Kelly Sloan

Many manufacturers view operational excellence as something that begins and ends on the shop floor. Kelly Sloan, vice president of operational excellence and global supply chain for Idex Corporation, defines it as excellence in execution of all the business processes.

Sloan said three major strategic activities brought Idex the needed changes to expand in the right way—Six Sigma, mix-model value streams, and strategic sourcing—but it was the company’s mixed-model lean process that brought it all together.

“It was a matter of adopting something more than just a traditional lean value-stream approach,” said Sloan. “We had to find something that worked for us in our high-mix low-volume environment.”

He said the important thing to remember in managing flow and reducing variation and cost is not to look at each step as an individual project. “We try to look at changes less as projects and more as iterative transformations that achieve greater flow of value. This effort is never finished,” said Sloan. “They are parts of a continuing lifecycle of flow.”

Pyramid of success
Northbrook, Ill.-based Idex has four operating divisions: Fluid & Metering Technologies, Health & Science Technologies, Dispensing Equipment, and Fire & Safety/ Diversified Products. Within these operating groups reside more than thirty different business units.

In 2005, the company achieved $23 million in cost savings, the first step of which began six years ago with a company-wide implementation of Six Sigma. Along with the standard belt-focused training, employees were educated on how to connect the three major voices of any business: the customer, the business, and the employee. Sloan said the company approached the next phase, mixed-model lean, from a different angle.

“We trained people in teams from each of our individual business units,” he said. “The group in training would be the same group to work the first value-stream transformation that would serve as a model for successive ones.”

The feedback from employees was positive, serving one of Idex’s basic tenets of successful operational excellence. Sloan said it’s important for employees to understand that while lean, Six Sigma, and strategic sourcing may provide cost-reduction opportunities, the real driver is to enable growth.

Within six months of the first process implementation, a business unit whose employees had been working over 12 hours of overtime every week for months went to no overtime at all. The second shift was eliminated, and the unit was meeting a 10% higher production volume than ever before—clear proof to the employees of the power of growth enablement.

Sloan said past operational modifications were individual two- to three-day Kaizen events that rarely evolved beyond the success of the first set of results. The changes of today are drastically different. He said there are expectations for the leadership teams to analyze how the value stream fits into the business model, listen to employee concerns when things are not working properly, and figure out what the next step in the process should be.

“We’re spending significant amounts of time debugging the new processes we put into place so they truly work,” said Sloan. “Employees recognize the management teams’ serious commitment to make these processes work.”

Part of the savings come from the company’s ability to retain and retrain employees to fit into other jobs when their current jobs are phased out through productivity improvements. In one of the company’s business units, mixed-model value streams have freed up several direct labor employees. Rather than letting them go, the company redeployed those employees elsewhere, cross-trained them to do other things, reduced the overtime in other places, and enabled growth without increasing the head count.

“For us it’s not about eliminating heads from the organization,” said Sloan. “It’s about enabling growth without stumbling and missing opportunities because we can’t execute.”

Reaching out
The other part of the cost savings of 2005 came from Idex’s approach to strategic sourcing. Although the phrase “global sourcing” conjures images of corporations trying to save a buck, Sloan said the approach Idex takes is a little different.

“One of the things we’ve migrated to is sourcing with a strategy,” he said. “It’s not about taking everything you make and simply looking for a cheaper place to get it.”

The company focuses on two aspects when looking to outsource their products: core competencies and the end-market strategy. One segment of Idex makes dispensing equipment for mixing custom-color paints in national and international home-improvement retailers. One of the business units in that segment makes the dispenser but is now outsourcing the sheet metal cabinet surrounding it. Sloan said this is a perfect example of how executives analyze the company’s core competencies when deciding what to subcontract.

“Sheet metal would be one of the non-strategic competencies we would look at to decide where the best combination of cost, quality, and delivery would be, rather than focus on it as an internal competency,” said Sloan. “If we find out that our own plant is the best combination of these three, we’ll do it there.”

Initial development of suppliers in low cost regions took a different approach as well. Rather than starting off with formal international sourcing offices as most companies do, Idex developed strategic direction and processes but let the business units search for overseas partners. “We try not to centralize too many things so we can preserve the entrepreneurial spirit in the business units, letting them grow and do the things they know are best for the businesses,” said Sloan.

The company did not have significant corporate staff for supply chain management when it began to look internationally in 2000. Some of the business units struggled to find acceptable suppliers while others succeeded. With the development of a more significant corporate supply chain leadership in the past couple of years, Sloan knows the rate of success will increase. “The business units realize where they need the corporate level assistance and are now hungry for it”.

“We are clear on the direction we’re going, but we’re still in a building and molding environment,” he said. “It’s a matter of continuing to pull the team together and execute.”