United Alloy ditches conventions—and business booms
JANESVILLE What CEO Terri Roessler and her colleagues are doing at United Alloy in Janesville is considered heresy in the manufacturing world.
They’ve taken the gospel known as lean manufacturing and thrown it out the window.
And instead of being struck dead on their shop floor, they’re enjoying a 40 percent increase in sales, a 21,000-square-foot expansion and plans to increase the workforce by 32 people at an average wage of $18 per hour plus benefits.
United Alloy has 86 employees and manufactures diesel fuel tanks, generator frames and other heavy metal fabrications. Its customer list includes Caterpillar, Generac, Morgan Corp. and Cummins Power.
Business has been booming, in part, because of demand in the disaster recovery market.
“Ninety percent of our business is in power generation, and 100 percent of that is in backup and standby,” Roessler said. “Unfortunately, the disaster recovery market has exploded with all of the earthquakes, floods, tornadoes, etc.
“It’s sort of like being a funeral director: It’s unfortunate that these things happen, but it’s the service we provide.”
Responsiveness and timeliness are critical to serving the market, Roessler said, and that’s an area where United Alloy has sometimes lagged.
“I’m embarrassed to say that in November 2010 we had an on-time delivery rate of 42 percent,” she said. “The issue of time kept coming up with our customers.
“This November, I’m thrilled to say it’s up to 96 percent.”
How did United make such an incredible turnaround?
It eliminated the concept of lean manufacturing, which basically focuses on the elimination of waste and production costs that don’t immediately add value for customers.
Instead, United secured commitments from most of its major customers for future products.
“We’ve become part of their forecasting and visioning process,” Roessler said. “We’ve agreed to build the expansion, we’ve agreed to build the products and we’ve agreed to hold them until they need it.
“All we’ve asked for in return is their commitment to buy it. This goes against every aspect of lean manufacturing on the planet.”
United’s massive fuel tanks aren’t built and shipped in a day. They’re high-value, low volume products that take time to produce.
“In disaster recovery situations, our customers’ products are needed within minutes of the event,” she said.
United’s approach has allowed it to level out its workflow, which since April has been in production around the clock five days a week. The ebbs and flows of what typically has been a cyclical business are gone, as is costly overtime.
United’s expansion is expected to cost about $750,000. The city of Janesville is giving the company a $100,000 loan that will be forgiven if it hires 32 people in the next three years.
While United’s approach is novel, it wouldn’t be possible without the contractual buy-in from its customers
“I’ve been left holding the bag on handshakes, having to scrap $100,000 in inventory,” Roessler said. “It’s unfortunate that business has come to that, but ‘hope’ is no longer a management strategy.”