The VMI DNA
This article first appeared in the 2013 Industrial Distribution January/February issue. You can view it here.
For Barnes Distribution, success means staying focused and not trying to be all things to all people. This Cleveland-based company has found a firm foundation in VMI and Lean thinking—and they’re happy with the results.
Cleveland-based Barnes Distribution is part of the Barnes Group (BGI), an international aerospace and industrial manufacturing and services provider, serving a wide range of end markets and customers. In 2007, Barnes Group Inc. celebrated its 150th anniversary, making it one of a handful of American companies that have flourished over three separate centuries. The backing of this long-standing strong company has allowed for Barnes Distribution to take advantage of the resources of a large company, while retaining the vision and agility of a small company. But the funny part is, Barnes Distribution isn’t small—it just feels that way. 2011 revenue numbers put Barnes at #29 on the ID Big 50 List with $355 million in sales.
But anyone with Barnes Distribution will tell you, companies aren’t just born with vision and agility—regardless of their size. These are characteristics that must be earned through the dogged pursuit of improvement and constant review of internal processes, replication of best practices, and consistent ability to respond to customer demands.
Barnes Lean principles have created an environment where “waste” is a 4-letter word. Big company bloat, red tape, and archaic processes have no place here, and company President Tom Fodell plans to keep it that way.
Cutting Waste Out of the Process
Tom Fodell’s career is rooted in sales, but the industry veteran – who began with Associated Spring, a BGI company – has the perspective of someone who cut his teeth in the industrial market with many different roles and responsibilities. It’s no surprise, then, that Fodell feels strongly about the merits of internal improvement. “We have invested a lot of money in having everybody in our business trained in the principles of Lean,” says Fodell.
Kaizen events proliferate every department at Barnes Distribution, and Director of Operations Jon Renko describes how these types of exercises have had the immediate impact of improving the order process in the warehouses, as well as their quality and speed. “When Kaizen events nurture an idea into consistent practice, the company attempts to integrate the procedure as what it refers to as standard work,” says Renko.
However, Fodell is quick to add that this doesn’t just come down as an order from on high: The DCs learning these best practices run their own Kaizen events to get a feel for the advantages before implementing. “One facility will take the lead and perfect the process, and then they’ll share best practices,” says Fodell. “That’s how we train each other.”
Another Lean initiative that’s been particularly successful, especially for the DCs, is the daily Gemba walk(s). The idea here is that visibility of problems (and subsequent solutions) are the best way for employees and management alike to realize the true impact of their actions. This visibility also culminates in the creation of a multitude of white boards showcasing daily productivity and target goals. The teams in the DCs are able to compare themselves to others and also to gain a true understanding of their level of efficiency. “Measuring ourselves gives employees the opportunity to see where they are at any time,” explains Joseph Ramos, Manager of the Barnes Hanover Park, IL distribution center – a 102,000 square foot facility responsible for processing more than one-third of the total demand for Barnes Distribution. “Gemba boards and spread sheets show employees if they’re on pace or need to step it up. It allows them to manage themselves, in many ways.”
These practices aren’t just relegated to the DC. In a cost conscious industry, Barnes tries to drive out waste wherever possible: “We look at things like quote turnaround time, inventory levels, telephone response time, collections, payables… we look at our IT systems and how our training is working and in the HR department, how our hiring is working,” says Fodell. “Every department in the building has Kaizen events and they determine what they need to focus on to become better. Then every month, a very large group from the building goes to that department to look at their Gemba board to see what progress has been made on those initiatives.”
Lean may dominate many a discussion at this company, but if you really had to break Barnes Distribution down to three letters, they’d be V-M-I.
“It’s in our DNA,” says Fodell of the company’s commitment to Vendor Managed Inventory. In fact, Lean and VMI go hand-in-hand for Barnes; the efficiency improvements the customer gains from off-loading this task to their supplier creates a comprehensive value proposition Fodell sees as unmatched. “We believe we provide the best VMI; we’ve built our entire system to support that,” he says.
VMI, for Barnes, is an opportunity for them to demonstrate value. “We have sales reps in every zip code in North America, and what we provide is a resource – our employee – who manages the customer’s C class items and makes sure they have the inventory they need on the products they’ve contracted with us to supply. Many times, the customer will also ask us to get a special product that isn’t necessarily in our bidding, but we have the capability to get it; we have access to over a million different SKUs. So if you’re a customer who has a 1,000 SKU setup, but you need a part number that’s not in that set up for some reason, we have access to a million different part numbers, and we can get them relatively quickly,” explains Fodell.
“When you think about Lean and think about VMI: a lot of customers are focused on having the right amount of inventory, and always having the inventory available when they need it. That’s really what VMI is. It’s so the customer can run their facility efficiently, but not have too much money tied up in inventory. That’s what we provide with the VMI model.”
Fodell feels that some industrial companies learned a hard lesson about cost during the recession by attempting to manage their own inventory. “Coming out of the recession, customers recognized that having a person who would run to a hardware store two or three times a day to get parts, or a purchasing person who has to monitor those purchases is just not an efficient way to do business. It’s actually much more costly than having VMI,” he says. This customer realization resulted in some new opportunities for Barnes. “VMI provides a strong cost savings if you have MRO needs. Those cost savings sometimes seem like soft dollars, until you compare it with the cost of having employees whose time is being used inefficiently.” With the help of its superior VMI, Barnes continues to add new customers every day. “The hard part is getting the purchasing or maintenance team to give you a few minutes to tell the story about the benefits. Once that happens, they realize the value and are sold on the process.”
For those lower velocity customers who don’t require a dedicated VMI person, Barnes offers an e-Commerce platform for online ordering, as well as an inside sales team that can service remote locations.
Training & Employee Development
Barnes also feels strongly that any additional internal investments in efficiency and productivity provide just as much value for the customer as they do for Barnes. Fodell and Renko describe the benefits of a recent cross-training program where DC employees can learn each position in order to engage in “cradle-to-grave ownership” of a process. This employee skill development program has caused both productivity and quality to go up.
As it relates to the field sales group, Barnes has created an online “Knowledge Center” so it can continuously train its field employees regarding new products. “If employees go to the Knowledge Center, they can become certified on a number of products we carry. All of our new reps need to obtain product certifications. We also train our reps constantly on our products and our processes. All good businesses have a combination of continuous training for their people and eliminating waste from the business,” says Renko.
It’s these types of initiatives that really create a competitive advantage for Barnes. Adds Fodell, “None of our customers are willing to pay us for our waste. That’s the reality of the business.”
Aside from increasing and retaining customers, Barnes sees plenty of payback for continuous training of its employees. Employees are empowered and are faced with clear paths for upward mobility and higher pay. The combination, says Fodell, is win-win. “We’ll do a better job for the customer, maintain lower costs, and increase the level of employee satisfaction—keeping employees engaged and doing a good job.”
Meeting Customer Demands Head-on
When it comes to customer demands, Barnes Distribution is confident that the supplier that is solely competing on price will always leave themselves open to being undercut. “Everybody who is successful in our business – and there are a lot of successful distribution companies – has something that differentiates themselves from the competition. It’s why the customers buy from them,” says Fodell. Differentiation, for Barnes, comes in other forms besides VMI. It’s Barnes Lean operations, training, and overall value proposition that truly lowers the customer’s total cost of ownership.
One example of this can be found in Barnes’ solution to a recurring problem facing one of its maintenance customers. To address the waste related to end users who have a host of widgets scattered throughout their workstation or tool crib, Barnes created tailor-made “kits” to condense and consolidate the most-used items into one centralized tool container. Not only does this improve organization, but it also reduces trips to the cool crib. These types of Lean solutions can only come from a company where Lean thinking drives every process and every decision.
“It’s easy to want to just sit at a distribution center and wait for orders to come in,” says Ramos. “Instead, we do ride-alongs with our field team to hear what the customers are saying.” These types of endeavors allow Barnes to proactively develop solutions to problems the customer may not have identified yet. It also provides the ability for internal departments to get a bird’s eye view of customer operations to help identify new solutions to old problems. “It’s about getting outside of silo thinking,” says Ramos, “and giving a fresh set of eyes for new opportunities.”
“You have to prove daily that you are of value to the customer,” says Renko. Truer words were never spoken in a time where, as Fodell explains, purchasing departments are being tasked to really squeeze points from their suppliers.
“We’ve seen a high level of cost consciousness,” Fodell says. “I believe that purchasing departments at many big national companies believe they can leverage their spend to drive lower costs. I think that’s putting pressure on all the distributors and maybe it puts more pressure on the ones who offer the more differentiated business model.” The savings from Barnes’ perspective comes from a VMI model allowing customers to lower their total cost of ownership by outsourcing the management of their small parts consumables. In addition, customers can find in Barnes a partner who is willing to forge ahead to really gain the knowledge of what they will need before they need it. This might include things as complex as researching new product and materials regulations specific to certain markets, or as simple as continually adding SKUs to the product line to keep their customers on the cutting edge of technology. In the end, the customer is king, but Fodell finds this to be a two-pronged obligation. “We have two customers: the people who use our products, and our salespeople. Our world revolves around making those two groups successful.”