Ironform shows lean manufacturing’s potential in metal fabrication.
Terry Wogan is a self-proclaimed “automotive operations guy.” He spent three decades managing automotive transmission plants that had embraced lean manufacturing for years. He had some metal fabrication experience in 2000, but in 2010 he took a consulting opportunity with a large custom metal fabricator in Ohio. Then he noticed how long the changeover times were.
“I realized that fabrication businesses are extremely sensitive to lean tools, because their changeover times are so long,” Wogan said. “When you shorten the changeover, you have this leveraged effect where it shortens the manufacturing cycle time, reduces the amount of inventory, and reduces batch sizes, and you can eliminate a lot of premium costs.”
The traditional view in metal fabrication is that long changeovers are just the nature of the beast. This is a make-to-order industry. Fab shops run large batches to increase machine uptime and reduce the number of changeovers. Sure, they may have to break into a large job to handle expedites, but again, that’s the nature of the custom fabrication beast. Fires are bound to break out; those who fight them best win.
Wogan doesn’t hold this view. In 2010 he saw a market in which construction, agricultural equipment, trucking, and other OEMs experienced continually changing levels of demand, and a host of small fab shops had trouble meeting those demands.
“By using lean tools, we can reduce lot sizes and run as close as possible to what the customer produces in a day,” Wogan explained. “Cycle time equals takt time.” That is, the pace of manufacturing at a fab shop should change to match the pace at the customer.
This idea ultimately led to Chicago-based Ironform Corp., an 800-employee, $200 million contract fabricator with seven locations across the country. The company formed in 2013 as a result of two acquisitions: Lebanon, Mo.-based Detroit Tool Metal Products (DTMP) and Denton, Texas-based Imperial Group LP, with additional locations in Decatur, Texas; Portland, Tenn.; Dublin, Va.; and Chehalis, Wash.
Wogan, Ironform’s president and CEO, added that this isn’t a simple story of scaling up the metal fabrication business through acquisition. It’s instead a story about just how dramatically lean tools can change metal fabrication for the better—and about how well those tools can be used to serve OEMs on a large scale.
An Investment Thesis
After his epiphany in 2010, Wogan reached out to Dani Goldsmith, a colleague from the automotive sector with private equity experience, and Marty Kozarec, a 30-year sales veteran in the fabrication sector. The three scrutinized an investment thesis that essentially touted the untapped benefits of lean manufacturing in the metal fabrication space.
With thesis in hand, they set out looking for private equity partners, met with five, and were offered investment money from all of them. In the end, they chose Chicago-based Wynnchurch Capital.
“We were very thoughtful about why we partnered with them,” Wogan said. “Wynnchurch is a PE firm that specializes in middle-market manufacturing. They were very quick to grasp our thesis. And the firm also has no timeline. They are long-term investors. There’s no clock running on the wall.”
Wogan and his team had a busy summer in 2013. In June they purchased DTMP, a company that had a mix of large customers in agriculture equipment, trucking, and mining. In August they bought Imperial from Accuride Corp., a publicly traded firm best known for its truck wheel manufacturing. The Imperial operation was also tied heavily to trucking, but it specialized in precision metal fabrications, stampings, and assemblies.
Since 2013 sales in the trucking sector have reached record levels, while many agricultural and construction equipment markets have seen better days. This customer mix, as it turned out, has served Ironform well. Trucking has driven revenue growth, but Ironform also has been winning more bids for new (albeit low-volume) work from agricultural equipment customers. Eventually Ironform managers expect those orders to ramp up to major projects once the agriculture market recovers.
What the Customer Needs—Today
When fabricators tackle lean manufacturing, many consider 5S a good place to start. Wogan has a different perspective. He doesn’t see anything wrong with 5S, but he actually views it as more of an effect than a cause of improvement. If you implement the core lean tools correctly, 5S happens almost automatically.
So how does a contract fabricator implement these core lean tools? The traditional way is to show people how to look for so-called “waste”: excessive movement, overproduction, and so on. But Wogan approaches lean with a statement that really gets to the heart of the matter and focuses on the customer, both external and internal (that is, the next manufacturing step).
“Try to make what the customer wants today, and discover why you can’t,” he said. “That creates the opportunity for continuous improvement.”
Custom fabrication (along with most of U.S. manufacturing) is full of variability, with different products, volumes, demand levels, shop routings, and more. Many operations absorb variability with finished-goods inventory. Others absorb it with more time, like a four- to six-week lead time. Nevertheless, the job itself may have just a few hours of value-added time in which parts are actually cut, bent, coated, and assembled. All that extra time the job spends waiting to be released, waiting for material or sourced components, waiting as WIP in front of a work center. Put simply, there’s a lot of waiting.
Ironform takes a different approach. The company has little finished-goods inventory. It absorbs variability instead with its raw stock inventory. Even here, though, the company carries less raw stock inventory than it did three years ago. Managers analyzed the product mix, studied the material usage patterns, and reduced inventory levels for less-used sheet and plate. Using another common lean tool, the company delivers and stores much of the sheet stock near the point of use, such as within steps of the laser cutting machines themselves.
Employees don’t deal with expedites. They don’t manage massive cut lists and aim for maximum material utilization by dynamically nesting and looking out ahead in the schedule, filling the space in the sheet with future orders. Laser operators still may group different jobs on one sheet, but all those jobs are due immediately. This makes life easier for material handlers who sort cut nests and move parts to the press brakes.
At the press brakes, operators receive a list of jobs that need to be completed by the end of the shift, as posted on screens populated by Ironform’s enterprise resource planning (ERP) software. The company doesn’t use the software for scheduling. Instead, the ERP simply displays what employees need to know for the workday: that is, what jobs are due that day.
Scheduling usually doesn’t go down to the machine level. For instance, in the forming department, jobs don’t have press brake-specific routings. Instead, jobs are split by whether a part can run on all machines (simple part that uses common tooling); some machines (part of medium complexity that may require special tooling or gauging); or a specific machine (job requires special tools and/or machine gauging).
The supervisor and operators work together to determine the best sequence and how to schedule work through the department. As Wogan explained, it goes back to asking that simple question: “What do I need to do to finish these jobs today successfully?”
Wogan conceded that the company does not achieve the material utilization it might if it dynamically nested a week or more into the schedule. But any additional money Ironform spends on material is far outweighed by the benefits of cutting on demand—just what’s needed for the day.
Besides, dynamically nesting beyond what’s needed to satisfy immediate customer demand would go against the fabricator’s driving philosophy: to match the customer’s pace (takt) of manufacturing.
Driving this is the customer due date. At Ironform, if you see a subassembly on the shipping dock, it was probably in the assembly department the day before, coating and paint prep the day before that, welding the day before that, bending and laser cutting the days before that.
Aside from plating, Ironform outsources few processes, which gives the shop more scheduling control. Ultimately, when a part is placed on the loading table for laser cutting, it will likely be on the loading dock within two weeks or less.
All this wouldn’t work without significant data analyses on the front end, what Wogan called Ironform’s “secret sauce.” The fabricator analyzes all SKUs and identifies similarities, such as material type, thickness, geometry (including the tooling that geometry will require), complexity (piece part versus large assembly), order volumes, and how consistently the orders come in the door.
If a job reaches a certain volume, it may make sense to build a hard tool for the stamping press (if, of course, the sheet type, thickness, and geometry make sense for stamping). If a job reaches a certain volume and order consistency, it may make sense to develop a cell, which in turn shortens lead times even further.
For instance, in Denton, Ironform has a multiprocess cell that produces parts for a nearby truck manufacturer. “Lead times are minimal,” said Mike Wogan, operations controller (and Terry Wogan’s son). “We usually get an order that tells us what’s due for the week, and we react in a few days.”
The scheduling strategy apparently is paying off. According to sources, Ironform’s on-time delivery rate well exceeds 95 percent, significantly above the industry average. In the past few “Financial Ratios & Operational Benchmarking Surveys” from the Fabricators & Manufacturers Association International, on-time delivery rates in this business have averaged between 85 and 87 percent.
Since 2013 Ironform has made significant equipment investments, and all of it is driven by the company’s approach to lean, including standardized work. The company has purchased eight new lasers since 2013 and almost a half-dozen new press brakes. It has also spent millions rebuilding and upgrading its stamping presses, all of which have modern, standard controls.
Every laser is the same brand with identical controls. The same is true of Ironform’s new press brakes. And the same applies to the company’s high-density plasma cutting tables. Across the organization, quality assurance technicians use the same inspection arms with the same software.
Ironform is also standardizing capabilities across its seven plants. Certain plants do have specialized equipment and areas of expertise that were there before the Ironform acquisition. For instance, its Virginia plant has extensive tube cutting and bending. But in general, each plant has similar capabilities to serve the local customer base.
With standard equipment and plant capabilities, Ironform has centralized its engineering in what it calls its “technical services group,” from which 70 engineers can be deployed wherever needed across the organization.
When fabricators talk about lean manufacturing, they often talk about getting employee buy-in. Terry Wogan said that, at Ironform at least, buy-in really hasn’t been an issue. This was especially true for front-line workers, who tended to be the first to appreciate the benefits of lean. No longer are they running around to put out fires. They get a to-do list for the day and get the job done.
Wogan added that Ironform has been paying for its employees to attend nearby community colleges, including Missouri’s Ozarks Technical Community College in Springfield, to obtain certificates in manufacturing. These aren’t night classes either. Ironform pays them to attend during the workday.
A large company size also brings with it career opportunities. The fabricator has hired or promoted almost 100 people over the past three years—those who have bought into Ironform’s brand of lean. “We’ve given prime management opportunities to people who have been with these companies a long time,” Mike Wogan said. “There’s a deep knowledge there.”
A Bigger Future
Terry Wogan said that they are looking for additional companies to acquire, adding that Ironform may buy at least one more company in the next 12 months.
Over the long term, company leaders are seeing big changes ahead. They see metal fabrication, especially those companies that serve large OEMs, as an area of industry ripe for consolidation.
Mike Wogan put Ironform’s goal simply:
“The ultimate goal is to grow to become the largest metal fabricator in the world.”
Images courtesy of Alan Shortall.
Ironform Corp., 312-374-4829, www.ironform.com