When its key manufacturer went into receivership, an equipment design firm bought the business. But the designers took 10 years to learn how to be good manufacturers.
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Entrepreneurs: Lindsay Wakefield (Managing Director), David Wakefield (Executive Director), Bruce Cox (Technical Director)
Company: Safetech
Business type: Materials handling and packaging
Founded: 1985
Employees: 50
Turnover: (2004 - 2005) $10M
Head office: Moe, Victoria
Contact details: +61 3 5127 4566
The Safetech Story
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Key learning points:
- Act now - When faced with a business problem, don't try to muddle through. Hire or contract someone who has proven experience in the field - and solve the problem.
- Consultants - Hire consultants for their solutions: how will they help you to fix your problem.
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They say a change is as good as a holiday. But changing the entire conception of his business was no holiday for Lindsay Wakefield. He founded Safetech in 1984 to design and distribute materials-handling equipment, not to be a manufacturer of his own designs. Manufacturing was not his interest, his skill-set or in his business plan - until Safetech’s key manufacturer went into receivership in 1992.
Safetech was Wakefield's second career. He graduated as a medical doctor in 1981 and spent time working at an occupational health medical centre, dealing with workplace injuries. He also visited factories several afternoons each week and saw how people were injuring themselves loading and unloading from pallets.
In 1984, he decided to move from curing back injuries to preventing them and invented a device that allowed workers to load pallets without bending. With his brother David (a lawyer), and a friend, Bruce Cox (an engineer) they developed a prototype, which they named Palift. In 1985, Safetech was formed and the pallet company CHEP became the national distributor of Palift. Partnerships and sales were developed in the United States, Britain and Japan.
The Challenge
With a growing domestic and international market, Safetech was carving out a niche in the market for safe handling of materials. Orders were rolling in. Then, in 1992, Safetech's manufacturer went into receivership. Safetech had a backload of orders, but no one to make its products.
The solution to that problem seemed simple enough: buy the manufacturer and its plant and begin making what it needed. Safetech made the purchase, but Wakefield was not comfortable with the move. He says: "We had to learn to be manufacturers, which we had vowed we would never do."
Safetech soon discovered that internationally successful designers are not necessarily good manufacturers. At times, it seemed to Wakefield that he should have stuck to his vow. He says: "Sales and marketing were good, design was good, and we did get a good product out, but we had to undertake these heroic efforts to get them out on time. Our margins weren’t improving."
Manufacturing problems would be resolved once but then crop up again. Other problems included late deliveries, quality issues, lack of capacity to deal with a sudden lift in sales, and stock management. Wakefield says: "To be honest, it took us several years to understand we had to get good at manufacturing. For a long time, we still saw ourselves as a design and distribution company." Learning how to be a good manufacturer took 10 years and lot of frustration.
The Solution
To deal with their lack of manufacturing expertise, Safetech's directors tried hiring new production managers, thinking that the right person would make the problems go away. When they found a good manager, it solved some of the problems - but not all.
In 2002, frustrated by the lack of improvement, Safetech hired Andrew Stewart of the supply chain consultants InteLog. Wakefield knew Stewart and had heard about the lean manufacturing system, which Stewart was trained in implementing.
Lean manufacturing reduces costs and wastage in key areas of manufacturing such as over-production, stockpile size, transportation and scrap. Costs are reduced systematically using reviews of the entire production process.
Lean manufacturers learn to reassess many of the assumptions that they have taken as givens - the "this is how we have always done things" approach. By constantly reviewing processes with an eye to cost-cutting and efficiency, manufacturers can rapidly improve their bottom-line profitability and operations.
Wakefield says going lean has turned Safetech's manufacturing around. "It's about process, about documenting what you do, understanding flow. It's about a clean, uncluttered workplace, workers having the tools and components they need."
The Result
With the application of lean principles, Safetech is now much more efficient. Wakefield estimates that since 2002 margins have improved by 5-10% and costs have been reduced by up to 20% on some lines. "Margins are better, delivery and quality have improved and our ability to cope with extra demand is much better."