A flexible philosophy

Engine

Photo/Benny Sieu Mark Krzewinski (left), applications engineer supervisor with Morris Midwest, and Waukesha Engine machinist Don Sharkey (right), look at a robotic system being installed recently at Waukesha Engine. The nearly $2 million manufacturing cell is part of Waukesha Engine's ongoing effort to modernize its manufacturing process.

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Waukesha Engine

New assembly lines will help reduce extra inventory costs

By RICK BARRETT
rbarrett@journalsentinel.com

Posted: March 12, 2007

Dresser Inc., the parent of Waukesha Engine Corp., will be sold to a private investment group, giving the new owners some automated manufacturing systems like those found at a growing number of companies.

On Monday, Dresser announced it was being acquired by a trio of private investment firms that includes Lehman Brothers, a New York bank with a $1.6 billion equity fund.

Terms of the deal were not disclosed. Dresser's new owners will be Lehman Brothers and business partners Riverstone Holdings LLC and First Reserve Fund XI.

Dresser, based in Dallas, currently is owned by private investors including First Reserve Fund. One of its divisions is Waukesha Engine, which has 1,000 employees and makes large engines used in the energy and utility industries.

"The bottom line of this change of ownership for Waukesha and our parent company is very simple - it's business as usual. The transaction will be transparent to our employees, customers and suppliers," Tom Laird, Waukesha Engine president, said in a prepared statement.

But what's different are some of the manufacturing methods that Waukesha and other area companies have used to become more productive and reduce costs.

Waukesha recently spent nearly $2 million on a manufacturing cell that uses three machines and a robotic arm to move parts between them. The cell makes large engine pistons weighing 40 pounds each.

This summer, Waukesha will install a flexible manufacturing system that can make engine components in small quantities rather than large batches, saving money on inventory.

"The key is to make as small of batch sizes as possible, and the ideal lot size is one," said Alan Antoniewicz, company executive vice president and general manager.

Other manufacturers have adopted similar methods, said Frank Rath, director of the engineering professional development program at University of Wisconsin-Madison.

"There's a lot of cost associated with inventory. Just the fact that you have to pay for it, carry it, store it and manage it really adds up," Rath said.

One study found that 25 cents of every dollar spent by manufacturing companies was related to inventory costs. Worse yet, companies sometimes make things that are never sold or have to be sold at fire-sale prices.

"You are much better off to produce small batches, of just what you need, and make better use of your manufacturing capacity," Rath said. "Otherwise you are losing valuable machine time for something that might just sit on a shelf."

With flexible manufacturing, companies can program machines to make as few parts as they want. Progress can be interrupted to make other kinds of parts before returning to the original job.

The days are gone when companies bought machines capable of producing only one or two types of parts, said John Lenz, president of CMS Research Inc., an Oshkosh firm that sells factory automation software.

Factories want the capability to produce a large variety of parts with the same machine. It's important for competitive reasons, Lenz said.

"When you visit low-cost countries like China, you will see some of the same, modern machines used by successful companies in Milwaukee. The Chinese aren't buying cheap, rundown stuff," Lenz said.

Manufacturers such as John Deere Inc., in Horicon, have set up flexible assembly lines that can be interrupted to change products on short notice. It has helped the maker of lawn and garden tractors remain synchronized with the changing needs of its equipment dealers.

Oshkosh Truck Corp. has a flexible assembly line that allows some trucks to have different features depending on how they will be used.

Oshkosh once carried about 10 days' worth of engines. Now it has fewer than two days' worth - lowering its inventory costs.

Inventory control is important for companies that supply the big equipment makers such as John Deere and Oshkosh. The suppliers no longer have the luxury of making thousands of parts at a time because their customers won't carry that much inventory.

New machine tools can be programmed to make fast changes in product design "on the fly." Previously, changes were expensive and time consuming.

"Now, instead of adding employees, companies are adding technology," said Tom Tank with Progressive Machinery Inc. in Wauwatosa.

"At the end of the day, they have produced more parts with the same number of employees," Tank added.

Ford Motor Co. has said it expects to save more than $2 billion by 2010 through the introduction of flexible manufacturing at assembly plants.

DaimlerChrysler Corp. has said that flexible manufacturing has allowed Chrysler Group to bring new vehicles to market quicker. Also, in some cases the new methods have resulted in up to 85% savings in some areas of the production line.

But it's not enough for companies to add robots and other technologies and immediately realize savings, Lenz said.

Some companies only get about half the productivity improvement they expected. The shortcomings are the fault of ineffective management, not the machines, Lenz said.

"Many times, companies put a lot of effort into the shop floor, in making that piece of the operation work, only to find that something like the data side of the project isn't capable," he added.

Getting the most out of flexible manufacturing requires coordination throughout a company, including office functions such as ordering raw materials and scheduling product deliveries.

"None of this is easy or everybody would be doing it," Lenz said.