Using The Decalogue™ methodology, Barzel took a long, hard look at its processes resulting in a much better way of doing things
Written by Martin Slofstra & Produced by Ian Ross
Sometimes there is more to a name change than meets the eye. It can also signal a radical new way of thinking, a paradigm shift or a total re-invention of the way business is done. Take, for example, Barzel Industries (for¬merly Novamerican Steel), which changed its name in February 2009.
Headquartered in Norwood, Mass., Barzel Industries operates from 16 locations in North America, offering a broad range of steel process¬ing services to North American markets that include pickling, slitting, blanking, cut-to-length and roll-forming. Barzel also manufactures tubes, pipes, sub-assemblies and semi-finished goods for a wide array of industries that include energy, construction, mining, transport and cargo, and consumer goods. Barzel distributes its manufac¬tured products directly to its customers as well as through its distribution facilities in the US.
The company started in 1979, when a Quebec entrepreneur opened a plant for processing hot-rolled carbon steel. Known then as Nova Steel, this venture grew quickly, acquiring such well-respected companies as Cresswell Roll Forming, Delta Tube and Company, Argo Steel and American Steel & Aluminum. Nova Steel evolved into Novamerican Steel in 1997 before being acquired by Symmetry Holdings in 2007 and ultimately becoming Barzel Industries in 2009.
At the time Symmetry Holdings acquired the company, yearly revenues were steady, but it faced the impending crisis of the North Ameri¬can auto industry.
“Our company, when we purchased it, was a disparate collection of individually managed units, and we brought them together under a single, unifying system. What we wanted to be was a vessel for the very effective and efficient, from the movement of material from the people that produced the steel – the steel mills – adding value throughout the supply chain, to the end-user, without stocking inventory,” says Domenico Lepore, President.
Holistic approach
The goal of this acquisition was also to implement a business model based on a man¬agement theory that Lepore had developed called “the Decalogue”. The Decalogue has its foundation in the quality movement of the ‘90s, finding some basic similarities with principles like Six Sigma and Lean, but ultimately offering a much more holistic approach.
Whereas the quality movement was primarily aimed at the manufacturing process, the Decalogue operating methodology takes it a step further by implementing statistical control mechanisms into non-production processes like marketing and human resources.
“The same tools that are used to monitor and manage variations in manufacturing are also used to monitor and manage variations in every other process within its system. The aim is to have a totally synchronized system that is moving, in its entirety, towards the same goal,” Lepore continues.
The Decalogue operating methodology is, at its core, an amalgamation of Dr. W. Edwards Deming’s Theory of Profound Knowledge and Dr. Eli Goldratt’s Theory of Constraints, infused with original theories from Lepore and Oded Cohen, Lepore’s colleague and a member of Barzel’s Board of Directors. Using these methods, Barzel thoroughly mapped its processes; identifying, measuring and addressing constraints in its system and ensuring that all other activities within the system subordinate to the constraint.
The constraint of the system is defined as the point where cash generation is defined. Throughout is the speed that the system gener¬ates cash through sales. According to Lepore, understanding this speed brings numerous measurable benefits, including faster market responses that better meet customer needs, reduction in the costs from better reliability and quality through the reduction of variation and sig¬nificantly lower inventories.
Irrefusable offers
In Barzel’s case, the strategic constraint that was identified was the replenishment process. It was what most slowed the goal of generating throughput.
“The standard amount of time it took for a mill to supply us with material to manufacture our customers’ goods was 8 weeks,” Lepore explained. “We worked out an arrangement with the mills – what we call an “irrefusable offer” – that ensured we got our raw materials within two weeks and they were happy to supply us in that timeframe. When we tell others in the industry about this arrangement, they are always stunned. It’s unprecedented.”
It is this ability to work closely with suppli¬ers and customers that further emphasizes the big-picture approach Barzel has taken. Unlike traditional companies, whose organizational charts are hierarchical and strictly inward-look¬ing, Barzel uses the “One System Schematic”, which depicts interdependencies between processes rather than departmental silos, and includes suppliers and customers.
“The uniqueness comes from some of the mathematical aspects, with a body of knowledge that has always been effective at the plant level, plus taking into consideration how to sell, manage, market and essentially create a corporate culture based on a systemic, non-hierarchical approach to management,” he says. “It’s very holistic and at the same time, provides very precise guidelines for every aspect of the operation.”
In other words, it’s all about proper planning, teamwork, and everybody joining in.
What Lepore says he found at Barzel was a group of people who believed in his thinking, who wanted to improve the way things were done and were willing to try something new – but they did not necessarily have the educational tools to implement the methodology that would be required for the day-to-day operations of the company. In fact, the first thing Lepore did was introduce comprehensive education into the system from the CEO down.
“Most reacted positively, but some could not cope with the speed that we made changes,” says Lepore. “But we do have an infrastructure now that we are very confident with.”
Lepore’s next challenge is to get the rest of the industry to think along the same lines, acknowledging there is some opposition to his way of thinking as he battles an entrenched way of doing things.
The steel industry supply chain, says Lepore, provides a good example of how the Decalogue methodology can work, where the current emphasis is on moving product quickly and reducing inven¬tory times. “The only thing that really brings value to this industry is the ability to improve the speed with which you move steel,” he says.
“We believe the main problem in the steel industry are the service centres who were buying steel at the lowest possible price and selling it at the highest price,” he says. But what happens when the price of steel drops, as it has recently, to all-time lows? It slows down the movement of goods.
“All we are trying to do is add value to this process, where the value is not connected to the speculation, or the hedging of the steel, but it is connected with the speed with which we can replenish the source.”
And Barzel, he says, is uniquely positioned because it can move product fast. From the time steel is received from the mills, “within 48 hours, we are able to produce the slitted coil, the tube or the manufactured product,” something that is unique in the industry.
“We are trying to promote a different way of doing business, something the mills like and some¬thing the end-user customers like, but that people in the middle may struggle to understand.”
He is confident, however, as to how this battle will be won.
“The evidence rests on the feedback and acceptance we receive from suppliers and our growing list of new customers. When we show customers and suppliers the gains from speed, reliability, and quality, then everybody wins.”
View Digital Corporate Profile of Barzel in Manufacturing Digital June 2009