Shipulski On Design

“Hyper” for Lean — Lean Directions, SME

Hypertherm’s lean journey began in 1997 as a natural and enthusiastic extension of its long history of continuous improvement. Founded in 1968, the company’s “lean vision” includes training, application of 5S components, visual factory audits, single and mixed-model flow lines and the engagement of its product design functions.

A recent Hypertherm success is found in the company’s HyPerformance series of plasma arc, metalcutting systems. The company’s product design community designed a product line with significantly lower material and labor costs. The cost reduction target for the product was challenging—35 percent cost reduction and 50 percent labor reduction. The product also had to have 30 percent more cutting capacity. The team introduced a “low waste” design, which was further “leaned out” by manufacturing. The design effort was not formally linked to our lean initiatives; nor was it given a programmatic feel. The cost reduction target itself was sufficient to focus the group. The lack of programmatic feel eliminated any possible resistance, which can be especially prevalent in the product design community.

The design team met all the cost and performance goals on the first product and developed the recipe for additional HyPerformance series product introductions, which resulted in the following achievements:

• Almost 75 percent increase in net sales per associate over four years.
• Stock value increased by 280 percent over that same time period.
• Inventory turns are around 10.

World leader in plasma cutting (more than 50 percent of sales are outside North America) while making all of its products in New England.

Continuous improvement has allowed the company to avoid a general price increase over 10 years, even with rapidly rising material costs.

The company continues to set new profitability records annually. Consistently identified as on of the top 20 mid-size companies to work for in America.

Hypertherm also has realized staggering cost savings in the traditional, measurable areas of labor and materials:

• 38 percent cost savings
• 70 percent reduction of labor costs

Though the savings in labor and materials are staggering, the downstream savings from design for lean are even more significant. As a surrogate for these downstream savings, the design team set a stringent part count reduction goal of a 50 percent reduction in part count. The team achieved a 47 percent reduction in part count. As we know, lean is about minimizing transactions, and parts drive transactions. To illustrate the point, think about the seven wastes and add “of/for parts” to the end of each waste. The seven wastes “of parts” follows:

1. Waste of overproduction (of parts)
2. Waste of time on hand—waiting (for parts)
3. Waste in transportation (of parts)
4. Waste of processing itself (parts)
5. Waste of stock on hand—inventory (of parts)
6. Waste of movement (from parts)
7. Waste of making defective products (using parts)

Looking back, looking ahead

While Hypertherm’s lean culture is as strong as ever, just three years ago that wasn’t the case. In 2004, lean progress slowed and even began to stagnate. A dedicated corporate improvement team (CIT) was established to increase the pace and broaden application of lean practices. The CIT worked throughout manufacturing and used both quick-hit kaizen events and larger projects at the value stream level. Within a year, independent kaizen projects were led by associates recently trained in lean. During 2006, the organization demanded support in its service and supply chain. And today, the majority of CIT work is with service teams and its supply base.

If there is a point of diminishing returns when it comes to lean, we don’t see it.

Instead, we view lean as an effective way to create value for customers through improved quality, improved delivery and improved cost structure of our products. And we believe the lean culture communicates respect for our associates in the form of long-term profitability, employment security and solid compensation.

Looking ahead, lean design efforts resulting in reduced parts count will continue to eliminate transactions in the business processes, resulting in stronger bottom lines throughout the manufacturing world.

The future is indeed bright.

About the authors

Mike Shipulski, PhD, is director of engineering for Hypertherm , a Hanover, N.H., based, privately held company that designs and manufactures plasma-arc metalcutting systems.

Mark Buck is vice president of manufacturing for Hypertherm , a Hanover, N.H., based, privately held company that designs and manufactures plasma-arc metalcutting systems.