of issues, including what tools, materials and systems can be used to increase productivity and lower costs.
One of the most interesting areas is Invention Avenue, which offers a look at recently issued U.S. patents and their possible applications to manufacturing processes.
Industry.net is free, but does require registration of a user name, password and information about your company.
So you think you're prepared for a disaster? Well you'd better be, because even the heartiest companies are likely to suffer serious hardship due to catastrophe. And even the bravest CEOs should take note of these disaster-related statistics, compliments of the Business and Industry Council for Emergency Planning and Preparedness.
- Eighty-five percent of businesses affected by disaster shut down within five years. As many as 70 percent close their doors within two years.
- The average disaster causes the equivalent of 4.8 down days.
- The average Fortune 500 company loses more than $78,000 per hour of disaster-related shutdown.
- Ninety-three percent of businesses that lose their data center for more than 10 days file for bankruptcy.
- Seventy-five percent of computer-dependent businesses would suffer crippling losses if their electronic data processing systems were down for more than 14 days.
- Between 67 and 72 percent of Fortune 500 companies do not have or do not test their disaster recovery strategies.
The number of manufacturing jobs and production facilities increased statewide last year in every area but Northeast Ohio. The net loss to the regionwhich includes Cleveland, Akron, Canton, Solon, Elyria, Mentor, Twinsburg and Lorainwas a whopping 82 facilities last year, which took 342 jobs with them.
The area, however, remains the dominant employer of manufacturing jobs in the state. Its an odd predicament, considering that the overall climate for manufacturers in Ohio has been positive.
For the second year in a row, the number of manufacturers and manufacturing jobs has gone up. According to the 1999 Ohio Manufacturers Directory, Ohio has 22,760 facilities which employ 1,244,769 people, nearly 22,000 more than last year.
A closer look reveals why Northeast Ohio is taking a hit.
Manufacturing jobs are leaving the big cities for the suburbs and rural areas, explains Thomas Dubin, president of Manufacturing News, which published the report. Twenty years ago, a manufacturer needed the labor pool, transportation and support industries that only the major cities could provide. Now companies have many more options, and are locating their plants in whichever municipality is most cost effective.
When Art Holmes and his brother, Charles, founded Mayfield Heights-based Chart Industries in 1992 as a vehicle to take their six private companies public, the duo already had laid the groundwork for how to run the geographically scattered conglomerate from its Ohio headquarters.
Rather than retain a firm grip on each company's day-to-day operations and force them to conform to one method of doing business, the brothers let the existing management of each subsidiary keep its autonomy.
"I'm a firm believer in the entrepreneurial spirit," explains Art Holmes. "If you empower an entity to achieve its goal, they'll go out and do the best job they can. Especially if you don't micromanage."
Some would call Holmes' management style laissez-faire because he allows for seven different methods of management and accounting from seven different subsidiaries. But the softspoken CEO is quick to point out the company's financial success and strong market position - 1998 third-quarter profits were up 46 percent over 1997 and sales continue to climb steadily. Chart controls about 26 percent of the world's cryogenic equipment market with its product and services.
So how does Art Holmes manage a public company with seven subsidiaries scattered around the globe without stepping on anyone's toes?
The company's success, Holmes maintains, is due in large part to giving the presidents of those subsidiaries plenty of breathing room. "As a holding company, we provide them with capital resources and benefits such as purchasing power," says Holmes. "But we don't have the controls that some large companies often have. Each business has its own balance sheet and plan."
The freedom the subsidiaries enjoys is as much a function of the size of Chart's staff as it is Holmes' philosophy. The Mayfield Heights corporate staff is a lean, seven-person operation-two operating executives, three financial officers and two support staff members. Together, they loosely manage a total of 1,300 people around the world.
The system works because Holmes is fully committed to making it work. It's not a system for the manager who can't delegate. He carefully chooses the companies Chart buys, ensuring that its management staff-particularly the president-is someone who will flourish in an entrepreneurial-type environment.
Size is also a major driver.
"The size of any one plant impacts our ability for this to work and for Chart to grow," Holmes says. "Each plant has no more than 250 people. When you get above that, you begin to lose the feeling of unity and the effectiveness of what we're doing."
Chart's seven subsidiaries-Altec International (Wisconsin), CVI (Columbus), Chart-Marston (England), Cryenco (Denver), Greenville Tube Corp. (Pennsylvania), Process Engineering Inc. (New Hampshire) and Process Systems International (Massachusetts) - are run as separate companies. They share resources and buying power, but have separate management teams and financial books. Each president is responsible for his own company's success.
"I don't like a lot of second guessing so I don't force it upon our subsidiary presidents," explains Holmes. "If you have each entity in a self-contained autonomous state, you don't need a big bureaucracy. Our philosophy is simple - we just pick good people and let them go."
That's allowed each subsidiary to grow at its own pace-despite the related product lines-while receiving whatever resources it needs from the parent company. Says Holmes, "That minimizes the costs that we'd have as a big corporation, both direct and indirect, by having fiefdoms within a headquarters. Our style requires true empowerment by corporate management and this has been our philosophy out of the chute."
Watch, but don't hover
Once a year, Holmes and his corporate staff assess and approve each of the seven subsidiaries' business plans. Each quarter, the presidents report against the plan and give a rolling 12-month forecast on where their companies are expected to go.
"It allows us to recognize how each company is doing without standing over the presidents' shoulders and watching them," says Holmes.
If a subsidiary isn't producing for an extended period of time, Holmes won't just stand still and let it flounder. While each president is responsible for the success of his company, Holmes can step in and make decisions for the presidents if necessary. He hasn't had to do so yet and would only consider it as a last resort. "I wouldn't like someone standing over my shoulder," he says.
Know when to ignore economies of scale
Unlike many companies its size-$171 million in sales through the third quarter of 1998-Chart doesn't use a systemwide software package for its subsidiaries. While using the same accounting program at each company might make some aspects of his job easier, that conformity compromises their long term gain. Explains Holmes, "We could put in a software system for manufacturers that's the same for each of our companies, but the problem is that some of our products are project-specific or order-oriented and others are widget-like. So one package won't fit all."
Nor does Chart use one uniform corporate report or financial system for all its companies. "We let each subsidiary put out monthly financial reports the way they always have," says Holmes. "We're not forcing anybody to change their management approach to meet Chart's. Chart lets them use their best management technique and reporting methods and we simply adapt to it."
Chart extracts the information it needs from each financial report and includes it in the corporate financial report for the stockholders.
Meeting of the minds
Chart's corporate staff holds quarterly meetings with the company presidents and individual annual meetings with the financial officers and manufacturing executives of each subsidiary.
"It's a chance to get together and talk about common issues and share ideas," says Holmes. "Then we discuss what's working for each business and the presidents can decide whether that's something they'd like to pursue. We encourage interaction and joint activity, but everything's done on an arm's length basis."
This has led to what Holmes considers a complex organizational structure made up of several flatter structures. "It's a more interactive style of management," says Holmes. "But it's not micromanaging. What happens is that you've got small manageable subsidiaries, each of which has few layers between the workers on the assembly line and the president. Bottom line, we let the market forces rule."
To the casual observer, it looked like the end of the road for Card Pak. On Nov. 11, 1996, co-owners Rick and Lisa Thomas stood amidst the smoldering ashes of the company's Warrensville Heights facility, surveying the damage from a massive fire. There wasn't much of a business left.
Earlier that evening, while the Thomases were on their way home from Las Vegas, 17 inches of heavy snow collapsed the roof of Card Pak's building, bringing down live power lines. One of the wires sparked, igniting the cardboard inside. By the time firefighters extinguished the flames, more than 75 percent of the 70,000-square-foot building was destroyed.
"Luckily, no one was hurt," says Lisa, company president. "But the company burned to the ground."
This wasn't the first tragedy to strike Card Pak-or the last. In 1994, a flood washed away much of the company's lower levels. Four months after the fire that left the company's future in doubt, one of the co-owners decided he'd had enough. He filed a lawsuit demanding the insurance money from the fire be divided 50-50 and that Card Pak's doors be shut for good.
Today, the company is still alive. In fact, it's thriving. Sales are up 33 percent since the fire-from $12 million to $16 million-and Lisa says the $20 million mark is right around the corner. What's more, Card Pak is putting the finishing touches on a new printing plant in Solon and plans to move in later this month.
The company's story isn't simply one of survival, it's about determination and perseverance-of the owners-and of the employees who stuck with them through the company's darkest days. But mostly, its a story about preparing a safety net to survive some of the most debilitating problems a business can face.
Learning from the past
In the middle of a parking lot that separates Card Pak's main offices from its manufacturing plant stand three concrete pads. Those-along with some scattered char marks on the back of the office building-are all that remain from the structure that once connected the two facets of Card Pak's operations.
The pads were the bases of Card Pak's original printing presses, explains Rick Thomas, CEO. "It (the fire) melted the aluminum side parts off the presses."
The fire could have been worse, Rick says. By the time it hit, Card Pak was well insured. That wasn't the case in 1994 when the flood hit. Seven inches of rain fell in an hour, causing a nearby creek to spill over its banks and race down a hill into the gully where Card Pak's building stands. Nearly three feet of water poured into the building, damaging most of the company's equipment.
"That almost put us out of business," recalls Lisa. "At that time, we were severely uninsured." Lisa says they lacked business interruption insurance and adequate flood insurance and the owners had to pony up enough dough out of their pockets to keep the business alive. "It was a bare bones policy," she says. The close call caused Card Pak's owners to rewrite their insurance policy and increase their coverage across the board.
In November 1996, after the fire, the Thomases told the insurance company they intended to rebuild. They quickly settled the contents portion of the policy with an $8 million claim and ordered new equipment. They also collected business interruption insurance, which paid their vendors and employees. The die shop was moved to Wadsworth. Other work was outsourced to competitors. With the exception of one customer who dropped Card Pak, the company's customer base remained intact.
Within six weeks, the company was up and running-albeit with a makeshift facility. "We retrofitted our warehouse space in the back to create a mini print shop," explains Lisa. "Our employees worked around the clock. They're the reason we survived. In fact, when Rick and I arrived to see the fire damage, there were several employees sweeping up what they could salvage inside the building."
Surviving the unexpected
In March 1997, while the Thomases were still negotiating the rest of the settlement with the insurance company and formalizing rebuilding plans, disaster number three struck: the lawsuit.
"After the fire hit, Bob Blake didn't want to rebuild," recalls Lisa. Blake was Card Pak's co-owner and Rick's partner. "He wanted to take the money and retire. But Rick wanted the business to go on. We had 100 employees and figured a viable business was better than the insurance money. So a line was drawn in the sand."
That dispute made it difficult for the insurance company to determine what to base its settlement on, which held up the building portion of the insurance policy. "When the lawsuit was filed, that changed the concept for the insurance company," explains Lisa. "They had to decide whether they would give us cash value for the destroyed equipment or replacement value for new equipment. We intended to rebuild, but it was hard to demonstrate that to the insurance company with a lawsuit pending."
Finally, in late October 1997, the lawsuit was settled. The Thomases bought out Blake's 50 percent stake in Card Pak for $6 million. "That unified ownership and provided a clear vision for where the company was going."
Back to the basics
After the lawsuit was settled, the insurance company paid out its final settlement. The company replaced the destroyed printing presses with two state-of-the-art presses and two cutters, upgrading its operations significantly.
The new equipment has helped slash the company's turnaround time-from about a month to two-and-a-half weeks. "On any given day, we can fill 20 customers' orders and print one million cards," says Rick. "We can feasibly expand to $30 million a year in sales with the equipment we have."
For the rest of 1997 and throughout 1998, most of Card Pak's 88 full-time employees and 12 temporary workers toiled out of two disconnected buildings. "Our long-time employees didn't want to see this business fail," says Lisa. "They told us they'd do whatever it took to get through."
The rest, mainly craftsmen, were employed by several of the company's outside vendors and partners while the company outsourced their work. When all was said and done, none of Card Pak's 100 employees was laid off. Says Rick, "Not one person missed an hour's worth of work."
Finally, in June 1998, the Thomases purchased a 90,000-square-foot former stamping plant in Solon and began extensive renovations so they could reconnect Card Pak's operations under one roof. Among the improvements is a redesigned work flow plan to make operations more efficient.
"All this has been a psychological boost for our employees, and us," says Rick. "Everyone's seeing us get all this work done, and they're looking forward to a new beginning. We were made whole through the insurance process. Not many people can say that."
Michael Bryan, an economist at the Federal Reserve Bank of Cleveland, describes deflation this way: "Consider that the dollar is a metric by which we alter value," he says. "The Fed wants to keep that metric constant-where 12 inches is equal to a foot."
Say you live in a 4,000 square-foot house and want more space. So you order a 6,500-square-foot house today, measured with a 12-inch foot and contract to pay $150 a square foot. That's $975,000.
But in the nine months it takes to build the house, if the foot gets trimmed to just 11 inches, the house will actually measure 7,630 square feet when finished. If you had paid in advance, that $975,000 translates to $128 a foot. But if you pay on completion, you'll still owe $150 a foot for the "larger" house: $1.14 million.
That's inflation, Bryan says.
Deflation is when the measuring stick gets larger and larger-and the square footage gets smaller and smaller. If you arrange the same deal, but the foot grows to 13 inches during construction, your upfront payment amounts to $179 a foot for a 5,460-square-foot home. If, on the other hand, you contracted to pay $150 per square foot upon completion, when you measure the finished home, you'll owe $818,700.
The point? Inflation favors those who spend immediately, while deflation discourages spending.
That's where the Fed comes in. Says Bryan, "It keeps the standard absolutely constant so that only real fluctuations in the economy are seen. You can manage demand by raising and lowering interest rates when things are good or bad."
When Scott Pease bought $35,000 worth of digital photography equipment between August 1997 and April 1998, the Solon photographer wasn't buying technology for technology's sake. He was investing in his studio's survival.
Pease's business wasn't struggling when he began making purchases. He had a thriving business taking photographs for catalogs and sales literature for such high profile clients as Eaton Corp., The Step 2 Co., Pioneer Standard Electronics and The Mazel Co.
But Pease prides himself on being both an ardent follower of advancements in his industry and being articulate and knowledgeable about commercial photography in general. He'd read industry estimates that projected by the year 2000 that 80 percent of all commercial photo projects would be done digitally by 40 percent of the photographers-those who were capable of such projects.
"That only left 20 percent of the assignments being done conventionally by 60 percent of the photographers," explains Pease. "That means it's going to be a nightmare for the guys who aren't set up to do digital photography."
Rather than be left with the majority battling it out for a smaller share of the pie, Pease in May 1997 chose instead to integrate digital photography into his 13-year-old studio.
In addition to planning for the long term, Pease's investment has allowed him to maintain more creative control over his work, lower costs and save himself and his clients money and time.
By now, most people have seen digital cameras in stores. Those models let you take pictures, which are stored on disc and can be viewed instantly on your computer. Color copies can be printed out for use in almost anything. The professional process is similar, but much more complex-and costly.
First, Pease bought a new computer, scanner, CD burner and high-tech photography software. The basic combination gave him the capability to scan in conventional photos, make computer-assisted enhancements and transfer the finished product onto CD-ROMs to take to the printing labs.
In August, Pease took it one step further. He bought a film scanner. That allowed him to scan in negatives for digital processing. In November, he purchased a color printer so he could print color photos at his studio instead of at a lab.
Finally, in April 1998, Pease added the final piece-a professional model digital camera. That gave him the complete package. "It was a large chunk of change to put out," says Pease about the investment. He hopes to recover that investment over the next five years by being able to provide a broader range of work. The equipment, he says, should last about 10 years.
When it all was integrated, things began to happen. Pease says with each new piece of equipment, he gained more control over the photography process. There was less reliance on photo labs to do his studio's film processing. That translated into lower production costs, which he could pass on to his clients.
Processing labs cost him about $125 per hour for scanning in the film and outputting it into a file, says Pease. If a slide or negative were needed, it cost another $125. With the new technology, Pease was able to charge his customers less than $100 an hour to do the same processing work.
"They noticed," Pease says. "In fact, there were several clients who were already familiar with the digital process and had used it in-house to alter images on their computers. When they saw we were using digital photography as well, it opened up a lot of work for us."
That included more catalogs, sales literature and trade show displays. It was a direct result of the benefits of digital photography-one of which is the ability to make composites of two or three different images on one finished photo.
Such was the case when, in early 1998, one of Pease's clients needed an image of a child on one of its sleds sliding down a snow-covered hill in front of a country home.
Pease could have taken the shoot on the road and found such a backdrop to take the pictures. But that would have been exceedingly expensive. Instead, Pease shot the child on the sled in the studio, surrounded by fake snow. Then, he took pictures of the house and the snow-covered hill. He transposed the image of the child over the other image to create the illusion that the child was in front of the house. The final result was so good it was nearly impossible to tell it wasn't one photo.
Previously, Pease shot pictures and had the film developed in a lab. He'd go over the photos with his client's art directors, who would suggest changes. The photos would then be taken to a service bureau, where they were altered to the art director's specifications.
But the digital process allowed all that to be brought in house. "I can do a whole lot more in a lot less time," he says. And because his work is more efficient, clients seem more satisfied. Especially, Pease says, since they're able to view images much more quickly.
"It used to take up to three days to get film processed," he recalls. "No longer. It puts the image immediately into a client's hands. More work can be done in a shorter amount of time. And if changes need to be made, we can take the digital image and work on it right there."
While it's difficult to say exactly how much more efficient the integration of digital equipment has been, Pease says it's improved productivity for each project by between 100 and 200 percent. "It's all the same medium now," he explains. "Since it's in the computer, it's all part of the same loop-from the moment the photo's taken to the moment it's printed out."
So far, more than a third of Pease's regular clientele have taken advantage of the studio's digital abilities. "Once they see it used, they want to use it every time there's a shoot," he says. "The rest are catching on and getting on board slowly. It's quickly becoming the choice."