Lean project brings better service, lower costs for Caradon plc

How WCI helped a division of Caradon (a European market leader in building products and materiel) improve delivery performance and reduce inventory.

Good news
The project achieved a 30% stock reduction in four months, liberating £1.3 million in working capital. The on time delivery rate doubled, saving a recurring annual £2 million. Management and employees continue the improvement, spreading it across the division's four European sites.

Good news for Caradon’s customers, good news for Caradon!

Leaner performance, lower costs and higher cashflow have strengthened their market leading position. What was the secret?

Key challenges
A highly seasonal market, plus long supplier lead times, had fostered high inventory levels. Cumbersome planning and control processes had grown alongside. The company had too much capacity for its output – uncomfortably reflected in operating costs. Costs or capacity had to fall.

To reduce inventory and allow shorter planning and production cycles, they needed a leaner operation, responding with agility to changing customer requirements. But with four European manufacturing plants and a thousand employees, the company was more interested in achievement than in head count.The biggest challenge was to succeed within months using our standard small consultancy team. This meant being innovative and opportunistic from Day One, not wedded to a fixed lean methodology.

Solutions
Benchmarking: key to continuing improvement

We worked from the start with multi disciplinary teams from the client’s staff. They specified objectives, then designed, developed and implemented the new processes. Their knowledge was key to success and their early involvement assured client ownership of the inevitable big changes.It is hard to admit that somebody else's process is better than yours. So people would need unequivocal evidence.

Benchmarking was the answer – with objective measures that people could apply for themselves.Commonality between the processes of the four plants let us develop an agreed, general, macro model of lean benchmarking covering the principal stages of manufacture. With it, the teams identified and proved 'best in class' lean process.Wherever there was no ‘best in class’ example, people were encouraged to create one – leaner, with shorter information loops and cycle times, test and then share it.

The model gives quantified answers the questions ‘How well does it work?’ (results on KPI measures) and ‘How does it do that?’ ( process attributes). People could measure their own process against the ‘hows’ of best practice, highlighting the changes they needed to make. Close the process gap, and the performance gap closes too.

A micro level expansion of the macro model would be defined only where that was essential to specify improvement opportunity – lean practice!From the model, we calculated the costs and resources of closing the gaps, and the benefit from each improvement when all plants operated at ‘best’ level. We drew up a list of worthwhile improvements, with an implementation plan. Now it was up to the plants.

Leaner processes
The company had already achieved excellent lean solutions intuitively, through intelligence and commonsense. But the complicated Planning and Control system needed a more formal approach to ‘lean’.We implemented a new supply chain planning programme, based on a close analysis of key activities carried out with Caradon's management team.This new, integrated Strategic, Sales and Operations Planning and Control matrix with six week accurate demand forecasting – transformed purchasing and manufacturing efficiency, satisfying customers and lowering inventory.An electronic kanban system triggered orders, greatly improving supplier schedules.

Synchronising the manufacturing sequence with the fixed distribution cycle raised first time pick rates and reduced transport costs.
Benefits

  • High predictability enabled suppliers to be moved onto a one day lead time, daily delivery system.
  • Accurate skus meant lower costs, fewer errors and sky high flexibility.
  • Caradon were saving £2 million per annum at one plant alone after only nine months! The other plants are following suit.
  • Lower costs with higher customer satisfaction reinforced Caradon's market leadership position
  • Customers get on time deliveries, with no stock outs – they too can cut inventory!
  • 75 non value adding jobs were eliminated at the first site, which had a total of 330 staff, including 80 temporary workers. As Caradon hoped, the benchmarking project did not impact on the permanent workforce.
  • Improvement continues. Benchmarking drives the constant effort to close the gap between what happens and what is possible.

Senior people from the Caradon parent support the teams in continuing the development and sharing of evolving ‘best lean practice’.

Leaner and still leaner
We involved company employees and management throughout, in a way that would make the improvement culture self sustaining.But our key innovation was to recognise that the process of identifying and transferring best lean practice had itself to be lean! No blind following of procedure: stop when you know the answer. Maximum output value for minimum input – just like the new operational system we installed!