Ryan Underdown

Graduate Research Associate

Automation & Robotics Research Institute

The University of Texas at Arlington

Fort Worth, Texas

Rhea Wallace

President

Rheaco Incorporated

Grand Prairie, Texas

Jo-An Weddle

Research Engineer

Automation & Robotics Research Institute

The University of Texas at Arlington

Fort Worth, Texas

Joseph Sarkis

Assistant Professor

Department of Management Sciences

University of Texas at Arlington

Arlington, Texas

The small manufacturing enterprise has a lot to gain by becoming more agile. The difficulty for most of these organizations lies in their lack of resources to effectively plan and implement agile concepts. We show how one small manufacturer, Rheaco, Inc., has been able to grasp agile opportunities using an enterprise engineering framework. This framework allowed Rheaco to rebuild an organization that is more able to respond to and thrive in an environment of continuous unanticipated change. A number of examples of agility are provided that have impacted Rheaco at a various organizational levels and are described within the context of the enterprise engineering framework.

Small manufacturing enterprises (SME) have had a significant impact on the nation's economy. Economists predict that the major source of growth and new jobs will be provided by small organizations. In 1986, there were over 300,000 SME with under 100 employees in the United States. These organizations employed over 5.3 million people and generated annual payrolls in excess of $107 billion [5]. Since that period, realignment of industries and increased "downsizing" have only added to the importance of SME on the U.S. economy. In addition, most large manufacturers are closely linked to the operations of SME. To this end, the future of small companies takes on greater importance as the nation begins to emerge from the recession of the late 1980's. To help meet this challenge, small manufacturers must be brought up to speed on the major practices that will help them maintain competitiveness. Agility is one such concept. Clearly, it is imperative that we ensure the competitiveness of domestic SME, and include them in the acquisition, adoption and implementation of various agile technologies and philosophies.

Small manufacturers generally lag their larger corporate competitors and partners in terms of awareness and implementation of advanced manufacturing concepts and practices, and especially agility. Most are too busy "fighting fires" to take advantage of these strategic, competitive philosophies. Most SME's will find it difficult to begin or remain on this journey without a long term plan and some aid.

For the purpose of clarity we use the Small Business Administration (SBA) definition of a small business. The SBA defines a small business as: "one which is independently owned and operated and which is not dominant in its field of operation."

The Dallas-Fort Worth Metroplex has 7000 SME. Over 2500 of these are SME supply defense contractors. In the past few years the amount of funding for defense related industry has decreased. This funding decrease has had significant impact on major contractors, but the results of these cutbacks have been even greater on the smaller subcontractors. Thus, for many small companies to survive, they had to achieve greater levels of efficiency, and agility.

The purpose of this article is to demonstrate how a defense based small manufacturer in the Dallas area is thriving in an increasingly competitive defense industry environment through adoption of a framework for change and grasping the agile opportunity.

Among the greatest challenges facing small manufacturers are related to their ability to cope with change. There are two types of change which have profound impact on SME; changes in manufacturing technology and changes in manufacturing philosophies. Technological changes primarily impact the tools and production processes used in the operation of the organization. Examples of technological change include the use of flexible manufacturing systems, advanced production control systems, robotics, and the numerous Computer Aided (CA-) tools. While the philosophical changes impact the culture and management of the organization. Major paradigm shifts in manufacturing philosophy include lean production, just-in-time manufacturing, total quality management, concurrent engineering, activity based costing, etc. A philosophy that begins to integrate many of the technological change requirements with organizational changes is agility. The concept of agility has been defined in a number of ways, typically it has been defined as being able to thrive in an environment of continuous unanticipated change.

SME generally adopt a niche marketing philosophy based primarily on providing customized products and services. Product and process design activities in small organizations tend to focus on a small number of processes. The design and manufacturing expertise within the organization is typically highly skilled in these specific areas. The knowledge base outside these areas, however, tends to be fairly limited with few resources available to learn about or experiment with new manufacturing technologies or philosophies. The business activities and procedures for smaller firms tend to be very informal. As these companies grow, the informal processes are institutionalized without the benefit of any procedural analysis. The planning and decision making processes tend to be reactive, rather than proactive, focusing on operational problems rather than addressing strategic or tactical issues. The narrow knowledge base, and lack of proactive planning, leaves SME vulnerable to shifts in the manufacturing environment. As product complexity increases, and the rate of technological advancement accelerates, focusing on a narrow set of processes and reliance on proven technology is a risky long term strategy for SME.

Agility can not be bought off the shelf. It must be a customized philosophy that meets the needs of each enterprise. SME rarely have the experience or resources to under take many strategic development efforts. Due to their size, limited resources, and lack of experience, SME are least able to cope and are most vulnerable to change. To help SME adapt to the needs of the market place and the demands of the manufacturing environment, a change methodology must be made available to help them respond to the changes in manufacturing philosophies and technologies.

An enterprise structure designed to enable SME adapt quickly and appropriately has been developed, and is under continuous development and upgrading at the Automation and Robotics Research Institute (ARRI). This framework is designed to facilitate change and continuous improvement within the organization as well as balancing the strategies, actions, and performance metrics of the enterprise. An ultimate model will provide functional, organizational, information, resource and process views of an organization. With this tool, an organization has the ability to develop an enterprise structure which is capable of quickly adapting to its current operational environment in a way which will support the realization of its strategic objectives. It is an agility enabler. The enterprise model will also determine how the organization must control and execute its activities in order to achieve these goals.

A general improvement model and its components are shown in Figure 1. This figure shows that the current enterprise is an input into an enterprise engineering (EE) methodology that aids in the organization's transformation into an agile enterprise. Two additional requirements that will help guide this transformation process are organizational commitment (through the development of a vision) and a enterprise reference architecture that will help define various processes within the organization (these may be "As-Is" and "To-Be" references). Enablers or mechanisms to aid in the EE process include the use of appropriate tools, including enterprise modeling, financial and economic, simulation, and optimization tools.

Central to the general transformation model is the EE methodology. The focus of this paper is on the use of this portion of the improvement framework. The EE methodology is modeled using IDEF0. IDEF0 is a functional systems modeling tool that was developed through the Air Force's Integrated Computer Aided Manufacturing (ICAM) program. IDEF stands for ICAM DEFinition [3]. IDEF0 is used to represent the functional (i.e., activity or process oriented) framework of a system. There are five elements to the IDEF0 functional model: the activity (or process) is represented by boxes; inputs are represented by the arrows flowing into the left hand side of an activity box; outputs are represented by arrows flowing out the right hand side of an activity box; the arrows flowing into the top portion of the box represent constraints or controls on the activities; and the final element represented by arrows flowing into the bottom of the activity box are the mechanisms that carries out the activity. The inputs, control, output and mechanism arrows are also defined as ICOM's. Another characteristic of the IDEF0 modeling technique is that each activity and the ICOM's can be decomposed (or exploded) into more detailed levels of analysis. These characteristics will be evident in the graphical description of the EE methodology (for example, see Figure 2).

The development of the EE methodology was accomplished through a thorough review of the literature, field observation of good practices and a reader-writer cycle with industry experts from consulting firms and large enterprises. The IDEF0 model was created incrementally with each part of the model being described in more and more detail [2,4]. As parts of the model were completed, they were sent to the experts for comment. The methodology was then validated at several SME.

This section briefly discusses the phases and components of the EE methodology. The high level diagram of the EE methodology is represented in Figure 2. Four major integrated activities define the EE methodology. These activities briefly described are:

We shall now describe how various components of the EE methodology were used to aid an SME in achieving elements of agility within its organization. We also include some performance results that were achieved in this case study.

Rheaco is a small family owned job shop of 65 employees in Grand Prairie, Texas, primarily involved in fabricating sheet metal and extruded metal products for aerospace and commercial markets. Their product diversity is 90% defense and 10% commercial. Established in 1967, Rheaco has produced build to print products for defense contractors for the past 27 years. In the Spring of 1992, Rheaco operations were not very agile, and not very competitive even among other SME's. Orders were in continuous backlog and seven day work weeks had become the norm. This had severely impacted the customer satisfaction levels.

Yet, there were opportunities that did exist within the company. For example, most of the management team was familiar with continuous improvement concepts and had received some training in this philosophy. Rheaco's vision, "Rheaco, Inc. will become a World Class manufacturer committed to providing products and services that exceed our customers' expectations", describes a drive to become agile, a key ingredient to exceeding customer expectations.

Decreasing defense dollars and increasing customer demands have continued to put external environmental pressures on Rheaco. Rheaco management investigated several local quality programs, consultants and quality seminars in an attempt to find a way to maintain a healthy business in a post-Cold War era, and to increase customer satisfaction. After a short search for help, Rheaco realized that reputable consultants were financially out of reach and that a one or two day quality seminar would simply not be enough to pursue agility or achieve full customer satisfaction. This observation is generally true of most SME.

During their search for assistance, Rheaco received an invitation from ARRI to attend a series of "breakfast workshops" dedicated to assisting small manufacturers in pursuing world class manufacturing, primarily sponsored by the SBA. This invitation initiated Rheaco's involvement with ARRI's Enterprise Excellence project. Rheaco executives began attending the weekly breakfast workshops and soon became involved in the comprehensive portion of the Enterprise Excellence project. As a "comprehensive company," a team of Rheaco managers met weekly with Enterprise Excellence personnel to begin their "Journey to Excellence" following the EE methodology.

Using the EE methodology as a guide, Rheaco's Management Team began to develop a vision by analyzing their current situation, recognizing their strengths, weaknesses, opportunities and obstacles, and formalizing their values as a company. For the first time, Rheaco executives were forced to take a long hard look at their corporate mission and determine where they wanted to take Rheaco in the future. From their vision, a strategic plan was derived to pursue the aspirations the vision describes. Referred to as Rheaco's Enterprise Excellence Plan, it broke the vision down into goals that could be supported by strategies and developed into lower level plans. The Enterprise Excellence Plan served as a guide for the Management Team to keep company activities focused toward pursuing their vision.

Once the direction of the company was set, the Change Culture portion of the methodology was addressed. A team of ARRI personnel and Rheaco employees, referred to as the Cultural Change Team, began a series of interviews of employees from all levels of the organization to determine the current state of Rheaco's corporate culture. Results were positive, although a number of obstacles to pursuing the vision were identified, such as a resistance to change, inconsistent application of company policies, inadequate communication, and low cooperation between departments. The Cultural Change Team reached consensus on the major barriers to change and developed a list of possible solutions for each barrier. A formal report was written and presented to the Management Team. With the report in hand, the Management Team determined the key barriers to achieving Rheaco's vision, and the most feasible solutions from the list of alternatives provided. These key cultural obstacles and accompanying solutions were incorporated into the Enterprise Excellence Plan in an effort to develop a culture that supports continuous improvement, and therefore the vision.

To address the Integrate & Improve portion of the methodology, the Management Team identified a single process critical to integrating the organization and pursuing the vision. In this case, "Paperwork Processing", was chosen since tractability and documentation were important to Rheaco's customers and the process was deficient. A Process Improvement Team (PIT) was assigned to the project composed of employees from all operations affecting the creation, use and final disposal of the router. The assignment was to improve the completion and accuracy rate of the paperwork processing system. The selection of a single process to focus on, rather than trying to accomplish too much at one time allowed them to move down the learning curve with less risk. It also allowed the whole team to learn the process of reengineering and continuous improvement. It also shows what type of other improvements may be necessary, especially those that exist in parallel functions, as explained below.

Analysis of the paperwork process indicated an unstable set of activities with wide variations in completion rates. The completion rate fluctuated from 18.5% to 72.2% to 37.5% over a 9 week period. The PIT determined the rate of product flow through the factory had a significant impact on the paperwork accuracy and completion rate. The PIT made recommendations involving three primary areas: paperwork; paperwork procedures; and product flow.

Many recommendations were implemented, others were scheduled for implementation, and some were declined. The functional layout of the router was revised and procedures for completing the paperwork were developed. Training for all involved personnel was conducted. To maintain tractability split-off tickets are now being used to identify all work-in-process when the router is separated from the order.

Holding areas were created for sub-assemblies in the machine shop and sheet metal areas. Hardware and tools required to complete the assemblies are stored in the respective holding areas to improve turn-around-time and reduce non-value-adding activities. Final assembly paperwork is now sent directly to these areas to await the required sub-assemblies.

The product flow rate significantly impacted the accuracy and completion rate of the paperwork, therefore the PIT recommended the adoption of cellular manufacturing practices. Cellular manufacturing improves the product flow rate because all processes associated with a given product are located 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. Thus, an example of showing the linkage and integration between an information process and a manufacturing or product development process. The improvement in one area, has been shown to closely link with necessary improvements in other functions.

Cellular manufacturing as a "technology" solution was approved for a "phased" or prototype approach. The product family chosen for this cell was simple extrusions. This product family comprises approximately 35% of the orders currently processed by the machine shop. Cellular manufacturing can triple the capacity of a given facility. Rheaco expects gross revenue from this product family to triple from $0.5 to $1.5 million annually. At the end of August 1993, there were approximately 13,000 extrusions on order, with order sizes ranging from 1 to 1000 pieces per order. Cellular manufacturing allows for volume flexibility requirement to help address order size variances.

The technology development process involved the extrusions team documenting the current process, identifying resources, and designing the cell. Individuals were selected and recruited for the cell team based on existing skills and willingness to cross-train to do all tasks within the cell.

Machines were identified and upgraded allowing 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. The majority of these resources were acquired from other departments or were made by members of the team. 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 are performed outside the cell.

The original layout for this product family required 2880 linear feet (over a half mile) of travel through the factory from start to finish of each order. Orders were stopped between operations and were stored in a holding area. Although actual machine time was limited, 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 new cellular layout for Phase I reduced travel to 810 linear feet. This distance includes travel outside the cell twice for processes not performed inside the cell. The cell itself is only about 50 feet long and if painting and final inspection could be brought inside the cell, travel time for most parts could be reduced to 50 feet. Now it was not necessary to stop an order once it is started.

Rheaco formed a team in their pilot cell to facilitate the change in culture (evidence of the concurrent nature of the EE methodology) that must occur to effectively operate in a cellular manufacturing environment. One of their initial activities was cross-training. Team members were trained to operate all machines in their cell and a number of machines outside their cell to move manpower to the areas of greatest demand, thus providing a measure of agility to respond quickly to changes in production schedules. Cross trained employees can operate machines of other employees on vacation or sick leave, thus not leaving the cell vulnerable to the absence of key personnel. The cell team collected data to determine constraints and will not initiate more work than can be processed.

By the second week of operation, the cell had achieved a 200% improvement in through-put. Other benefits of the cell included reduced turn-around-time, reduced work in process, reduced scrap, and improved product quality. A Phase II cell is being planned for the sheet metal area. Several customers, observing improvements by the Phase I cell improvements, have expressed an interest in placing additional orders once the Phase II cell is operational.

The cellular manufacturing system implementation was one of the many processes that went through each step of the EE methodology to help become more agile. Other improvements that can be related to agility in Rheaco that may be attributed to pursuing the EE methodology are summarized below. Many of these changes that aid in agility, similar to the cellular manufacturing implementation, do not require high levels of capital investment.

Shipping & Receiving - When ARRI began working with Rheaco, all shipping and receiving was done from the same area. All raw materials were received at the shipping dock then transported 400 feet through a maze of machines and work in process to the other side of the building for storage in the warehouse. These two functions have been separated. Now raw materials are received directly into the warehouse where records are updated and materials stored. Annual savings are expected to be approximately $5000. These process changes simplified receiving procedures and alleviated congestion in the shipping area. On-time deliveries have improved because orders do not get lost or forgotten due to overcrowding. Production is not delayed because incoming materials are overlooked or lost.

Inventory Policies & Parts Overruns - Previous operations had a situation where excess parts were manufactured above the customer’s order quantity to allow for scrap and rejects or simply to use all the raw materials ordered for the job. Sometimes the customer would buy these parts, but eventually a substantial amount of finished goods inventory was accumulated. This practice has been modified to minimize overages and the completed goods inventory. Additionally, the existing finished goods inventory (dating back as far as 1977) was evaluated. Some parts were sold, as much as one-half of the inventory was disposed of, and the remainder was moved to a warehouse. The 800 square foot room that was used to store the excess finished goods inventory has been renovated to create a dual purpose training and break room.

Continuous Improvement of Manufacturing ProcessES - Employees are were empowered to continuously improve 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 through-put. 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 are expected to exceed $99,000 and can be delivered in one-fifth the time. This exemplifies a situation where a cross-functional employee team, with little investment produced significant productivity and cost improvements.

Networking - Rheaco's management took advantage of every opportunity facilitated by ARRI to network with other companies striving to achieve Enterprise Excellence. Representatives attended presentations at local manufacturing companies to hear about these companies' efforts to become world class manufacturers and benchmark Rheaco against world class practices. Networking became a key strategy for Rheaco along their journey to agility. Witnessing the success of other local manufacturers proved to be a powerful tool in convincing managers and supervisors who were skeptical of the concepts and philosophies described in the EE methodology. While visiting other manufacturers, the most dramatic influence stemmed from the employees who conducted the tours. Hourly employees conducted tours in their areas, demonstrating a high level of understanding of world class concepts, and outstanding commitment and enthusiasm towards their organization.

Additionally, Rheaco has developed close relationships with other ARRI assisted companies. Companies who have participated in the Enterprise Excellence project in the past and those currently under ARRI assistance, have shared their successes and failures to shorten the learning curve of becoming agile. Another aspect of forming relationships with companies with similar experiences, is the potential for forming virtual enterprises. Companies pursuing agility recognize the importance of partnering with other companies to mutually increase their competitiveness. Rheaco, Control Products and Santech Industries meet once a month to discuss possibilities of forming virtual relationships and issues related to pursuing agility, continuous improvement and world class manufacturing.

Rheaco investment was primarily in terms of time. 660 hours in direct contact with ARRI to set direction for the company, learn new skills, and improve processes. This included 33 on-site ARRI facilitated meetings, 23 Breakfast Workshops, 8 networking opportunities and countless hours of preparation outside of formal meetings. The costs associated with many of these agile improvements were minimal, the benefits in scope, robustness and time, were significant.

Rheaco is an SME that was able to produce a number of agile improvements. They showed that with some aid and a structured framework to develop and deploy their plans, a number of successful agile components can be implemented. Many of these agile components are characteristics of the achievements presented above. They are presented within the context of the EE methodology. This allows for identification of the various agile components at different levels of the organization.

VISION: With a clear vision of where the organization headed, employees can make decisions based on whether activities and resources will assist Rheaco to achieve their vision. This reduces non-value adding activities and focuses the efforts of everyone in the organization into a single driving force. This is an example of agility at the corporate level of the organization.

CHANGE CULTURE: Becoming agile is largely contingent on the extent of cultural change an organization can accomplish. Before ARRI's involvement, Rheaco tried a number of different activities to become more agile. Most of these efforts failed due to a lack of acceptance at the operational level. With the introduction of the pilot cell, employees were convinced that this change was not a "program of the month", but rather a serious change in how Rheaco will do business. The physical movement of the machines, new paint on the floors, and new lighting and electrical connections demonstrated management's level of commitment to cells with tangible, resource consuming changes. Everyone knew that management was serious about becoming agile, and there was no going back. After two weeks of operation, the pilot cell had shown dramatic results: increased throughput, reduced work-in-process, fewer defects, and faster turn-around time. This performance proved to be a powerful tool in changing employees attitudes towards the benefits of cells.

Cell team members meet each morning to discuss the production schedule and each week to discuss process improvement topics. These meetings facilitate communication and the pursuit of agility. Problems encountered the previous day can be discussed as well as changes in customer demands. Agility is facilitated by the frequent dissemination of information and the decision making capability of the team. Team members are empowered to make decisions that effect their operation without receiving approval from management unless the decision consumes significant levels of resources. Decisions are made by those who have intimate knowledge of the process and changes are implemented in a timely manner. Decisions are made at the time they are needed rather than waiting for a supervisor to address the problem which could take several hours or days. For example, as team members discover that the current cell configuration is not optimum, they will take the initiative and rearrange the cell layout or take measures to obtain additional equipment, an example of quick response with robust action at the cell level of management. No longer are Rheaco supervisors and managers expediting parts or fighting fires. Their time can now be spent planning and setting the future direction of the company. A key element of pursuing agility is scanning the environment for opportunities to partner with other organizations and to develop new markets.

INTEGRATE & IMPROVE ENTERPRISE: To receive the full potential of cellular manufacturing, one piece flow must accompany cell implementation. One piece flow, or a lot size of one, drastically decreases work-in-process (WIP) since parts are not allowed to accumulate at each work station. Processing one piece instead of large lots allows quick changes in products running through a cell, thus enabling Rheaco to rapidly respond to customer desires. Defects are detected before the part leaves the cell rather than after the entire lot has been processed. From a financial point of view, a reduction in WIP increases the resources available to Rheaco for other investments to become agile. Rheaco now purchases raw materials in smaller quantities and has developed relationships with their suppliers to deliver raw materials when needed rather than in bulk quantities.

One piece flow inherently increases throughput. Parts are completed at a drastically faster rate than in large batch processes. Faster throughput allows more parts to be completed in one day, thus satisfying the customer's desire for quick delivery.

One piece flow reduces the number of orders in the shop, thus allowing sales and other departments to accurately track the progress of orders. Now sales can confidently predict when orders will be completed and quickly respond to customer inquiries.

Rheaco now has a customer focus. Machines are loaded and schedules are made according to customer demands rather than the availability of machines and operators. The pilot cell is scheduled to produce one day's production, with required raw materials and fixtures to accomplish those orders. The volume to be completed in a given day is based on a financial goal for the month. Before moving to cellular, several orders would be at a given machine in various stages of completion. Operators were not given a priority of orders to complete and they became overwhelmed at the number of orders in backlog.

DEVELOP TECHNOLOGY SOLUTIONS: To facilitate the agility effort, Rheaco has develop a number of technology solutions. For example, to enable quick tooling change-overs, Rheaco has empowered specialists in tooling to develop common fixtures for all tools used in their CNC machines. Locator pins in the fixture allow quick installation and removal of cutting tools with greater accuracy and consistency than previous methods. These show agility initiatives at the workstation level. Technology also enabled Rheaco to obtain a major order that would otherwise have been out of reach. Due to their volume of business and good reputation, Rheaco was able to borrow resources to purchase a special machine for this order. After the order is complete, the machine will be sold to a industry partner. This an example of agility in resource management. Where it was observed previous to acquisition of the equipment, that its use will benefit production of a specific product, whose customer will not exist after completion of the order. A buyer for the equipment, before it was even installed at Rheaco, was found. A true agility example made possible by Rheaco's networking and ability to scan the market for opportunities.

Rheaco's success has granted them a view of their organization as being able to respond in an agile fashion. This knowledge allows them to put agility into practice. The success of the pilot cell has facilitated a mindset change among Rheaco employees. Thriving in an environment of unanticipated and continuous change becomes more possible. Change is now accepted, perceived to be positive and viewed as a certainty. When new changes challenge Rheaco, employees will be confident that they can adapt and survive. As the defense industry declines, Rheaco must continue to change, develop new markets and gain a greater piece of the defense pie. The EE methodology and cellular manufacturing are tools that enable agility. They allow this SME to become "proficient at change." [1].