Net Profit Doldrums

Situation:

After being in business for over ten years, two owners of a private medical device company that made custom silicone rubber components were frustrated that their profit margins were not in line with comparable medical device companies. The Continuous Improvement (CI) team they had in place was floundering. The firm needed a top-down reorganization of their manufacturing process if they ever hoped to achieve the results they wanted. I was hired to replace the outgoing VP of Engineering and asked to take over leadership of the CI team.

Action Plan:

  • Meet with the manufacturing engineers as well as all their internal customers (manufacturing, quality, regulatory compliance and finance) to get everyone’s needs and issues on the table.
  • Initiate standardization processes for OEM-customer quoting, mold setup and post-molding tool assessments. Begin tracking low profits and variance issues and prioritize part numbers by dollar loss.
  • Meet regularly to discuss progress, close out tasks, identify what issue the CI team should address next and develop plans for doing so.
  • Initiate Lean Six Sigma techniques to eliminate waiting, defects, overproduction and extra processing, and to remove waste in motion, inventory and transportation.

Results:

By every measure, our efforts were a resounding success. In the first three years, operating income grew an average of 28% annually. Gross margins improved by an average of 16% per year. Department work-center overhead rates fell 9% a year for three consecutive years.