Question: How Does Anchor Audio Succeed in Competition With Foreign Manufacturers?Answer: Lean Business Management 1. Lean Manufacturing, 2. Lean Distribution, 3. Lean Vendor Management, 4. Lean Engineering, 5. Lean Finance.
1. Lean ManufacturingAction Steps (Over a 3 Year Period):• Hired CMTC to Consult on Lean Manufacturing Techniques • Point-of-Use Storage (Minimized Movement of Inventory) • Cellular Manufacturing (Eliminated WIP Inventory) • Single Piece Flow (QC Each Unit to Assure High Yield)• Improved Receiving Inspection (No Bad Raw Materials)• Invested in Automation Equipment to Manufacture Circuit Boards• Re-engineered Products to Capitalize on Manufacturing Capabilities• Created Incentive Programs for Every EmployeeResults:• Reduced Direct Labor By 50% (7% of COGS)• Failures Reduced to 0 – 2 per Day• Reduced Inventory by 45% (No WIP)• On-Time Delivery is 100% (Promise 3 Day Shipping)
2. Lean DistributionAction Steps:• Improved the Management of Our 3,000 Dealers – Fired Independent Manufacturers Reps in the US – Expanded Our Sales Department to Provide Dealer Support, • Phone, E-mail, Web Support, Trade Shows & Field Visits • SPIFF Awards to Dealers’ Salespeople• Closed Barcelona Distribution Center – European Operating Costs Too High, – New Transportation & Communications ServicesResults:• Sales Increased After the Reps Were Fired,• Eliminated Rep Commissions (6% - 10% of Sales),• Improved Dealer Communication (Dealers Prefer Direct Contact)• Eliminated European Inventory, Staff & Overhead.
3. Lean Vendor ManagementAction Steps:• Custom Parts (Plastics & Metal) – Designed Out Custom Components As Much As Possible – Studied & Improved Vendors’ Manufacturing Processes » Material Handling Procedures & Fixtures » QC Procedures to Align With Anchor QC Standards » Replaced Non-Performing Vendors• Commodities (Electronics) – Qualified Multiple Sources » Price, QC & Delivery Requirements• Accurate Forecasting to Drive the MRP and Purchasing.Results:• Gross Profit Increased By 10% (Parts are 87% of COGS),• Very Few Receiving QC Problems,• Almost No Raw Material Parts Shortages.
4. Lean EngineeringAction Steps:• Efficient Project Planning & Control – Initiated Daily Project Management Meetings – Involved Marketing, Sales, Production & Finance – Improved BOM & BOO Documentation.Results:• Rapid Decision Making to Guide the Projects• Organization Operates as a Coordinated Network• Time-To-Market Dropped Dramatically• Accelerated New Product Development: – AnchorMAN Wireless Intercom – Patent Pending – Beacon Portable Line Array – Patent Issued 2/08 – Acclaim Portable Lectern – MiniVox Lite – Upgraded Electronics in Existing Products – Improved Enclosures for Human Interface
5. Lean FinanceAction Steps (Eliminate the Outside Cost of Capital):• Bought Back All Outside Shareholder Stock• Paid Off All Bank Debt• Purchased a Building for the CompanyResult (Positioned to Pursue a New Growth Phase):• No Payments for Dividends, Interest or Rent,• Cash Flow Is Available to Fund Company Growth – New Product Development – New Market Development (Europe) – Acquisitions
Summary Recession Closed Europe Large Dealer BK Sales Incr by 14% Introduced New Products Improved Dealer Management Gross Profit Lean Manufacturing Incr by 39% Product RedesignsLean Mfg OverheadCut Reps Decrease by 19%Closed Europe Debt Income Increase by 617%FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09