How Lean Manufacturing Saved An Electronics Company

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Two years ago the Morris Group of companies was at a turning point. The Newcastle-based manufacturer found that the mining turndown, mixed in with some archaic manufacturing practises, was affecting its profitability.

The group specialised in a range of products and services for the mining and other industries, such as temperature sensors, electronic componentry and float probes, as well as CNC machining and fabrication services.

Morris Group director, Ash Morris, along with his co-director and brother Linsey, knew that something had to be done or they would be out of business. More importantly, the 30-plus people they employed would be out of work. In a town like Newcastle, which for decades has been reliant on the mining and manufacturing sectors, the chances of finding employment in a similar field was remote.

It got to a stage that one of the companies, Pritchard Electronics, was failing, while unbeknown to the Morris brothers, another of the companies, D&N Engineering, was about to lose one of its major contracts.

Realising that things couldn’t continue as they were, they went to local industry body, Hunternet, who put them in touch with Irescot Learning Services managing director, Pat O’Flaherty. O’Flaherty arranged for the Morris Group management team to visit the Lithgow Arms Factory.

In 2013, the factory was about to be closed because it was losing money. Management decided to adopt the Lean manufacturing approach to doing business. This Japanese-inspired form of manufacturing, at its most basic, ensures waste is kept to a minimum, which in turn improves production times for throughput while reducing costs.

O’Flaherty then introduced them to the Institute for Lean Systems (ILS), who showed them the Lean way to operate.

“ILS ran a course onsite here where we got a group of about six local manufacturers in Newcastle to come to our factory,” says Ash Morris. “ILS ran a Certificate Three in Lean Manufacturing processes for our local community. From there, we starting implementing those processes.”

Both Morris brothers knew that some of their staff would push back, while others would embrace the new regime.

“Some of the team leaders were a bit sceptical about the whole thing at first,” says Ash Morris. “They thought it was all about costs and that their futures were under threat and they weren’t very happy about change. Their attitude was ‘I’ve being doing it for 20 years why would I change now?’

However, as they learned more about Lean they realised it was pretty cool. They found that they had to work smarter not harder. They realised that they didn’t have to do any more work than they did now. They realised that it would improve production output. Working smarter does that. We eliminated a lot of waste.

“From the team leaders back to the workers, there were a few chaps that left. Their attitude was ‘well, I’m not going to do that’. So we said, ‘this is what we are going to do. If you’re not going to come on board the door’s open but you don’t have to come in’. We had a few people kick and scream. A couple left, but overall it has been embraced at the Morris Group.”

What sort of results have the new processes brought to the company? “Savings have been across the board,” says Ash Morris. “For example, our purchasing staff don’t buy extra stock if it isn’t needed. This frees up space. We’ve eliminated waste from our standardised work so workers are not wasting time.

They’re not standing around waiting for work or waiting for a part to come in so they can finish the job. It’s there before they start. By having these things in place we’ve been able to put more throughput through the factory and workshops. We’re putting out more work with less staff but working smarter. By being able to do that, we’re more profitable.”

It wasn’t only the way they worked that changed, but also job role descriptions – something subtle like changing a supervisor’s designation from ‘foreman’ to ‘team leader’ was implemented.

“Foreman gives the impression of lauding it over others,” says Ash Morris, “while team leader means they work with a team of people.”

More importantly, the bottom line in terms of productivity and profitability have increased with some impressive numbers. There has been a 25 per cent reduction in man hours and a 10 per cent increase in throughput. There has also been a lift in net profit margin of 17 per cent across all the companies.

“Two years ago D&N Engineering, on average, took one week from purchase order to finished goods,” says Ash Morris. “Now it takes a day to turnaround the same goods. The companies are now beginning to increase capacity so much so that we don’t want people to know [how we did it].”

They still believe there is a lot to do. “Our efficiency went from about 40 per cent and is now about 75-80 per cent,” says Linsey Morris. “We want to get those efficiencies up to 95 per cent. A lot more work is involved in that. Continual improvement is our model.”

As for advice they would impart to other companies struggling in the manufacturing space, there are a couple of things they should take on board.

“We used to wait for the phone to ring. People who do that now in manufacturing? The phone doesn’t ring,” says Ash Morris. “We don’t say much when we meet a client. We just listen and then go back [to them] with problems we can fix. You have to be proactive with your sales people and you have to go out and solve your clients’ problems for them.”