Walbar’s journey to world class manufacturing through operational transformation
02
Walbar – An engine of growth and operational efficiency WRIT TEN BY
JOHN O’HANLON PRODUCED BY
TOM VENTURO
03
w w w.wa l ba re ngi ne c o mpo ne n ts . com
04
Walbar Engine Components has undergone a considerable transformation over the past two years: it has overcome delivery, supply chain, manufacturing and quality issues to become both a worldclass and a low-cost partner to its aerospace clients
W
albar is a long-established manufacturing and engineering company, founded at
Tempe, Arizona in 1951. Though it’s not a household name, it is well known amongst engine manufacturers worldwide: Walbar’s components can be found in the hot section of turbine engines around the world. Its main products include blades, vanes and related components used in aircraft and industrial turbine engines. The company was acquired in 1986 by
Cornerstone Capital Holdings to acquire Walbar, LLC. It represented a great opportunity to get deeply involved with a troubled company that was either too small or too tarnished to catch the interest of conventional private equity firms or strategic buyers. The deal was closed in September 2016 and Mr. Grein assumed the role of President, assembling a small team of industry professionals to get the transformation started. For a supplier to an aero engine OEMs like Rolls Royce and Pratt & Whitney, Walbar was under performing: quality and delivery performance were faltering, and a climate of mistrust had grown between Walbar and its customers. It was difficult to understand, Grein Coltec Industries, and later, in 1999 by
recalls, how such an adversarial relat-
Goodrich. In the following year, they
ionship had developed. “When your
started a plan to relocate their labor-
customer is an adversary it is imposs-
intensive manufacturing from several
ible to get the kind of collaboration that
US locations to the port city of Guay-
is required to improve things,� he says.
mas in Sonora, Mexico. Later, in 2012,
One problem, he found, was that
Goodrich was taken over by United
there was a disconnect between the
Technologies Aerospace Systems.
customer-facing commercial group
By 2016, Walbar had been struggling
and the plant where the parts were
and was losing its competitiveness, as
made. Faunna Bartlett, Vice President
an under-managed division of a multi-
of Sales and Contracts stated, “before
billion-dollar industrial conglomerate. It
Walbar was independent, the team was
was then that Tim Grein partnered with
bidding for all available work, sometimes w w w.wa l ba re ngi ne c o mpo ne n ts . com
05
06 at prices that did not reflect the
had the chance to meet the Senior
company’s costs.” The first change,
Management Team, and we were not
therefore, was to align the sales effort
sure what we would find.” Apart from
and the plant. Nothing can be signed
himself, Mr. Grein teamed up with two
off until it has passed the scrutiny of
associates, James Dickson, as VP of
engineering, operations and supply
Operations, and Faunna Bartlett, as
chain in collaboration with sales. “From
VP of Contracts and IT, both of whom
that point forward, when we win new
helped to initiate the operational
work everybody understands what it
improvements, commercial strategy
involves and is ready to execute on it.”
and customer relationships. Much to
One thing that worried the new own-
the relief of everyone involved, the
ers was the leadership of the company,
team quickly meshed and proved to
which was a complete unknown.
be highly capable and motivated to
“When we walked into Walbar two
help drive the company’s transforma-
years ago, we had not previously
tion. “The Senior Management Team
“ When we win new work everybody understands what it involves and is ready to execute on it”
at the Mexico plant – at last, they were being heard. It produced the expected results: within six months the business was speaking the same language of profitability and cost, and working side-by-side to drive toward world class operational excellence. James
— Timothy Grein President and CEO, Walbar Engine Components
“the Team was desperate for collabora-
remains nearly unchanged, and I am
we began to see immediate change
proud to say that as soon as we engaged
and transformation in nearly every
them in decision making and strategy
aspect of the operation.”
Dickson, VP of Operations, observed tion and focus. As soon as we set clear objectives and started communicating,
development they proved super solid,
The current scope of work was an-
capable and extremely dedicated to
other challenge that needed to be
Walbar’s success.”
addressed. “I think part of being
Radical change is often difficult, but
successful in the aerospace world is
in this case, it was met with huge relief
focusing on what you’re good at and
E X E C U T I V E P R OF IL E
Timothy Grein Timothy Grein is Walbar’s President and CEO. Tim brings an array of experience in aerospace manufacturing and management in private equity environments. A West Point graduate and United States Army veteran, Tim began his professional career at GE Power Systems before transitioning into operations and executive leadership.
w w w.wa l ba re ngi ne c o mpo ne n ts . com
07
“ By having extra machining capability we could reorient some of our flowlines to create permanent setups” — Timothy Grein President and CEO, Walbar Engine Components
of the new ownership, his presentation to the workforce set the stage for the level of employee engagement that had been achieved. “It seemed like the Senior Management team and employees were not communicated how the business was doing. We started by making a commitment on three things: firstly that our people come first and that we would not implement any change that would compromise employee health, safety or happiness; secondly that Quality was of paramount concern and that every employee
avoiding distractions outside of your
needed to recognize that our products
core competencies,” asserts Mr. Grein.
are critical to the safe operation of
“We quickly highlighted a few groups of
airplanes; and thirdly that we all
parts that were either priced incorrectly or deemed to be not our core competency and we engaged our customers to make some changes. The customers could see our quality and delivery improvements and they started to work with us to help us get out of those lossmaking parts.” While it was a long road, by the end of 2018, Walbar will have exited all of these, with the full cooperation of the OEMs. The transition away from UTAS was abrupt and a complete surprise to the entire workforce. On the first morning w w w.wa l ba re ngi ne c o mpo ne n ts . com
09
“ All of our growth focus is on aerospace components so the expansion allows us to create space for these in our original 70,000 square foot facility” — Timothy Grein President and CEO, Walbar Engine Components 10 needed to understand that Walbar acts as a direct extension to our customers’ assembly lines so on-time delivery is vital. We committed to the employees that we would make no changes for short term benefits if they would compromise these three Key Principles.” With these principles establishing some basic ground rules, Mr. Grein openly shared information about the company’s recent financial performance, preceding Cornerstone’s acquisition. The company had recorded significant losses and declining sales for the previous four years. “But then, I went on to explain why I remained optimistic about being able to fix things as a team. If we focused on three simple things, we would quickly return to profitability: (1) operational expense control, (2) improvements in
productivity and efficiency, and (3) scrap reduction. As a real-time example I showed them that if all we did was eliminate our scrap ($3.6mm worth of castings were wasted), we would return to profitability.” Before this message was conveyed, it seemed like the blame had been placed on poor contract pricing. But a new level of awareness and accountability spread throughout the enterprise as a whole, with spectacular results: in the first nine months scrap rates were cut by 50% while nearly every other operating metric similarly improved. As the team reflects on the journey of the first two years, it became clear that changes in operational management and employee engagement were the key factors in the transformation, however, technology played its part too. Within the first three months of ownership, they invested in and implemented QC-CALC, a software program that statistically tracks process capability in real time. The plant operates more than 25 coordinate measuring machines (CMMs) that make critical measurements on the components. This quickly gave better visibility into the areas where process improvement was needed. James Dickson said, “We also invested in new machines to created dedicated flow lines. We found that certain machines did not have enough volume to be dedicated to a particular “family” of parts and we were doing too many changeovers, which introduced unnecessary variation in our processes. By adding select extra machining capability we could reorient some of our flowlines w w w.wa l ba re ngi ne c o mpo ne n ts . com
11
12 to create permanent setups. As soon
equipment can be very effective if used
as we did that and could show positive
for the optimal work statement. For
performance improvements, our
example, with more than thirty (30)
customers responded by giving us
five-axis Huffman grinding machines,
more volume.” It’s a virtuous cycle, he
managed with careful process control,
says: with greater volumes, it’s easier
Walbar is very effective at producing
to justify dedicated flowlines and
state-of-the art high pressure nozzle
permanent setups.
guide vanes (NGVs) and seal segments
The machinery at the Guaymas
for large commercial aerospace
factory is a combination of legacy and
applications. And during the last two
modern equipment, resulting from the
years, Walbar has invested heavily in
previous ownership’s relocation of
new machinery to expand its capabili-
unwanted equipment and programs
ties, including the purchase of multiple
that they no longer wanted to keep in
Blohm grinders that are currently being
the USA. Nonetheless, most of the
used to manufacture extremely
high-volume turbine blades for a leading commercial engine. The company’s performance improvements emboldened Cornerstone Capital to support an aggressive plant expansion. In September, exactly
“ With a competitive cost structure in Mexico the opportunities are endless for us” — Timothy Grein President and CEO, Walbar Engine Components
two years after becoming an inde-
space for further manufacturing flow
pendent company, Walbar held its
optimization and aerospace growth.
grand opening of a 35,000 sq. ft facility
Mr. Grein and the Walbar team
that will initially be dedicated to
continue to look forward, seeking ways
Walbar’s non-aerospace products,
to continue the transformation that is in
such as turbocharger assemblies for
process. At this time, they are begin-
the locomotive industry. This bold
ning to implement a software program
expansion represents a 50% increase
to help manage real-time operating
in manufacturing space and makes
performance at the machine-level. This w w w.wa l ba re ngi ne c o mpo ne n ts . com
13
is a move to create a digital and visual factory that will help to identify unutilized capacity while creating an engagement tool to give operators a channel for communicating inefficiencies throughout the facility. They are in the early stages of this implementation, but are optimistic about the possibilities it will create. Walbar’s current customer base is very internationally diverse, with 85% of its customers located outside of the USA. While the original attraction for these customers was the low-cost 14
70,000
Square feet of manufacturing area
1951
Year founded
200-500
Approximate number of employees
location, these customers are increasingly viewing Walbar as a leading
“ We solely look for OEM partnerships on engine components, and our customers really appreciate that” — Timothy Grein President and CEO, Walbar Engine Components
manufacturer able to compete, from a quality and delivery perspective, against any manufacturer in the world for similar components. “With our capabilities, combined with a competitive cost structure in Mexico, the opportunities for Walbar are tremendous,” says Mr. Grein. In fact, he fully supports the aspiration of Walbar’s Senior Management Team, expressed six months after the transformation started: that
15
Walbar will grow to become one of the
turer approval) market Walbar avoids
largest independent engine component
that potential conflict of interest. “We
manufacturers in the world.
solely look for OEM partnerships on
One characteristic that differentiates
engine components, and our custom-
Walbar from its competitors is that it
ers really appreciate that. I think the
intentionally does compete with its
fact that we are not a competitor in the
OEM customers for aerospace comp-
aftermarket positions us to start growing
onents in the aftermarket. Many com-
with other leading engine OEMs.�
petitors that make parts for the engine
Currently, as an example, Walbar does
OEMs also seek to sell higher-margin
not have any business with GE Aviation,
products on the PMA (parts manufac-
nor Safran, whom together account for w w w.wa l ba re ngi ne c o mpo ne n ts . com
Founded in 1986 in Hebron, KY, Ellison Surface Technologies is an expert provider of thermal spray coating and special processes to many of the world’s largest manufacturers of aircraft engine, structural, industrial gas turbine and industrial components.
Learn More
“ It is clear that there are going to be capacity constraints for turbo engine components” — Timothy Grein President and CEO, Walbar Engine Components
more than 65% of the market for large commercial aero engines – a clear opportunity for growth. Another benefit of gaining customer trust and cooperation is demonstrated in Walbar’s supply chain transformation. When Walbar became independent in 2016, approximately 90% of all external processing, notably coating work, was done in the USA or elsewhere since no suppliers in Mexico were qualified. However, Ellison Surface Technologies had already made significant investments in Sonora and
had both the capability and the capacity required, and they were eager to support an ambitious plan. “You can’t switch suppliers for a critical operation, such as coatings, without the support of your customers. But after we had started to develop good rapport with them, the customers saw the potential benefits of both cost and cycle times reductions and we started a process to complete the qualification process. By December 2017, we transitioned our highest volume blades into Ellison and the relationship has been a resounding success for all parties.” Parts that
17
previously had to be shipped to Connecticut could now be trucked 400
and airplanes. “There is a widely held
yards across the industrial park to
consensus that there will be significant
Ellison. With volumes in the order of
capacity constraints for turbine engine
50,000 – 90,000 blades/year now
components. Two years ago, we set
being processed in 2-3 days rather
out to position Walbar to be prepared
than three weeks.Now, as the end of
for this opportunity. Today, with our
2018 approaches, 85% of Walbar’s
quality and delivery performance ex-
coating requirements have been
ceeding customer expectations, we
successfully transitioned to remain
are ready to capitalize on these
within Mexico.
opportunities.”
Since Walbar has reestablished itself as a high-performing company, the business fundamentals are all in favor of the company driven by unprecedented demand for new engines w w w.wa l ba re ngi ne c o mpo ne n ts . com
Walbar Engine Components 1400 E Southern Ave, Suite 130, Tempe, AZ 85282 T +1 (480) 482 5440 | www.walbarenginecomponents.com