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Just-In-Time Manufacturing

A lean, mean manufacturing system means less inventory-and, often, more cash in your pocket.
May 30, 2001
URL: http://www.entrepreneur.com/article/40850

The words "just-in-time manufacturing" might evoke images of vast automotive assembly lines, but the principles that revolutionized large-scale American manufacturing in the 1970s and '80s are being applied on a smaller scale all over this country.

One small business that has recently switched to the just-in-time system is Gamblin Artist's Oil Colors, a small oil-paint manufacturer in Portland, Oregon, owned and operated by husband-and-wife team Martha and Robert Gamblin.

Robert Gamblin is a painter who began making and selling oil paint more than 20 years ago, not long after graduating from the San Francisco Art Institute. "It's a rare and fortunate individual who is able to make a living by selling art," says Robert. "There was a need for someone in this business to make paint with the artist in mind."

From a modest start in Robert's garage, producing just three colors of paint, Gamblin Artist's Oil Colors now sells 87 colors of oil paint all over the United States and abroad, has 20 employees, and owns its own manufacturing facility. The paints cost between $7 and $20 a tube. The Gamblins declined to state the company's gross revenue.

As the company has grown, Martha, co-owner and general manager, has taken steps to solve the problem of managing the increase in paint production. "We started talking about making bigger and bigger batches of paint," she says. "A 100-milliliter tube of titanium white weighs one pound. Add that up, and it's a [hefty] weight. When someone started talking about putting 400 pounds of paint on a rail above our heads, I knew I needed to talk to an engineer."

Martha found that manufacturing consultants charge about $200 an hour-a fee that a small business like Gamblin just couldn't afford. After talking to the Portland Development Commission, Martha found Charlie Martin, a manufacturing consultant for the Oregon Manufacturing Extension Partnership (OMEP). Martin guided the Gamblins through their transition from a traditional manufacturing system to the newer, leaner, just-in-time model.

Martin's fee was just $65 an hour, a rate that is subsidized, in roughly equal parts, by local, state and federal funding. "If I were doing this privately, I couldn't afford to work with most of them," says Martin, who advises about six different small businesses at a time.

OMEP is part of the Manufacturing Extension Partnership (MEP), a national network of not-for-profit centers organized in 1986 by the National Institute for Standards and Technology. The program has more than 400 centers around the country, at least one in every state and territory, and it helps more than 20,000 small manufacturing businesses a year. Most of these businesses, like the Gamblins', have 50 or fewer employees. Eligibility for participation in MEP varies by region. (Call 800-637-4634 for more information.)

The Gamblins used to make colors in batches of 1,200 tubes of paint at a time, which would remain on the shelves as inventory for three to six months. "Old-style American manufacturing works on a push system," notes Martha. "The whole system is about putting a pig in a python-one huge bite that moves through the shop."

Now the Gamblins make colors in smaller batches-about 500 tubes-and they focus on producing a single type of color at a time, like different kinds of red all made on the same day. "Many small businesses don't realize that we need a manufacturing philosophy," says Martha. "We increase creativity and flexibility by reducing variation."

After implementing new manufacturing strategies, the Gamblins cut their inventory in half and freed up about $200,000 in cash, which they'll use to invest in capital growth and launch their first advertising campaign.

The equation is simple: less inventory means more cash-and cash flow is king for any small business. "Each color turns twice as fast. We're not putting three months of product on the shelf," says Martha. "Now it's down to six weeks, so our cash returns twice as fast."

The inventory change is just one of many the Gamblins have made since they started working with Martin and the OMEP more than a year ago. Quality control has also improved. "In each station, we ask the question, 'Am I making good stuff?' " says Martha. "If the answer is no, the production process stops. The manager is called, and there's 20 minutes to make a decision. Adjust and fix, or pull. The decision gets made right at the station."

Every week, the 10-person production crew aims to solve one process problem as a team. Everyone is involved-from staff meetings to conversations and problem-solving on the floor. "This engages workers," says Martha. "They're not checking their minds at the door. We have better jobs, better teams, better management, and a better environment for personal growth."

Although Martha has experience in business and management, she says she still found the lean manufacturing system counter-intuitive at first. "We're well-educated people with good common sense," she says, "and we couldn't have done this without help."

Martin's guidance and the OMEP's help have made it easier for the Gamblins to implement new procedures, but the changes have not been easy for everyone to accept. "We start looking at the shop floor as a system, and our goal is to improve the function of the whole system. Instead of being hierarchical, it's more of a team process," says Martin. "But not everyone works in this environment well. You do lose a small percentage. The shop-floor folks prefer it. The people who get threatened tend to be first- and second-level managers-people who have struggled their way up."

In fact, during the transition, the Gamblins lost two employees-a supervisor and a key operator-who were not comfortable with the changes. "It's traumatic," says Martha, "but it's the price of change."


Jane Applegate is a syndicated columnist and the author of 201 Great Ideas for Your Small Business. For a free copy of her "Business Owner's Check Up," send your name and address to Check Up, P.O. Box 768, Pelham NY 10803 or e-mail it to info@sbtv.com. Sarah Prior contributed to this report.