Windings Aids NASA’s Curiosity • Western Graphics’ Lean Culture • Gardner Bender’s Automation Transformation
Helping Manufacturing Enterprises Grow Profitably
SEPTEMBER 2012
10 Steps to a
Smarter Supply Chain Taking a strategic approach to product transportation can save time and money, increase access to capacity and improve service.
Also: How Minnesota businesses are cultivating the next generation of manufacturing talent. 12
www.enterpriseminnesota.org
Enterprise Minnesota 310 4th Avenue S. Suite #7050 Minneapolis, MN 55415
What smart business owners are doing to maintain their focus on their business. 22
NONPROFIT ORG U S POSTAGE PAID Slayton, MN PERMIT NO. 22
Enterprise Minnesota looks back on an exciting year for Minnesota manufacturers. 16
In plant operations, the ¿rst energy you should save is your own.
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contents At Western Graphics, employees compete to win prizes and recognition for making lean improvements. (See page 4)
SEPTEMBER 2012
Features 12 Manufacturing Talent
Facing a qualified worker shortage, forward-thinking businesses work to encourage today’s students to pursue tomorrow’s manufacturing and trade careers.
16 Year in Review
From new services, grants, events and awards to revealing results in the fourth-annual State of Manufacturing® poll, Enterprise Minnesota has been honored to assist Minnesota manufacturers in their efforts to grow profitably.
22 Outsourcing Savvy
More and more, smart business owners are outsourcing personnel management duties to maintain their focus on their business.
27 10 Steps to a Smarter Supply Chain
Taking a strategic approach to product transportation can save time and money, increase access to capacity and improve service.
Subscribe to our e-Trends newsletter today! Get updates on the people, companies, and trends that drive Minnesota’s manufacturing community. To subscribe, please visit http://www.enterpriseminnesota.org/Resources/ Magazine-eNewsletter/Subscribe.aspx.
Visit the Enterprise Minnesota Web site for more details on what’s covered in the magazine at www.enterpriseminnesota.org.
in every issue:
Bob Kill:
Innovations:
Innovations:
Final Word:
Enterprise Minnesota’s Year in Review celebrates a landmark year for Minnesota manufacturers. Page 2
Lean strides keep Alexandria staple manufacturer Gardner Bender steps ahead of its global competition. Page 6
A Windings product helps NASA’s Curiosity rover to land on Mars. Page 7
Effective project management is integral to reaching business improvement goals. Page 32
ENTERPRISE MINNESOTA SEPTEMBER 2012 1
bob
kill
Journey’s Bend Bob Kill
Helping Manufacturing Enterprises Grow Profitably Publisher Lynn K. Shelton
You’ve probably seen it framed on an office
wall or posted on a billboard.
Editors Tom Mason tmason@mason-publicaffairs.com Andrea Lahouze andrea@mason-publicaffairs.com
“Life is a journey, not a destination.” At Enterprise Minnesota, we believe that the path to business growth is a journey, too. And we are dedicated to helping Minnesota manufacturers continuously improve along the trail. Whether it’s developing a marketing strategy, going global, introducing lean principles, leading Kaizen events, or achieving ISO Certification, when Minnesota manufacturers succeed, we all do.
Bob Kill is president and CEO of Enterprise Minnesota.
It is in this spirit that the September issue of Enterprise Minnesota® magazine highlights our Year in Review, starting on page 16. This year summary is, in part, about the work of Enterprise Minnesota, yet it is more of a celebration of the manufacturing industry’s accomplishments. Like an average $30-to-1 return on investment for the Growth Acceleration Program (GAP) grant participants. A collective $15.1 million in increased sales and $4.63 million in reduced spending among 30 participating Workforce 2020 companies. Or 1,765 created or retained jobs and a $210 million economic impact among the 200-plus companies that enlisted Enterprise Minnesota’s consulting services in 2011-2012. These are significant statistics that bolster our confidence in the future of manufacturing. Indeed, the future is something that weighs heavily on the minds of many manufacturers. Retaining the vast knowledge base of retiring Boomers while finding ways to attract and train a new generation of workers is a monumental task. But it is also a tremendous opportunity for growth, innovation and partnership among schools, companies and communities. This month in our ongoing workforce series, we will profile North Anoka Plumbing, Pequot Tool and Clow Stamping, three companies that are doing it right when it comes to educating students about manufacturing’s breadth of high-tech, high-paying career opportunities. Like the growth journey, they see their efforts as part of an ongoing pursuit, and rightly so. Building a talent pool is not done quickly. But they are already beginning to see the benefits. Turn to page 12 and you’ll see what I mean. I hope you draw upon the stories shared in this issue to move forward in your own journey with vigor and conviction. We’ll be there to help at every bend in the trail.
Contributing Writers Claire MacDonald Dan Ryan Photographer Patrick Kelly Art Director Amy Bjellos
Contacts To subscribe subscribe@enterpriseminnesota.org To change an address or renew ldapra@enterpriseminnesota.org For back issues ldapra@enterpriseminnesota.org For permission to copy lynn.shelton@enterpriseminnesota.org 612-455-4215 To make event reservations events@enterpriseminnesota.org 612-422-4239 For additional magazines and reprints contact Lynet DaPra at lynet.dapra@enterpriseminnesota.org 612-455-4202 To advertise or sponsor an event sue.roe@enterpriseminnesota.org, 612-455-4213 To pitch a story andrea@mason-publicaffairs.com
Enterprise Minnesota, Inc. 310 Fourth Ave. S., #7050 Minneapolis, MN 55415 612-373-2900 ©2012 Enterprise Minnesota ISSN#1060-8281. All rights reserved. Reproduction encouraged after obtaining permission from Enterprise Minnesota magazine. Additional magazines and reprints available for purchase. Contact Lynet DaPra at 612-455-4202 or lynet.dapra@enterpriseminnesota.org. Enterprise Minnesota magazine is published by Enterprise Minnesota 310 Fourth Ave. S., #7050, Minneapolis, MN 55415 POSTMASTER: Send address changes to Enterprise Minnesota 310 Fourth Ave. S., #7050 Minneapolis, MN 55415
2 ENTERPRISE MINNESOTA SEPTEMBER 2012
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INNOVATiONS
Lean’s Ripple Effect
photograph by PATRICK KELLY
St. Paul printer Western Graphics helps its clients “print less.”
While at a conference in Jacksonville, Florida,
Western Graphics CEO Tim Keran watched a seven-minute video that changed the way he runs his business. The silent video documented a press operator walking around a shop floor looking for something. A timer in the upper right hand corner of the screen timed his search, second-by-second. At seven minutes, he happily returned with a ruler, which he had needed to rule out his press sheet. “He had a $350 per hour press down for seven minutes looking for a $3 ruler,” Keran says. “I knew right away when I was sitting in that conference room that that was going on at Western Graphics. I returned and told my VP of operations, ‘we’ve got to go on a lean journey.’ That’s how it started.” 4 ENTERPRISE MINNESOTA SEPTEMBER 2012
The Western Graphics team makes lean fun with Olympic medals and its own edition of Monopoly. First row, left to right: Tim Keran, CEO/owner; Neal Johnson, president. Second row, left to right: Jolyne Cross, lean champion; Cassie Sonnicksen, accounting lead; Claire Bailey, premedia. Back row, left to right: Eric Moen, project manager; Jon Beck, digital lead; Matt Hammes, finishing lead.
Employees at the St. Paul printer began by “red-tagging” items they felt went unused, and ended up filling four 40-yard dumpsters with unnecessary clutter, including one full dumpster of paper. Extra furniture was auctioned off to employees. Keran says the event’s success got everyone on board with the value of lean. “It’s like how everybody feels better once they clean out the garage or the closet,” he says. Five years and more than 2,000 documented improve-
ments into its lean journey, Western Graphics has realized a 70 percent decrease in quality defects, higher profitability and significantly lower turnover thanks to simplified processes, less waste and frustration, and a companywide commitment to improvements. “The value of lean for us is ‘how simple things can be.’ In the process of simplifying things and correcting things one at a time, you pile up a lot of those little improvements and it turns into a big bang,” Keran says. Now, Western Graphics is taking that philosophy to its clients, asking each how it can help them to simplify their operations. For one client, Western Graphics now emails its invoices instead of mailing them. For another, it adds a cost center number on each packing slip. The simple switches have saved clients significant time. Keran says the company is committed to making 10 percent of its improvements specifically for its customers. “Some of these little things in life are irritating, but we live with them for some reason because we don’t feel that we can ask for a change. We’re trying to teach our customers to tell us what they want, so we can make it work better for them,” Keran explains. To keep both internal and external improvements coming, Western Graphics hosts a board game linked to making lean improvements. This year, it’s Monopoly. Teams that make improvements receive Monopoly money to add
“
“Some of these little things in life are irritating, but we live with them for some reason because we don’t feel that we can ask for a change. We’re trying to teach our customers to tell us what they want.”
”
Tim Keran,
CEO and owner, Western Graphics
to their property and spin to win prizes on the game board. Each month, recognition for the three best improvements is awarded in the form of “Olympic medals.” Western Graphics has even instituted a quarterly profit sharing program for all employees, which Keran says maintains a companywide dedication to solving problems and bettering the business, one improvement at a time. “We’ve got this winning culture now that we didn’t used to have,” he says. “I think lean is a big part of that. … It’s a flywheel of success. Everyone’s helping each other and we’re all on the same team.” To learn more about Western Graphics, visit www.westerngx.com.
ENTERPRISE MINNESOTA SEPTEMBER 2012 5
INNOVATiONS
Competitive
Advantage Since starting lean in 1999, staple and fastener products manufacturer Gardner Bender has reduced lead time, increased on-time delivery and doubled output per employee. How? “Process improvements and automation,” says Operations Leader Ron Larson. As part of worldwide industrial company Actuant Corporation, Gardner Bender manufactures plastic and metal staples and fasteners used to secure electrical wires and cables. Because manufacturing these products is relatively simple, the Alexandria-based company faces a constant deluge of U.S. and international competition to make them faster, better and cheaper. In 1999, it turned to lean to stay ahead of the competition without outsourcing its production. Thirteen years and more than 200 Kaizen events later, staple production remains at the Alexandria facility, output per employee has more than doubled, and lean has transformed the entire business. Process improvements play a large role in Gardner Bender’s ongoing lean success. In one instance, the company invested in automation to blow freshly molded staples through a tube to a finishing area where nails are added, eliminating the need for workers to carry them from one end of the plant to another in bins. Another improvement reduced its mold changeover time from three hours to 12 minutes. Mold changeovers involve many steps and require two people working together on either side of a machine. Workers found that committing the process to paper enabled each worker to better understand their specific assignments, thereby simplifying the process and reducing the number of unnecessary steps. Workers have also retired the timeconsuming process of securing each mold with bolts, opting instead for bayonet mounts, which twist and lock into place in one step, no tools required. For processes that do require tools, workers find them right at hand on shadow boards next to each machine. The company has also taken a pre-emptive approach to machine maintenance. Instead of repairing machines when they break, operators use an Overall Equipment Effectiveness (OEE) system to track the ratio of fully productive time to planned production time on their machines each day. When overall efficiency on a machine goes down, operators identify and correct the root cause before it takes a toll on production. Companies with an overall OEE of 85 percent or higher are considered 6 ENTERPRISE MINNESOTA SEPTEMBER 2012
photograph by PATRICK KELLY
Lean strides keep Alexandria staple manufacturer Gardner Bender steps ahead of its global competition.
Operations Leader Ron Larson sits in front of Gardner Bender’s automated staple transportation system, which sends staples from molding to finishing.
“world class” according to many industry sources, including automated OEE data monitoring equipment manufacturer Vorne Industries Inc. In June, Gardner Bender’s overall OEE was 93 percent. “If something goes wrong, whether it’s a machine starting to fail or a person issue where someone isn’t running it correctly, we’ll know very quickly,” Larson explains. “We try to address any potential machine problems before they actually occur.” The preventive approach has also contributed to the company’s 99-100 percent on-time delivery and stellar safety record: zero lost-time injuries for the past 11 years. The Actuant Corporation provides a website where employees can share best lean practices, before and after pictures, savings from Kaizen events and contact information for lean experts in various departments who can answer questions. Gardner Bender’s lean activity suggestion box is typically empty, but not for lack of ideas. Employees simply feel empowered enough to suggest improvements to management in person—a most telling sign of its cultural transformation. “Usually, they’ll see something and then we’ll just implement it right away,” explains Tim Lamb, technical leader. “We won’t wait to go through a formal process.” To learn more about Gardner Bender, go to www.gardnerbender.com.
New Ulm to New Planet NASA’s Curiosity rover lands on Mars with help from a custom component manufactured by New Ulm’s Windings Inc.
Photograph courtesy of NASA
On August 6, NASA’s Curiosity rover was lowered gently
This artistic rendering depicts the mission’s sky crane hovering as it lowers the Curiosity rover to the surface of Mars. Windings’ stator is a component of the sky crane’s dynamic braking system, which controlled the speed of Curiosity’s descent.
to the dusty Martian surface by cables descending from the spacecraft flight system’s sky crane, which hovered overhead. The delicate process left no room for error, and its success capped the rover’s 350-million-mile journey to the Red Planet. Over the next two years, Curiosity will travel to various locations on Mars gathering chemical and geological evidence to determine whether the planet has ever been habitable. For employees at Windings Inc., a custom electric motor and generator component manufacturer in New Ulm, Curiosity’s landing was especially gratifying. A custom-built Windings stator is a key part of the sky crane’s dynamic braking system, which controlled Curiosity’s descent speed from the sky crane to the planet’s surface. While smaller rovers of past Mars missions have used airbag landing systems, Curiosity’s sheer size, which is comparable to a Mini Cooper, necessitated the more complex touchdown system. The $2.5 billion rover is the largest ever sent to explore another world. Windings President and CEO Jerry Kauffman says building the stator required “excruciating attention to detail,” rigid quality inspections and meticulously clean conditions. Employees donned smocks and gloves, and examined each individual strand of the stator’s copper wiring under magnification to ensure quality. Kauffman says employees feel Curiosity’s historic landing was well worth the effort involved. “A mission like this clearly meets that intrinsic need that we have as people to say, ‘I was part of something that was really unique or special,’” Kauffman says. “It makes you feel good about spending so much time searching every skinny little wire underneath a microscope. It was really hard to do, but we did it successfully and contributed.” Windings components have played roles in multiple outer space missions, including the Solar Dynamics Observatory (SDO) launched in 2010 to study solar variability and its effects on Earth, the Lunar Reconnaissance Or-
biter (LRO) launched in 2009 to study the dark side of the Earth’s moon, and the Deep Impact mission launched in 2005 to study the physical makeup of comets. Its components can also be found on the International Space Station. Typically, Windings stators contribute to spacecraft antenna systems, allowing them to position antennae with pinpoint precision to send and receive vital information between spacecraft and mission control. The Curiosity mission is Windings’ first time contributing to a spacecraft braking system. Though the job of transporting Curiosity is done, Kauffman says the feeling of accomplishment among Windings employees remains. “It’s exciting for us because everybody is talking about it,” Kauffman says of the mission. “It captures the imagination. It’s pretty amazing to think about this vehicle on Mars that’s going to be driving around and exploring up there and sending back information, and we helped to deliver it safely.” For more information about Windings, visit www.windings.com. ENTERPRISE MINNESOTA SEPTEMBER 2012 7
INNOVATiONS
Packaging Precision North Anoka Control System’s PurePouch™ packaging machine brings faster, safer, simpler packaging to medical device manufacturers.
photograph by PATRICK KELLY
NACS Inc. President Todd Olson demonstrates the PurePouch™ machine’s ability to package medical devices of varying shapes and sizes.
North Anoka Control Systems, Inc.
specializes in custom process automation for the tightly regulated medical device manufacturing industry, and has clients in Minnesota and across the United States. The engineering firm’s mission can be described in one word: efficiency. “When companies are moving to higher production levels or taking steps to make their products more repeatable and reliable, NACS looks at their processes to determine what level of automation they need, and what volume they need,” explains Todd Olson, NACS president. Most of the automation solutions are specific to the processes of each client company, so NACS designs them, then turns the plans over to its customers for production. One exception is the PurePouch™ packaging machine. In 2002, a client had asked NACS for help in streamlining its medical device packaging process. At the time,
8 ENTERPRISE MINNESOTA SEPTEMBER 2012
bags for most medical devices were wound on a roll, then cut to size. Operators used gloved hands to open each bag, drop each medical device into a bag, heat-seal the bag, and send it off to sterilization. If bags required printing, the bag roll was first unwound, printed on, then rewound before being cut into individual bags. Olson says the whole process took multiple operators between four and eight seconds per bag. A single operator required between eight and 20 seconds per bag. NACS engineers have since combined multiple automations in one machine to allow one operator to package one medical device every three seconds. Most medical device packaging is made of polyethylene and Tyvek® material. Engineers realized that cutting through the polyethylene layer of the bag while keeping the Tyvek® layer intact would allow them to open bags while keeping
them on the roll. They also knew that eliminating the need to open each bag manually would expedite the process, so they incorporated a component that blows each bag open with a stream of air. Operators drop the medical device in the opened bag, and then the machine heat-seals and cuts it, dropping finished products into a bin. NACS engineers soon realized they had developed a product that could help other companies in addition to their client. As a result, the company created a separate PurePouch™ LLC to market and sell the PurePouch™ machine. Apart from reducing time, Olson says the PurePouch™ machine also reduces error by decreasing the number of times each bag is handled. The machine adapts to different bag sizes, and cuts bags completely instead of perforating them to minimize debris. It also saves “recipesâ€? for bag sizes and printed designs, facilitating faster changeover times. Olson says the machine’s most valuable offering to customers may be peace of mind. A digital screen called a Human Machine Interface or HMI counts out the number of bags in each batch as they are completed, and records the temperature, force and time of each heat-seal for process validation during FDA audits. If metrics fall outside the allowable range, the machine alerts the operator not to run
“
Innovations
“When companies are moving to higher production levels or taking steps to make their products more repeatable and reliable, NACS looks at their processes to determine what level of automation they need, and what volume they need.�
�
Todd Olson, NACS president
product. Olson hopes sales of the product will increase as more potential customers learn about its capabilities. “It’s a quantum shift for people from the other way [of packaging medical devices] to this way, so not a lot of people know about it,� he says. “The challenge lies in marketing and telling the story.� To learn more about NACS Inc., go to www.nacsinc.com.
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ENTERPRISE MINNESOTA SEPTEMBER 2012 9
INNOVATiONS
Strategic Partnership
Precision metal fabricator Corchran Inc. teams up with Enterprise Minnesota to achieve multiple improvements. Corchran Inc. began in 1949 when Founder James
B. Corchran opened a small blacksmith shop in Waseca. Now 63 years into its existence, the homegrown company has expanded into a 64-employee, 93,000square-foot operation. The company offers a variety of metal fabrication services, including CNC laser cutting, CNC punching, and both traditional and robotic welding by certified welders. Among its many customers are Birds Eye Foods, Brown Printing, Donaldson Company, Tennant Company and Toro. President Joel Matheson believes Corchran’s focus on a positive team attitude contributes to its high retention rate, with many employees staying on for 25 years or longer. Two employees who will retire this month have worked for the company for more than 40 years. In 2005, Corchran also became 100 percent employee-owned, a move that Matheson says has further bolstered its teamoriented culture. “Now, employees have a bigger stake in the success of the company, and pride in ownership,” Matheson says. The company is equally committed to its employees. To foster continued growth and a calm and structured work environment, Corchran has recently partnered with Enterprise Minnesota to provide two consulting services to its employees. A grant from the Growth Acceleration Program (GAP) will help offset the costs of the services. GAP is a grant-matching program enacted by the Minnesota State Legislature and designed to help small manufacturers create jobs and accelerate business improvements through training and consulting. First, Enterprise Minnesota will lead Corchran employees through its Strategy Management consulting service. The service conducts financial, performance benchmarking and leadership alignment assessments, then assigns specific projects designed to help the company improve in each area. Next, Corchran employees will tackle Proactive Marketing to define the company’s ideal target markets and com10 ENTERPRISE MINNESOTA SEPTEMBER 2012
Corchran Inc. offers a variety of metal fabrication capabilities, including CNC laser cutting.
petition, and ways to provide the greatest value to customers. The employees will gather with representatives from a handful of different companies for four half-day sessions over three months. Participants learn from each other by sharing their experiences and challenges with the group. In between each group session, Enterprise Minnesota travels to each individual business to coach them on applying what they learned. In the fourth session, representatives from each company come forward and present a marketing plan around a specific opportunity that they would like to pursue in their business. Matheson hopes participating in Strategy Management and Proactive Marketing will help Corchran to achieve better internal communication, increased efficiencies and profitability, continued growth and a safe, stable and enjoyable work environment. “It’s hard to pull yourself away from the day-to-day stuff as a small company, but we want to make sure that we’re going down the right path in terms of potential new markets and customers,” Matheson says. “We also want to have really good, open communication so that employees are more knowledgeable about and comfortable in the company that they work for and own.”
For more information about Corchran Inc., go to www.corchran.com.
Innovations
Innovations with Dale Andersen Position: President and CEO of Delkor Systems, Inc., a packaging equipment and machinery manufacturer based in Circle Pines.
What was the catalyst for your company’s participation in Global Market Strategy? We were seeing a dramatic increase in international business. In the first quarter of 2012, 50 percent of our new machinery sales were to international customers, which was an all-time high for us. Because there are so many hurdles to exporting successfully, it’s really important to have a defined strategy that can help keep you focused on achieving step-by-step growth. We were reaching a point where we really needed to add more definition to our whole marketing strategy, so it came at a good time.
In what ways has Global Market Strategy benefited your business? It helped us define several goals that we needed to achieve in the coming months in order to be more successful internationally. For example, we are creating a series of online training videos for operating our machinery. Because about 15 percent of our sales are to countries where the predominant language is Spanish, the videos will be offered in English and Spanish starting in the second half of 2013, making it easier for our customers to train their employees. We’ve also hired an additional bilingual service technician to provide more service support to our Spanish-speaking customers. The service helped us pinpoint more specific target markets as well. We had a broad Latin America target market, and through the Global Market Strategy process, we eliminated Brazil. We know that for our business, we would have to manufacture in Brazil, and we have a lot of technology that we’ve either patented or that we consider trade secrets, so we are not interested in having another manufacturer manufacture those types of machines. In
photograph by PATRICK KELLY
Questions
Activity: Delkor recently completed Global Market Strategy, a service created by Enterprise Minnesota, along with the Carlson Global Institute and The University of Minnesota Center for International Business Education and Research (CIBER). The service helps manufacturing enterprises make a strategic decision to export, and guides them through the steps of discovering which foreign markets hold the greatest potential for their products, and how to target each market most effectively. turn, we gave a higher priority to other countries in Latin America, particularly Columbia and Mexico.
Were there any unexpected benefits that Delkor experienced as a result of the service? We are a sub-supplier to a large European company that supplies machinery all over the world. Soon after we completed Global Market Strategy, they officially established us as a sub-supplier to them for packaging machinery, and they audited us in April. Because we had a defined market strategy, that was a very positive part of our internal audit. The auditors were trying to decide what parts of the world Delkor could supply machinery to in order to support their international efforts. They were considering having us support Latin America. Because we had a new international market strategy, it became clear to them that we were a good candidate to support their efforts not only in Latin America, but also in Australia and New Zealand.
What should other manufacturers consider before undertaking Global Market Strategy? I don’t think this service is really for a company that has never exported. This service is for a company that has done some exporting, and wants to give more focus and direction to it, and enhance it. For us, we have a solid understanding of the importance of exporting for Delkor. Our machinery is designed to serve international customers, so it’s important as we expand our business to be able to serve our customers who are international effectively. Global Market Strategy is helping us do that. To learn more about Delkor Systems, Inc., go to www.delkorsystems.com.
ENTERPRISE MINNESOTA SEPTEMBER 2012 11
Manufacturing
Talent
Facing a qualified worker shortage, forward-thinking businesses work to encourage today’s students to pursue tomorrow’s manufacturing and trade careers. By Andrea Lahouze 12 ENTERPRISE MINNESOTA SEPTEMBER 2012
Eighteen-year-old Bryce Brethorst spent the summer at UTC Aerospace Systems, an aerospace systems and components manufacturer in Jamestown, North Dakota working as a machine shop assistant. In exchange, the company is helping him to pay for post-secondary studies at Alexandria Technical and Community College, where he’ll attend advanced machining courses this fall. Brethorst already has an offer to be a full-time machinist at UTC once he graduates. Trained graduates like Brethorst are increasingly valuable in Minnesota—and increasingly difficult to find. In
“ ”
Bill and Karen Jansen, owners of North Anoka Plumbing, display the Trade Scholarship they award to graduating seniors with Paul Neubauer, St. Francis High School principal.
“We recognized that we had a common problem and if we worked together, we’d be more effective.” Debby Hoel,
human resources manager, Pequot Tool
The challenge is compounded by students’ misperception that manufacturing jobs pay poorly and are dirty, dangerous and monotonous work. Though today’s manufacturing careers belie that image, many students shy away before understanding the breadth of career opportunities in manufacturing. The industry now faces a daunting task of realigning perception with reality.
Supporting Students
photograph by PATRICK KELLY
the 2012 State of Manufacturing® survey, 31 percent of Minnesota manufacturing executives reported concern over finding qualified workers, up more than double from 14 percent in 2011. As a sector, manufacturing has one of the state’s oldest workforces, with 45 percent older than 44, according to a 2008 report by the Minnesota Department of Employment and Economic Development. With about 700,000 Minnesotans expected to retire over the next decade, manufacturers will be hard-pressed to find qualified replacements. The challenge lies in cultivating that talent pool -- now.
The first step is to encourage students who are already on track for manufacturing careers. Much of the support happens on a local scale. For St. Francis High School students like Brethorst who show an interest in skilled trade work, North Anoka Plumbing owners Bill and Karen Jansen have established the North Anoka Plumbing Trade Scholarship, which awards $500 scholarships to two students each year who plan to pursue skilled trade careers. The company is among the first in Minnesota to offer a trade-oriented scholarship to high school students. The idea for the scholarship arose after the Jansens attended St. Francis High School’s annual Scholarship Night, which presents many graduating seniors with scholarships sponsored by about 30 different businesses and organizations in the local community. They noticed that among many scholarships, there was nothing for a trade school. “We wanted to help grads get a start at learning lifelong skills and encourage teens to go into technical college, and go into trades to make a living,” Karen Jansen says. “It’s been good for us and our family, and we wanted to encourage others to do the same.” The Jansens let local teachers nominate students for the scholarship each year. Each recipient is “generally a student who may have taken all of the metals classes and all of the automotive classes and as many of the woods classes as their schedule would allow. They typically will use up all their elective opportunities in school to take classes in those areas,” says Paul Neubauer, St. Francis High School principal. Brethorst won a scholarship after becoming a staple in the school’s machining and welding classes. He says it will help offset a portion of tuition bills that aren’t covered by UTC. He believes the scholarship could inspire other student recipients who were on the fence about postsecondary education to pursue it. Neubauer has similar hopes for the scholarship’s recipients, saying the scholarship has “provided a pathway” for ENTERPRISE MINNESOTA SEPTEMBER 2012 13
students to begin post-secondary education. “Even in the most difficult times over the last couple of years, our community has continued to support our students through scholarships,” Neubauer says. “That speaks volumes about the support that our community has for our kids and for our education system.” On a broader scale, students in West Central Minnesota who show an interest and aptitude for manufacturing-related skills can gain hands-on exposure to opportunities through the Bridges Career Academies and Workplace Connection, which offers classes in 22 school districts. In the Manufacturing Academy, which is one of several industry-oriented academies within Bridges Career Academies, industry professionals develop course curricula with high school instructors. Students can take courses at their high school or at Central Lakes College, and can earn college credit and a diploma or degree in Mechanical Drafting & Design, Machine Tool Technology or Robotics. The Bridges program also arranges job shadows at local businesses, and hosts an annual Career Exploration Fair at Central Lakes College. The 2012 career fair drew about 100 local businesses and more than 2,000 high school students from 20 different school districts. Twyla Flaws, personnel manager at Clow Stamping Company, says the event is a team effort to bolster the local talent pool. “It’s not about [different businesses] trying to hire the same kids,” Flaws explains. “You don’t represent yourself. You go there to represent career opportunities and career choices for kids. It’s not a job fair; it’s a career fair.”
Spreading the word
Along Highway 371 in Brainerd, a billboard proclaims, “Manufacturing is not a job … it’s a career.” The billboard features Erica Morrison, a young quality inspector at Pequot Tool & Manufacturing, a precision milling, turning and CNC fabricator in Pequot Lakes. Morrison joined the company after a stint as a Subway sandwich artist, and worked her way up from packager to her current position with both on-the-job and online training offered through DMG Mori Seiki University, which specializes in advanced machining courses. “She is a great example of a person building their career in manufacturing,” says Debby Hoel, Pequot Tool human resources manager. The billboard is one of a series of media ads sponsored by Dream It. Do It. (DIDI), a national campaign kickstarted by National Association of Manufacturers and The Manufacturing Institute. The campaign’s mission is to connect students’ interests to well-paying manufacturing career opportunities, and to redesign the image of manufacturing in the minds of students, parents and educators. In West Central Minnesota, Pequot Tool joined forces with other local manufacturers, including Clow Stamping Company, Lakeland Mold Company, Graphic Packaging and Lindar to promote manufacturing. The group 14 ENTERPRISE MINNESOTA SEPTEMBER 2012
Pequot Tool’s Dream It. Do It. billboard features Erica Morrison, who worked her way up from packager to quality inspector at the company with both online and on-the-job training.
worked with Central Lakes College and the Manufacturing and Applied Engineering Center of Excellence’s 360º organization to bring DIDI to the region. 360º is a collaboration of Minnesota State Colleges and Universities and Minnesota companies that works to prepare students for manufacturing and applied engineering careers by offering access to more than 60 specialized programs. Students can take courses on campus at partnering institutions, or online, and receive training ranging from certificates to master’s degrees. “We’re all struggling to find high-tech workers,” Hoel says of other participating DIDI companies in the area. “We recognized that we had a common problem and if we worked together, we’d probably be more effective than if each person worked by themselves.” In addition to the locally-inspired billboards, the companies are creating videos that show how classroom learning can connect to diverse career opportunities at each company. They will circulate the videos to local schools and post them on YouTube and the Dream It. Do It. website. Flaws says the high ratio of students to high school counselors has compounded the challenge of giving
“
“We wanted to help grads get a start at learning lifelong skills and encourage teens to go into technical college.”
”
Karen Jansen,
co-owner, North Anoka Plumbing
P
hoto courtesy of Pequot Tool
“ ” “Besides talking to the students, it’s important to talk to the people that influence those students.”
Debby Hoe ,
human resources manager, Pequot Tool l
students a solid understanding of local career opportunities. She hopes the outreach efforts will encourage more students to stay in Minnesota’s West Central region when they begin job searching. “There are hundreds of students to one counselor, and so it’s hard to do any kind of career path conversations with that kind of a need. Kids just don’t understand the opportunities that exist in our community. We really need to expose them to that high-demand, high-pay career information because we want to get them educated and employed in our area. We’ve got some of the best and brightest. We need to keep them,” Flaws says. This proactive attitude also prompted participating DIDI companies to work with the Brainerd Lakes Chamber of Commerce to form a Manufacturing Alliance. Across Minnesota, Hoel says that ongoing support from the business community will be essential to reversing the public’s negative perception of manufacturing careers. She stresses that there is no “quick fix” to building a larger talent pool. Generating public awareness “takes a real concerted effort,” Hoel says. “Besides talking to the students, it’s important to talk to the people that influence those students. So we also want to get that message out to their teachers, to their sports coaches, to their parents and grandparents. … It takes a village all working together to get that message out, and you’ve got to hit lots of different levels.” Though Hoel expects the shift in perception will take years, she says Pequot Tool is already seeing an increase in applicants for its high school student apprenticeship program. The apprenticeship allows students to gain firsthand experience in a manufacturing environment by working a few hours at the company each week during
their junior and senior years. More than 50 percent of Pequot Tool’s apprentices return to the company for a full-time position upon graduation from high school or post-secondary school. Similarly, Karen Jansen says the Trade Scholarship has attracted more summer apprentices to North Anoka Plumbing, a handful of whom receive full-time jobs after graduation. Flaws believes Clow Stamping’s outreach efforts have sparked more interest among potential employees. “When your presence is out there, more [potential employees] realize that you’re here. We have a very viable career here for people, and the students in the community see that,” Flaws says. “There is also personal satisfaction in knowing that you are educating the kids in the community.” Ultimately, local students’ education and career choices will determine the companies’ success. “I’d love to see our local technical college programs just filled up with young people that want to go into manufacturing careers. That would be great,” Hoel says. Until then, they will continue to work one class, one student and one scholarship at a time.
ENTERPRISE MINNESOTA SEPTEMBER 2012 15
nterprise Minnesota E
Year
in Review
Enterprise Minnesota looks back on an exciting year for Minnesota manufacturers.
Bridging the GAP Enterprise Minnesota partners with IRRRB to offer business improvement services and Growth Acceleration Program funding to Iron Range manufacturers. In 2008, the state of Minnesota launched the Growth Acceleration Program (GAP) to encourage job creation in the manufacturing sector. This past January, Iron Range Resources and Rehabilitation Board (IRRRB) and Enterprise Minnesota teamed up to concentrate more specifically on manufacturers in the Taconite Assistance Area, which includes areas in Cook, Lake, St. Louis, Itasca, Crow Wing and Aitkin Counties. Funded by a $50,000 grant from the IRRRB, the service reimburses qualifying area companies for business improvement services from Enterprise Minnesota. Specifically, they can take advantage of its Growth Acceleration Program (GAP), which provides small manufacturing and manufacturing-related companies with matching grants that help them boost efficiency and eliminate waste. Companies receiving consulting services from Enterprise Minnesota are required to match the IRRRB funding dollar-for-dollar and apply for other available funding to offset the cost. Eight Iron Range companies have received IRRRB GAP grant funding, including Aitkin Iron Works, American Peat Technology, Anderson Lubricants/PetroChoice, Conveyor Belt Services, Detroit Diesel Remanufacturing LLC, Minnesota Twist Drill, NexLink and Sure-Fab.
16 ENTERPRISE MINNESOTA SEPTEMBER 2012
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From new consulting services, grants, events and awards to revealing results in the fourthannual State of Manufacturing® poll, Enterprise Minnesota has been honored to assist Minnesota manufacturers in their efforts to grow profitably. Read on for highlights from Enterprise Minnesota’s past year.
The statewide GAP program was designed to encourage manufacturers to keep investing in their people and companies even during hard times. To date, it has helped 192 manufacturing companies across Minnesota create or retain 1,700 jobs. Participating manufacturers have realized a $30 return for every $1 spent on GAP, with some companies reporting a 40-to-1 return.
Getting the Facts Enterprise Minnesota’s fourth-annual State of Manufacturing® poll reveals executives’ continued confidence in the future of their firms amid growing worries over finding qualified workers. Hundreds of manufacturers, educators and political figures gathered at the Minneapolis Convention Center February 21 to learn Enterprise Minnesota’s annual State of Manufacturing® poll results. The event, which featured pollster Rob Autry of Public Opinion Strategies and included an introduction from Sen. Amy Klobuchar, kicked off a series of similar poll presen-
Paving Pathways to Success Enterprise Minnesota kicks off year two of the Pathways to Business Growth service.
photograph by PATRICK KELLY
On March 14, Enterprise Minnesota entered the second year of its Pathways to Business Growth service with a celebration of Enterprise Minnesota business growth advisors and service participants at Padilla Speer Beardsley in Minneapolis. Pathways “is about assessment, discovery, where to start and what can really help an individual company the most,” said Enterprise Minnesota From left to right: Karlo Goerges of Pequot Tool & Manufacturing; Rikk Schaehrer, Sarah Richards, David Richards and David Olson President Bob Kill, speaking to of Jones Metal Products Inc.; Duane Petersen and Jason Zoubek of Absolute Quality Manufacturing; Roger Paul of Panels Plus; Doug Olson of Lou-Rich Inc.; Larry Beavens of Almco Inc.; Randy Eggum of Exact Manufacturing, a division of Lou-Rich Inc.; Kathy kickoff attendees. Silvernale of Hutchinson Manufacturing Inc.; Don Tomann, Mary Pettit and Roxann Wardarski of UMC Inc. Seated: Bob Kill of Enterprise Minnesota adEnterprise Minnesota and Thomas Norman of Norman Development Consulting. ministers the Pathways service with a $515,000 grant from the National Institute of Standards and Technology Manufacturing Extension Partnership (NIST/MEP). Its mission is to help participating companies achieve profitable growth by working with Enterprise Minnesota advisors on training initiatives including strategic planning, innovation and idea mining services, business assessments, organizational and leadership development, and marketing strategy. Enterprise Minnesota is also using lessons learned from working with each company to develop industry-wide best practices for helping manufacturers drive growth within their companies, which NIST/MEP will share with MEP centers nationwide. In 2011, Enterprise Minnesota worked with 10 companies on the Pathways service, including The Aagard Group, Absolute Quality Manufacturing, Alexandria Pro-Fab Company, Akkerman Inc., Automated Equipment, Fiserv Solutions Inc., Ideal Aerosmith, Innovance Inc., Pequot Tool & Manufacturing and Ultra Machining Company. This year’s companies include Jones Metal Products, Harmony Enterprises and Hutchinson Manufacturing. Jason Zoubek, sales manager at Absolute Quality in Minneapolis, says Pathways has reinvigorated his company with a new web site, new marketing plan, and newfound clarity around its mission and vision. It has also transformed Absolute Quality’s perspective on employee empowerment. “Now, what we’re seeing is more interaction between our employees and management,” Zoubek says. “We’re really drilling down to the lowest appropriate level to make decisions within the organization.” tations across the state, drawing a collective audience of more than 800. Now in its fourth year, the poll surveyed 400 Minnesota manufacturing executives to discover their perspectives, experiences and opinions regarding the manufacturing industry’s current state. Twenty focus groups held across the state provided additional insights. Poll results revealed manufacturing executives’ continued optimism in the futures of their companies, as well as a spike in concern over finding qualified workers. Eighty-two percent of executives reported confidence in the future of their firms. However, worry over finding qualified workers has doubled over the past year. Thirty-one percent of executives say this issue is a
concern for their firm, up from 14 percent in 2011. The 2012 poll was conducted by Public Opinion Strategies, and sponsored by statewide sponsors Baker Tilly Virchow Krause, LLP, Granite Equity Partners, Gray Plant Mooty, M&I, a part of BMO Financial Group, RJF, a Marsh & McLennan Agency LLC Company, Trusight and Xcel Energy, and regional sponsor The Blandin Foundation. For full 2012 poll results, visit www.stateofmanufacturing.com.
ENTERPRISE MINNESOTA SEPTEMBER 2012 17
Enterprise Minnesota
Year in Review Worker Shortage Enters National Spotlight
Enterprise Minnesota President and CEO Bob Kill testifies before a U.S. Senate subcommittee on April 17.
Enterprise Minnesota president and CEO testifies on qualified worker shortage before U.S. Senate sub-committee. In April, the qualified labor gap gained national attention when Enterprise Minnesota President and CEO Bob Kill traveled to Washington, D.C. to testify before the Senate Subcommittee on Competitiveness, Innovation and Export Promotion, chaired by Senator Amy Klobuchar. Kill stated that manufacturing’s chronic shortage of qualified workers poses a significant and escalating challenge despite high national unemployment rates. Kill’s testimony used data collected from this year’s State of Manufacturing® poll to illustrate that anxiety over attracting qualified workers has more than doubled in the past year, with 31 percent of Minnesota manufacturPhotograph courtesy of U.S. Senate ing executives saying it is a concern, up from 14 percent in 2011. Nearly six out of 10 (58 percent) manufacturing executives also say it is a challenge to attract qualified workers to their companies, up from 45 percent in 2011. “Rapidly changing technology... widens the gap between the sector’s existing workers and the skills that are needed in today’s manufacturing environments,” Kill told Senators. In the fourth quarter of 2011, Kill said the skills mismatch left 4,925 jobs unfilled in Minnesota’s manufacturing sector, accounting for 9.8 percent of the state’s job vacancies. Nationally, there are approximately 600,000 vacant positions in manufacturing. Kill concluded that attracting more students to industry careers will depend on using public/private partnerships to expose students to manufacturing’s wide variety of career opportunities.
Awarding Excellence Enterprise Minnesota staff receive 2012 “Practitioner of the Year” and “Newcomer of the Year” Awards from the U.S. Manufacturing Extension Partnership. In May, the 2012 National MEP Awards in Orlando, Fla. named Enterprise Minnesota’s CEO Peer Councils and managing staff “Practitioner of the Year.” The staff members include business growth advisors Jan Hepola, Mary Connor and Deb Bly. In addition, Constance Fantin, a sales assistant at Enterprise Minnesota, was named MEP’s “Newcomer of the Year.” The Peer Councils were created eight years ago with a single group of CEOs. Today, more than 85 manufacturing CEOs belong to one of 10 councils throughout Minnesota. Each council convenes one full day each month for a combination of topical presentations and open-ended conversation. In this way, members function as an informal, off-the-record advisory board for each other. Membership is by group invitation only, which fosters a high level of trust, confidence and respect among members. It also ensures that council members have a similar level of “business sophistication.” Each day’s meeting is organized and facilitated by the award-winning team of 18 ENTERPRISE MINNESOTA SEPTEMBER 2012
business advisors. Between the monthly meetings members receive oneon-one coaching from Enterprise Minnesota consultants toward their specific improvements, with ROI measured every six months. Fantin, winner of the “Newcomer of the Year” award, joined Enterprise Minnesota in August 2010 as a parttime sales support assistant, taking on a role previously filled by two full-time employees. By streamlining several areas of sales support operations, she freed up eight business development staff and 10 consulting delivery staff to focus solely on their core responsibilities of sales and delivery with manufacturing clients. Fantin has also taken on the role of coordinating logistics of Enterprise Minnesota’s monthly Business Events and annual State of Manufacturing® poll.
Global Growth
Gaining Training
Enterprise Minnesota partners with the University of Minnesota’s Carlson Global Institute to offer Global Market Strategy.
Enterprise Minnesota continues longstanding Workforce 2020 program partnership with West Central Initiative to bring new skills to the region’s manufacturing workforce.
Enterprise Minnesota and the Carlson Global Institute at the University of Minnesota have teamed up to offer Global Market Strategy, a series of four full-day sessions that give participants the information and one-on-one instruction necessary to develop an international sales strategy. Though exporting opportunities hold tremendous value for manufacturers, many seem to be deterred by three significant obstacles: lack of knowledge about practical matters such as shipping, language, and currency; uncertainty about how to establish business partnerships; and overall anxiety over where to begin. Global Market Strategy addresses all three concerns while helping companies shape a focused strategy. Enterprise Minnesota Director of Consulting John Connelly says Global Market Strategy differs from other exporting programs and offices because it works helps companies make a strategic choice to pursue exporting in the first place, then develop a strategy for success. In the first session, participants walk through different exercises to establish clarity about their objectives. The sessions are held one month apart, giving participants time to work with their assigned coaches and complete their “homework.” During the second meeting, participants focus on developing a business plan, sharing the results of their research, and refining their unique selling proposition, says Greg Thomas, a business growth advisor for Enterprise Minnesota. “We also spend time considering things like sales distribution options, logistics, and financing,” he says. The final sessions include a review of each participant’s strategic plan by a panel of international business experts. “You’ll hear things like, ‘I didn’t go to that country because of these cultural issues or these requirements,’” Connelly says. “The panel adds so much to the secondary research because they’ve been there and done that.” By the end of the series, manufacturers have a carefully reviewed international strategy and the knowledge and contacts to begin carrying out their plans. With follow up and individualized coaching, participants also receive feedback going forward. “We’re not just putting a plan together, but helping them implement and execute that plan,” Thomas says.
In 1992, West Central Initiative (WCI) launched Workforce 2020, a service that offers financial support for companies to train their current employees in the evolving skills needed to remain competitive. Its goal is to strengthen the nine-county region’s economy by developing its current manufacturing and industrial employee base. Workforce 2020 has since helped to fund training for more than 9,000 manufacturing workers. Its mission is to provide financial support for manufacturing training that is not widely available in postsecondary schools. As such, the types of training eligible for funding change over time. The service began by training workers how to operate the computer-controlled manufacturing equipment coming into the marketplace in the early 1990s. It then moved on to lean and six sigma, and later, Training Within Industry. Its latest focus is on providing training in geometric dimensioning and tolerancing, or GD&T, which involves creating engineering drawings and three-dimensional, solid models for products. Enterprise Minnesota has remained a partner in the service throughout its existence. As a part of the national Manufacturing Extension Partnership network, Enterprise Minnesota connects companies with instructors across the United States. They travel to Minnesota to provide the highest level of skilled training on a specific topic. Statistics show the service is working on multiple fronts. A study conducted by Andrea Lubov, PhD, found that in 2005, participating firms enjoyed a turnover rate of 26.2 percent, while turnover rates for non-participating firms were 54.8 percent. And an Enterprise Minnesota study of 30 participating firms in 2007 and 2008 found that companies increased sales by a total of $15.1 million and reduced spending by $4.63 million.
ENTERPRISE MINNESOTA SEPTEMBER 2012 19
Enterprise Minnesota
Year in Review Cultivating Continuous Improvement E
Enterprise Minnesota combines environmental and efficiency considerations in new GreenLean™ consulting service.
ffective Enterprise Independent survey of 200 Enterprise Minnesota customers reveals company is highly effective in supporting profitable growth.
Launched by Enterprise Minnesota last year, GreenLean™ In 2011, manufacturers reported $210 million in economic imis a consulting service designed to help companies foster a pact after hiring Enterprise Minnesota for a wide range of conculture of continuous improvement and growth by elimisulting, including continuous improvement projects, strategic nating time and energy wastes. planning, obtaining certifications, and business growth services. Rooted in the famed Toyota Production System, lean practices have long been valued by manufacturers for cost savings and efficiency. “Green” manufacturing practices also have popped up in business plans, but usually for reasons based in altruism. Now, more manufacturers are combining green practices and the more traditional procedures of lean enterprise to maximize bottom-line benefits. “The potential savings are huge for every company when you tie lean and green initiatives together,” says Enterprise Minnesota Business Growth Advisor Samuel Gould. “It’s hard to separate the two. If I am able to stop a ton of metals being poured because I fixed a process issue, then I saved a lot of energy, and that’s green. There are also savings there, so they’re tied together,” he says. At an Enterprise Minnesota business Brian Kopas, director of supply chain management at Foldcraft Company, event earlier this year, speakers from with a handful of the company’s wood waste, which helps heat its facility in Medtronic and Foldcraft Company prewinter months to save the company an annual $100,000. sented snapshots of their green and lean journeys, and, along with Xcel Energy Field Sales Manager Ryan Bruers, offered tips for instilling a lasting, results-oriented lean and green culture. Foldcraft used green and lean to move a recently acquired company under its existing roof, eliminating the need to rent, light and heat at least 35,000 square feet of space, saving $634,000 in utilities and even more in avoided truck traffic between sites. At its Brooklyn Park facility alone, Medtronic’s green and lean efforts have saved 1.5 million gallons of water, reduced wood and packaging by 200,000 pounds, and have sustained an annual savings of $215,000. photograph by PATRICK KELLY
Market Smarts Enterprise Minnesota teaches strategic approach in new Proactive Marketing consulting service. This year, Enterprise Minnesota launched Proactive Marketing, a service developed to help manufacturing companies use a strategic approach to grow their business. Specifically, the service assists companies in defining their ideal target market and their competition, then looks for ways each company can differentiate itself from its competition to provide the greatest value to its customers. The service gathers representatives from six to seven different companies for four half-day sessions over three months. Similar to Enterprise Minnesota Peer Councils, company representatives learn from each other by sharing their experiences and challenges with the group. In between 20 ENTERPRISE MINNESOTA SEPTEMBER 2012
each group session, Enterprise Minnesota travels to each individual business to coach them on applying what they learned. In the fourth session, representatives from each company come forward and present a marketing plan around a specific opportunity that they would like to pursue in their business. Deb Bly, Enterprise Minnesota business growth advisor, says the 20 companies that have completed the service within the past year now have a clear vision of what is important to their customers. “They understand that while growth can come from new markets or new customers, it can also come from winning more business with existing customers. They focus on delivering value, and they do it by looking at their business from the customer’s point of view,” she says.
The data was collected by an independent survey of more than 200 Enterprise Minnesota clients, and also reported that these manufacturers retained or created 1,765 jobs. A third party conducted the annual survey on behalf of the National Institute of Standards of Technology (NIST) Manufacturing Extension Partnership (MEP), which operates out of the U.S. Department of Commerce. Over time, the survey has demonstrated that Enterprise Minnesota’s consulting services gave manufacturing clients a 20-to-1
T
eaming Up Enterprise Minnesota partners with a Puerto Rico MEP center to teach GreenLean™ to Spanishspeaking workers.
return on their investment. Its current survey for the past four quarters showed a 32- to 35-to-1 return, says John Connelly, Enterprise Minnesota director of consulting. “The survey is evidence that Enterprise Minnesota works with clients to help them achieve measurable business growth,” Connelly adds. “It’s not enough to just bring a methodology or experience, and it’s not enough to coach on the application of tools like lean or strategic planning. It’s got to be about achieving actual business results.”
Lean enterprise expert Julio Lugo (standing) trains Spanishspeaking workers in GreenLeanSM using a hands-on manufacturing company simulation.
When St. Paul Brass and Aluminum Foundry was invited to receive GreenLean™ consulting services from Enterprise Minnesota, it had an unusual request. Close to 50 percent of the company’s workers speak Spanish as their first language, so company leaders asked if it would be possible to offer the consulting services in both English and Spanish. To make it happen, Enterprise Minnesota networked with Puerto Rico Manufacturing Extension (PRiMEX) to fly lean enterprise expert Julio Lugo to Minnesota for the Spanish session. Smith Foundry in Minneapolis had also requested the consulting services be offered in Spanish, so the two foundries pooled their workers together for two sessions over two days. GreenLean™ alternates rounds of classroom learning with rounds of a hands-on simulation in which each participant is assigned to a different department of fictional circuit board photograph by PATRICK KELLY manufacturer Buzz Electronics. Each round, participants are instructed to assemble and “ship” a certain amount of circuit boards. Between rounds, they learn how to apply lean techniques like kanban systems, 5S methodology and a lean plant layout to become more productive and efficient in the simulation. Enterprise Minnesota business growth advisor Tim Bjorgum, who led the session in cooperation with Lugo, says instructing in Spanish allowed workers to gain a comprehensive understanding not only of lean practices themselves, but also of the thinking behind them. “We needed somebody who could say, ‘This is what we mean when we’re talking about point-of-use storage or the 5S program.’ Obviously in Spanish, there are no five s’s because they are different words. We were lucky to get Julio because he understands the lean implementation, and was able to both translate it and add the green aspects to it,” Bjorgum says. Plant Manager Dan Daubenspeck says having Spanish-speaking instructors helped workers to feel at ease. “A lot of the guys that typically keep to themselves and are quiet opened up with the Spanish-speaking teacher because they were more comfortable,” he says. ENTERPRISE MINNESOTA SEPTEMBER 2012 21
Outsourcing
Savvy
More and more, smart business owners are outsourcing personnel management duties to maintain their focus on their business. By Claire MacDonald SPHR - Human Resources Manager, Doherty Employer Services
22 ENTERPRISE MINNESOTA SEPTEMBER 2012
It is rare to find a business owner who started
their own company so they could worry about payroll, agonize over the constantly evolving employment laws or manage employee relations issues. Yet for many owners of small and medium-sized businesses, that is the unfortunate reality. Not only do they need to develop business plans, oversee finances and focus on growth, but they also often deal with these day-to-day items on a regular basis. These tasks are a significant time sponge for companies and often end up hindering employers’ efforts to be forwardthinking. Many owners end up deciding enough is enough and start a search for a better process. Susan Cary-Hanson is no exception. Cary-Hanson is principal owner of PGC, an Edina-based custom component manufacturing business that brings in approximately $15 million in annual revenue. Overwhelmed by managing the different aspects of running her business, CaryHanson came upon a solution at a networking meeting when a colleague suggested outsourcing human resources (HR), benefits and payroll administrative functions. “The way [PGC] makes money is by making a part, packaging it and shipping it out on time. I don’t make money running benefits or writing a job description. My time is better spent thinking strategically [about] the skills and knowledge we need to be thinking about for the next three years and that we need to start developing in our employees - and let the day-to-day activities be handled by the subject matter experts,” Cary-Hanson explained. PGC is an expert in manufacturing custom components for branded OEMs, and that’s where Cary-Hanson wants to focus her efforts. By outsourcing HR functions, she found she was able to do just that. Outsourced HR provides thousands of small business owners with relief. Specific services vary based on the HR Outsourcing (HRO) firm, but a company can typically expect to receive HR services similar to a Fortune 500 company. The most common service platforms provided by HROs are Professional Employer Organization (PEO) and Administrative Services Outsourcing (ASO) models. The PEO model allows companies to co-employ their employees with the HRO, permitting the company to use the HRO’s benefit offerings and tax ID numbers. Others prefer the ASO model, which provides many of the same services without the co-employment relationship. For many, moving to an HRO feels like a big decision. For Cary-Hanson, it was a no-brainer. Like many small companies, PGC’s HR functions were fragmented and disorganized. “I knew a little bit about a lot of things,” she explains, “it’s really overwhelming. You cannot be a subject matter expert and continue to run your business if you’re trying to learn it and do it all, because you’re going to make mistakes.” Cary-Hanson says risk mitigation was a key reason for outsourcing. “You’re a sitting duck as a department of one,” she says. “I don’t know what I don’t know and I didn’t think it was in the best interest of the company to
run it that way. When you think about the risk of litigation, it’s really an affordable service.” Every HRO is different and may or may not provide all the standard HR services, so employers should investigate what services are offered before making a selection. Common services a company could expect to receive include:
Risk Mitigation
Like Cary-Hanson, many small business owners find they don’t have the necessary resources to make informed HR decisions. Employment laws change constantly and keeping up can be a full-time job. Large companies have access to entire teams of legal counsel and HR professionals, giving them a huge advantage over small businesses. By outsourcing, an HR professional will be available to help navigate these laws and keep organizations educated on changes before they find themselves in trouble. Companies are able to make more informed decisions and proactively weigh risks. Employment laws cover everything from illegal harassment claims to writing a driver’s license number on the correct line of the Form I-9. Additionally, each state has its own set of laws, which can be a challenge to manage for employers with satellite offices in multiple states. For example, Minnesota employers need to know about the Bone Marrow Donation Leave Act. In Rhode Island, non-exempt employees must be paid at least 1.5 times the normal rate of pay for working on Sundays and holidays. Violations of these laws don’t come cheap. Even unintentional errors can result in steep fines, and repeated violations could bring criminal penalties and jail time.
HR Management
Outsourcing allows small businesses to develop an employee handbook, review hiring and termination procedures, obtain wage analyses, develop performance management programs, conduct employee surveys and establish a robust HR program to maximize employees’ potential. Managers receive expert advice on how to manage employee issues, use effective coaching and development techniques, and handle termination meetings appropriately. Tasks that are huge time stealers when performed in-house are virtually pain-free when handled by an HRO.
Benefit & 401(k) Administration
After partnering with an HRO, many companies think about benefits only during annual renewal. Employers no longer worry about tracking employee eligibility, enrolling or terminating employee coverage, reconciling invoices, educating employees or ensuring COBRA is properly administered. Employee questions and changes are handled directly by benefit experts at the HRO. Those in a co-employment relationship may also utilize the HRO’s health insurance plans. Some will allow companies the flexibility to pick and choose which benefit plans to use and which of their own benefits to maintain, while others require companies to adopt all ENTERPRISE MINNESOTA SEPTEMBER 2012 23
“
The way [PGC] makes money is by making a part, packaging it and shipping it out on time. I don’t make money running benefits or writing a job description.
their benefits. Employers who opt to use an HRO but forego the co-employment relationship maintain all their own benefits, which are administrated by the HRO.
Payroll Administration
Only a handful of employers still process payroll in-house; the risk of fraud is simply too high. The HRO handles many of the standard payroll functions, including payroll processing, federal, state and local tax management, and year-end W-2 production. Many HROs also perform Independent Contractor audits, minimum wage checks and Form I-9 assessments, helping to alleviate liability should the government ever audit the company.
24 ENTERPRISE MINNESOTA SEPTEMBER 2012
”
Susan Cary,
Hanson, principal owner, PGC
HR Information System (HRIS) Web Portal
In today’s technological era, small businesses are often behind in employee self-service sites. Online access allows employees to obtain their payroll and benefit information at any time. Managers can use the web portal to access employees’ emergency contact and salary information, and even report changes online.
Drug, Background and Unemployment Management
Administering drug and background screenings can be an important step in reducing liability, but they are also tedious and time consuming. An HRO will handle the
pause before posting an open position. Many HROs offer the option to purchase recruiting services a la carte, either directly through the HRO or through a staffing agency partner. By outsourcing this to staffing professionals, managers can circumvent administrative tasks and initial applicant selection procedures, allowing them to focus on interviewing pre-qualified candidates. If the HRO partners with a staffing firm, the company also benefits from access to a large pool of already screened and tested candidates, expediting the hiring process and improving the quality of new hires.
Workers’ Compensation Insurance
If a company uses an HRO under the PEO model, they may have the option to apply for and obtain workers’ compensation coverage through the HRO. Typically, the premiums are paid with each payroll, relieving the burden of a considerable annual premium deposit. Additionally, the HRO will provide safety consultations and will manage all aspects of worker’s compensation claims, payroll audits and setting up insurance for out-of-state offices.
Considerations When Selecting an HRO
Using an HRO is a great way for businesses to reduce risk while significantly enhancing HR functions. Business owners often report a reduction in stress and an increase in productivity after outsourcing. However, every HRO functions differently, so it’s important employers do their homework before they make a selection. Several factors to consider: 1. Does the HRO offer all the items previously discussed? If so, what is the depth of service provided and what items will continue to be the responsibility of the company? Some HROs say they provide everything, but actual services differ and they may not handle key administrative tasks.
entire process from start to finish and will work with the company to ensure their policies and practices are in compliance with state laws. Terminated employees often file for unemployment benefits. Small businesses can be especially burdened by these claims. It only takes one or two former employees to significantly increase a company’s State Unemployment Tax Act (SUTA) rate. An HRO helps ensure the company can defend against unemployment claims, manages responses and attends hearings on the employer’s behalf.
Recruitment and Selection
Screening resumes, selecting candidates and conducting initial interviews can be enough to make any manager
2. Is the HRO ESAC accredited? In order to maintain Employer Services Assurance Corporation (ESAC) accreditation, an HRO must subscribe to a strict code of ethics and undergo quarterly audits by an independent CPA firm to verify net worth, timely payment of payroll taxes and benefit premiums, adequate reserves for insurance claims, etc. The criteria are very stringent, leaving only a handful of accredited HROs in the U.S. Accreditation provides clients with solid protection through the Client Assurance Program, with Surety Bonds guaranteeing financial performance. 3. What is the ratio of sales managers to HR professionals? If an HRO has three sales representatives for every one HR professional, this asserts their true area of focus: sales instead of service. An understaffed HRO often tries to reduce its workload by streamlining aspects of the HR process, frequently resulting in cookie-cutter, one-size-fits-all options. This means the HRO most likely won’t allow for special customizations. HRO isn’t just ENTERPRISE MINNESOTA SEPTEMBER 2012 25
about risk reduction; it’s also about maximizing employees’ potential and promoting the work environment, making these serious considerations. 4. Is the HRO local? When a company chooses to outsource HR, they often forget to focus on the importance of face-to-face interaction. When the HRO is locally owned, managers and employees can meet and develop genuine relationships with their HR contacts. When harassment claims arise or volatile employees are terminated, it can make all the difference when the HR professionals comes onsite to provide services. 5. How will the implementation process and ongoing services operate? Will everything flow smoothly or will gaps occur and administrative tasks shift between departments? It is always a good idea to ask the HRO for client references. These can provide insight on how the HRO program works in practice and whether it is the right solution for the organization. 6. What are the HRO’s technological capabilities? Companies should ask for a demonstration of the HRO’s technology and discuss any special needs upfront. Each HRO’s offerings and abilities will vary, so it’s important to make sure the systems provided will be sufficient. 7. How do managers and employees contact the HRO? Some HROs function as call centers while others provide a single point of contact. The call center environment is typically staffed with knowledgeable profession26 ENTERPRISE MINNESOTA SEPTEMBER 2012
als who can assist with basic HR questions, but they will not understand the company’s culture or be as valuable in ongoing employee relations issues. The single point of contact model allows companies to form a lasting relationship with their HR representative and consider them an extension of the company. It’s also important to understand upfront who may contact the HRO. Some HROs allow only the owner or a select few members of upper management to contact them, whereas others will work directly with all employees. These are only some of the items to consider when choosing an HRO. Companies will want to assess their own needs and reasons for using an HRO, and spend time discussing these during the sales process. Once a selection is made, employers can move forward with implementing the program, mitigating their risk and freeing up their time to focus on the strategic direction of the business. For many business owners, like Cary-Hanson, it’s a winwin situation. Claire MacDonald has been with Doherty since July 2005 and manages a variety of clients, providing services in performance management, training & development, HR strategy, policy development and HRIS reporting. She obtained a Bachelor of Arts degree from St. Olaf College with a degree in Sociology and obtained her Senior Professional in Human Resources (SPHR) designation in 2009.
For more information about Doherty and its services, please visit www.DohertyHRO.com.
10 Steps to a
Smarter Supply Chain
Taking a strategic approach to product transportation can save time and money, increase access to capacity and improve service. By Dan Ryan
vice president, C.H. Robinson
ship between manufacturers and service providers. An When it comes to transportation, changes in ongoing effort to seek alignment between manufacturers economic and market activity are key drivers in deterand service provider networks is a strategy that can show mining the availability of capacity necessary in order to benefits to both parties. Seeking alignment between busimove manufactured goods from one place to another. ness goals and outcomes of both manufacturers and service When product demand is weak, less freight moves and providers can result in better rates and exceptional service more capacity is available. However, when demand increases and freight exceeds the available truck supply, a Benchmarking example capacity shortage results. In tight capacity markets, service providers have a greater choice of business options resulting from increased demand and the possibility of increased difficulty in obtaining the equipment they need, often resulting in paying higher transportation rates. Most likely, you are not interested in paying higher rates for the same service. Given these ebbs and flows in transportation capacity, it’s not too late to start taking a more strategic approach to truckload procurement—a mutually beneficial relationŠ 2012 c. h. robinson worldwide, inc. all rights reserved ENTERPRISE MINNESOTA SEPTEMBER 2012 27
levels over time. So how do manufacturers and service providers align their business goals so everyone is happy? That is precisely what this article will try to demonstrate by providing 10 insights on a strategic truckload procurement strategy and increased lead time. At the end of this article, manufacturers, by taking these steps, will have a better idea of how to obtain better access to capacity, better rates (three of the tips have been demonstrated to save more than $81 per load) and exceptional service levels, regardless of seasonal or economic conditions.
1. Don’t try to time the market. There’s nothing wrong with seeking competitive rates at a given point in time. At the same time, there’s no more likelihood you’ll be able to time the transportation market than the stock market. “Timers” in transportation—the people who try to lock in rates when they believe rates are absolutely at their lowest point—often get in at the wrong time and end up paying more in the long run than those who are more strategic about their procurement. 2. Benchmark. Understanding how last year’s transportation rates compare with this year’s is only part of the equation. A manufacturer needs to know whether current rates are good or bad, and how they compare, high or low, to the overall market. Manufacturers can also use benchmarking tools, which help set realistic expectations for both manufacturers and service providers. 3. Conduct a procurement exercise at the same time of year, every year. Reviewing rates and ser-
vice provider options every 12 months allows for better alignment of your network for the long-term, and allows sustained pricing levels to stay at or below the market. Manufacturers who develop a robust process for contract-
Carrier acceptance of tendered loads
ing freight also build credibility in the market as reliable, even-handed customers. In fact, recent research by Iowa State University suggests1 that a freight transportation procurement strategy based on a predictable schedule and process can deliver substantial cost savings and network efficiencies. The research found that shippers in the study that annually rebid their freight achieve a rate reduction of $25.17 per load compared to those that seldom or never use this buying method. In addition, shippers can expect to capture lower rates, $15.27 to be exact, by virtue of a procurement event. The two savings combined are $40.44 per load. With an average cost per load of $907, regularly run procurement events can lower a manufacture’s freight costs by 4.46 percent at the time of implementation. 1 C.H. Robinson white paper: “Stale Rates Research: Benefits of Frequent Transportation Bids.” June, 2012.
4. Share the truth about the business. Manufacturers who make their freight look better than it is may get competitive rates through a procurement exercise. However, if moving that freight turns out to be more involved than expected, such as shipments that aren’t available until the end of the day, week, month or quarter, or shipment with consistently long loading times, service providers may decide to accept easier freight from other shippers in the marketplace. When the primary service provider doesn’t accept the freight, it’s common that backup providers may have also accepted other freight before being offered your freight. As the manufacturer continues down the routing guide, a document with straightforward instructions detailing what service provider is to be used for any given shipment; they usually pay above-market rates and may still have non-priority service levels. Conversely, if manufacturers don’t disclose to service providers what’s attractive about the freight, providers may assume the worst. In that case, they may make plenty of capacity available to the manufacturer, but not at the best possible prices. 5. Routing guide depth drives transportation costs. While a
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28 ENTERPRISE MINNESOTA SEPTEMBER 2012
service provider’s rates in the shipper’s routing guide are contractually agreed upon, it is understood that a service provider will not always have the assets available to accept the load. If the load is rejected, the manufacturer tries the next service provider in its routing guide, and so on, until the load is successfully tendered. Sometimes, it takes more than five tenders before a service provider is found who will haul the load. A study by M.I.T.2 in 2008 shows that the first service provider accepts about 78 percent of their volume tendered. Of the 22 per-
cent of the volume that the first service provider rejected, the second service provider accepts 13 percent, the third service provider accepts 4 percent, and the fourth service provider accepts less than 2 percent. Service providers below this on the routing guide accepted less than 1 percent of total loads. The deeper the manufacturer goes into the routing guide, the greater the rate per mile they will have to pay. Overall, with each step down the routing guide, manufacturers pay about $.06 per mile more in rates. This translates into an average increase of more than $26 per load each time the load is rejected. 2
C.H. Robinson white paper: “Increase Lead Time, Decrease Costs.” 2010.
6. Tender lead time affects the likelihood that preferred carriers will accept a load. The same M.I.T.
a constraint based bidding tool in addition to providing a sounding board to help determine whether a solution is truly realistic, and how much risk the manufacturer may take with various scenarios. By choosing a consultant with experience conducting procurement exercises—preferably a consultant that also has web-based and constraint bidding tools to compare all the scenarios— manufacturers obtain an unbiased view of rates being offered and discern how realistic those rates really are.
8. After the procurement exercise, use a TMS.
There’s no substitute for Transportation Management System (TMS) tools once a plan is in place for the year. A service provider should be able to provide and/or use a TMS that produces carrier scorecards, client scorecards, savings analyses, item and order level reporting, network and ship site performance, and overall financial analysis. A TMS is also neutral, delivering performance data and analytics without bias. Incorporating this kind of intelligence into annual and quarterly reviews with service providers leads to two important outcomes. First, it allows manufacturers to work with hard data instead of anecdotal information. They can compare real costs to both historical and planned costs in an effort to optimize the network and track routing
study shows that the deeper the manufacture delves into the routing guide to cover the load, the more important lead time becomes in the cost equation. In fact, the more lead time a service provider has between the tender and the pickup day, the more likely the first service provider in the routing guide is willing to accept the load. In the data, loads that had shorter lead times had a much higher level of tender rejections. Loads with lead times longer than two days were the least likely to be rejected by service provider. Even at 48 hours, Average tenders per load there’s a real savings opportunity. It makes sense that a service provider would accept a higher percentage of loads one week in advance of pickup, since much of their trucking capacity is uncommitted at that point. The study also concludes that making even small changes in lead time, from less than two days to over three days, for example, would improve © 2012 c. h. robinson worldwide, inc. all rights reserved the service provider acceplane rate increase by tender depth tance rate and save an average of $15.34 per load3. 3 C.H. Robinson white paper: “Increase Lead Time, Decrease Costs.” 2010.
7. Hire a procurement expert to run a procurement exercise. Experts can help diminish the burden of preparing for a procurement exercise and ensure that all the necessary elements are in place. They can provide experience modeling multiple scenarios and using
© 2012 c. h. robinson worldwide, inc. all rights reserved
ENTERPRISE MINNESOTA SEPTEMBER 2012 29
guide leakage. Without this information, it isn’t clear why a plan succeeds or fails to meet the budget at the end of the year. Second, it gives service providers the insights they need to provide better service. TMS software and/ or related services are widely available for purchase, lease,
d
istribution of rate ages
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30 ENTERPRISE MINNESOTA SEPTEMBER 2012
or as fee-based solutions with the trained people who can help obtain both immediate and sustained ROI.
9. Maintain a stable set of service providers from year to year. This doesn’t mean that manufacturers can’t
add any new service providers. Competition is healthy. However, the manufacturer should measure how much freight they give to non-incumbents, and recognize that as more freight is given to these providers, more risk is added to the solution. Realignment with service providers where it makes sense, not constant provider turnover, drives real access to capacity and savings. Manufacturers can build stable relationships by developing a longrange mindset, which means conducting rate negotiations on a fixed cycle so service providers can plan their network around freight needs. Alignment over a sustained period of time is beneficial for both manufacturer and service provider as when both parties collaborate on a full-year plan using forecasts and modeling tools, there is a
“
“Manufacturers can watch certain economic indicators to understand what is happening in the market and anticipate potential impacts on transportation rates.”
”
Dan Ryan,
vice president, C.H. Robinson much better chance that capacity and cost will be aligned. Service providers gain an incentive to accept shipments and provide tools, processes and dedicated services that result in higher quality outcomes.
10. Understand what drives ongoing fluctuations in the market.
As mentioned at the beginning of this article, the availability of capacity is driven by economic change. Capacity shortages, like the economy, are also cyclical. So, while there are no fail-proof ways to absolutely identify when a capacity shortage will occur, manufacturers can watch certain economic indicators to understand what is happening in the market and anticipate potential impacts on transportation rates. Various freight indices offer views of spot market freight that represent changes week-over-week, month-over-month and year-over-year in transactional capacity and rates and other indices, such as the Active Truck Utilization index from Freight Transportation Research Associates, provide helpful information for planning. Manufacturers who are aware of changes in the market can better communicate with their providers, offer details about their annual bidding cycle, and reiterate the desire to maintain an ongoing relationship, fostering a winning long-term strategy. Dan Ryan is a vice president at C.H. Robinson based in Eden Prairie, Minn. The company, one of the largest logistics companies in the world, develops global supply chain plans, offers analytics and consulting services, provides door-to-door transportation, and executes freight services to meet the needs of its customers.
For more information about C.H. Robinson, visit www.chrobinson.com.
ENTERPRISE MINNESOTA SEPTEMBER 2012 31
final word
Projecting Success Effective project management is integral to reaching business improvement goals. By Greg Langfield How many times has this happened to you? You see an oppor-
For more information about Greg Langfield, go to http://www.enterpriseminnesota.org/about-us/enterprise-minnesota-team/greg-langfield.html. 32 ENTERPRISE MINNESOTA SEPTEMBER 2012
Greg Langfield
photograph by patrick kelly
tunity for improvement in your business and assemble a project team to implement it. The project experiences good initial momentum, but then progress slows to a crawl, adding weeks or even months onto the timeline. The unfinished project falls lower and lower on the team’s priority list. Eventually, momentum stops altogether. Working with hundreds of companies in the course of my career, I’ve seen this scenario play out for a variety of reasons. But the most common culprit is lack of effective project management. The project leader may be adept at managing tasks but not people, or vice versa. The project may lack a scheduled plan for carrying out its different elements, or an established method for communicating progress to leadership. The project team may not have a clear vision of how the project ties into the company’s larger mission and goals. Project management plays a key role in every service that Enterprise Minnesota delivers, from the smallest Kaizen events to the largest lean transformations. With that in mind, our project management approach is different. Instead of consulting with clients and then leaving them to do the work, we consult and help them do the work, both throughout a project and after a project’s duration. We’re there to do the work when a project loses momentum or veers off course. We can serve as project co-leaders. We can help determine whether a project should be split into smaller, more manageable pieces. And as an outside party, we can provide candid, unbiased advice and insights. Like players on the field, the clients are doing the activity. We are the coaches working with them to achieve the intended outcome. Once a project is complete, many companies have developed a list of sub-projects they would like to pursue. We can help them determine which of those sub-projects best fit their organizational goals, then decide which one to tackle first. Enterprise Minnesota sees its approach as a defining element of our commitment to helping manufacturers grow profitably. We are dedicated to helping manufacturers find ways to continuously improve, and believe our varied menu of consulting services paired with our ongoing support from project to project fosters more strategic improvements, more growth and a more vibrant manufacturing sector in Minnesota.
Greg Langfield, an Enterprise Minnesota business growth advisor, works with medium size and small manufacturing companies throughout the state to identify and implement operational excellence strategies to grow business. Greg has worked within both small businesses and large corporations, drawing on 30 years of experience within engineering and manufacturing to bring an experienced approach to right-sized solutions. Prior to joining Enterprise Minnesota, Greg served as engineering manager at Covidien, a medical device manufacturer. Within this role, he provided leadership for capital management, process improvements and facility management, utilizing lean and six sigma methodologies to support operational excellence. Previously, he served within packaging, automation, material handling and machine tool industries focusing on custom equipment solutions. Greg holds a bachelor’s degree in mechanical engineering from North Dakota State University.