Kudu Industries Journey to Lean

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Kudu Industries Journey to Lean
The Good and the Getting There
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Todays Discussion

• What the Heck is a Kudu?
• Lean Management
• Our Successes
• Cultural Change Commitment Perseverance
  Training Purchasing Procedures Inventory
  Management Supplier Relations
• Our Opportunities
• Measurement Training Company Wide Vision
  Functional Procedures
• So What?
• Questions?

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Whats a Kudu?

• Whats a Kudu?

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Kudu Industries Today

• Private company founded in 1989
• Based in Calgary, AB with field offices in
  Canada, Kazakhstan, Australia and distributors in
  the USA, Asia, Middle East, Russia and South
  America
• Manufacture and distribute Progressive Cavity
  Pumping Systems (PCPs), downhole production
  tools, driveheads, and power units
• 140 employees
• 46mm Sales per year
• ISO 9001-2000 Certified

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Our History

• Sales grew at 50/year to 36.3m in 1997
• Staff grew from 2 in 1989 to 110 in 1997
• Won recognition as one of the 50 Best Managed
  Private Companies in Canada in 1997
• Then

Had a NDE in 1998
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What Happened?

• Sales per employee had declined from over
  500,000/yr to 330,000/yr
• Quality was declining, i.e., inconsistent
• Profit margins were declining (to 2 A.T.)
• Stock-outs and late deliveries were increasing
  (200 in 1997 gtgt 7 in 2004)
• Inventory and bank debt were soaring
• Identified 3.7m/yr in Value Not Added!

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The Result

• Sales crashed by 60 in Feb/98, caused by the oil
  price collapse
• Inventories ballooned to 13.8m, due to
  outstanding over-orders
• Kudu was insolvent by April 1998
• Sales declined another 40 in 1999

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We had to do something

• Lean Thinking?

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The Meaning of Lean

• To become fit or athletic in terms of
  business and operational performance
• To systematically and continuously take out
  waste or muda out of every aspect of a
  companys operation (across all supply chains)
• To challenge the traditional and status quo
• To bring out the best in people and allow teams
  to develop ideas and implement changes
• To focus on long-term, sustainable changes as
  opposed to short-term gains
• A way of life, never ending journey toward
  world-class status

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7 Forms of Muda

• Overproduction
• Producing more or sooner than customer needs
• Waiting
• Long periods of inactivity people, info,
  machinery, or materials
• Transportation
• Excessive movement of people, information, or
  materials
• Inappropriate processing
• Using wrong tools, procedures, or systems
• Unnecessary inventory
• Excessive storage and delay of information or
  products
• Unnecessary motion
• Any motion which does not ad value
• Defects
• Frequent error in paperwork, product quality or
  delivery

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Kudu Results After Lean

• Very viable company with reservesLean generated
  10.5mm in cash
• Capitalizing on market opportunities at a rapid
  pace
• Growing at 45 per year
• Attracting quality people, suppliers and
  customers

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How Did We Do It?

• Cultural Change
• Commitment and Perseverance
• Training
• Purchasing Procedures
• Manufacturing Tools
• Inventory Management
• Supplier Relations

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Cultural Change

• Vision
• Develop a clear vision
• Communicate the vision
• Make it easy to understand

• Accountability and responsibility
• Flip the org chart
• Transfer responsibility to shop floor
• purchasing, inventory, order management

• Trust
• Open the books
• Remove the fear of change no layoffs

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Commitment and Perseverance

• Rome was not built in a day
• 18 months of weekly company wide mandatory Lean
  meetings
• Maintain the energy
• Benefits are not immediately visible .. stick
  with it

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Training

• Jobs are banded
• Raises ties to increased skill sets through
  training, not time
• Training allowance per employee 2500/annum

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Purchasing Procedures

• Pushed responsibility for purchasing down to the
  lead hands on the shop floor
• Eliminated a go between department (Muda)
• Fewer processing errors, faster overall
  processthose in the know make the decisions

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Manufacturing Tools

• J.I.T. with Kan Ban, pull through
• Manufacture of one-offs, no batches
• 5S
• Value stream mapping
• Spaghetti diagrams
• Shop floor organized by value stream, not function

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Inventory Management

• Developed tools for inventory management
• Pull through with current data
• Kanban system (2 bins)
• Visual inventory
• Supplier involvement in the process

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Supplier Relationships

• Financial success requires a strong relationship
  with suppliersone where Muda is mutually
  eliminated
• Review your suppliers using your criticality vs
  clout matrix
• Partnerships are the most difficult
  relationships to manage that is why the divorce
  rate is so high, and In business competition,
  why does one partner have to win when the other
  looses? Brian Hesje, CEO Fountain Tire

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Supplier Stories

• Early on invited two key suppliers to take a Kudu
  sponsored Lean course
• One supplier bought in and changed their system
  to reduce our lead time from 3 weeks to 1 week
• Kudu rewarded them by paying them 2 times faster
• Second supplier chose to keep costs down by
  continuing with batches (President of this
  company is an accountant). Kudu in-sourced this
  work and the supplier almost went bankrupt.

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More Supplier Stories

• Other suppliers adopted our Kanban system which
  reduced our inventory costs and freed up shop
  space
• One supplier continued with batchesquality
  issues were multiplied by their batch sizeKudu
  changed suppliers
• Another supplier required year long forecasts
  which dont fit with LeanKudu eliminated the
  need for their productsupplier adapted to
  smaller batches
• Overseas supplier read the book developed
  their own Kanban system to reduce our shipping
  costs total savings 650k/yr

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Next Steps with the Suppliers

• Continue to work with suppliers who can reduce
  cost, supply when needed, and improve quality
• Work on supplier integration program (through
  CME) that provides both Kudu and supplier timely
  demand and pricing information
• Expedite purchasing so Kudu personnel can spend
  time adding value instead of tracking/chasing
  POs
• Move toward all in one receiving and payments
  thus removing Muda in the process of matching and
  paying cheques manually
• Closer integration will allow us to cement
  relationships and work towards more removal of
  Muda

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Our Opportunities

• Measurement
• Training
• Vision
• Further Functional Procedures

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Measurement

• What does success look like?
• Benchmarking
• Metrics
• Pictures

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Potential Scorecard
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Training

• Our success has become an issue for us

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Vision

• Did a great job on the Lean vision with our
  manufacturing and support staff
• Failed to include sales and engineering
• Disconnect on company direction
• created outsiders to the process
• company lingo not universal
• Lean Product Development
• Use the value stream teams to streamline the
  development cycle
• Design and build product

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So What?

• Lean works
• Lean is doable
• start internal, make it visible, and spread it to
  your suppliers the customers will follow!

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Typical Achievements of Lean
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Kudu Achievements with Lean

• Waste reduced by 50
• Input cost reduced by 20
• Inventory reduced by 65
• Production capacity increased 500
• 10.5mm in cash generated over 60 months

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Questions??
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Contact Info

• Matthew Kenna, CMA
• CFO and VP Field Operations
• Kudu Industries Inc
• Matthew.kenna_at_kudupump.com