Lean manufacturing practices enabled the company to respond quickly to market declines without being caught holding excessive inventory. Discipline and transparency enabled WIKA to maintain profitability during the global market downturn, and then respond quickly when sales growth returned. Download Full Case Study
German Manufacturer Utilizes Lean Manufacturing Practices to Weather Recession and Bounce Back to Set Record Sales
When sales at WIKA Alexander Wiegand SE leveled off at around 300 million in 2001, lean manufacturing practices helped reposition the company as a highly responsive, high volume supplier of made-to-order pressure and temperature measurement instruments.
“We were told that the award for transitioning to lean would be nothing but growth,” says Michael Gerster, former President of WIKA Instrument Corp. in the U.S. “That was true until 2008 but in 2009 we experienced negative market forces that derailed an otherwise spotless record.”
WIKA business leaders decided to leverage operational excellence and lean manufacturing to transition to a just-in-time, high variation, fast delivery strategy that provided enhanced customer value. They were able to protect their margins because their lean methods made production activity and performance much more transparent.
Challenge: After seven years of sales growth bolstered by WIKA’s LeanSigma efforts, the global economic recession caused a double-digit sales decline.
WIKA’s lean journey began in 2001. Management’s primary objective was to shorten order lead times, then running anywhere from four to six weeks, and improve on-time delivery performance, which was hovering between 60-70%. Improving quality and productivity were other top priorities.“One of the weekly discussions that we had before lean was that we were too slow, too expensive, never had the right stuff in stock and our quality was not good,” recalls WIKA Instrument Corp. COO Klaus Gross.
Solution: Lean manufacturing practices enabled the company to respond quickly to market declines, maintain profitability during the global market downturn, and then respond quickly when sales growth returned.
One of the critical elements of WIKA’s ongoing success has been the fact that lean efforts and the continuous improvement mentality have not been limited to the factory floor, or to any one department or division.
Some examples of how their Lean Management practices extend across all departments are:
- Policy deployment practices now define breakthrough performance targets for the whole company.
- Leadership development programs identified skill gaps, assessed management strengths and weaknesses, and provided individual and team coaching to help make the best decisions and develop talent from within.
- The Georgia plant shipping department simplified order picking, streamlined product flow, and improved inventory management.
- Many kaizen workshops have reduced working capital requirements by reducing both inventories and receivables.
- The continuous improvement mindset even led to standard, company-wide processes for organising meetings and hosting visitors.
Results: Financial benefits include sales and market share growth, healthy margins and operating cost advantages such as higher productivity, less scrap and lower working capital requirements.
When market demand fell in 2009, WIKA was able to protect its margins because their lean methods made production activity and performance much more transparent. In the past when orders fell productivity fell along with it because people worked slower. Because each lean work cell now has its own prominently displayed performance metrics, it’s easy for supervisors to see when output or any other key indicator slips. And when market demand returned, it was easier to align production activities to order requirements.
Lean Practices Enabled Manufacturer to Protect its Margins and Come Out of the Recession Successfully
- Order lead times reduced to 3-5 days from an original 4-6 weeks
- Productivity gains in the United States alone have made it possible for the business to grow without adding the labor equivalent of 200 employees, which calculates out to cost savings of $7 million per year.
- Since 2002, their EBIT margin has improved 1% every year