Duluth Manufacturer Implements Lean, Improves Bottom Line

A worker at Spectral Response in Duluth inspects a circuit board before it is shipped to a customer. Georgia Tech’s Enterprise Innovation Institute assisted the company with improving its manufacturing processes.

Spectral Response, a Duluth-based manufacturer of circuit boards, has a lot going for it. It just celebrated its 21st year in business, 70 percent of its workforce has been employed there between five and 10 years, and it won the 2008 Georgia Manufacturer of the Year Award from the Georgia Department of Technical and Adult Education and the Georgia Department of Economic Development.

But Kevin Melendy, president of the company, says Spectral Response had to develop innovative ways of thinking to survive and thrive.

“Like everybody, we faced an onslaught of competition from low-cost manufacturing. We had to find a way to compete,” he said. “We had to either fight to survive or try to find new and expanding business segments that have higher margins and less competition, and those just don’t exist.”

To improve the company’s manufacturing process, Melendy turned to Georgia Tech’s Enterprise Innovation Institute for assistance. Lean specialists Kelley Hundt and Jennifer Trapp-Lingenfelter initially visited Spectral Response to help streamline the way the company initiated product orders. After developing a value stream map – a diagram used to analyze the flow of materials and information required to bring a product or service to a consumer – they suggested the project focus on the entire manufacturing floor plan.

“The factory floor was being driven by the how orders were loaded. If a customer called, we had to figure out a way to get it done, whether it was working nights, weekends or three shifts,” Melendy recalled. “But as our business grew and the margin pressures were layered on top of that, we didn’t have that luxury any more. We had to take an order from a customer and make sure our supply chain commitments matched up to our manufacturing processes.”

After meeting with Spectral Response’s leadership, Hundt and Trapp-Lingenfelter both thought the company’s manufacturing process would benefit from a cellular design. At the time, the company was arranged in functional departments that caused excess work-in-process, long lead times and lack of flexibility. Cellular manufacturing, sometimes referred to as cell production, arranges factory floor labor into semi-autonomous and multi-skilled teams that manufacture complete products. These more flexible cells are able to manage processes, defects, scheduling, equipment maintenance and other manufacturing issues more efficiently.

After training the entire 137-member workforce on lean manufacturing principles, a cross-functional team of eight employees examined the “before” process, brainstormed ideas and used lean tools to highlight areas of improvement. The team decided to shut down operations during the week of July 4, 2007, to re-arrange all of the equipment into nine different cellular production lines.

“We used to refer to the floor plan as the snake, and a product had to travel through the entire snake, meaning it was in a single file. If we started a product on Monday, it might be ready to be shipped on Friday,” said David Shockley, vice president of operations. “With the cell production, we can have nine parallel lines – much shorter in length – producing nine products at once. Now, products are ready to be shipped within 48 hours after the order is launched in the system.”

Not only did the cellular design reduce the length of time from the order initiation until it was ready to be shipped, but it also helped with orders that needed to be re-worked or changed. Todd Owens, lean manager for Spectral Response, estimates that inventory in this area was cut by more than one-third.

“Before, the boards that did not pass the testing area would just get set aside into what we called the bone pile. We would have to find time to go back and re-work them, and that inventory became a significant dollar amount,” he said. “Now, we handle the failed board as we run them through the individual cells. A year ago, the value of the bone pile inventory was more than $300,000; today, it’s around $80,000.”

As a result of the lean implementation, Spectral Response has seen a number of impressive impacts. Total work-in-process has decreased by more than one-half, from $2 million to approximately $800,000 worth of inventory. Lead times have been cut in half, overtime is down from 15 percent to less than five percent, and there is 40 percent more floor space for future growth. Melendy also estimates that the company’s electricity bill has decreased by 20 percent, since it is using big, power-hungry equipment less.

“It’s easy to quit on this because it’s difficult, but ultimately you come out on the other side with a company that’s more efficient and better run than when you first started,” Shockley noted. “In July 2008, we will implement cell number ten, and it will be our highest volume product. We are committed to this being a never-ending, continual process.”

About Enterprise Innovation Institute:
The Georgia Tech Enterprise Innovation Institute helps companies, entrepreneurs, economic developers and communities improve their competitiveness through the application of science, technology and innovation. It is one of the most comprehensive university-based programs of business and industry assistance, technology commercialization and economic development in the nation.

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Media Relations Contact: John Toon (404-894-6986); E-mail (john.toon@innovate.gatech.edu).

Writer: Nancy Fullbright