1997 IW Best Plants: Senco Products Inc., Fastener Manufacturing

At A Glance - Senco Products Inc., Fastener Manufacturing

• 4.7 defects per million opportunities.
• 89.1% reduction in customer rejects since 1989.
• 43% scrap reduction since 1989.
• Air emissions reduced by 99.3% since 1987.
• Cycle times reduced by 78% and 66%, respectively, for nails and staples.
• Warranty costs reduced as a percent of sales by 81.4% the last five years.
• Annual labor turnover typically less than 1%.

Nails. Staples. They seem simple enough. But when production levels reach 6 billion staples and 2 billion nails per month, with 900 active stockkeeping units, simplicity gives way to multiplicity.

Senco Products Inc. Fastener Manufacturing has managed such metrics by continually inventing products, processes, and production equipment that have set the pace in the collated nail and staple markets for the better part of 45 years.

"From a knowledge base and a performance base we continue to make ourselves stand out," says Glenn Petrosky, manager-worldwide fastener manufacturing. "I challenge anybody to look at the performance of this plant and find where you can do it better in this industry."

Ever since William Tillinghast, George Kennedy, and A.G. Juilfs founded the company in 1951, securing a place in the fledgling pneumatic-fastening-system industry, the plant has designed and built most of its own machinery. The Cincinnati manufacturer steadily adds new equipment that produces nail and staple coils and cartridges. Those packages feed fastening tools, primarily Senco devices produced in a plant adjacent to this year's winner. What nail- and staple-making machinery Senco doesn't build it buys and modifies to its needs.

On the floor of the 542,965-sq-ft facility, early Juilfs creations still operate alongside leading-edge technology, but the relics that remain are likely destined to join a heralded predecessor in the Senco lobby. Old equipment that used to make 300 nails per minute has been replaced with equipment that produces 1,000, and labor-intensive staple operations have been replaced with equipment that simultaneously forms, coats, dries, and packages products.

And with each upgrade of equipment comes greater productivity.

Senco has been able to squeeze 50% more production out of its plant, in large part because of an annual improvement in inventory turns of 10.5% for the last 10 years. Despite an 84% increase in sales volume the last five years, dollar value of WIP inventory has remained constant.

Had the plant not been able to reduce nonproductive inventory (all but inventory allocated for shipment and maintenance parts) by 59% the last several years, accompanying new business would have required Senco to double the size of the facility just to hold the inventory to produce that increase, says James Cauhorn, project manager for North American manufacturing.

Senco supplies everyone from mom-and-pop construction outlets to large-scale manufacturers of furniture and manufactured housing, of which it holds about a 75% share of the market. Other manufacturers have tried to drastically undercut Senco on price (the International Trade Commission is hearing an antidumping suit targeted at Asian products), but even when clients have made the change they typically come back looking for Senco quality and reliability, says Cauhorn.

"[Other suppliers] could not perform at the quality level, service level, or delivery that we can," adds Petrosky. "[Customers] realize the major difference in price does not overcome the loss of value that they had."

Senco has lost only two of its top 500 customers in the most recent four-year period -- a retention rate of 99.6%. Keeping customers by keeping them satisfied is epitomized by Senco's relationship with one of its largest customers, Fleetwood Enterprises, a manufactured-housing contractor. The two "partners" jointly explore and develop alternative solutions to fastening. Fleetwood recognized Senco with its Circle of Excellence award three consecutive years and its Partnering Award the last two years. Senco holds an exclusive single-supplier contract with Fleetwood, one of the first in the industry and a first for Senco, and Senco management and production employees are intricately involved with quality improvement at Fleetwood.

"We went into their plants and actually got on their quality-improvement teams," says Petrosky. "We've solved problems with them unrelated to our product. We showed them how we do problem resolution, showed them tools we would use. We also do the same with materials where it's our fastener being used in the process. . . . Not only do they have a reliable supplier and we get products and services bought from us, but we get opportunities to explore [how to improve] things comfortably together as a system."

While there has been a history of innovative equipment design and customer satisfaction dating back to the plant's founders, there's also a lineage of loyal workers who staff a four-shift operation that runs 152 hours of the 168 hours in each seven-day workweek. Average seniority among the 700-plus employees is well over 20 years, says Cauhorn. The plant's annual labor turnover rate is approximately 1%, and 10% of the workforce had perfect attendance in 1996, without financial motivators.

Norm Jacobson, recently appointed manager of fastener production, says this dedicated workforce is at the root of the rural plant's success, and management steadily implements philosophies to enhance hourly employees' stake in day-to-day operations. Senco rolled out an employee trust and team approach in the 1990s, bringing to all employees two phases of empowerment and team-building training. A third phase on behavioral-profile training is currently underway.

Employees have also received training in quality concepts through the Senco Total Quality Process, which has resulted in a reduction of more than $3.86 million in price of nonconformance. The plant's near-Six Sigma quality -- 4.7 defects per million opportunities -- could not have occurred without the active participation of the plantfloor employees, says Lem Bailey, manager of staple and nail manufacturing, who has been with Senco for more than 35 years.

Denny Rosenhoffer, communications manager and one of the trainers, says, "Hourly people went through a cultural change a few years ago when we started to create an empowered work environment for them. They truly bought into the ownership of their job process. The 'pro' ideas started coming from them. The process engineers were much more accessible to them, gave guidance to their ideas, and installed a lot of process improvements."

Evidence of the plant's move toward empowerment is an employee-to-supervisor ratio that has risen from 23:1 to 85:1 since 1990.

"There is trust between the leadership and the employees, and I think we've demonstrated it time and time again," says Michael Lemon, manager of materials and manufacturing service. "Over the years we've had significant productivity improvements. Where many companies would have laid people off as a result of those productivity improvements . . . what we've done is place people in new positions, or those improvements have led to increased business that leads to additional jobs as well as investments in the company."

The company did not have a layoff from its founding until 1974, and the plant hasn't had a layoff since 1991. Cauhorn notes that this record is a result of strong, continued growth and a longstanding management philosophy by which inventories are managed and flexed to avoid "dramatic" production changes.

He emphasizes that any additional inventory-carrying charges this approach incurs are far outweighed, tangibly and intangibly, by the benefits of workforce stability.

Despite the inventory buffer, finished-goods inventory at the plant has declined by 20.7% since 1987, equivalent to $2 million, while the products offered have doubled. That reduction coincides with Senco's move in the 1990s toward "wire-in/box-out" operations, which have significantly reduced costs, moved processes closer to in-line processing, and eliminated waste, cleaning operations, and inventories.

The "wire-in" portion refers to coils of steel rod, from which all nails and staples begin. Lemon says last year the plant processed about 171 million lb of steel rod, which equates to about 4,300 truckloads of raw material. Once in-house, the coiled rod travels into wire-draw operations where it's uncoiled, straightened, descaled, drawn to exacting diameters required for each variety of nail and staple, and then recoiled.

Previously the operation was a two-step process -- descaling and drawing -- but "what we've developed is a combination where we have in-line probably four different manufacturers' [equipment], including our own, and we've integrated that to make it an in-line system," says James Wetter, manager of wire-draw and metallurgical services.

The wire-draw operations are a whir of speeding and spinning cable, with large bobbins feeding insatiable machines. Potential for accidents is high, but the department had one stretch recently of a year without a lost-time occurrence.

Cauhorn says the wire-draw operation was once considered for outsourcing, and its high accident rate was a factor against keeping it, but improvements to process and safety have enabled the operation to sustain its health, in addition to becoming a significant contributor to plant profit.

Wire-draw is also an environmentally friendlier operation because of Senco's decision to descale rods mechanically rather than use hydrochloric or sulfuric acid. That decision, combined with converting solvent usage elsewhere in the plant to water-based chemicals, has taken chlorinated-solvent usage to zero from 1.4 million lb in 1987. The facility has also reduced Superfund Amendments and Reauthorization Act (SARA) air emissions from 2.7 million lb of volatile organic compounds in 1987 to 19,000 lb last year.

Senco and its rod suppliers took three years to develop a new wire-draw process that, says Wetter, may be unique to the world: A proprietary galvanized operation has eliminated costs for suppliers and saves Senco more than $1 million per year. From wire-draw the recoiled, small-diameter wire is delivered to staple-making and nail-making operations, both of which have undergone considerable change and automation through the years. High-speed presses pound out huge pail after pail of nails that are moved by towlift to automated machines that collate the nails, marching them into precision strips or coils and into automated packing machines designed and built by Senco employees.

Bailey says the recent addition of automated packaging of both nails and staples has significantly enhanced productivity, reducing substantial hand labor by production workers and enabling fewer operators to manage more machines. Senco supplies its own packaging through a support operation that is entirely self-managed. Three machines run seven days per week and supply the entire plant. Reliability of this unit is essential -- no cartons, and the nail and staple machines shut down.

"When we look at how much downtime we have on [carton] equipment, it's virtually zero; it's under one-tenth of 1% of the downtime that we incur [in the staple department]," says Lemon. "So I'm real proud of this group."

Each month the unit processes more than 500,000 cartons and makes about 600,000 labels. Customer needs that cannot be supplied out of Senco's primary staple operations fall back to Senco's highly agile Plant Within a Plant (PWP).

The unit, which has been operating for five years, has its own customer-service agent, technical leader, and dedicated staple machines. PWP has reduced contract quoting turnaround from two months down to 24 hours, and actual order delivery from three months to two weeks (48 hours for urgent requests).

Cauhorn estimates that combining PWP sales with products that have originated in the unit and gone on to normal production runs brings in about $5 million annually. PWP also ensures that customers never go looking for limited-volume products elsewhere, instead keeping clients "100% Senco."