enterprise minnesota magazine august 2013

Helping Manufacturing Enterprises Grow Profitably

AuGust 2013

NONPROFIT ORGU S POSTAGE

PAIDSlayton, MN

PERMIT NO. 22

Enterprise Minnesota310 4th Avenue S. Suite #7050Minneapolis, MN 55415

YOu CAN INCREAsE tHE VALuE

OF YOuR COMPANY

New analytical tools provide a strategic picture that goes well beyond financial fundamentals

Meet: MnSCU’s new Grand Connectorthe new mini-Jarraffenterprise Minnesota’s esteemed Colleague

www.enterpriseminnesota.org

Green: the new ripple of lean

How energy savings can add up

St. Cloud’S dCI ShowS that there IS no “I” In lean

Can Lean and ISO COexISt? How elk river Machine blends them into a

seamless management strategy 24HUtCHInSOn ManUfaCtUrInG:

the challenges of 100 percent growth 14

creo

Hutchinson Manufacturing

Rebates and Programs from Minnesota Energy Resources help manufacturers of all sizes

save on high-e�ciency equipment and projects. Be on the lookout for energy-saving

rebates and programs at minnesotaenergyresources.com or call 866-872-0052.

It’s Worth �e Energy®!

THE LOOKOUTAlways keeping watch to save his business energy and money.

ME05-0213_Enterprise_MN_FP_Final-Resize.indd 1 8/13/13 5:38 PM

creo

Visit the Enterprise Minnesota Web site for more details on what’s covered in the magazine at www.enterpriseminnesota.org.

Final Word:The trusted principles that have served manufacturers since World War II are now accom-modating a more sophisticated marketplace.2

Innovations:Joe Mulford is manufacturers’ point for contact into the system.Page 10

Innovations:Jarraff Industries listens to customers and creates a smaller, remote controlled version of its signature tree trimmer product.Page 8

ENTERPRISE MINNESOTA AUGUST 2013 1

AUGUST 2013

IN EVERy ISSuE:

cONTENTS

Hutchinson Manufacturing

14 Hutchinson Manufacturing The challenges of managing 100 percent

growth with a shortage of employees.

20 The Power of Enterprise Value Enhanced—and affordable—methods of

determining a company’s valuation can help owners see what their businesses are worth, what’s working well, and areas for improvement.

24 can “lean” and ISO coexist? Interview: How an ISO-phobic lean specialist

helped Elk River Machine blend the two concepts into a seamless management strategy.

29 Green: The new ripple of lean Companies are discovering how energy savings

can add up.

FEATuRES

Subscribe to our e-Trends newsletter today! Get updates on the people, companies, and trends that drive Min-nesota’s manufacturing community. To subscribe, please visit http://www.enterpriseminnesota.org/Resources/Magazine-eNewsletter/Subscribe.aspx.

Bob Kill:Manufacturers in greater Minnesota get due respect. In the Twin Cities? Not so much.Page 2

photogr

aph by patr

ick kelly

Rebates and Programs from Minnesota Energy Resources help manufacturers of all sizes

save on high-e�ciency equipment and projects. Be on the lookout for energy-saving

rebates and programs at minnesotaenergyresources.com or call 866-872-0052.

It’s Worth �e Energy®!

THE LOOKOUTAlways keeping watch to save his business energy and money.

ME05-0213_Enterprise_MN_FP_Final-Resize.indd 1 8/13/13 5:38 PM

creo

Data from Minnesota’s Department of Employment and Economic Development tell us that manufacturing in Minnesota’s northwest is enjoying an economic renaissance that outpaces the rest of the state. But a recent trip north in which I toured seven companies showed me again that the company narratives behind the data are even more compelling.

Over a couple days, I visited LaValley Industries, Nortech Systems and North Central Doors, all in Bemidji; Real Stone (Bagley), Anderson Fabrics, (Blackduck), Claw Stamping (Merrifield) and American Peat Technology (Aitkin).

Each of these diverse and entrepreneurial companies shows how they combine to establish deep new roots in their communities that promise to directly and indirectly yield vigorous economic benefits.

But an equally encouraging dynamic is how well their communities seem to appreciate it.

Here’s what I mean: The primary purpose of my visit north was to deliver a lunchtime briefing in Bagley about the results of our State of Manufacturing survey/research project. The event attracted more than 60 people, an audience that represented a significantly a diverse cross section of manufacturers, other business owners, and community leaders.

The people who attended that briefing are invested in their manufacturers. Some of this might be residue from the you-don’t-know-what-you-have-until-it’s-gone syndrome. Local communities may not have had an appropriate appreciation for their manufacturers until the great recession of 2009 forced manufacturers to cut back contracts with local suppliers and lay off employees.

Our Bagley meeting (and others like it) demonstrated how local chambers, MnSCU schools, economic developers and elected officials have a resurging appreciation for their manufacturers. They seem to be more conversant with the benefits manufacturers provide and with the challenges they face.

But there is an important distinction to make. This phenomenon is much more evident in Greater Minnesota than in the metropolitan Twin Cities area. Manufacturers in the Twin Cities don’t often enjoy the political and community recognition they deserve for uplifting the local tax based and providing solid, well-paying jobs to their communities.

The fact is, the citizens of Bemidji or Thief River Falls or Willmar are more likely to know exactly who their local manufacturers are, who works there, and what they contribute to their economies.

The “local economy” in the Twin Cities is less well defined and certainly more integrated across a larger geographical area. It is much easier for a suburban plant to work away anonymously in industrial parks or neighborhoods without acknowledgement.

I am no longer surprised during the manufacturing company tours in the Twin Cities that Enterprise Minnesota helps organize when elected officials or community leaders are amazed by the company’s level of sophistication and complexity. And I am no longer surprised when they admit afterward, “I had no idea this was even here.”

We need to rectify that.

Bob Kill

Member, Minnesota Magazine & Publications Association

Printed with soy ink on recycled paper, at least 10 percent post-consumer waste fiber.2 ENTERPRISE MINNESOTA AUGUST 2013

Contacts

To subscribe [email protected]

To change an address or renew [email protected]

For back issues [email protected]

For permission to copy [email protected]

612-455-4215

To make event reservations [email protected]

612-455-4239

For additional magazines and reprints contact Lynet DaPra at [email protected]

612-455-4202

To advertise or sponsor an event [email protected], 612-455-4225

To pitch a story [email protected]

Enterprise Minnesota, Inc.310 Fourth Ave. S., #7050 Minneapolis, MN 55415

612-373-2900

©2013 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 [email protected].

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., #7050Minneapolis, MN 55415

Bob Kill is president and CEO of Enterprise Minnesota.


PublisherLynn K. Shelton

Editors

Contributing WritersJohn ConnellyKate Peterson

PhotographerPatrick Kelly

Art DirectorAmy Bjellos

A tale of two regions

BOB KIll

Manufacturers in Greater Minnesota get due respect. In The Twin Cities? Not so much

creo

Printed with soy ink on recycled paper, at least 10 percent post-consumer waste fiber.

creo

A sometimes-overlooked leg-acy of Lean Enterprise training in manufacturing is the team-building culture it develops among employees who collaborate to make operations run with less waste and improved ef-ficiency.

That point was never lost on Tom Evens, the plant supervisor at DCI, Inc., the St. Cloud-based manufactur-er of custom processing equipment.

Evens was one of three featured speakers at a hugely popular business event sponsored recently by Enter-prise Minnesota called Lean Office: Beyond the Manufacturing Floor.

Evens demonstrated how he used lean training to rebuild company mo-rale after an extended and dispiriting collective bargaining negotiation.

“We were looking at very, very dif-ficult negotiations with the union,” Evens recalled. “We had seen a down-turn in business. We went through a tumultuous time. We needed to come up with something to re-engage the workers on the floor.”

“We really struggled to come about with some kind of solution that was go-ing to work for the union and for DCI long term. We were in a quandary.”

So in 2010, DCI brought in Enter-prise Minnesota to structure lean exer-cises to bring his employees together. Over the past three years, DCI has de-ployed cross-functional teams for most of its 200 St. Cloud-based employees. They conducted five Lean 101 train-ing sessions with Live Simulations. From there, 110 shop and office em-ployees have participated in 13 Rapid Improvement Events six informal in-

house events.“But my whole goal was to try to get

guys back involved,” Evens says. But most importantly they have

greatly improved our working re-lationship with all our co-workers through out the entire organization and that has made us stronger.

“It has had a cultural impact,” he says. “Nothing happens overnight. My main goal was to get the guys back on board, because there are some really talented craftsmen out there.”

“Not everything is a win,” Evens said. “I had more luck driving the shop

projects than I did driving the office projects, although some of the office projects have more potential for sav-ings.”

Evens says the company still has its share of what he calls “C.A.V.E men” -- Citizens Against Virtually Every-thing. “We still have some guys reluc-tant to change,” he says. Engineers, for example are not always the most out-spoken. “They are very intelligent, but sometimes it takes a while to pull out their ideas.”

“But from Day 1, building a stronger culture was my goal with this. I needed

St. Cloud-based DCI uses lean for efficiency and team-building

4 ENTERPRISE MINNESOTA AUGUST 2013

There is no “I” in lean

INNOVATIONSTom Evens, plant supervisor

But most importantly they have greatly improved our working relationship with all our co-workers through out the entire organization and that has made us stronger.

photogr

aphS by patr

ick kelly

creo


these guys back on with us. And now they are. When we started the lean process, there was a lot of pushback.”

Now, he says, the most controver-sial questions he gets about Lean is “when is my department getting an opportunity?”

“Sometimes it is just having that formal mechanism to set that resource aside to do the work.”

DCI was founded in 1955 to produce stainless steel storage tanks from a vacant farm implement building in Holdingford. The company outgrew Holdingford in 1969 and moved to its present location in St. Cloud.

The quality stainless steel equipment being made by DCI, Inc., was being purchased by a wide range of industries. In 1978, it became apparent that the Dairy Craft corporate name was not symbolic of the products and industries being served by the company and the name was changed to DCI, Inc.

Today DCI supplies steel and stainless steel alloy equipment to many industries requiring the metal’s long-lasting, corrosion-resistant advan-tages in processing and storage equipment.

Industries served by DCI include dairies processing milk, cream, ice cream, butter, cheese, yogurt and whey products, breweries; the beverage indus-try for processing its products; including storage of sucrose and fructose; and the pharmaceutical industry for processing and storing blood plasma and sterile water, as well as in manufacturing drugs like insulin and interferon. Biotechnology is a relatively new growth industry and DCI’s ability to produce fermenters of extremely high quality will place DCI in the forefront as an equipment supplier.

About the company

To learn more about DCI, Inc., visit www.dciinc.com

phot

ogr

aph

S by

pat

ric

k ke

lly

You DRIVE the INNOVATION. We ride SHOTGUN.

Because the manufacturing industry moves fast, it’s important to have someone by your side to help

navigate the hairpin turns. Baker Tilly Virchow Krause’s knowledge of the road ahead can help provide solutions to Minnesota manufacturers in an ever-changing global

marketplace. There’s no telling how far we’ll travel together.

Connect with us: bakertilly.com/manufacturing612 876 4600

© 2013 Baker Tilly Virchow Krause, LLPBaker Tilly Virchow Krause, LLP is an independently owned and managed member of Baker Tilly International.

6 ENTERPRISE MINNESOTA AUGSUT 2013

Minnesota’s manufacturers got significant recognition when the Minnesota legislature this year funded the Growth Acceleration Program (GAP) in the amount of $750,000. More meaningful yet was the fact that legislators put GAP funding into the government’s General Fund, which means it will be regularly included in the State’s budget.

GAP is a 6-year old program that provides a $1 rebate to manufacturers for every $3 they invest in consulting services that increase operational effi-ciencies and promote growth.

Insiders say that part of GAP’s ex-traordinary funding success originates with the fact that so many legislators have become personally acquainted with their local manufacturers through visits coordinated by Enterprise Min-nesota. Over the past 6 years we have personally organized over 300 of these meetings all across Minnesota.

Legislators and other local policy-makers invariably leave these meetings with an eye-opening appreciation for manufacturers. They see that manu-facturers really are an increasingly high-tech local job creator, whose employees enjoy well-paid careers in challenging and rewarding environ-ments - and whose efforts evolve into a valuable economic multiplier effect that benefits, suppliers and contrac-tors, as well as lawyers, bankers, ac-countants and insurers.

Plus, they understand that there are things they can do legislatively (or not do) that can materially help manufac-turers compete and grow.

GAP is a good case in point. An independent survey of clients using GAP funding found that collectively, manufacturers created and/or retained 1,700 jobs in Minnesota; they boosted company sales by $106 million; they

saved $15.9 million in business costs; and on average, generated a $15-to-$1 return on investment.

To be eligible for GAP, companies must be located in Minnesota. They must be in manufacturing or in a relat-ed industry. They must operate as in-dependent profit centers, employ 250 or fewer full-time employees, have a business plan for improvements and demonstrate an economic need for GAP. The program is administered by Enterprise Minnesota and the Min-nesota Department of Employment

and Economic Development is the fiscal agent. GAP works solely to ben-efit smaller manufacturing companies and is beneficial to the creation and retention of Minnesota manufactur-ing jobs.

Advocates recognize that manu-facturing is a key economic driver of our state’s economy, and particularly in Greater Minnesota, where manu-facturing jobs are oftentimes the life-blood of local communities. Manu-facturing is the key to our economic recovery and job creation.

Legislature funds popular rebate program for consulting

Stern Compnaies has used GAP.

Minnesota Widens the GAPINNOVATIONS

An independent survey of clients using GAP funding found that collec-tively, manufacturers created and/or retained 1,700 jobs in Minnesota; they boosted company sales by $106 million; they saved $15.9 million in busi-ness costs; and on average, generated a $15-to-$1 return on investment.

photographS by patrick kelly

creo

Innovations


Minnesota Widens the GAP

Doug Green seems continually on a mission to bring value to things that might otherwise be overlooked.

You have to start with the fact that he has taken peat moss – a manufac-turing component that most people might consider have just slightly more value than dirt – and transformed it into an Aitkin-based business that experts predict might help add 5,300 mining jobs up on the Range.

The other under-appreciated value was uncovered recently when Green and Enterprise Minnesota co-hosted local policy-makers for a tour of his American Peat Technology facility.

Attending were State Senator Car-rie Ruud, State Representative Joe Radinovich, Mike Steffen, President, Bremer Bank in Aitkin, Matthew Hill, Aitkin Chamber of Commerce, Mark Wedel, Aitkin County Com-missioner - District 1 – along with Bob Kill, president & CEO, Enter-prise Minnesota.

Enterprise Minnesota has arranged scores of these tours over the past few years to help manufacturers show-case their value to the community, especially through elected officials. Green’s tour was among the best yet.

“I wanted them to see that local talent is available in rural Minnesota to do what I think are some pretty re-markable things,” Green said.

Green took the team on a full tour of his facilities, where he explained that since 2003 he and his team have been on a mission to analyze peat’s molecular structure and capabilities, and engineer useful products in the process.

Among them is the ability to re-move dissolved heavy metals from water—and the potential ability to remove the sulfate that forms and

enters the water supply when metals are mined from sulfur-bearing rock.

“It’s wonderful that we have a company that is so focused on its future, bringing jobs and great new products,” State Senator Carrie Ruud told a Lakeland News television re-porter.

“Peat is one of the least val-ued and most valuable natural resources we have,” Green says.

So is APT.

Aitkin-based APT showcases its facility to local leaders

For the LOVE of Peat

Doug Green gives a plant tour to Senator Carrie Ruud and State Representative Joe Radinovich.

photographS by patrick kelly

photograph by lynn Shelton

Power comes from being understood.®

When you trust the advice you’re getting, you know your next move is the right move. That’s what manufacturing professionals can expect from McGladrey. That’s the power of being understood.

Experience the power. View our free technology newsletter at www.mcgladrey.com/techbulletin.

Are you

driving IT?

Or is ITdriving you?

creo

St. Peter-based Jarraff Industries’ smallest product is poised to kick-start what could be its biggest growth trend to date. The new Mini-Jarraff is a take-off on the company’s Jarraff mechani-cal tree trimmer, designed to trim tree branches encroaching on electrical power lines. The finalized model is set to hit the market later this summer.

Heidi Boyum, Jarraff Industries owner and CFO, says the idea for the Mini-Jarraff came from its customers, many of whom had asked for a small-er product similar to the Jarraff that could easily maneuver in residential backyards.

While residential tree trimming work has traditionally been bucket truck territory, Boyum says bucket truck setup and operation can be ex-pensive and requires larger teams of people. Jarraff Industries wanted its product to require a smaller setup team, and just one operator.

“We knew it needed to be remote-controlled. We knew it needed to be able to get in backyard gates. We wanted to make it as nimble as pos-sible,” Boyum says.

The 2009 recession, Boyum adds,

was the perfect opportunity to make it happen. “I didn’t want to sit on the sidelines and wait for this thing to pass,” she says. “I wanted to come out of this recession and have something to show for it. This downtime gave us an opportunity to be able to produce something new, something that peo-ple would want to purchase when they were ready to buy again.”

After more than a year of research and development, the 37-employee company unveiled a preliminary ver-sion of its Mini-Jarraff at a trade show in 2011. Attendees were impressed by the Mini-Jarraff’s remote-controlled operation, which allows the operator to walk alongside the machine to get the best view. Its faster setup also al-lows operators to complete projects in nearly half the time it would take with a bucket truck.

“We had people placing orders that day that had never seen the machine before,” Boyum says.

Those customers have since worked closely with Jarraff Industries to fine-tune the Mini-Jarraff’s design and ease of operation. Boyum says the collab-orative product development process

has strengthened Jarraff Industries’ re-lationships with its current customers.

“It is an honor for them to request that we build the next thing they think the market needs. It makes us feel good that they are confident in what comes out of St. Peter, Minnesota,” she says.

She also expects the Mini-Jarraff will help Jarraff Industries to gain new customers as smaller companies invest in the more affordable Mini-Jarraff. Boyum anticipates 20 percent growth in revenues this year. Once the Mini-Jarraff becomes established in the mar-ketplace, she says it could account for 30 percent of company revenues.

Mini-Jarraff to Make Big Splash

photogr

aphS by patr

ick kelly

Heidi Boyum stands atop Jarraff’s signature product.


For more information about Jarraff Industries, go to www.jarraff.com.

INNOVATIONS

“”“We had people placing orders that had never seen the machine before.”

HeIDI Boyum,owner

Jarraff Industries listens to customers and creates a smaller, remote controlled version of its signature tree trimmer product.

Mini-Jarraff to Make Big Splash

To hear Joel Wittenbraker talk about En-terprise Min-nesota, you might be re-minded a little of the old razor blade commerc ia l in which busi-ness executive Victor Kiam

said he liked his Remington Shaver so much that he bought the company.

Well, almost. Wittenbraker, president & CEO of Red Wing-based Machtech, had such a good experience with En-terprise Minnesota’s consulting services over the years that he agreed to join the board of directors.

Mactech is a manufacturer of on-site machining equipment and processes, offering standard product supply on a sale or rental basis, specialized tool de-sign and development and full on-site staffed contract service to a variety of industries such as oil and gas processing, decommissioning, power generation, and shipbuilding.

“I’m a guy that doesn’t like to use consultants,” he says. “I don’t like to go outside, as a rule, because I think it is an easy way to waste money. But the re-wards (with Enterprise Minnesota) have been consistent: I’ve done marketing, they built our website, we’ve done plant layout, we’ve done process analyses – the export marketing program. I feel that every one of them has paid for itself.”

In addition, he says, “The quality of the people that I’ve dealt with and the quality of the service that we as an orga-nization have received has been valuable. I like the people in this organization – as friends. When Bob said there was an opening, I was extremely flattered.”

Wittenbraker joined Mactech in 1994 as president. His experience includes a history in corporate finance, investment banking and business development, in-

Says enterprise minnesota has a ‘customers for life’ approach

Wittenbraker Joins Board

U.S. Bank works hard to tailor the right solutions for your business.With the help of a trusted U.S. Bank Business Banking specialist, you can manage your cash flow, payments, and loans for futuregrowth. Straight business talk that speaks to your business, so morebusiness owners like you can get what they need to move forward.

Call Craig VeurinkBusiness Banking 952.927.1275

*Applications subject to credit approval. Some restrictions may apply. Deposit products offered by U.S. Bank NationalAssociation. Member FDIC, ©2013 U.S. Bank

branch usbank.com/smallbusiness

If your business needs additional or new equipment, you need a loan from US.


cluding capital formation, mergers and acquisition and public securities offerings.

“Basically, Enterprise Minnesota is a very high level consulting business that brings value to companies at a reason-able price, with a lot of breadth,” Wit-

tenbraker said. “It is like I run my own company. Everyone may not be a cus-tomer, but when you do get them, you want them to be a customer for life.

“I feel that Enterprise Minnesota has a customers-for-life type of ap-proach.”

”

Joel Wittenbraker

creo

Enterprise Minnesota’s State of Manufacturing survey in recent years (both in the poll and especially in fo-cus groups) has made two issues abun-dantly clear. First: The availability of workers who can skillfully adapt to the increasing sophistication of modern manufacturing operations will be es-sential for the industry to adapt and thrive in the increasingly competitive global economy. Second: Manufactur-ers consider Minnesota’s State Col-leges and Universities (MnSCU) the resource necessary to producing those future workers.

Manufacturers, meet Joe Mulford. His title is System Director for Edu-cation Industry Partnerships, but his function is MnSCU’s Grand Connec-tor. If there one easy entry port for individual manufacturers to have an impact on how MnSCU is developing future members of their workforce, it is probably through Mulford.

“My primary duty is to cultivate relationships and partnerships for the (MnSCU) system,” he says, especially for individuals or organizations that have workforce solution needs or is-sues. His day, he says, can be as routine as finding a campus that might want to receive a donated piece of used manu-facturing equipment, or as dynamic as helping Minnesota’s notoriously con-fidential aerospace manufacturers de-velop customized programming.

Mulford admits he can’t provide any tangible deliverables from the system office, but says his job is to find people who can.

A product of the MNSCU sys-

tem, Mumford considers himself an “accidental” educator. His personal educational path seems to have gradu-ally progressed down Interstate 94, beginning at Moorhead State, where he received a two-year degree and winding through a four-year degree in marketing from St. Cloud State and a Master’s Degree in Administration of Metropolitan State.

He received his entrepreneurial chops between Moorhead and St. Cloud when he spent four years as a fish farmer, at a facility near the Bran-don Exit off Highway 94, just north of Alexandria. Starting as an employee, he eventually bought the business, be-fore selling it four years later. “I loved it. I sold it. I went back to school,” he says.

In 1995, he began work in educa-tion, starting as an admissions recruiter for the Minnesota School of Business (Globe University). In 1999 got a job as a customized training representa-tive at Century College and eventually spent eight years at Hennepin Techni-cal College, where he became dean of the manufacturing program.

For their part, Mulford says manu-

facturers can have a direct impact on their local MnSCU institution by en-gaging the advisory committee struc-ture that all of institutions are required to maintain.

“There probably is never an easy time to do it,” he says. “People are busy. But if they get involved, they’ll build a relationship with the faculty, which will give them insights and in-fluence into the curriculum that’s be-ing offered locally.” On top of that, he says, they’ll get a head start on finding the best students.

“Advisory committees have impact,” he adds. “It isn’t any more complicated than calling them up and saying, ‘I’m involved in manufacturing. I’m inter-ested in hiring graduates, or doing in-ternships.’”

That call, he says, can be with the president of the college, the folks that work in the outreach divisions, cus-tomized training, or the faculty mem-bers themselves – all available on Mn-SCU’s website.

Mulford is System Director for Education Industry Partnerships

MnSCU’sGrand Connector

photogr

aphS by patr

ick kelly

To learn more about mnSCu, go to www.mnscu.edu.

Joe mulford is manufacturers’ point of contact into the system

INNOVATIONS



Greg Langfield was named this year’s Esteemed Colleague at Enter-prise Minnesota. The award draws attention to an employee whose peers think has best embodied the cultural values of Enterprise Minnesota, both in terms of success and style.

With a degree in Mechanical Engi-neering from North Dakota State Uni-versity, Greg has devoted his entire ca-reer to manufacturing. Before joining Enterprise Minnesota one and a half years ago, he worked at several differ-ent manufacturing companies, where he says he became passionate about be-

ing a problem-solving partner.Langfield’s expertise includes Op-

erational Excellence, GreenLean, and Human Capital Improvement.

He’s earned a reputation among staff for being “ideally rounded” as a con-sultant. “He enters every relationship without any bias, so he’s willing to look for creative opportunities,” according to John Connelly, director of consult-ing. “And he’s always eager to learn.”

On top of that, Connelly says Greg shows unrivaled enthusiasm for the in-depth analysis of the results of our efforts, required as one of 59 affiliate organizations of the Manufacturing Extension Partnership, part of the U.S. Department of Commerce.

“He knows that’s the best way to demonstrate our value, as well as im-prove our services.”

Peers honor Langfield with enterprise minnesota’s top employee award

Esteemed Colleague

Langfield receives congratulations from Bob Kill, president and CEO of Enterprise Minnesota.

photogr

aphS by patr

ick kelly

Better Companies through Better Communication.

Sharing information is key to aligning employee behaviors with business strategies and results. Our software provides a simple and straightforward way for employees to access everything from from key metrics to CEO messages.

Share Information I Engage Employees I Improve Performance I Measure Results

pdpsolutions.com or toll-free 1-866-737-4894 I 124 East Walnut Street, Suite 110 I Mankato, MN 56001

CHECK OUT THE PDP WEBSITE FOR AN INTRO VIDEO FEATURING AN ENTERPRISE MINNESOTA CLIENT

creo


QueSTIonS

INNOVATIONS

e-Trends, Enterprise Minnesota’s weekly digital newsletter is now get-ting a little more personality as Lynn Shelton has begun contributing a reg-ular column to its editorial lineup.

e-Trends for years has provided Min-nesota’s manufacturing community with news about the industry and no-tices of what’s happening behind the scenes at Enterprise Minnesota. Shel-ton’s column, she says, will bring a little more personality and analysis to the news.

The newsletter doesn’t promise com-prehensive information about manu-facturing, Shelton says, but focuses on news items, instructional insights and interesting people – all of which illus-trate relevant industry trends.

“In a lot of ways, this builds on the success Enterprise Minnesota has en-joyed through our State of Manufactur-ing survey research project,” says Bob Kill, president and CEO at Enterprise

Minnesota.For the past five years The State of

Manufacturing has used a nationally recognized pollster to conduct an an-nual survey of manufacturers about business prospects, trends and wor-ries.

“Where the poll enables Enterprise Minnesota to capture the trends, frus-trations and aspirations of manufactur-ers across the wide spectrum of their marketplace – including their relation-ship with government,” he added, “e-Trends encapsulates a quick snapshot of that environment on a weekly basis.

“It all contributes to our company-wide objective to be the statewide con-nector for manufacturers.”

Shelton is director of communi-cations and marketing at Enterprise Minnesota. Drawing on more than 25 years of management-level positions in policy and public relations, her experi-ence includes time as a staff member in

the U.S. Senate and for the leadership in the Minnesota state senate. She has held senior level positions at two local agencies and also served as a director at Minnesota’s Department of Trade and Economic Development (now named the Department of Employment and Economic Development).

At Enterprise Minnesota, she directs the organization’s marketing initia-tives, promoting Enterprise Minne-sota’s business services, business lead generation, website development, on-line marketing, legislative relations, media relations, publishing, and busi-ness events.

Shelton is also publisher of Enter-prise Minnesota magazine.

enterprise minnesota’s e-Trends appears each Friday via email

Shelton contributes a new digital column

Readers may opt-in to e-Trends by going to www.enterpriseminnesota.org

Enterprise Minnesota’s CEO Peer Councils will convene their first annual statewide conference October 14 in Plymouth.

The meeting, open to peer council members only, will represent an influ-ential gathering of Minnesota’s manu-facturing CEOs, according to Bob Kill, president and CEO of Enterprise Min-nesota.

“This might be unprecedented,” he said. “Manufacturing’s best and bright-est are getting together behind closed doors with no agenda other than to help each other -- to talk about only things that are relevant to the success their businesses, on their terms.”

The Peer Councils were created eight years ago with a single group of CEOs. Today, more than 85 manu-facturing CEOs belong to one of ten councils throughout Minnesota. Each

council convenes one full day each month for a combination of topical presentations and open-ended conver-sation. In this way, members function as an members advisory board for the others.

“The fact that there is such a high CEO retention rate over the eight years of operating CEO Peer Councils speaks to the tremendous value placed on these relationships,” Kill said.

Membership is by group invitation only, which fosters a high level of trust, confidence and respect among mem-bers. It also ensures that council mem-bers have a similar level of “business sophistication.” Each day’s meeting is organized and facilitated by the Enter-prise Minnesota business advisors.

Between the monthly meetings members receive one-on-one coach-ing from our consultants toward their

specific growth and operational goals, with ROI measured every six months. The meetings are also supplemented by multi-council events, leadership de-velopment webcasts, company tours, demonstrations, and a council website.

At the request of member CEOs, Enterprise Minnesota recently ex-panded the Peer Council approach by developing three Operations Executive Councils using a similar model.

Enterprise Minnesota’s Peer Coun-cils (and the staff that manage them) received significant national recogni-tion when they were named “Prac-titioner of the Year” by the National MEP Awards.

Enterprise Minnesota is one of 59 regional centers that make up the U.S. Manufacturing Extension Partnership (MEP).

Ceo Peer Councils schedule their first members-only statewide conference

Hosting manufacturing’s best and brightest

creo

InnovationsInnovations

Position: Attorney and Principal at Gray Plant mooty, a full-service law firm based in minneapolis.

Role: Steve counsels employers in a variety of industries with respect to employee benefits. He has over 25 years of experience providing legal services to employee-owned companies and eSoP trustees.

with Steve Eide


How does a company set up an ESOP? Once the company has determined that an ESOP is feasible, the selling shareholders usually start the process by obtaining a preliminary appraisal of the value of their shares. This is an important step because an ESOP, by law, cannot acquire shares at a price above the appraised fair market value. Based on the preliminary appraisal, the sellers decide how much stock they want to transfer to employees.

Meanwhile, the company designs how the ESOP will operate as a benefit program, creates the trust that will hold the stock, and appoints one or more trustees for the ESOP. The stock transaction may take many forms, but typically the sellers or their representatives negotiate directly with the ESOP trustee over the terms of the sale. The ESOP trustee is assisted by its own legal counsel and financial advisor in this process.

How are ESOP stock purchases usually financed?A distinguishing feature of ESOPs (as compared to other types of retirement trusts) is their ability to borrow. This capability allows the ESOP to consider several options for financing the purchase of employer stock. The trust can borrow cash from a bank or other third party lender, or it can borrow from the company itself. In many instances, especially in recent years, sellers have provided some or all of the financing by accepting notes from the ESOP.

ESOP debt is secured by the acquired shares and is repaid with contributions or dividends from the company’s future earnings.

What are the critical success factors for an ESOP?The most successful ESOP companies have a well-conceived management succession plan, reliable cash flow, a team of knowledgeable advisors, and a commitment to nurturing a culture of employee involvement.

What is an ESOP and what are its advantages as an ownership succession tool?An employee stock ownership plan, or ESOP, is a trust created to purchase a corporation’s stock on behalf of its employees. The trust contains separate tax-deferred retirement accounts for each employee, where shares of employer stock accumulate until the individual retires or leaves the company for other reasons. The trust is subject to the requirements and protections of federal pension laws, much like a 401(k) plan or qualified profit sharing plan, but the law invests ESOPs with other unique capabilities.

The advantages of ESOPs are varied and extensive. They allow owners to transfer equity to a broad group of employees without requiring the employees to invest personal assets or future income. Thus, ESOPs can deliver a shared incentive to more employees than stock options, with less financial risk to the employees. ESOPs often provide a catalyst for greater employee engagement and productivity, resulting in a more sustainable and resilient business model.

ESOPs offer tax savings for the corporation, and employees accumulate wealth on a tax-deferred basis, which can later be rolled into IRAs after their stock holdings have been liquidated. The tax benefits give ESOPs an advantage over phantom stock, restricted stock and other equity compensation programs. In some cases, selling to an ESOP also provides tax advantages for the former owners. An important aspect for many closely held business owners is that an ESOP gives them more control over the timing and manner in which they hand over the reins, which could involve staged sales of stock over a period of years.

Putting a business up for sale on the open market creates a risk that the buyer will cut jobs or move operations out of the community where the company is located. Selling to employees through an ESOP virtually eliminates those concerns.

photogr

aph cou

rteSy of gray plan

t Mooty

QueSTIonS

Hosting manufacturing’s best and brightest

creo


In 23 years as a welder, Rian Suchy, a weld lead at Hutchinson Manufacturing, Inc, (HMI) has likely never been busier. He’s not only producing weldments of unprec-edented precision and sophistication, he’s having to do it every day with apprentices in his shadow.

Suchy’s assignment is just one example of how the folks at HMI are managing the challenges of a mas-sive and technically sophisticated contract with FMC Technologies to manufacture components for its thriving subsea oil and gas operations.

The effort has not only doubled the company’s revenue over the past 18 months, but it has plant managers scrambling to find creative uses for every inch of its 100,000-foot factory floor and scouring the region to find skilled employees. HMI’s workforce has increased from 105 to 176, with slots still unfilled.

“You can’t walk in the door with-out seeing how busy it is and how much work actually is being done here,” Suchy says.

Indeed, the plant seems continu-ally alive. The shop floor, the offices

and the lunch-room seem packed to capacity. Just finding an empty space in the company parking lot can be as frustrating as getting a mid-day space at the Minnesota State Fair.

Suchy’s piece in this this puzzle is to help the company satisfy its burn-ing demand for welders. Unable to attract a sufficient number of already-scarce welders to this community of 14,000, just 75 miles east of the Twin Cities, HMI has decided to do the next best thing: they are making their own.

Beginning last march HMI inaugu-

The challenges of managing 100 percent growth with a shortage of employees

Hutchinson’s UNdERSEA AdvENTURE

Hutchinson Manufacturing now fabricates 70 percent of the components in FMC’s massive undersea energy exploration.


rated an aggressive weld apprentice-ship program.

“We found there were a lot of people entering weld programs and local community colleges, but they weren’t getting the necessary skillset they need to walk into HMI and start welding,” says Isaac Marceau, an HMI vice president.

Their 90-day apprenticeship requires the company’s weld leads to take on two or three trainees at a time. “They come in with very little experience,” Suchy says. We basically train them to build our products. We want them to know exactly what we

do by the time we turn them loose out on the floor.”

The FMC ConnectionThe architect of this bustling busi-ness is owner Tom Daggett. In 2006 he invested $2,500 to attend what he calls an “on-line dating service” for suppliers that wanted networking introductions to energy companies that operated in the Houston, Texas market.

As a result, FMC dispatched an audit team to assess Hutchinson’s machining capabilities. “In ‘06 we were not a machining house, but we had welding and painting capabili-ties that they also needed,” Daggett remembers.

At one point, he says, HMI was the only shop in the FMC network that was certified supplier to do paint-ing, welding, laser machining and non-destructive examination (NDE) of welding.

By 2008 Daggett says he knew the FMC relationship was going to be “a big hit,” but he couldn’t foresee that there would be glitch along the way. In April 2010, the explosion at a BP drilling facility in the Gulf of Mexico created the largest accidental marine oil spill in history, which forced FMC to scale back its contract with HMI by 30 to 40 percent.

By early 2012, the business came roaring back.

“Looking back,” Daggett says, “we grew, but it was managed growth. I have a great staff. We really did a great job. People wouldn’t believe that we got this done, this type of specialized one-off custom manu-facturing at the specifications we’re operating.”

A Massive EffortHutchinson now fabricates 70 percent of the components -- hous-ings, frames, and control panels

-- that comprise the two to four story underwater pods that are eventually plumbed together two miles below the surface of the ocean to harness oil and gas. FMC performs the actual assembly, inserting and regulators inside of the assemblies.

Marceau compares the assembly to a computer server room. “We might make the server rack and the housing for the server, but we aren’t making the hard drive or the wires inside of it,” he says.

On the shop floor, HMI employ-ees call it “making a Swiss watch of structural steel.”

Marceau is the key choreographer of this complicated process. As vice president for operations, he bal-ances responsibilities for engineer-ing, purchasing, estimating, and the operations of the entire shop floor. He says the company has matched the “very precise demands” of the industry through welding technique, welding practices, a lot of layout and design of joint configuration, how the parts line up and, of course post-weld machining.

Has HMI done anything like this before? “Not to this scale,” Marceau says.

Is he ever worried that project might overwhelm them? “We have that discussion nearly every week in our staff meeting – to make sure we’re not over our skis,” he says.

Applying expertise he acquired in part from training with Enterprise Minnesota, Marceau leads a continual campaign to optimize the plant’s re-sources. Every quarter, he and other managers review what he calls the plant’s “overhead recovery.” During the most recent review, for example, the group decided to free up space for highly profitable welding operations by decommissioning a metal press break, the oldest piece of equipment on the HMI floor.

“ ”“I have a great staff. We really did a great job. People wouldn’t believe that we got this done, this type of special-ized one-off custom manufacturing at the specifications we’re operating.”

Tom DaggeTT,owner, Hutchinson manufacturing

The challenges of managing 100 percent growth with a shortage of employees

Hutchinson’s UNdERSEA AdvENTURE FM

C TeChn

ologies


HMI supplies Par Nuclear with cranes for reactors

In addition to his lucrative relationship with FMC’s sub-sea drilling operation, HMI’s owner Tom Daggett is also work-ing in the production of nuclear power facilities around the world in conjunc-tion with Shoreview-based Par Nuclear.

The story of that relationship contains eerily similar plot points to FMC: of be-ing in the right place at the right time, showing the instincts and agility to seize a market opportunity, and then to endure the vulnerability to outside unforeseeable incidents.

In the summer of 2008, executives at Par Nuclear approached Daggett about what they called a “big opportunity.” The downside: “We can’t tell you much about it” --even though HMI had been a “limited” supplier to Par.

Parr needed a facility to build operat-ing cranes for the new Westinghouse AP 1000, a “prefab” nuclear reactor for which it already had orders.

After looking at the requirements, Daggett concluded he’d need a much bigger facility than the one he had.

They responded: Why don’t you build one?

He declined, at first, but then recon-sidered, thinking he could build on some property he already owned. He sent a basic proposal. He said: “Here’s what this building would need to look like to build these cranes. Based on what I know, here’s what a pro forma would look like to staff and build it, not knowing what it would really take. I’ll be the landlord. Here’s the timeline.”

Daggett says his letter showed up about the same time that the West-inghouse Toshiba board met and told Par they would not fund the purchase of a crane manufacturer. “Go find a partner,” they said.

Daggett’s proposal was approved just three months later.

But then came financing – in 2009. “This is a time when you can’t finance a car. And I’m looking for $5 million,” he said. After Bremer backed out at the 11th hour, he says, Wells Fargo agreed to finance 60 percent. Center Bank in Litchfield agreed to do the rest. They broke ground on August 24, and occu-pied the plant on March 20, 2010.

In March 2011, the nuclear power plant in Fukushima, Japan suffered a series

of equipment failures and nuclear meltdowns, eventually becoming the largest nuclear disaster since Cher-nobyl.

Those 10 contracts were quickly reduced to four. But Daggett remains upbeat. “New plant construction will be questionable, but the rebuild business will be very good,” he says. “There are 109 nuclear plants in the United States. They need controls. They need lift capacity. It is going to be good.”

Daggett’s other energy plan

photogr

aph by patr

ick kelly

Owner Tom Daggett


“Think of a metal fab shop getting rid of a press break,” Marceau says. “That doesn’t sound logical, I know, but it was the right decision.”

The press break not only occu-pied several hundred square feet of scare floor space, he says, but was infrequently used. Marceau’s review revealed that the press break had used only 76 hours of labor this year. The decision to remove it was easy: instead of generating only $4,000 of revenue in that space, HMI can now generate $400,000 a year welding in that same square footage – and outsource the press break time.

The company also recently sold two laser-cutting machines, leaving it with just one. “We work that one a little harder,” Marceau says. “That freed up space to buy a new plate role, also freed up space for another weld bay.”

Says Daggett: “In 2000 I had five lasers and I had five press break operators. Today I have one laser and one press break operator. The business totally changed. I remember back when we had five machinists, now we have 30 machinists.”

Finding EmployeesA bigger challenge has been to enlist a sufficient number of new employees to take on the process. The com-pany had some luck recruiting from Hutchinson Technology, a cross-town business that had had to make workforce reductions. “A lot of our indirect and new leadership has come from finding individuals HTI has let go,” Marceau says.

But the fact is, he adds, “this area is not rich in welders.”

Enter Holly Wanous, an HR pro-fessional, who eventually found this to be something of an understate-ment. HMI hired Wanous in April 2012 to help the company meet the exploding demand for employees, es-pecially welders and machinists, in a market that had few takers. Managers warned her that the company would be expecting her to recruit maybe 20 employees in its ramp up for the new business. The actual number ended up being more like 70.

Like Marceau, Wanous had to balance competing demands. She had to satisfy the plant’s urgent and immediate need for workers without sacrificing the quality of the people she hired. “I had to be tactful, but you don’t want just warm bodies,” she says. The skills and experience required by the FMC contract simply overwhelmed the area’s resources.

Wanous began by doubling down on traditional recruiting methods. She increased their presence on Monster.com, Craig’s list, and Min-nesota’s Job Bank, reaching even into the Twin Cities’ markets. She revived their use of advertising in the local paper.

When the company sponsored a billboard to celebrate its 60th anni-versary, they even included a message about jobs. “We even did a few radio ads,” she says. “They weren’t really that helpful, but I think it was good just getting our name out there.”

The company enjoyed some recruiting success through referrals. Employees who recruited newbies received $200 initially, another $200 after 90 days, and a final $200 on the new employee’s first year anniversary. Wanous says the company eventually hired about 15 people through this method.

Job fairs showed promise but delivered little. When Wanous first visited Dunwoody, she says, candi-dates didn’t know about the company or even where Hutchinson was. The second job fare was more productive – instructors had tipped off students about the opportunities at HMI -- but the only candidates willing to re-locate were “pretty green,” she says.

Eventually, she says, the company realized it would have to start looking at candidates who had more poten-tial than experience. “We looked for people who seemed like good em-ployees and seemed capable of learn-ing,” Wanous said. Which meant, in turn, that the company would have to make a bigger investment in training.

In addition to the weld apprentice program, the company invested in Tooling U, an online teaching center. It developed an IT tech and training

center that has four computers in a lab setting, where machinists can sit in a quieter environment and really work through online modules.

They also use MasterCam software for programming its machining cen-ters. They send employees to offsite training facilities.

Navigating the FutureMarceau says the company has a backlog of work for the next 18

Acquisition triples revenue; brings $1 million in contract work to HCI

In 2002, HCI president Tom Daggett bought the assets of Hutchinson-based May Wes Manufacturing out of bankrupt-cy. The company had been founded in the late ‘70s when Wesley and Marvin Bruns innovated a way to lengthen the life of a combine by placing plastic sheets on the metal bottoms to reduce wear and rust.

The idea had been a success, but not enough to sustain the financial demands of their newly constructed facility.

Daggett transferred ownership to Pride Solutions, another of his holdings.

“The company had a lot of inventory and really good name in the industry, so I dramatically reduced the overhead and let it sit for three years and live off its catalog, some advertising, and its name,” Daggett says.

The company slowly rebounded, helped greatly by the popularity of the innova-tive Stalk Stumper. As a combine harvests corn, the Stalk Stumper bends corn stalks over, to prevent costly damage to the com-bine. The popular product got a significant bump as genetic corn seed manufacturers engineered a product that would be strong enough to support more ears and to with-stand greater amounts of wind. Related sales jumped $3 million to $10 million.

“That was a nice deal,” Daggett smiles.

Not to mention that Hutchinson Manufac-turing does more than $1 million worth of manufacturing work for May Wes.

Stalking Profits

months and has a “good idea” where the company will be in three years, “but we don’t necessarily know.” What he does know is that “oil and gas isn’t going to drive us forever.”

Never far from their thoughts is the memory that FMC is the second multi-national energy company whose contract work has catapulted HMI to lucrative, if uneven, success. In the late ‘70s, the company began building component natural gas tur-bine parts for Donaldson Company, which over the next quarter century became by far Hutchinson’s largest customer – rising at one point to 80 percent of the company’s revenues.

Then, almost out of nowhere in the midst of recession, that business went to Mexico. The contract collapsed.

“We were really caught flat footed because it had been such a hot mar-ket,” Daggett says. “I could circle the day on the calendar when I realized it was over: March 8, 2002. That was the day we looked at it and thought, wow, this is dead.”

The FMC experience has enabled HMI to examine different markets and how it could expand its business. “It certainly raised the bar internally, in terms of our capabilities and our understanding the market,” Marceau

says. The project, he says, has enabled

HMI to grow into a “world class” heavy steel fabricator. “It gave us an opportunity to grow our expertise. The engineering department we have now versus what we have in 2007 is vastly a different model.”

“Marketing?” Daggett asks. “That thought is like a knife to my heart. I think about it every day,” he says. “Here we sit. We are really good a making stuff. We can sell, but we can’t market. That’s probably my big-gest fear, my biggest concern.”

Marceau agrees: “To be honest, the last two years have been consumed by creating processes and systems. “But have got to get on it. Everything has a sunset,” says Marceau.

The company has engaged Enter-prise Minnesota’s Deb Bly to help plot out that future. Her mission, she says to spend time helping the com-pany focus on different opportunities and a lot of different directions.

“I give Tom (Daggett) a lot of credit for not resting on his current success,” Bly says. “He understands that in three years, the situation may look different. -- and that now is the time to start strategically planning for that event.”

But reality is what it is: “They are so busy,” Bly says.” They are trying to manage it, to keep it together and also to be proactive, to be intentional about very specifically looking at the longer term.”


To learn more about the Hutchinson Manufacturing, go to www.hutchmfg.com.

In May 2013 Hutchinson Manufacturing hosted an open house for community leaders and employees’ families to celebrate the company’s 60th anniversary. The original 2,400 square foot building has today become a 100,000 foot facility with 180 employees.

photograph by patrick kelly

Isaac Marceau, vice president, operation

hookerandcompany.com 651.659.9648

If you really want my business, you could miss this putt.

Or you could just shut up and

play better.

If you can stand a little honest, no nonsensefeedback in your marketing and advertising, we’re

the best little ad agency you could partner with.Give Colin Hooker a call to discuss the next steps.

hookeradv_golfad_7x10.indd 1 8/16/13 11:40 AM

photograph by patrick kelly

creo


Enhanced—and affordable—methods of determining a company’s valuation can help owners see what their businesses are worth, what’s working well, and areas for improvement.

By Kate Peterson

In 2009, GEOTEK, a Stewartville-based manufacturer, generated $18 million in annual sales, primarily from the composite cross arms it sells to the electric utility industry. That’s when Granite Equity, a private equity firm headquartered in St. Cloud, took a majority stake in the company.

Prior to that transaction, Granite Equity looked hard, really hard, at the company’s financial picture. In addition to examining GEOTEK’s income statements and five year financial history, Granite Equity thoroughly and systematically re-viewed the underlying elements that

contributed to cash flow. Think of it as an assessment of company value on steroids.

Among other revelations, Granite Equity’s analysis uncovered industry dynamics that pointed to GEOTEK’s potential for growth in international markets. That meant a more accurate sale price, and equally important, a guide for boosting future income. The result: GEOTEK has doubled its annual sales, to $36 million, since 2009. The company has also doubled the size of its facilities and its work-force in that time.

There’s a lesson in GEOTEK’s

experience for all business owners, whether they are thinking of selling immediately, within five years, in ten years or more, or possibly not at all. Experts say regardless of when—or if—you might sell, there’s no better, more comprehensive tool for business improvement than a thorough com-pany valuation.

Recent developments in analytical methods allow a company’s valuation to reflect the true future potential of the enterprise, giving owners a better understanding of the company’s price, and a blue print for strategic planning and improvement, whether a sale is

Value of Your CompanyYou can Increase The


Value of Your Company

imminent or not. Equally exciting, these methods aren’t just available to the select few being courted by outside investors.

Sophisticated new ways of gather-ing information and crunching the numbers—including comprehensive valuation software called “Core- Value”, which is now offered in conjunction with Enterprise Min-nesota consulting services—provide a picture that goes well beyond finan-cial fundamentals. Packaged pricing allows businesses to purchase access to the software, assistance with com-pleting the evaluation, and follow-up consulting services starting at $5,000.

“The CoreValue assessment simply identifies and quantifies value in a private company by looking at the operations within a company versus just the financial results,” says Lisa Kable, CoreValue’s co-CEO. “More importantly, it identifies red flags or issues that could render a company ‘valueless’, and untapped value in a company called the ‘Value Gap.’”

An understanding of enterprise value is clearly critical for busi-ness owners on the verge of a major milestone. The sale of the company, an acquisition of another enterprise, a major expansion requiring a large commercial loan or outside investors, for example, all demand an exhaus-tive calculation of the company’s financial worth. And, supplementing that firm’s financial record with data showing the enterprise’s future potential can boost the sale price considerably. This kind of informa-tion can also make a case for a large commercial loan or a bid for new investors much more compelling.

Mary Connor, a business growth consultant with Enterprise Minnesota emphasizes that it’s not only com-panies anticipating a major change that benefit from assessing company value. Advanced approaches to de-termining corporate worth provide a more detailed picture of a company’s current and potential value, looking at the many factors that contribute to long-term viability. And from those deeper analyses, which consider market, supply and industry dynam-

ics, for example, business leaders can develop a clear view of the company’s value now, and how to improve it in the future.

A case study in the power of valu-ation

Art Monaghan, a partner with Granite Equity, the private equity firm that took a majority stake in GEOTEK in 2009, says a company value analysis is important before a sale, but also after. All of Granite Equity’s companies go through a company value evaluation annually.

The reason for the yearly review is simple. “If I were running a business, I would hope that what I was doing on a day to day basis is increasing the value, for the long-term. Because if you’re not increasing value, you are likely to go out of business, because in this competitive world, either your competitors are, or your industry is shrinking,” says Monaghan.

Dale Nordquist, the CEO of GEOTEK, says that annual valuation provides a much-needed understand-ing of where the company has been and where it’s headed. “It’s helpful for me to know how the value of the company is recognized and grow-ing. Increasing company value is a by-product of our creating value for our customers, and it shows us that to be successful, both have to grow in harmony,” he says.

The assessment process Granite Equity uses—both before an acquisi-tion and for ongoing analysis of the companies it owns—involves a very methodical look at what Monaghan describes as “cash flow sustainabil-ity.” By considering market forces, supply chains, corporate leadership and industry dynamics, executives get a much clearer picture of what the company is worth, where it can im-prove, and the opportunities that can make it stronger, Monaghan says.

Monaghan and his partners often use what they call the “Five Forces Model,” which looks at a handful of very specific factors contributing to the company’s future cash flow potential. Specifically, Granite Equity considers the threat of new entrants to the industry, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products, and the rivalry of existing players “in your sandbox,” he says.

GEOTEK offers an excellent example of how the information gleaned through this type of meticu-lous evaluation of its cash flow—spe-cifically looking at its position within its industry—can be used to develop a growth strategy. In the U.S. electric utility market, with more than 3,000 different utilities and only minimal standardization, GEOTEK sells its ability to customize its products for each utility it serves, as well as its ability to test its products to custom-ers’ unique requirements, in addition to offering outstanding reliability.

“We’re exceptionally good at giving it to them their way,” says Nordquist, pointing out that under-standing GEOTEK’s strength in the market helps company executives know where to make investments and focus activity to inject the most value for customers and the company.

Through its company value as-sessments, GEOTEK also evaluates customer dynamics around the globe, and it has found that the value of its composite cross arms is even greater in harsh climates. Where wood cross arms typically last 25 to 40 years in the U.S., in a country like Malaysia, wood cross arms have a five year life span, Nordquist says. Understanding those customer needs has allowed GEOTEK to market its long-lasting composite products very effectively around the world.

“”

“By considering market forces, supply chains, corporate leadership and industry dynamics, executives get a much clearer picture of what the company is worth, where it can improve, and the opportunities that can make it stronger.”

art monaghan,granite Equity

A strategic planning tool for all businessesJohn Connelly, director of consulting for Enterprise Minnesota encourages all companies to undergo the kind of valua-tion process that provided direction and opportunity to GEOTEK. Combining Enterprise Minnesota consulting and CoreValue’s software, the same type of evaluation used by equity investors is accessible to the full spectrum of busi-nesses. “When we use this approach, we can tell you not only what your business is worth today, but what it can be worth in the future, and what steps to take to get there,” Connelly says.

The evaluation process weighs 18 specific “drivers” within the company, including brand strength, differentiation among competitors, margin advantage, and barriers to entry. Connor says that information, coupled with financial statements, takes enterprise valuation to a new level by drilling down into the data about industry-specific intangibles.

In some industries, a company might be deeply discounted for relying on one or two suppliers, for example. In other industries that might not be the case. Because the analysis includes that built-in understanding of industry dynamics, accurate valuation is highly likely.

But the valuation is only the beginning of the process. After businesses com-plete the Web-based questionnaire, they receive a prioritized summary of “best bets” for investment dollars, Connor says. “Our system helps determine which of these 18 drivers is most important,” she says. Company owners can use the information provided by the analysis and begin taking specific steps to boost enter-prise value.

If a company has a narrow customer base, which discounts the enterprise value in its industry, for example, En-terprise Minnesota consultants can help complete the market research to deter-mine how best to expand the business’s reach. That research might show the best opportunity for growth in inter-national markets. Consultants can help the company identify the best potential global markets, assist with any necessary application or permitting processes, and ultimately work with the company to begin making sales.



Connor emphasizes that the results and action items are beneficial for all companies—whether the owners intend to sell the business or not. For example, leadership issues should be addressed regardless of where a company is in its life cycle. “If all the business decisions and knowledge about the company rest with the owner, that can discount the value of the enterprise,” she says, but ad-dressing that weakness will make the enterprise stronger, regardless of who owns it.”

Determining and boosting sale priceWhile valuation is an excellent stra-tegic planning tool for all companies, it is critical for those business owners considering selling. A thorough understanding of a company’s market price is essential in advance of a sale. With a realistic valuation in mind, the seller can determine how much time and investment will be required to create a more valuable enterprise for buyers, even if they are not in-tending to sell right away, or within a set time frame.

Indeed, some business owners aren’t even sure they want to sell their companies, and if they do, they are uncertain if it’s best to wait and build more value, or sell sooner. Connor says a generation of entre-preneurial baby boomers is think-ing hard about whether and when they want to sell the companies they founded and have nurtured over the years. Should they sell now, or hang on for a few more years? And if they hang on, will those companies grow in value or not? How can they know? Can they take any steps to boost value in a relatively short time? Should their investment dollars go toward equipment, marketing, or some other area?

Understanding how much the company is worth today and how much time, effort and investment would be needed to increase the sale price helps business owners answer those questions and make the best decisions about the company’s future. Ultimately, company owners want to

sell viable, thriving companies with a management team in place in an industry that has many other success-ful companies.

A complete valuation provides the type of information needed to reach that goal. “This assessment shows a few steps that can be taken to increase the value of the company in a short period of time. Owners can take those results and start increasing their value,” Connor says, noting that Enterprise Minnesota consultants have extensive expertise in those high priority areas that boost company valuation.

With the system Enterprise Min-nesota uses, consultants can access the CoreValue evaluation results and help guide the executive teams as they work through the action items prioritized by the software. “We can use this software as a communication tool between the consultant and the owner,” Connor says. As each project is completed, the client “checks it off online, the consultant is notified, and the consultant can either review that item or move on to the next project.”

Beyond strategy and sale priceWhile some companies might use valuation as a strategic planning tool, and others may employ it to boost sale price, the process can be valuable for businesses facing other situations as well. Enterprises face a number of milestones through their life cycle, and an evaluation of value at these junctures is useful as well.

Thorough company value as-sessments are particularly good for growing companies in need of a large commercial loan, for example. If a bank is uncertain about extending a line of credit based on assets alone, a detailed, industry-specific valua-tion can reveal strength and future

potential that may not be evident with a traditional examination. “The company can show it is worth so much more than its assets—it has an excellent management team in place, for example, or its policies and procedures are very advanced for the industry it is in,” Connor says.

Connor also says assessing value is important for companies in the midst of an intergenerational transfer of ownership. When the next gen-eration of a family takes over the company, having a thorough under-standing of the company’s value is essential—it gives the new owners an appreciation of the company’s history, its place within the industry, and its future potential.

“It’s a quick way for Junior to learn about the fundamentals of the busi-ness, if he’s in the room as the ques-tions are answered. Dad may have thought he knew everything about the business, but it turns out Junior wasn’t actually paying attention to all those conversations at the dinner table,” Connor says. “This is a great way to provide that information.”

Regardless of why company own-ers go through a company value assessment, how they use the results can have an enormous impact on the future of the business. Executives cannot afford to allow those action items to languish at the bottom of a crowded to-do list.

That’s why Enterprise Minnesota consultants are enthusiastic about offering the valuation analysis and consulting services together. “There are so many different ways we as consultants can use this system to help our clients. We can guide com-panies in a step-by-step process to get the results outlined by the evalu-ation,” Connor says. “We’re helping them eat the elephant, one bite at a time.”

“ ”“When we use this approach, we can tell you not only what your business is worth today, but what it can be worth in the future, and what steps to take to get there.”

John ConnElly,Enterprise minnesota

creo


Interview: How an ISO-phobic lean specialist helped Elk River Machine blend the two concepts into a seamless management strategy.

In July 2011, just six weeks after joining Elk River Machine Company to help drive the company on its lean journey, Bruce Roles was asked to sit in on meetings in which company managers were developing and creat-ing a QMS system for ISO. It was odd, maybe a little uncomfortable for Roles, because as lean expert, he was no fan of ISO. Lean adherents, in his experience, had long viewed ISO’s bureaucratic reporting requirements as being incompatible with, even antithetical to lean.

A subsidiary of Cretex, Elk River Machine’s 75 employees work out of an 80,000 square foot facility in the middle of their namesake commu-nity, located northwest of the Twin Cities. The company’s build-to-print fabrication shop and concrete equip-ment division provides made-to-order concrete processing, transport, and installation equipment. Like many companies, Elk River Machine thought ISO certification would open them up to new and lucrative customers and markets.

CAN LEAN & ISO COEXIST?

photograph by patrICK KELLy

Bruce Roles


But it wasn’t going well. The original Management Representative (MR) left the company early on when the company was still very much in the learning process. That lack of experience resulted in poor decisions that led to the MR not attending and leading the Management Review Meeting – a Major Non-confor-mance. That meant automatic failure of the preliminary Stage I audit. The auditor’s expressed opinions sug-gested a lack of company dedication; that management wasn’t serious – just trying to check the box and get it done.

Roles was then asked to take over the process that would prepare for the next attempt, a little like asking a Hatfield to host a McCoy family reunion.

You were hired as a lean expert. Is it fair to say that you weren’t a fan of ISO?Roles: I wasn’t keen on ISO at all. Everything I had heard was that it required reams of documentation and compliance -- and it was largely a quality gig. People on the “lean” side of the fence always said that trying to do lean and trying to do ISO would not work well. Lean looks for the waste in process/system and identifies ways to eliminate it. A QMS with ex-cessive procedures, work instructions and regulations would potentially be full of non-value added activities in just keeping track of and managing the documentation.

Is it fair to say that you may not have taken the Elk River job had you known that ISO would be-come among your responsibilities?Roles: Maybe. With the little I knew about ISO, it would have weighed in on my decision.

So let’s reset the scene: You

were the new ISO Management Representative at Elk River. The first effort had failed; you were distrustful of ISO as unnecessar-ily bureaucratic; and you had zero background to manage ISO. What was your first step?

Roles: I have dived into enough unknowns in my career to know that I would have a vertical learning curve. I looked for anything I could read to educate myself. One book was Memory Jogger 9001:2008, a little book that simplifies the standard and helps convey what the standard might be driving at. And then l literally read the 9001: 2008 ISO standard itself. It was a path of self-education.

I also worked a lot with (Enter-prise Minnesota consultant) Kent Myhrman. I asked a lot of questions. In the beginning I was a kind of thorn in his side during the early meetings. Coming from lean, I challenged a lot of things. Then one day, I am sud-denly in charge of ISO; working with him on it, and asking him to help lead me through it. It helped that Kent had some experience in lean, so he understood some of the things I was driving at. In the end, it worked out very well. What sealed the whole thing for me was that the more things I learned about ISO in the supple-mental materials, the more I started to see links to lean.

Both are foundationally continu-ous improvement programs. As such, both use similar tools & principles to drive the continuous improve-ment. Fundamentally both apply the PDCA process improvement model. In addition both use similar process mapping tools to help identify the waste and problems in the processes being analyzed. Finally, to maintain your certification you need to show evidence of continuous improvement.

Then it just became a matter of Kent and me working together. Kent had regular visits to ERMC to review progress and provide direction to the management team. In addition, Kent

and I would have meetings after the meetings to discuss things in greater detail. Beyond that the correspon-dence was via the phone and e-mail. Over time, Kent became a good re-source to draw on for explanation and insight into development of a QMS.

You had about five months to prepare for the next ISO audit. Were you nervous?Roles: I was nervous right up until we did it. The deeper I dove into it, the more work I saw that we had to do. I honestly didn’t know what to expect. I’d never been through an audit before. Every part of getting ready was a learning experience. I had nothing in regards to personal experi-ence to bump it up against.

Did that become an issue in the audit? Roles: When we started the audit, we were all sitting at a table and we went around and introduced ourselves. When it was my turn to talk about my background, I mentioned nothing about ISO. The auditor came back and said, “you didn’t say anything about your ISO background.”

I said, “no, I didn’t.”“What experience do you have?”I said, “None.”“Do you have any training?”“No.”“What makes you think you can do

this?”“I’ve been studying and learning on

my own and from Kent and I think we are ready.”

Then I went into probably 45 minutes of trying to sell myself and the company to the auditor.

No other ERMC executives spoke. I talked in detail about what I had

“”

“Lean is all about improving your processes and driving out waste. ISO is all about improving your processes and driving out problems. They are both rooted in the continuous improvement of the business.”

bruce rOLeS,elk river Machine company

CAN LEAN & ISO COEXIST?

photograph by patrICK KELLy


done to get up to speed. I identified the resources I had used, talked in detail about what the company had done to address the issues identi-fied in the Stage I audit. Through examples I tried to show and explain why it appeared management wasn’t committed and then talked about what had been done to show we were ready – appointing a MR, new and revised procedures and WI, large amounts of training of staff, control of the MRM and alluding to things he would see during the course of the audit.

You wore him down?Roles: I started to build a rapport with him as I answered his questions. And then, I think, as he went though the process of the audit throughout the week, I was able to show what he wanted to see in me and show that we were a different company than what he had seen in November. I spoke confidently and accurately about how we were applying the standard to our business. The difference now was the effort to become ISO certified had a designated leader that had the ability to lead the company on that journey. The company was always willing

to do what it needed to do; it just needed leadership. At the time of the Stage I audit there were two people trying to fill that role and still meet all of their other responsibilities. As a result the ISO certification effort didn’t get the attention it needed.

You passed the audit and then passed the next one as well. Would you say now that you have evolved into an ISO advocate? Roles: Yes. I suppose being ISO certified could be a big challenge for a company if they take the wrong approach. The challenge is in how you look at your QMS - is it Qms or qMs. I think some companies focus on the big “Q” and it becomes just a gig for “Quality”. Meaning it focuses on just something they (Quality) do – tracking product quality, following some inspection procedures and doc-umenting product quality problems when they arise and then tracking the resolution of those problems.

But as you plow through the stan-dard, you come to understand that it is trying to drive you in terms of how you perform as a company. ISO is re-ally a management system – qMs. It is rooted in quality, but it really is a way

to manage the business. It can be-come an all-encompassing approach to managing the business – not just tracking product quality, writing non-conformances & corrective actions on bad parts, but instead, looking at per-formance against procedures and WI across the entire business. Because of our focus we could be just as likely to write a preventative action on how Sales enters orders as we would on how an inspection process is done in manufacturing.

You have said that the company’s ISO certification became a game changer for the company. How so? Was it immediate?Roles: It is both immediate and gradual. You start to think what ISO can do for you – and you start to put procedures in place that start driving how you do things that you weren’t doing before. That doesn’t necessari-ly change the business. It changes the way you procedurally do things, but it doesn’t immediately change things like the culture of the company. That happens over time and it changes as a result of how problems are solved. People start thinking differently about the issues they have before

Cretex delivers a gigantic concrete beam for the new Hastings bridge using a “Hydra-Steer” trailer built by Elk River Machine.

photogr

aph by patr

ICK KELLy


them and how to solve them. It takes time and it is still changing the busi-ness. One way it continues to change the business is we have shifted from writing and executing a lot of correc-tive actions to a lot fewer correctives and more preventatives – sometimes more of them than correctives. This is because many problems have been resolved. It is also a sign we are shift-ing from chasing problems to getting out in front of issues and solving them before they become problems.

Here’s an example: When I started here there was a lot of conversation on the floor about “when are they ever going to fix the errors in the drawings?” -- or errors in the docu-mentation or errors in the travelers that come down to the floor. A specif-ic problem could be repeated drawing errors. The last time we built it we discovered a problem on the drawing and solved it. The change never was made to the drawing and now we are building it again and resolving the same problem.

Well our system was this: there was no system. An employee told the supervisor, the supervisor talked to someone up in production control.

And in that whole process you hope that one guy remembered to tell the other guy, and if he did, did he tell him the right thing. And then when it finally got to the right guy, did he remember to make the change? And did he change the right thing?

As we created our QMS we put systems in place. We put a formal process in place to drive engineering change orders. Now instead of talking to someone, you pull out the change order, write it down, attach the ap-propriate documents, you log it, you track it, you send it to the person that makes those changes. And then you track that it got done and what gone done.

These things don’t happen over night. You’ve got 40 years of doing things in a very informal way, that for many years, were adequate given the size of the company. Now as the company has grown, more robust formal systems are needed to give the company the operating platform that a larger company needs. That takes time. What we’ve seen in a year and half of having those kinds of tools and methodologies in place is the noise level has gone way down. Seldom do

you ever hear someone complain that they got inaccurate drawings.

Because we have a number of ef-forts in place driving improvements across the organization, it is hard to point at any one of those and say it is because of that effort that things are improving. Yes, we are seeing improvement in the bottom line and in the metrics, but it is because of the combination of these efforts.

Do the people in the plant credit ISO with these improvements? Roles: People truly start to sense that things are getting fixed. Does the guy welding parts on the floor? I don’t know if he makes that connection. But what he does know is that people are working on making things better and he is noticing improvements in the items he works with – piece parts, documentation, etc.

What is the value of having a President who understands the wide-ranging value of ISO?Roles: I think he was in the same boat I was in, maybe a little further downstream, in understanding its true value. Maybe there was a little naiveté

Bruce Roles with Corey Mitchell, a welder at ERMC.

photo

graph

by patrICK KELLy


at the beginning. But together we came to understand the value of what we’re embarking on. ISO was a re-quirement to take the business in the direction we wanted to go and into some of the markets we wanted to be involved in. Then, along the way, you get smarter and a better understand-ing of how it really works and how it works better for the business. And we both mentally make the shift from big Q to big M.

Forget about just those companies who require it to do business with them, this is going to make us a bet-ter business.

Without the president, ISO would just be a bunch of paperwork. People would complain, compliance would be harder and getting through an audit would be a lot more difficult.

You talk a lot of about the value of your ISO quarterly reviews. You call them “sideways” reviews: What do they entail? What do you get out of them?Roles: We just did one: The Q2 management review meeting. Every company does meetings – daily, weekly, monthly – that review perfor-mance: Where are these orders? Are the parts coming through on time? Are things getting through paint when they need to be? How much money did we make on that job? Are we are profitable as we thought we’d be?

In the management review meet-ings, we look at the business side-ways. We may look at some general parameters about profitability, but then we look at the system. How many NMRs (Non-Conforming Ma-terial Reports) did we have? Why are we having so many non-conforming parts coming from this area? What’s driving those errors? Why so many non-conformances from suppliers? Is it something we’re doing?

Without ISO we didn’t have the tools in place that generate the data to analyze. We didn’t have a Non-conforming Material Report. We didn’t track NMRs – we knew we had them but had nothing that showed us magnitude or trends.

A lot of things that come out of the ISO processes are metrics that tell you how well your processes are looking. You are taking a different perspective.

We do it every quarter. It is on the calendar. When we go into that meeting, the doors close, there is no email, NO phone calls or anything else. It is a lengthy meeting, about four hours.

The net effect might be measur-able by action items. Every meeting generates a list of action items that drive improvements to the QMS in general or to specific pieces of it. It also provides an opportunity to talk about issues in a general sense, ana-lyzing trends, that point out ways that we can improve the QMS and how the business operates. If you have an issue with a customer – that issue is dealt with as it happens, you get reso-lution for that issue on that day. In the MRM, you review all issues with customers and look for trends and common themes. That leads to an action item and then you solve that.

You’ve obviously re-assessed your view that lean and ISO are incompatible. Roles: The fact is you apply lean to make ISO more effective. If you didn’t, you could drown in proce-dures, work instructions, forms, and documents. If you put your lean glasses on, you say, I’m not going to create any more procedures than I have to – and I’m not going to make things more complicated than they need to be.

Lean is all about improving your processes and driving out waste. ISO is all about improving your processes and driving out problems.

They are both rooted in the continu-ous improvement of the business. Lean is about running the business and applying those tools and so is ISO. They merge nicely as you create an overall culture of continu-ous improvement. They don’t get in each other’s way. In fact, I think they enhance each other. We have a program in house known as SCIPs – Small Continuous Improvement Projects. It is an opportunity for every employee to identify oppor-tunities for improvement. They are cards filled out by the employee to the start the process. Many times the work of making the improve-ment identified is done by that same employee. Sometimes those SCIP ideas drive changes to our QMS in that a procedure needs to be revised or a form changed, etc. So our lean tools can drive change to the QMS and vice versa.

In the final analysis, do you think it was pretty savvy to put a lean guy in charge of ISO?Roles: Looking back, you’d say it was pretty smart, although I’m not sure if it was intentional.

What would you (or do you) tell former “lean” colleagues about the value of ISO?Roles: If they were to say that you can do one, but not both, I’d tell them they simply don’t understand ISO. And you don’t understand how QMS can be structured to manage a busi-ness. Also, if they said “our custom-ers don’t require it, so we won’t do ISO,” I would say the same thing.

For more information about elk river Machine, visit www.ermc.com.

“”

“Without ISO we didn’t have the tools in place that generate the data to analyze. We didn’t have a Non-conforming Material report. We didn’t track NMrs – we knew we had them but had nothing that showed us magnitude or trends.”

bruce rOLeS,elk river Machine company

It wasn’t that long ago that many manufacturers could see no connection between lean and green. In fact, there are many who still don’t.

“For too long manufacturers viewed “green” and “lean” as two different – even oppositional --approaches, methods, and philosophies,” says John Connelly, director of consulting at Enterprise Minnesota says. Lean was driven to make manufacturing systems go faster and work more efficiently by removing wasted time; green represented add-on processes that were imposed on manufactures at the political/regulatory behest of environmentalists.

“Lean is easy to deal with,” Connelly says. “When we remove time, we make the process faster and more cost effective. We improve our price and our margins. We improve quality.”

Green, on the other hand, he says, is correlated with expenses that inflate price, suppress margins and possibly slow down completion. Where once manufacturers merely disposed of waste by putting something down a drain or hauling it away, green regulations now required that they had to treat it, or separate it, or flush it with water.

The ultimate merging of Green and Lean principles seemed felt incompatible. One reduced costs, the other added expense.

At the same time, some companies were taking on green/lean initiatives with very encouraging results.

In 2011, Le Sueur Incorporated (LSI) was one of a handful of companies who participated in a 30-month Minnesota Jobs Skills Partnership program, administered by Enterprise Minnesota, that helped the organizations identify and remedy sources waste through green/lean techniques.

In one set of Kaizens, the company identified sufficient waste around compressed air that saved the company $120,000 per year.

Savings focused mainly on leaks, but there also examples also mis-use.

“There were some big ones,” Zwart remembers. His team discovered, for example, that employees were using compressed air to clean areas underneath large band-saws. “It was a clever idea because they didn’t have to sweep underneath,” he says, “but at what cost?

Zwart became a fan of green/lean initiatives. “It was an extremely valuable experience for us,” he said. It

certainly saved more money than any of us would have expected. I thought that was a great lesson learned. And when you are going through the process, you discover that there are other opportunities.

He now thinks there may be a half million dollars in potential energy savings throughout his plant.

Connelly describes the evolution of green and lean in terms of waves. “Think of a company’s productivity as a pond,” he says. “Poke the center and watch the ripples.”

Connelly says, the center ripple – operational efficiency -- began decades ago when manufacturers began to comprehensively analyze their processes to identify the fastest, most efficient ways to make parts, or to make a machines run faster. Operational efficiencies are so ingrained in modern manufacturing, he says, that manufacturers seldom pay attention to it. “It’s inherent in the way they do business.”

More than 20 years ago, Connelly says, manufacturers recognized that there’s “a chunk of non value-added

Green: The new ripple of lean


Companies are discovering how energy savings can add up

Efficiency

Chem

ica

ls

Compressed AirW

aterW

aste Outside the ProcessSolid Waste

Ener

gy

Over

prod

uctio

n

Unnecessary Inventory

Underutilized People

Excessive Transportatio

n

Wai

ting

Defects

Unnecessary Motion

Non Value-Added Processing

creo


time” within every one of those processes. To address this, they added the second ring, the lean ring. Lean experts characterized eight non value added wastes that take place outside of what’s valuable in the process itself: overproduction, waiting, excessive transportation, non value-added processing, unnecessary inventories, unnecessary motion, defects, and underutilized people. And they devised 12 tools to get rid of those wastes.

“They could say, I got the machine down to the tightest number I could, but it still took too long and cost too much money to make the part, because these pieces weren’t well managed,” Connelly says. “This is the non-value added within that process. That is the ripple that has occupied most manufacturers for the past 20 years. It is really simple to understand, challenging to apply and well worth the effort.”

The third ripple, the green ripple, involves what Connelly calls reducing waste that occurs outside the process itself. These overhead

issues include energy, compressed air, chemicals, water and solid waste. “In essence, it is about how we control these overhead issues to further reduce non-value added waste,” he says.

The ability to experience savings from green activities – the concept of actually merging the philosophies of green and lean -- has taken time to evolve for at least a couple reasons beyond the bad wrap that green added costs. One is that it was simply not on the radar screens of manufacturers. Connelly recalls early on asking the director of operations for a client company how much he paid for electricity.

“He didn’t know. He assumed it wasn’t an issue,” Connelly says. Of all the budget elements he managed, electricity was a bill that got paid. “The machines were electric and we need electricity to run them. What else did he need to know?”

The “what else,” Connelly says, turned out to be meaningful. The manager discovered his electric bill was five digits on a regular basis. “That’s not a case where they www.eidebai l ly.com

Knowledge is PowerfulA business valuation is an essential tool for any successful business owner who may be buying or selling a business, planning for retirement or transitioning his business to the next generation.

Eide Bailly can help you determine the value of your business, so you can make sound decisions that will

We have the knowledge, experience —and objectivity—to provide you with an accurate value.

Experience the Difference

Call today to learn more! 855.220.8634

“A business valuation is a powerful tool that can be used to better manage

your business.” ~ David Stene,

Partner

Pier Foundry and Pattern Ship in St. Paul is one of many Minnesota manufacturers that has saved money through green lean.

creo

Does your accounting/ERP software do this?

Reduce your manufacturing cycle time

Improve customer service

Provide real time information

Streamline operations

Reduce administrative costs

Call Rob or Russ at Solution Dynamics, your local Microsoft NAV manufacturing

experts at 952-854-1415 or [email protected]

Reserve Your Ad Space TODAY!

Inside Enterprise Minnesota® magazine you will find in-depth information and unmatched insights into the latest innovations, business successes, and ingenious company leaders among Minnesota’s manufacturing community. The magazine reaches over 42,000 readers, including CEOs and additional key decision-makers.

InIn 1991 Minnesota Technology, Inc. debuted withthe mission to help Minnesota manufacturersimprove their productivity and efficiency throughautomation and technology. Over the years weintroduced clients to lean manufacturing processesto help them become more efficient. We focused on improving operationalprocesses that would lead to cost reduction and an improved competitive position.Overseas competition was for real and efficiency was vital to our state’smanufacturers.

As the world has become flatter we expanded our view from lean manufacturingto lean enterprise. We now complement our operational efficiency expertise toinclude programs for sales, marketing, product development, and supplier andcustomer relationships. We truly have evolved to help our clients across theirextended lean enterprises. To celebrate this evolution, we are renaming andrebranding our organization Enterprise Minnesota.

What does that mean to you and your company? We are not abandoning ourfocus on manufacturing; in fact it is stronger than ever. We have developedprograms that capitalize on the effectiveness of “leaning an organization” throughnew products, markets and sales channels.

One example, Training Within Industry, helps companies develop needed training for supervisors and first line managers. Another relatively new program,Accelerate, works with clients on creating and managing an effective supply chainprocess. Finally, we are helping clients develop, test and market new productsthrough unique programs such as Eureka! Winning Ways®. This program applieshard data to growth strategies through a three step process: idea engineering, market research and an action plan designed to bring products to market. Theprogram employs quantitative methodology to product development and trainsyour key staff members how to take new sales, market and product ideas from concept through introduction. We are excited about the many client testimonialsfor these new products and services

So, welcome to Enterprise Minnesota. And welcome to the first issue of Enterprise Minnesota magazine. Just like many of our clients, the changing natureof business has led us to add new capacity and expertise. We grow and thrive byhelping our clients do so. Please read on to learn more about these clients and ournew programs. It truly is an exciting and energizing time at Enterprise Minnesota.

2 ENTERPRISE MINNESOTA JUNE 2008

June 2008

PublisherLynn K. Shelton

EditorTom Mason

Contributing WriterAndrea Strand

Managing EditorSarah Asp Olson

Art DirectorShari Schumacher

Advertising SalesLaura [email protected]

Editorial Director, Custom PublishingSarah Wyatt Elbert

Design Director, Custom PublishingGeoff Kinsey

Project ManagerAnna Rivard Biss

Enterprise Minnesota, Inc.310 Fourth Ave. S., #7050, Minneapolis, MN 55415612-373-2900

Enterprise Minnesota helps manufacturing enterprises growprofitably.

©2008 Enterprise MinnesotaISSN#1060-8281. All rights reserved.Reproduction encouraged after obtainingpermission from Enterprise Minnesota magazine.Additional magazines and reprints available for purchase.Contact Laura Cohen at 612-373-9562 [email protected].

Enterprise Minnesota magazineis published eight times per year by Enterprise Minnesota310 Fourth Ave. S., #7050, Minneapolis, MN 55415

POSTMASTER: Send address changes to Enterprise Minnesota310 Fourth Ave. S., #7050Minneapolis, MN 55415

Printed with soy ink on recycled paper, at least 10 percent post-consumer waste fiber.

Member, Minnesota Magazine & Publications Association

PH

OTO

GR

AP

H B

Y C

RA

IG B

AR

ES

Editorial

Bob Kill

A New NameReflects Our MoreFocused Mission

Regards,

Bob KillPresident and CEOEnterprise Minnesota, [email protected]

1 entmnjune08_toc_edltr_19e.qxd 6/26/08 8:12 PM Page 2



Women leaders in Minnesota’s manufacturing industry tell us how

they got there, what it’s like to be a woman at the top in a historically male-dominated industry, and why women today can thrive within it.

Also:With the recession fading, companies look to hire new talent. 18

Contract manufacturer Lou-

Rich takes a unique approach

to exporting. 22

How Enterprise Minnesota’s

Business Problem Solving course energizes continuous

improvement efforts. 26


AUGUST 2011

Daktronics Scores in Minnesota Waterous Surges into 125th Year Page 1 Printers’ TWI Success

Blazing Trailsto theTOP

Traci and Lori Tapani, co-presidents of

Wyoming Machine

>> Jim Schottmuller, Enterprise Minnesota Relationship Manager >> [email protected] >> 612.455.4225 >> www.enterpriseminnesota.org

Helping Manufacturing Enterprises Grow Profitably SEPTEMBER 2011


Water Heater Innovations Joins MNSHARP Ranks Zierke Built Triumphs with ISO Dual Language Training at St. Paul Brass

New approaches that will help manufacturers prosper

THE NEW NORMALAlso:Toyota Way expert David Meier discusses the benefits of Practical Problem Solving 12How strategic thinking can refocus your operation and target new customers 22Seven tips to improve your leadership skills from the inside out 26

resisted being green, it was a place where it wasn’t on their radar.

Industry experts call this learning to see, Connelly says. “Green/lean becomes viable when manufacturers comprehend its positive impact on productivity and profitability. My premise is that we won’t learn how to get rid of these overhead costs until we learn to see them.”

A second impediment to green lean is how to easily quantify results. While lean wastes can be measured in units of time, green inputs can seem more vague. A manufacturer might be paying $35,000 in energy over a period of time, but doesn’t necessarily see the portion of that total bill which is part of a specific process. I go through a half million gallons of water in a month, but I don’t know exactly how much is tied to this process.

“That’s part of learning to see,” he says.

Many Enterprise Minnesota customers have learned to see in money-saving ways.

Other local manufacturers have

embraced the synergies of green and lean.

Jones Metal Products in Mankato, for example, invested in a machine that captures solvent for re-use, thereby eliminating hazardous waste disposal and the need to buy more solvent. St. Paul-based Pier Foundry used a value stream mapping to categorize the type and disposal of waste. In addition the company identified a method replacing plastic containers for holding hazardous materials with metal. Foldcraft eliminated 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 multiple sites.

Employees at Medtronic’s Brooklyn Park site launched a sustainability council that dove headfirst into to reducing waste, discovering opportunities for reusing and recycling by literally jumping into its garbage containers to see what it was throwing away. The company has continued to pursue waste reduction in a variety of areas, including water and electricity conservation, and recycling of plastic, cardboard, metal, light bulbs and batteries. Today, 52 percent of the industrial waste created at the Brooklyn Park facility is reused or recycled, up from 27 percent six years ago. At its Brooklyn Park facility alone, Medtronic has saved 1.5 million gallons of water, reduced wood and packaging by 200,000 pounds, and has sustained an annual savings of $215,000 through its green and lean efforts.

There’s no question that there is a substantial business case to be made combining lean with green. Ryan Bruers of Xcel Energy says that the average manufacturer could use green practices to save about a third of its energy bill each year.


photogr

aph by patr

ick kelly

To learn more about green lean, go to www.enterpriseminnesota.org

creo

As you probably know, U.S. manufacturers in the 1940s developed TWI -- “Training with Industry” -- to help them overcome two obstacles that hindered their transition to a wartime economy.

First, as they were expected to retool their plants to produce tanks, battleships, planes and armaments to support the American war effort, they also had to work within the reality that most males of the right age – their employees – now com-prised the U.S. fighting force. Hence, the second obstacle: Manufacturers needed to backfill their plants with people who weren’t used to produc-tion, many had never worked on a factory floor.

TWI became the basic process that American manufacturers used to quickly transform these inexperienced workers into an efficiently productive wartime engine.

It worked so well, so incredibly well, that many TWI experts refuse to adapt the original model, even today. But there are others, like us, who think that methods deployed 70 years ago need to adapt to the more sophisticated and inter-related processes that characterize manufac-turing today: TWI 2.0, if you will. And we can do it without abandoning the three primary programs that have always structured TWI.

• Job Instruction involves teaching someone to independently perform a particular process. Envision oper-ators in the ‘40s who sat in front of a lever-activated drill press. They’d take a part out of one bin, place it in its fixture, pull the handle down, inspect their work, and then place it in the next bin. They’d repeat that process all day long, day after day. Today’s operators require skills and expertise in six or 10 or more

different processes, each of which involves a 12 or 18 or 20-step process. Their instruction must ac-commodate higher complexity and greater sophistication.

• Job Relations encompasses com-munication and conflict resolution. In the ’40s, those responsibilities included what to do, when to do it, how it should be done. Its objective was to provide specific direction. Today’s job-relations efforts involve a sophisticated program that em-powers, motivates and integrates work-teams. We want employees to be involved and engaged, not just directed.

• TheJob Methods of the ‘40s were simpler and so was their analysis. Efforts to add structure typi-cally applied to the most repetitive processes and were perceived to be controlling, boring, and inflexible. Today we want to transcend merely analyzing a common method for its efficiency. Standardized work can contribute to nonroutine and even creative functions leveraging knowledge and skills to continu-ously seek a better method. By addressing the repeatable aspects in a process we can best ensure con-sistent quality and efficiency and go beyond to study the uncommon and to innovate.

Our conclusion is that the 1940s version of TWI remains a solid prod-uct. But in 2013 it should evolve from merely developing better trained sets of steps into a more direct connection to business results. It is the difference between developing a series of tactics or using that knowledge to cultivate a generation of supervisors and team leads who understand how to deploy them.

32 ENTERPRISE MINNESOTA August 2013

The trusted principles that have served manufacturers since World War II are now accommodating a more sophisticated marketplace

The Evolution of TWIfINAl WORd

To learn more, go to www.enterpriseminnesota.org.

John Connelly is responsible for the consulting services of Enterprise Minnesota and manages Minnesota’s connection the NIST Manufacturing Extension Partnership [MEP] national system. He has more than 25 years of consulting, manufacturing, and management experience.

He has been a regional sales manager for a manufacturer of automotive wheel service equipment, a sales and marketing manager for a manufacturer of engineered motion controls, a director of program management for a gear systems manufacturer in the aerospace industry and general manager for a tooling and machining company before coming to Enterprise Minnesota.

John has a BA degree in Business Administration from Penn State University and a mini-MBA from the University of St. Thomas.

PHoTogr

APH By PATr

ICk kElly

John Connelly

The trusted principles that have served manufacturers since World War II are now accommodating a more sophisticated marketplace

The Evolution of TWI

John Connelly

ENTERPRISE dIRECTORYadvertising section

Eide Bailly is a full-service CPA and business advisory firm that serves more than 650 diverse manufacturing clients, ranging from food processors and household products to machinery, electronics and fabricated products. Our clients appreciate that we understand the complex issues they face and stay connected with them throughout the year. Using a team approach, clients benefit from seamless access to the services and resources they need to succeed.

To learn more call 888.510.2687, or visit our website at www.eidebailly.com

McGladrey helps more than 8,000 companies compete in today’s complex environment. Combining industry knowledge, deep resources and personalized service, McGladrey offers solutions to reduce costs, increase efficiency and maximize profitability. McGladrey LLP is the largest U.S. provider of assurance, tax and consulting services focused on the middle market. McGladrey is a licensed CPA firm.

801 Nicollet Ave., Suite 1100Minneapolis, MN 55402612.573.8750

MCGlAdREYEIdE BAIllY llP

We are focused on solving supply chain challenges for manufacturing and distribution companies while delivering real operational efficiencies through world-class, industry-specific, Microsoft business software. Your local Solution Dynamics team has extensive experience assisting organizations to select and successfully deploy ERP projects specifically for Minnesota distribution and manufacturing companies.

2626 East 82nd Street, Suite 160Bloomington, MN 55425Voice: 952-854-1415Fax: 952-854-1442www.solutiondynamics.net

The University of Minnesota’s College of Continuing Education has been “opening doors” since 1913 for individuals looking for educational opportunities outside traditional paths. We offer interdisciplinary and applied degrees designed with the needs of working adults in mind. Our evening and online/blended course delivery and our supportive advisers contribute to your success. Credit and noncredit certificates, conferences, and individual courses provide distinctive opportunities for professional and personal growth.

612 624-4000 • fax 612 [email protected]

U Of M COllEGE Of CONTINUING EdUCATIONSOlUTION dYNAMICS

Tailored Business Solutions from U.S. Bank since 1863. From managing your cash flow to providing tailored business solutions, U.S. Bank can propel your business to new heights. Our local & experienced Business Banking Sales Managers and their team of Business Banking Officers are ready to take your business from where you are to where you want to be.

Craig Veurink, Sr. Vice President region Manager, 952.927.1277

Mary Charbonneau, Executive Assistant, 952.927.1275

With a strong regional focus, Wipfli LLP ranks among the top 25 accounting and business consulting firms in the nation. With 80+ years of experience serving over 1,800 manufacturers and distributors throughout the Midwest, we provide solid strategic thinking from different perspectives: financial success, tax optimization, operational excellence, and engaged workforce. Put the power of our industry focus to work for you.

Jeff Thill, [email protected]

WIPflIU.S. BANk

Customized Training and Continuing Education provides quality, applied training at our site, your business, or online. We assist businesses and organizations throughout the metro area stay current and informed regarding best practices relevant to workplace and technical skills, leadership, organizational sustainability, and practical business solutions. Ourpartnerscanexpect:•Customizedtrainingsolutionstomeetyourorganization’suniqueneedsandculture•Real-worldapplicationstaughtbyindustryexperts•Flexibletrainingtoensureyougetexactlywhatyouneed, when you need it.

Contact us at: 651-846-1800www.saintpaul.edu/CTCE

BUSINESS EvENTSSAINT PAUl COllEGEFutureBusiness GrowthPaymentsCash FlowManaging your

Deposit products offered by U.S. Bank National Association, Member FDIC. 130135

From managing your cash flow to providing tailored business solutions,

U.S. Bank can propel your business to new heights. Our local & experienced

Business Banking sales managers and their team of Business Banking

Officers are ready to take your business from where you are to where you

want to be.

Call us today for a solution tailored to your business.

usbank.com

Craig Veurink, Sr. Vice President Region Manager, 952.927.1277

Mary Charbonneau, Executive Assistant, 952.927.1275

Tailored Business Solutions from U.S. Bank since 1863.

Sponsorship Opportunities Available Now!Sponsoring Enterprise Minnesota® Business Events is a great way to increase sales, expand your visibility and reach Minnesota manufacturers. Platinum, Gold, Silver and Bronze sponsorship levels are available.

Learn More:Jim Schottmuller, Enterprise Minnesota Relationship Manager612-455-4225 [email protected] www.enterpriseminnesota.org

Member FDIC

Lean EnterpriseLean e�orts at their own company.

Lean Tools Lean Culture.

all of the presentation materials from all six sessions.

Register online by CLICKING HERE.

The cost is $90 per registrant. For every 4 attendees get 1 additional registration for free.

2012 attendees rated the event 4.6 out of 5!Don’t miss out on this year’s Lean Summit.

SAVE THE DATE

Tom Kammer Greg Thomas

CLICK HERE

FOR MORE INFORMATION:

Keynote Speaker - Paul Akers

2 Second Lean.www.paulakers.net

All attendees will receive a copy of Paul Aker’s book, 2 Second Lean!

Paul A. Akers

Lean2 Second

How to Grow People and

Build a Lean Cultureat

Work

&

at Hom

eFun

™

creo

enterprise minnesota magazine august 2013

Documents

business energy

minnesota energy resources

worth e energy

enterprise minnesota310

enterprise minnesota

new ripple of lean companies

greater minnesota

manufacturing enterprises