Manufacturing Digital learns that running lean enables increased inventory turns and operational flexibility for this Texas firm
Written Padma Nagappan & Produced by Sean Bakke
Fort Worth, TX-based Photo Etch manufactures display and control panels for aircraft cockpits and for simulation and training purposes. It also makes black boxes and has established a niche in night vision lit display panels.
Founded in 1968, it is a large job shop that supplies military and commercial original equipment manufacturers (OEM) such as Northrop Grumman, Lockheed Martin, Rockwell Collins, Honeywell, Boeing and Bell Helicopter, among others. It also supplies the US Air Force and the US Navy.
CEO Randy Fry bought the company along with a silent partner in 1997 and has initiated drastic changes, adopting lean manufacturing methods that have contributed dramatically to process improvement.
NEW & NICHE PRODUCTS
The decision to go lean also impacted the bottom line positively, with revenues peaking at $12 million for 2008, up from the previous average of $8 million to $10 million. Due to the slower economy this year that number has slipped to $11 million, but Fry is quick to point out there have been no layoffs; the company has retained all 92 of its employees.
The first quarter of this year was considerably slower than last year, with sales down 26 percent, but then business picked up through the rest of 2009, so Photo Etch’s sales will only be 8 percent lower than 2008.
Photo Etch has three product lines and Fry has grown each of them considerably since he took over. The simulation and aircraft control panels represent the bulk of his business, while the wiring components for the black box (not the flight recorder but the box behind the control panel) have seen significant growth.
“When I got here, we did less than $1 million in simulation. Now we do $4-$5 million. I got into black box manufacturing three or four years ago. We know the box work is going to more than double, but panels generally stay flat. We are hearing that the simulation market is going to pick up in 2010-11, since no one has the money to train their pilots on the actual aircrafts,” says Fry.
Fry estimates there are about 10-12 job shops like his in the US and Canada and only three or four focus on night vision work, giving Photo Etch a competitive advantage and putting the company at the high end of the market. The nature of the business is such that each shop combines a couple of product lines, instead of focusing on just one line such as bezel panels.
“The night vision display panels have very precise lighting that helps pilots read their gauges. This product line allows us into a part of the panel manufacturing world that the competition can’t get into very easily,” Fry explains.
LEAN PAYS OFF
Photo Etch has invested in updating its equipment and facilities and implemented quality management systems such as ISO. Fry tried working with a local manufacturing group to implement lean manufacturing, but when that did not work out, he joined the Supplier Excellence Alliance (SEA), a non-profit group formed by aerospace, defense and space companies whose mission is to make the US supply chain more globally competitive by creating a single lean enterprise system.
The company obtained the Lean Enterprise System (LES) certification in 2008, becoming the first supplier in Texas to do so. The switch has enabled it to cut lead time in half, improve on-time delivery, increase inventory turns significantly, and reduce work-in-progress (WIP) inventory levels and defective goods returns.
Managing change within the company and implementing new methods calls for careful thought and planning. “I did not feel we were disciplined enough to go it alone, so they came in for a week at a time. I often come across people who think they can do it themselves, but for every dollar I spent on SEA, I got back three,” Fry says.
The resulting improvements have been pervasive. Where before it took 16 to 18 weeks to build a keyboard panel, it now takes the company only 6 to 8 weeks. Fry is optimistic his team can further reduce the time frame by half again in 2010.
The assembly time for a bezel panel (the electronic interface of a touch screen panel) went from several hours to 20 minutes. Fry says this dramatic reduction in time happened because the initial design was not very good and required a lot of work by hand to fix it. “Once we started to focus on that as a problem, we were able to improve the process instead of trying to bully it through the shop floor,” he says.
He explains they are not yet down to one-piece flow, since certain steps such as painting, checking the light balancing and laser etching require batch processing. Changing this scenario calls for different machinery that can do those jobs one piece at a time, which will require capital investment, which his board members have approved.
Photo Etch used to have three months worth of inventory on hand but now, with better scheduling that moves supplies in and out quickly, works with about three to four weeks worth. To help implement lean principles and cellular manufacturing, it has three managers certified as Six Sigma green or black belt and are skilled, lean experts.
It has set up three cells on the shop floor that group the processes and pass the product down the line, where before the panels jumped around a lot in the factory. “Building one panel at a time is easier than building 50 or 60. If you find an error in one, you can halt the manufacturing and fix it before you build all 60 with flaws in them. Any one in our factory can turn on the red light to stop the process,” explains Fry.
LEAN DELIVERS CLIENT BENEFITS
The company’s clients have reaped the benefits of going lean in several ways. There have been far fewer returns on defective goods, since it is able to make a much better quality product now.
Lean has also helped improve on-time delivery considerably. Fry says small manufacturers are used to fill inventory gaps, when the larger customers order something for later but end up needing it sooner or vice versa. With lean, it is now easier to ramp up production.
Operational flexibility has benefitted both Photo Etch and its customers, who now approach Fry with requests to expedite delivery or to increase the order quantity. “It’s a dynamic world we live in now and being able to adapt to changing customer needs has been an advantage,” he says.
The defense business has stayed steady, but thanks to the sales growth in simulation and black boxes, the commercial business has picked up considerably. Rockwell Collins is his biggest client for simulation panels and Fry is focusing on growing the commercial side, which forms 35 percent of his business.
The company is now completely internally funded. “In this economy, I don’t want to accumulate debt,” he says.
FACTS AT A GLANCE:
Company Name: Photo Etch
CEO: Randy Fry
Operations: Manufactures control and display panels for military and commercial aircrafts, as well as for simulation and training equipment. Also makes electrical wiring black boxes that go behind the panels for the cockpit
Established: 1968
Employees: 92
Revenue: Approx. $11 million
www.photo-etch.com
View Digital Corporate Profile of PhotosEtch in Manufacturing Digital January 2010