Rheaco, Inc., a privately held company, fabricates sheet metal and extruded metal products for the aerospace and commercial markets. Rheaco was founded in 1967 and employees 65 people in their 40,000 square foot facility.

Actions

ARRI personnel assisted as Rheaco's top executives examined the company's strengths, weaknesses, opportunities, and obstacles. This provided the basis for a vision statement and an Enterprise Excellence plan that guides the company and helps them set direction for their future.

An assessment of Rheaco's situation revealed that:

Customers were reducing their supplier base and demanding products of continuously improving quality, on shorter delivery schedules, at reduced costs.

The workforce had performance and participation problems including a resistance to change, inconsistent application of company policies, inadequate communication, and lack of cooperation between departments.

Current business processes were inadequate to cope with changing demands of the marketplace.

A Process Improvement Team (PIT) was created to study the "Paperwork Processing" system to improve the completion and accuracy rate. The process involved all operations affecting the creation, use, and final disposition of the paperwork.

Results

Analysis indicated an unstable paperwork process with wide variations in completion rates. The PIT determined that product flow through the factory significantly impacted the paperwork accuracy and completion rate.

The PIT recommended changes in three primary areas: paperwork layout; paperwork procedures; and product flow. The physical layout of the paperwork was revised and procedures for completing the paperwork were developed. Training for all involved personnel was conducted. To maintain traceability, split-off tickets were implemented to identify all work-in-process when the router is separated from the order.

Holding areas were created for subassemblies. Hardware and tools required to complete the assemblies are stored in the holding areas to improve turn-around-time and reduce non-value-adding activities. Final assembly paperwork is sent directly to the designated areas to await the required subassemblies.

The PIT recommended adopting cellular manufacturing practices, locating all processes associated with a given product together. This reduces travel time, improves communication, and facilitates continuous flow of the product. The team recommended a phased approach to minimize cost, minimize possible disruption to on-going operations, and increase the probability of success.

Cellular manufacturing was approved for a "phased" or pilot approach. The product family, simple extrusions, was chosen. "This product family comprised approximately 35% of the open machine shop orders. In August 1993, 13,000 extrusions were on order, ranging from 1 to 1000 pieces per order.

The extrusions team documented the current process, identified resources, and designed the cell. Individuals were selected and recruited for the cell team based on existing skills and willingness to cross-train.

Machines were upgraded to allow a minimum number of machines to perform all operations required by the cell. A comprehensive list of tools, gauges, calipers, etc. was identified and procured for the cell. Only a small investment was needed to upgrade existing equipment and provide the resources needed to make the cell self-sustaining. The cell is responsible for all machining operations, inspections (except final), and shipping. Planning, painting, plating, and final inspection will be performed outside the cell.

The original layout for this product family required 2880 linear feet (over half a mile) of travel through the factory from start to finish of each order. Orders were stored between operations in a holding area. Although actual machining time was small, any given order could take weeks to complete. Frequently orders were started, but stopped and placed in a holding area, to be completed only after the customer inquired about the order. Someone then expedited hot jobs through the remainder of the operations.

The cellular layout for Phase I reduced travel to 810 linear feet. The distance includes travel outside the cell twice for processes not performed inside the cell.

By the second week of operation, the cell had achieved a 200% improvement in throughput. Other benefits of the cell include reduced turn-around-time, reduced work in process, reduced scrap, and improved product quality.

Additional Achievements

An objective of ARRI’s Enterprise Excellence program is to transfer advanced manufacturing concepts and philosophies to participating companies. Activities in the companies which ARRI does not initiate are a measure of the success of this objective. Rheaco demonstrated a high level of success.

Inventory Policies & Parts Overruns In the past, excess parts were manufactured over and above the customer’s order quantity to allow for scrap and rejects or simply to use all the raw materials ordered for the job. This practice has been modified to minimize overages and reduce the completed goods inventory. The 800 square foot room that was used to store the excess completed goods inventory has been renovated to create a dual purpose training and break room.

Continuous Improvement of Manufacturing Process Employees are continuously improving the manufacturing processes. The first order of a support beam assembly, machined from a 4 x 4 x 8 inch solid aluminum bar, was manufactured on a manual milling / drilling machine. Each part required five days of dedicated machine time and a dedicated operator to monitor the machine. When a second, much larger order was received for the support beam assembly, a team worked to improve the process and determined that the part could be made on a CNC machine. Processing time was reduced to one day resulting in a 500% improvement in throughput. The cost of production has also been reduced because the CNC operator can perform other duties while the part is being machined. This part previously required 40 hours of operator time; now it requires less than 2 hours, a 95% reduction in operator time. The savings on this order of 50 pieces alone exceeded $99,000 and were delivered in one-fifth the time.

Networking

Rheaco’s leaders took advantage of every opportunity to network with other companies striving to achieve Enterprise Excellence. Representatives attended presentations at local manufacturing companies to hear about companies’ efforts to become world class and benchmark Rheaco against world class practices.

Rheaco's Journey Continues

ARRI facilitated as Rheaco began their Journey To Excellence. The company continues to apply the lessons learned. Based on the accomplishments of the pilot cell, Rheaco implemented plant wide cellular manufacturing by grouping products into "families", redesigning processes, and redesigning facilities layout.

Significant Achievements

The formation of a Steering Team provides management an improved overall perspective. First, the group refocused company efforts on teams to better delegate new responsibilities. Now the Steering Team focuses on strategic planning instead of fire fighting. To position the company in the market, the quality systems needed to be redesigned. Improvements in quality performance has upgraded Rheaco's supplier status to "primary critical parts supplier" and created the opportunity for them to become a "certified supplier" for several local large prime defense contractors. Dollars wasted per month have dropped from $5000 to $2000 and rejections per month have dropped from 30 to 6 in a seven month period.

Implementation of plant wide cellular layout dramatically reduced travel distance (over 5 miles on the longest process), reduced WIP by 65%, improved 1st run yield by 77%, reduced turnaround time by 86.5%, and reduced cost of goods sold by 42%. Cellular manufacturing allowed Rheaco to double their output of extrusions from $0.5 to $1.0 million. Overtime hours were cut in half.

Use of advanced manufacturing techniques such as First-in First-out order processing and Just-in-Time inventory management has freed over 5000 square feet. This space allowed for manufacturing a special order for the Army. When this job is complete the space will be utilized to install a powder paint facility.

Empowerment increased participation, improved communication and employee morale. Use of monthly company-wide meetings to recognize employees has gone very well.

Improvements were made in bidding, accounts payable and receivable, and other front office processes. Business process redesign increased capacity by 60% and reduced order generation time by 75%.

Constraint analysis revealed a need for better trained personnel. Rheaco is now working with the Ft. Worth Independent School District, Tarrant County, Bell Helicopter, and other local small defense manufacturers to form a consortium that will provide a machinist apprenticeship program. This is a long term solution to a flexible workforce.

Recognition/Awards

Rheaco was the winner of the 1994 U.S. Small Business Administrators Award for Excellence and is one of two Texas manufacturers selected as Regional Winners of the U.S. Chamber of Commerce Blue Chip Enterprise Initiative award.