Given the competitive pressures in the pallet market today, companies that thrive must be efficient and produce little waste.
These values are also helpful when it comes to good environmental and sustainability scores. That’s why undertaking lean manufacturing principles and using them in your business is so important in today’s pallet market. If you haven’t begun your lean journey or if it feels like your initiative has plateaued, it just might be time to take a fresh look.
Lean holds the potential to eliminate waste, cut costs, improve your sustainability story, and empower and engage your workforce to take ownership of ongoing process improvement. The Pallet Enterprise interviewed a group of people who are familiar with lean initiatives in the pallet industry. Their experiences can help improve your chances of success.
Panelists include (in alphabetical order by last name) Cory McGee, COO of Phoenix Wood Products with locations in Florida and Georgia; Matt O’Malley, president of O’Malley Lumber Company; and Henry Quesada, professor, assistant director of extension and ANR program leader at Purdue University. While the first two participants speak from practical experience at their companies, Quesada brings perspective as both an academic and a consultant. He has guided many companies, including pallet operations, on their lean journeys.
What does Lean Manufacturing mean to you? How would you explain Lean to a new employee at your company?
Cory: Lean manufacturing is simply taking out any unnecessary steps in any of your processes. Success in lean initiatives requires a very involved leader. I always tell those who are training employees, if someone has to take more than two steps to complete a repetitive task, it is not lean enough. Good managers look for ways to simplify jobs and make them easier. If you keep it simple and have honest conversations with yourself and your team, you will go a long way in making your operation leaner.
Matt: Lean Manufacturing is an ever-evolving concept where we are getting better at all stages of our manufacturing process. From the time an order is placed to the time our customer takes possession, we are constantly looking for ways to improve. When explaining lean to a new employee, we need the person to buy into the concept of continuous improvement by maximizing productivity while reducing waste at the same time. We rely on employees to drive these improvements by constantly looking for process changes that will make their job easier while making the entire company more efficient. We want the employees to know that we are looking for their input and, more importantly, that we value their ideas.
Henry: In a company or organization, you have all these assets. You look at the building. You look at equipment; you look at all tools. How can I really maximize their utilization? You may have a loan, and then there are interest rates and you have depreciation. You also have to think about raw materials, work-in-process inventory, and finished inventory. But I believe that the most important asset that you have in your company is the people, and Lean has to be a core part of it, which is using people to their maximum potential. In order to continually improve processes, everybody has to feel involved. How do you create a system that inspires people to say, “I love my job; I want to come tomorrow.” Pallet manufacturing jobs can be very repetitive and exhausting. That’s why you have to find ways for people to feel like they are involved. But again, if you want to summarize it in 10 seconds, Lean is basically trying to maximize asset utilization.
What were the main factors or events that led your plant to adopt lean manufacturing principles?
Cory: We want to be better today than we were yesterday. What is valued is measured. We have a ton of metrics that we look at daily, weekly, monthly and yearly. The goal is to beat our previous metrics. I am not doing my job and watching the competition. I am looking at what we did yesterday and trying to improve on that performance. Over time, you will continue to get better and better, and before long, you are outpacing the competition. Lean is not an event so much as a continuous evolution and way of thinking about your job.
Matt: Waste wood has always been something we strive to eliminate or maximize its value. In 2007, we were having a lot of trouble finding viable markets for the wood chips coming out of our sawmills and pallet operations. This led us to invest in a new pelleting plant to maximize wood waste utilization. The efficiencies we gained from this operation were easy for all employees to see and understand. After this investment, we felt that we had buy-in from the employees. So, we started to pick one lean project to focus on at a time, and we clearly explained the benefits it would have on the employees and the company as a whole.
Henry: It is hard to say what prompts companies, but often I see it happening because they are having issues delivering what they promise to customers. Are they delivering the right product to the right location at the right time? And sometimes companies want to be more flexible. Maybe the customer only wants to order two crates, or one very specialized crate, and you have to pass because your policy is not to take an order for less than 100 units. So lean can really help you be flexible in meeting customer needs and in having a good production mix. Most lean projects start with those challenges. Then you start looking at your production system and using lean tools to achieve your goals.
Could you share some specific examples of how the adoption of lean manufacturing has changed the day-to-day operations at your plant?
Cory: It starts with your attitude and approach to dealing with people. If someone is underperforming or needs coaching, stop right then and have a conversation. Why wait until review time? Help the employee perform at his or her best right now. Managers do an employee an injustice if they fail to act quickly or help others improve. One thing I think we do well is be able to have a hard, honest conversation, learn from it, and formulate a game plan moving forward. Often, in a matter of minutes, we can make a major operational decision to pivot and pursue. A lot of organizations cannot do that; there is too much red tape or overengineered hoops to jump through.
Matt: Sitting on a fairly large piece of property, material flow and staging were always issues. Employees either had trouble finding raw materials, or work stations were waiting on lumber because raw material was everywhere on the yard. We created a clear process flow chart from inbound lumber to finished goods. This was a fairly simple process for all the employees to grasp. It made their jobs easier while boosting efficiency. It did take a lot of policing at first, but with clear charts for everyone to see and the topic brought up at weekly toolbox talks, employees quickly started policing each other. This was a project that management thought would take months to implement. However, once the employees bought in, it became a reality quickly.
Henry: When you look at the production floor, especially for smaller companies, there is a lot of activity. You have to understand the processes and separate those activities that actually generate value for the customer from the ones that don’t. Anything that doesn’t create value adds cost to the owner. When you have things lying around the floor that don’t move, or flow, that adds cost. Lean focuses on eliminating cost from your system. For example, if you are buying poor-quality lumber, maybe you have to spend too much time cutting out all of the knots. Another example is dust collection systems. Some companies have to stop for half an hour every shift to clean up dust because they don’t have the right collection system. If you calculate the lost time you spend on cleanup, it could be huge. These are examples of how you can eliminate waste and improve flow.
What have been the biggest challenges in implementing lean manufacturing, and how did your team overcome them?
Cory: The biggest challenge is always the resistance to change and obtaining buy in from fellow employees. Human nature seeks to resist change. But once you open someone’s eyes to a better way of doing things, it makes buying in so much easier. Start with your leadership team and get their buy-in on what you are trying to accomplish. They can help champion the cause, which trickles down to widespread adoption by others. A good way to start this process is to make sure everyone understands HOW to do what you want them to do and WHY this is beneficial. If they understand the how and why, they are more likely to buy-in. My process is to clearly explain the goals and the how/why, then get out of their way and let them surprise me with their creative ways to achieve the desired outcome.
Matt: Two of the biggest challenges were getting employees to buy into new ideas and encouraging them to offer up their personal ideas. Production workers were very hesitant at first to offer up ideas. So, we implemented an idea box where employees could put their ideas down on paper and turn them in anonymously. Once they started seeing their own ideas come up at our weekly toolbox talks, the back and forth of ideas started flowing from employees to management. Employee buy-in has always been a tough one, but we have found that clearly explaining a new process or procedure we want to implement and the reasons for those particular changes has had a huge impact on employee attitude toward the endeavor.
Henry: A typical problem I see is companies trying to do lean as a top-down initiative. The big challenge is how to involve everyone, so they are aligned with those projects. They need to understand why the project will be beneficial. If they are involved in projects and are invited to come to the meetings, then everyone can improve a specific process. Success requires very effective communication from those in charge. Lean is not about eliminating jobs. It’s about making people’s jobs better, safer and more rewarding.
I strongly recommend that even small companies make an investment in having someone in charge of their continuous improvement projects. The reason is that lean improvements are an everyday thing. Most managers and supervisors don’t have time to do that. As a result, lean initiatives get dropped. You need a specific person to manage your lean program. It’s an investment, but it will pay off. I guarantee you.
How have you measured the success of your Lean Manufacturing implementation? Can you share some quantifiable improvements or achievements?
Cory: One item that stands out is how we operate our resaws. Years ago, we would feed one board at a time. The guys would turn to take a couple steps, grab some wood, stake a few steps, and load the saw. The first thing is to attack the two-step rule. Ask, “Why is he having to move his feet?” Retrain the lift operators on how and where to put the wood for them. We also added stops to the saws where the operator can pile 4-5 boards at a time. So, now the operator never moves his feet, pivots, grabs 4-5 boards, pivots and places the wood in the saw. Once these changes were fully implemented, our total board footage throughput increased by almost 50%.
The best advice I can give someone who wants to see if or how they can become leaner is to go out and view their operation. If anyone has to take more than two steps to complete their job tasks on a regular basis, then ask yourself why.
Matt: The three main factors I look at when measuring our lean success are our productivity now compared to the past, our total headcount in each department and our material margin per unit. Over the last five years, our total sales have grown by over 40% while our total headcount has been lowered by more than 35%.
Henry: Have a baseline and then compare it every month, two months or three months. And I’m not talking about 150 metrics. Think of your car. You might have 1,000 parts in your car, but you just look at a few gauges like fuel, speed, RPM and the engine temperature. You just need a few key metrics.
What are some ways that lean thinking is being integrated into training and staff meetings?
Cory: We stress that anything an employee does, to always know how best to do it and why it needs to be done. Without knowing how and why, you will never fully understand a process or its intended outcome. Start there in training, and when laying out a plan in a meeting, people will grasp the concepts better and perform the needed tasks more reliably.
Matt: One question we ask every week at our toolbox talks is, “What can we do to get better this week?” Whether it’s an idea coming from an office employee or a production employee, somebody always has an idea on how to improve the operation.
Henry: In the past, I worked a lot with the medical industry. They offered a great example of how to do a lean implementation. Many medical companies have a continuous improvement manager. And that’s when lean works best, when you incorporate it through those roles and make it part of the company culture. It doesn’t matter if I retire and they hire somebody new; the culture lives on. But it will take time to build the culture. Be patient and commit to it, knowing that your journey may require many years to achieve lean success.
How do Lean initiatives conflict with the need to provide greater customer service through managed inventory and increasing safety stock?
Cory: Our goal is to keep a large safety stock of pallets but almost a just-in-time operation on cut stock material. Having a large safety stock of pallets in inventory will allow me to grab those pallets straight from inventory and place them on a truck for my customer quickly and never disrupt operations. I am not wasting time by having to schedule those pallets into production and jump through hoops when my operational flow is interrupted. Any person in operations will tell you that one of the most painful things to do is completely revamp your production schedule on the fly.
However, disruptions are normal, and when you try to run a just-in-time cut stock operation on your nailing machines, a change in the schedule is painful in the middle of a shift. This is when it is critical to have a sales team that understands operations and what it takes to make the magic happen. Bailing a customer out in a pinch is part of our approach to excellent customer service. So, when a customer is in need, we do everything in our power to accommodate. A large pallet stock helps that, but a just-in-time cut stock inventory can make that process painful. Keeping too much cut stock on hand leads to waste. You have to make sure that you keep everything rotated by having a strong first-in, first-out process in place.
Matt: As a company that has always offered inventory management and inventory stocking programs, lean processes have only increased our ability to react to customers’ needs. Being organized throughout the production process and having sales and front office staff included in the lean process has led to a better customer service experience.
Henry: One of the best tools for lean is just-in-time. That’s the best case because the cost of holding inventory is very high. People don’t even calculate things like insurance, space utilization, or product decay. But your strategy regarding how much inventory you have has to do with your access to suppliers. Who is close by, and how many are there? You need to have enough inventory, but having too much could be fatal.
We recently worked with a pallet company that had five reliable suppliers within a 50-mile radius. They can basically order everything just in time. But depending on where you are and your proximity to suppliers, you might need a month of inventory. You don’t want to tell your customer that you can’t deliver because you don’t have enough lumber. This requires finding the right balance.
How are lean principles key to your efforts to comply with sustainability goals and ESG initiatives?
Matt: As sustainability goals and ESG become more important to our customers, the efficiencies we have gained through our lean processes will only help us achieve those goals.
Henry: They are absolutely connected because lean is about eliminating waste. This involves minimizing raw material waste, decreasing electricity consumption, and minimizing defective products. Lean also relates to the circular economy, and I think one of the best examples that we have is the wood pallet industry, especially pallet recycling. Those pallets are not wasted. They are refurbished and inserted back into the system. It is one of the best examples in the supply chain of a circular economy.
Every time I see a company go on a lean journey, they’re not just going to increase their profits. They’re also going to increase customer satisfaction. And they’re going to also have a great impact on their sustainability metrics.
Bottom line, if you have not started your lean journey, you should strongly consider formalizing your process improvement efforts through a lean initiative. And, on the other hand, if you think you have finished your lean journey, think again. A lean manufacturing mindset never ends, and success in this more competitive landscape will require it.
