Embedded computer maker explains how to operate in a tough business location
Let’s face it; Massachusetts can be a cruel home for the commercial faint-of-heart.
By Chris Boutilier
Let’s face it; Massachusetts can be a cruel home for the commercial faint-of-heart. Onerous taxes, expensive employee benefits packages, and less-than-ideal weather conditions are among the myriad factors that have driven many businesses to seek smoother waters elsewhere. Yet about two years ago, Carlo Gavazzi Computing Solutions, a manufacturer of electronic packaging and system expansion solutions based in Brockton, Mass., decided to conduct all operations in its original Brockton corporate headquarters.
It wasn’t necessarily the company’s desire to consolidate, yet since a growing number of customers had become more cost sensitive, leaders of Carlo Gavazzi felt increasing pressure to reduce its own costs. This was in addition to growing offshore competition, which has always been an issue since the company manufactures everything in the United States, resulting in much higher quality but at a higher cost per unit.
Since Carlo Gavazzi makes its own sheet metal, does it own machining, fabricates and populates its own boards, runs its own assembly operation, and performs its own painting and silk screening, lowering costs would clearly be a daunting challenge.
So why Massachusetts? The choice of Carlo Gavazzi to merge its three entities in Massachusetts was based partly on business, partly on history, says Jessica Isquith, Carlo Gavazzi’s vice president of corporate marketing.
Made in Massachusetts
“Either Texas or Nevada might have been cheaper, but we liked Massachusetts, Isquith says. “We were founded here, so there was a sense of returning to our roots. Plus, from a business standpoint, we felt there was a tremendous amount of talent here—a surplus of intellectual capital that we could recruit from.”
Consequently, while other firms were leaving, Carlo Gavazzi stayed, and implemented strategies to create a lean organization that would function efficiently and make high-quality products on a limited budget.
Carlo Gavazzi’s managers remembered something they had discovered shortly before the consolidation: Massachusetts has several programs to award grants to companies for education and training. About a year before, the company received a $30,000 grant from the Massachusetts Workforce Training Fund, a state fund enacted in 1998 and financed entirely by private-sector employers, which provides resources to Massachusetts businesses to train current and new employees.
“Unlike many states, Massachusetts doesn’t require the recipients of its grants to give matching dollars,” Isquith says. “Instead, whatever amount the state awards to a company, that company is expected to contribute that much worth of time to its people, so if you get a $10,000 grant, you’re expected to give $10,000 worth of time to your people. But of course, the number of people who will go through the training, how many hours they will spend, the exact nature of the coursework, must all be clearly defined.”
The company’s first grant was to help bring the company’s prior ISO certification up to the most recent ISO 9001-2000 standard. The thinking was, why not apply for another grant to help teach employees how to work better?
Carlo Gavazzi worked with a third party to complete the application, and Massachusetts awarded the grant fall 2006. Company leaders decided to use the money for implementing process-improvement initiatives—specifically, “lean manufacturing” techniques. The third-party company also helped Carlo Gavazzi find proper trainers.
Making the program work
The only variable left was to decide how to initiate the program. “The suggestion was to focus the lean manufacturing techniques on our program for General Electric,” recalls Paul Gilchrist, Carlo Gavazzi’s operations manager. “We make a single unit for them, and it’s relatively easy to make. My first thought was that we should apply the program to an area where we could get more ‘bang for the buck.’
“We changed everything about the GE program, from the way we processed the sheet metal, to the way we kitted it, to the way we brought in product, to how we brought it out to the floor, the works,” Gilchrist continues. “We had flow charts and value stream mapping charts up on walls to help us critically examine every aspect of the manufacturing process, no matter how minor. Our trainers kept asking us, ‘Why are you doing it that way?’ The standard answer was that we had always done it that way, but they wouldn’t accept that.
“People who had been performing their tasks a certain way for a long time suddenly discovered more efficient ways to do those same things,” Gilchrist says. “They didn’t necessarily learn to work faster or harder, they learned to work smarter. We started changing the smallest things, but they made a huge difference. For instance, we used to throw carts on the floor with all the required parts on them, but we realized that by organizing the parts a little better and labeling them, people could find them more quickly. From a bottom line perspective, the efficiencies enabled us to realize serious cost reductions—not necessarily a large amount per unit, but since we make so many units for GE, it really added up.”
That was only the beginning
“Quality went up dramatically as well,” Gilchrist says. “In fact, we have been running at 100 percent in final inspection for last six months, which is an unprecedented figure.” Cutting costs through lean manufacturing even helped Carlo Gavazzi’s sales process, as the company was able to lower costs for its clients while still generating profits.
Naturally, the cold, hard figures were a welcome outcome, as they are easily translatable to bottom-line results. Just as critical, however, are the less obvious, internal improvements that will make Carlo Gavazzi better equipped to deal with the highly competitive business climate that defines Massachusetts—especially now that the lean manufacturing principles have been applied to other programs.
“When you start with a traditional factory environment and transform it, even for a few hours each week, into a learning organization, people get excited and even rejuvenated about their jobs,” Isquith says. “The people in the trenches—the direct-labor personnel—begin to feel that their voices are being heard and that they are directly involved in the process. That has a profound impact on employee morale. We had people who left the company and came back because of the training. What’s more, whenever we do have turnover, it’s much easier to get the new people up to speed since our processes have been dramatically streamlined.
“Following the success of the GE program, we implemented lean manufacturing on a project for Halliburton, with outstanding results. Using lean manufacturing on GE was the foundation of the way we do business now,” Isquith says. “Quality has gone up across the board.”
A winning team
Gilchrist credits the program’s success to the commitment of management. “To make something like lean manufacturing work, you need commitment from the top down,” he says. “To allow a number of people to be in training all day one day a week is a massive undertaking. The commitment of Carlo Gavazzi’s president and other company executives to this program cannot be overstated.”
One indication of the program’s success is the award of a subsequent grant to Carlo Gavazzi—this time for $176,000.
“We got the impression that the amount and the short time frame between the second and third grant were unusual,” Isquith says. “We attribute that to the dramatic results we were able to achieve in a relatively short time frame.”
Perseverance, management commitment, and a burning desire to improve—along with an infusion of much-needed grant money—have all contributed to Carlo Gavazzi’s ability to make it in Massachusetts. While not a huge sum by corporate standards, the grant money produced a paradigm shift in the company’s approach to doing business.
“We were already looking at ways to improve our operation,” Isquith says. “Constant improvement is one of our company’s hallmarks. But the money certainly helped. We thought it was going to provide some assistance, but it turned out to be a catalyst to a company-wide solution that’s helping us to win our battle in the Massachusetts corporate landscape.”
Chris Boutilier is president and CEO of Carlo Gavazzi in Brockton, Mass.