The Next Generation of Lean

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• The Next Generation of Lean
• July 22, 2009

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• Douglas Machine Overview
• LEAN Journey
• Challenges
• Implementation
• Results
• Environmental Sustainability and LEAN
• Customer environmental initiatives impact for
  Douglas
• Douglas environmental initiatives

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• Douglas Machine Overview
• History and facts
• Organizational structure
• Core products
• Core markets

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History and Facts

• Recognized leader in secondary packaging
  solutions involving corrugate, shrink-film, and
  paperboard.
• Founded in 1964
• Operated under a variety of ownership types
• Closely held, family business 1964 to 1986
• 2B Public Company 1986 to 1993
• Venture Capital 1993-2000
• Employee owned 2000 to present
• 100 employee owned
• 500 employees based out of Alexandria, MN
• 220,000 square feet additional 40,000 square
  feet under construction
• Annual revenues approximately 90M

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• Douglas Machine Overview
• History and facts
• Organizational structure
• Core products
• Core markets

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Organizational Structure

• Operating Groups (Cells)

Customer
Paperboard Products Cell
Shrink Wrap Products Cell
Technical Support Cell
Customer Products Cell
Alexandria Finishing Cell
Douglas Scientific Cell
Corrugate Products Cell
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• Douglas Machine Overview
• History and facts
• Organizational structure
• Core products
• Core markets

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Douglas Scientific Division
ArayaTM array tape scanner
NexarTM fluid dispensing instrument
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• Douglas Machine Overview
• History and facts
• Organizational structure
• Core products
• Core markets

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Core Product Revenue by Market Segment
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Core Product Revenue by Geography
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Sampling of Key Customers
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• Douglas Machine Overview
• LEAN Journey
• Challenges
• Implementation
• Results
• Environmental Sustainability and LEAN
• Customer environmental initiatives impact on
  our business
• Douglas environmental initiatives

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• LEAN Journey
• Challenges
• Implementation
• Results

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LEAN Challenges

• Custom machine builder
• 100 machines a year, similar but different
• Complexity
• 1000 fabricated parts
• 1000 purchased parts from numerous suppliers
• Multiple finishes
• Shop floor clutter
• Plant layout always in flux
• Test product
• Personal tool carts
• Racks for parts, fasteners
• Craftsmanship mentality in machine
  design/assembly
• Failure with prior continuous improvement efforts
• Complacency with acceptable financial
  performance
• Lack of consensus about continuous improvement
  philosophy

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• LEAN Journey
• Challenges
• Implementation
• Results

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LEAN Implementation

• Change in Philosophy modular machine design
• New product platforms released from RD
• 2002 Axiom case packer
• 2005 Contour shrink-wrap system
• 2006 Invex case packer
• 2007 Customer specific case packer
• 2008 Customer specific case erector
• Made LEAN a priority one of our 2008 2009
  Tactical Plan Imperatives Improve value add
  time in machine assembly
• Employee communication about the need to change
• Hired dedicated continuous improvement resources
• Identified and document root causes, established
  baselines
• LEAN training
• 2008 - LEAN Certification Program (LECP) training
  
• 2009 - Toyota Problem Solving training
• 2009 - LEAN basics
• Specific employee performance deliverables around
  continuous improvement
• Made a splash epoxy floor, new lighting, added
  racking, tools

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LEAN Implementation

• 2007/2008 Started with a laser beam approach
  machine platform specific (big projects)
• Contour shrink-wrap system
• Customer specific case packer
• 2009 Expanded LEAN implementation
• 11 Kaizens completed in 2009 (4-5 day projects
  with focus on 5S)
• 76 Different people have participated in the
  Kaizens
• 46 Quality Improvements Implemented
• 50 Safety Improvements Implemented
• 52 Productivity Improvements Implemented
• 2 in process this week

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Contour Shrink-Wrap System
Sealing
Wrapping
Infeed
Approximate dimensions 60 long, 10 high, 10
wide
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Traditional Machine Assembly and Test
Parts Rack
Parts Rack
Parts Rack
Tool Cart
Test Product
Machine Frame
Elec Tool Cart
Elec Tool Cart
Tool Cart
Tool Cart
Parts Rack
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Traditional Assembly Method
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Contour Shrink-Wrap System

• Traditional Manufacturing
• Contour machine build center concept
• Sub-assembies currently 15
• Machine section build centers 3 major machine
  sections
• 2006 Heat tunnel
• 2008 Infeed
• 2008 Wrapping

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Build Center Concept

• Specific location for each standard fabricated
  and purchased part
• Right part, right time
• Kan Ban replenishment system
• Standard tools
• Visible, company-owned, no personal tool boxes
• Leverage standardization
• Sub-assemblies, fasteners, value engineering
• Assembly work instructions
• Easy to understand, visible
• 5S with visual controls
• No extra stuff
• A place for everything and everything in its
  place
• Visual metrics

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Cutter subassembly
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2007 Heat Tunnel
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Wrapping Section
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• LEAN Journey
• Challenges
• Implementation
• Results

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Contour Shrink-Wrap System

• (2009) Finishing Center will be developed
• 3 major machine sections
• Complete electrical connections
• Testing and debug
• Results to date
• Reduction in assembly hours by 15
• Reduction in lead time of 25
• Reduction in warranty costs
• Gained market share

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Customer Specific Case Packer
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Customer Specific Case Packer
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Customer Specific Case Packer LEAN manufacturing

• New project - new opportunity to implement LEAN
  processes
• Subassemblies/Garages
• 50 subassemblies
• Assembled in 6 garages balanced workload in
  each garage
• Subassemblies staged for Pit Stops
• Pit Stops
• Machine frame moves through 6 Pit Stops
• Subassemblies added to machine frame
• Electrical wiring/components added
• Acceptance Test
• Final assembled machine moves to factory
  acceptance test (FAT) area

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The 1st 15 Machines
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Frito Garage (Build Center) 1
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Pit Stop 1
Pit Stop 2
Pit Stop 3
Pit Stop 4
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• Douglas Machine Overview
• LEAN Journey
• Challenges
• Implementation
• Results
• Environmental Sustainability and LEAN
• Customer environmental initiatives impact for
  Douglas
• Douglas environmental initiatives

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• Environmental Sustainability and Lean
• Customer environmental initiatives impact for
  Douglas
• Douglas environmental initiatives

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Customer environmental initiatives impact for
Douglas

• The Wal-Mart Sustainability Scorecard Becomes
  Interactive, Competitive Reality
• Wal-Mart Stores Inc. has backed up it commitment
  of reducing packaging across its global supply
  chain by 5 by 2013 by rolling out its
  sustainability-minded packaging "scorecard" this
  fall. The program also serves Wal-Mart's other
  ambitious goals of dramatically reducing solid
  waste and energy expenditures. Ostensibly, the
  program is a tool that will help Wal-Mart and its
  suppliers improve packaging and conserve
  resources. Though it is a tool for
  self-evaluation, it sets up a competitive
  environment as more companies try to better their
  sustainable performance. Package Design
  Magazine

Wal-Mart's packaging scorecard is a measurement
tool that allows suppliers to evaluate themselves
relative to other suppliers based on specific
metrics. The metrics in the scorecard evolved
from a list of favorable attributes announced
earlier this year, known as the "7 R's of
Packaging" Remove, Reduce, Reuse, Recycle,
Renew, Revenue, and Read. Through months of
consultations the Packaging Sustainable Value
Network a group of 200 leaders in the global
packaging industry, including suppliers, experts,
and internal and external stakeholders, outlined
the following metrics for the packaging
scorecard 15 will be based on GHG / CO2 per ton
of Production 15 will be based on Material
Value 15 will be based on Product / Package
Ratio 15 will be based on Cube Utilization 10
will be based on Transportation 10 will be
based on Recycled Content 10 will be based on
Recovery Value 5 will be based on Renewable
Energy 5 will be based on Innovation
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Customer environmental initiatives impact for
Douglas

• Customer expectations for supplier environmental
  accountability
• PepsiCo Sustainability summit (January 2009)
• Expect supplier reporting requirements in the
  future
• Supplier environmental conscientiousness will
  become part of purchasing decisions

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Customer environmental initiatives impact for
Douglas

• Packaging materials reduction
• Alternative packaging materials
• Re-usable cartons/containers
• Higher efficient packaging machinery

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Customer environmental initiatives impact for
Douglas

• Materials reduction Beverage market
  (Tray/Shrink-Wrap)
• Migration from corrugated trays to u-board to
  pad-only to pad-less to nested bottles
• Light-weighting PET bottles
• From 12.5 grams to less than 10
• Reduction in shrink-film mill thickness - coming
• Materials reduction Corrugate (Wrap Around Case
  Packers)
• Reduction in corrugated material
• Tray with shroud in lieu of full wrap around
• Less partitions
• Materials reduction - Flexible packaging (Bags)

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Customer environmental initiatives impact for
Douglas

• Alternative Packaging Materials
• Presents challenges
• Provides opportunities
• The Coca-Cola Company announcement May 14, 2009
• The Coca Cola Company unveiled today a new
  plastic bottle made partially from plants. The
  PlantBottleTM is fully recyclable, has a lower
  reliance on a non-renewable resource, and reduces
  carbon emissions, compared with petroleum-based
  PET plastic bottles.

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Customer environmental initiatives impact for
Douglas

• Re-usable cartons/containers
• Have not noticed any new trends
• Frito Lay is the market leader using returnable
  cases

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Customer environmental initiatives impact for
Douglas

• Expectation of higher efficient packaging
  machinery
• Greater reliability
• High efficient motors
• Electrical components versus air (air cylinders)

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• Environmental Sustainability and Lean
• Customer environmental initiatives impact for
  Douglas
• Douglas environmental initiatives

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Douglas Environmental Initiatives

• Historical
• We were pro-active but not structured
• Focus was on cost savings with good ROI
• Current
• 2009 Tactical Plan Initiative Expand
  environmentally conscious practices throughout
  the company. employee education, recycling and
  reuse of materials, and reduction in energy
  usage.
• Organized Environmental Responsibility Action
  Team (ERAT)
• 16 members
• Time commitment 1 hour per week

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Douglas Environmental Initiatives

• ERAT activities and subcommittees
• Document past environmental projects
• Establish measurement data
• 2006 to 2008 utility usage and cost
• 2009 CAPEX budget includes s for project(s)
  with marginal ROI
• ERAT Subcommittees
• Douglas recycling map
• Junk mail reduction program
• Occupancy sensors
• Energy robbers

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Douglas Environmental Initiatives

• ERAT activities and subcommittees
• Document past environmental projects
• Establish measurement data
• 2006 to 2008 utility usage and cost
• 2009 CAPEX budget includes s for project(s)
  with marginal ROI
• ERAT Subcommittees
• Douglas recycling map
• Junk mail reduction program
• Occupancy sensors
• Energy robbers

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Douglas Environmental Initiatives

• Junk Mail Reduction Program
• Objective Reduce junk mail by providing a means
  for employees to remove themselves from mailing
  lists
• Established junk mail collection points
• Employee communication
• Notification of junk mail source
• Results

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Douglas Machine is GOING GREEN An Environmental
Responsibility Action Team (ERAT) has been
assembled to help Douglas Machine GO GREEN. One
Objective of ERAT is to REDUCE JUNK MAIL. If
you receive a piece of junk mail, ensure your
name is clearly visible on the item and simply
toss the piece of mail into one of the bins
located throughout the company labeled JUNK
MAIL. Thats all you need to do. Bin
Locations Douglas will contact the sender
and a request will be submitted to remove you
from their mailing list. This will not only save
you time, but will help Douglas Machine

GO GREEN
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Douglas Environmental Initiatives

• Junk Mail Reduction Program

Activity
Source
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Douglas Environmental Initiatives

• Documentation of past environmental activities
• Sustainable site
• Water usage (Alexandria Finishing)
• Energy and atmosphere
• Materials and resources
• Indoor environmental quality
• Innovation in operations/product realization

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Douglas Environmental Initiatives

• Sustainable site
• On sight tree planting
• 2009 building expansion native prairie planting
  around retention pond on City owned property
• Partner with a local environmental magnet school
• Voluntary storm water permitting and management
  compliance
• Pollution prevention progress report
• Compact fluorescent bulb - employee awareness
  campaign
• Employee awareness - recycling campaign
• Douglas Machines President/COO is a Board member
  at the local municipal utility
• Technology Partners

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Douglas Environmental Initiatives

• Water usage (Alexandria Finishing)
• Conductivity meters installed on plating rinse
  tanks (measures clarity)
• Prophix extended the life of the acid baths from
  one month to two years (additive no dump)
• Ano Pure process extends the anodizing bath life
• Reduced water usage
• Decreased sulfuric acid usage by 60
• Decreased caustic soda usage by 90
• Decreased sludge from 75K lbs to 54K lbs
• Eden System dialysis extends the life of the
  electro-less nickel bath indefinitely
• Converted from a powder to a liquid cleaner,
  extending the zinc and nickel cleaner baths life
  from two months to six months
• Coolant Recycling and Reclaim process and
  equipment
• On site waste water treatment systems

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Douglas Environmental Initiatives

• Energy and atmosphere
• Lighting retrofits
• Weld shop filtration
• Variable frequency drives (VFD) on make up air
  units and exhaust fans
• 150 KVAR power factor correction, west service
• 150 KVAR power factor correction, Alexandria
  Finishing west service
• 450 KVAR power factor correction, Alexandria
  Finishing east service
• Routine compressed air leakage inspections
• Air scrubber installed over the sulfuric acid
  tank
• Air scrubber installed over the caustic etch tank

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Douglas Environmental Initiatives

• Materials and resources
• Deionized water system replaced with reverse
  osmosis (Alexandria Finishing)
• Reverse osmosis system for machine tool coolant,
  dilutes concentration
• Reusable shipping containers
• Reclaim and reuse of shipping / packaging
  materials
• Aggressive solid waste management program
• No solid waste goes to the land fill
• Aggressive recycling program

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Douglas Environmental Initiatives

• Indoor environmental quality
• Impermeable flooring installed at Alexandria
  Finishing to prevent the risk of seepage
• Sustainable cleaning products and supplies used
• Purchase cleaners in concentrate form

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Douglas Environmental Initiatives

• Innovation in operations/product realization
• Environmental Response Action Team (ERAT)
• Repeatable product line development (standardized
  products)
• Reduced scrap
• Increased throughput
• Greater machine efficiency
• Build to stock production process (pull system)
• Reduced paper usage significantly
• Reduced shipping materials
• Engineering Change process improvement reduce
  defects
• Right sizing of motors for energy efficiency
• Development of package flexible equipment
  eliminates the need for dedicated machinery

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• Thank you
• Rick Paulsen
• 320-762-6226
• rpaulsen_at_douglas-machine.com