Mark Young hears how automotive supplier Lander Automotive refocused on its core competencies, flexibility and a sound financial footing in order to flourish despite the impact of the recession.
Founded in the late 19th century, Lander Automotive is one of the best established names in the Midlands business directory, partly owing to the fact that until 1991 the firm had highly visible premises right in the very centre of Birmingham. Now operating out of a 100,000 square foot factory just outside of the city, Lander and its 280 employees make fabricated structures and tubular assemblies. Its core products are car seating and dashboard instrument structures and tubes for heating, cooling, and air conditioning systems. It supplies to both original equipment manufacturers and their tier one suppliers and you’ll find its parts on Nissan, Toyota, Ford, Jaguar, Land Rover, Volkswagen and Vauxhall vehicles.
The company has two key objectives. Firstly, it aims to increase its turnover from its current level of £28m to £45m by 2014. Because of the way the automotive industry works, with programmes running on four year cycles, almost all of that target figure will be made up of either new or replacement contracts. Either way, the business must be won. Lander is well on target though, having secured an extra £9m already in 2010. The second objective is to cut costs by 10% over the next two years. Here too the company has already made impressive inroads towards achieving its goal. Its reduction in energy costs, for example, is impressive to say the least. Two years ago, on a turnover of £25m, it was around a half million pounds per year. Today, with the turnover at £28m, it’s less than half that at £215,000. It achieved these savings with the help of consultancy firm E2 Services.
E2 first surveyed Lander’s site in early 2009 and quickly identified major savings that could be made. For example, replacing the fixed speed compressed air system with a variable one and reducing the pressure to only what was necessary saved £25,000 per year. Similarly, transforming the voltage down on the lighting system, replacing bulbs with more efficient ones and installing day light sensors saved helped toward annual savings of £23,000. Local extraction systems were installed on each cell, replacing the central one and saving £26,000 per year; a new control system on the heating will bring the total gas usage down by 15% in the winter months; and servicing the furnace and recalibrating it to make it run more consistently made savings to the tune of £7,000.
This programme is demonstrative of a holistic organisation-wide culture change within Lander to put the company on a firm financial footing. Commercial director Steve Bailey explains: “We found ourselves in a position in 2006 where our financial team wasn’t as supportive as they needed to be. We were unsure as to how robust our management accounts were and delays in their preparation only added to the concern. There were changes in personnel and we also engaged with an external organisation, experts in the area of finance, to resolve this issue.
As well as greatly improved reporting, the firm took a commitment to paying for and ensuring it got paid for supplies on-time, ensuring it had a good relationship with, and plenty of lending facilities from, its bankers. A blitz on outstanding customer queries has not only reduced debtors but has also improved customer relationships. And a new ERP system, aimed at making Lander’s administrative systems as ‘lean’ as its manufacturing processes, should also improve supplier relationships.
Its efforts have not been in vain.
Credit checker Dunn and Bradstreet recently placed Lander in the top 15% of low risk, financially sound companies in the UK, across any industry and sector. “It’s a great message to our customer base who might have suffered with suppliers failing during the economic crisis,” says Steve.
This was the start of a change in strategy for Lander and a new culture based on the pursuit of flexible, lean manufacturing, driven by managing director Roger Whitehouse. Initiatives to this effect involved putting together flexible manpower lines, introducing standardised work within the cells, switching to a ‘pull’ system with a 20 minute bus route delivering line side and encouraging process ownership and people empowerment throughout the factory.
“A key measure of the ‘lean’ progress we have made is the use of our factory space,” says Roger. “Two years ago, when turnover was £25m, the factory was full. In four years we’ll do £45m in the same factory with room to spare. If you look at value to the business – pounds per square metre per year – it is phenomenal now compared to what it was.” As time went on and more initiatives were implemented, the business was completely transformed. And looking back at the company’s first ever value stream maps – on air bag canisters – proves it. Roger remembers the figures very well because the numbers were so striking. The lead time of the product was 25 days but the added value processing time was only 156 seconds. The rest of the time was product just stagnating – waiting in queues to be processed in batches.
Now the typical lead time in the factory is less than a day.
Quality is king Efficiencies and cost savings are one thing, but what Lander is ultimately looking for in parallel to its lean initiatives is an unwavering commitment to quality and this has seen its quality move from industry standard to the very front end of excellence in five years.
Quality is king
Efficiencies and cost savings are one thing, but what Lander is ultimately looking for in parallel to its lean initiatives is an unwavering commitment to quality and this has seen its quality move from industry standard to the very front end of excellence in five years.
“Quality is still king,” says Steve. “In this industry if you have a poor track record with quality it will hang like a lead weight around your neck. We don’t have that, and we won’t put ourselves in a position where we’ll negotiate on quality.” Lander is one of the few plants to put aluminium brazing inside a flow line; the norm is to keep it separate as an island of excellence outside of the line. It has done so in the name of quality. “We felt it was important to put the critical process right in the middle of the set up,” says Roger. “This means we can account for the quality better – when it is within a single piece flow, one single defect becomes an issue. When it’s an island, out of the way, a single defect isn’t disruptive downstream. Effectively you buffer between the island and the line with processed stock. Defects aren’t allowed the way we do it and you’re reaction time to a problem is much faster. If you haven’t been able to ‘fool proof’ a process your reaction time to a problem has to be instant.” Testament to its success, the company has now been supplying to Toyota in France for 18 months without one single defect. “That’s truly world class,” says Roger. And it is to the quality that his commercial director points when asked why more and more companies from the likes of Turkey, Bulgaria and other supposedly lower cost countries are sourcing goods from Lander instead of utilising local cost efficiencies.
Flexibility was deemed undesirable in one area of the business though. If you go back a few years, the company supplied services to all manner of different industries, including Leisure and DIY. Now, Lander only serves automotive. And within that, the company has narrowed its focus too.
It used to supply many other product types like – latches, seat adjuster systems and head rests. When one of Lander’s customers was interested in and completed the purchase of its latch and adjuster system business, this then spurred the company on to narrow its focus onto its core capabilities – fabricated structures and tubular assemblies.
Without the flexible measures, Lander could well have met a similar fate to many of its peers two years ago. “When the world came crashing down we hit the same brick wall as everybody else,” says Steve, though he’d be forgiven for venturing that, given its industry the recession packed that little bit extra punch for Lander.
Ultimately though, the business never did worse than break even. Something that helped Lander to survive and to recover quickly when the recession began to subside was not panicking when it came to its workforce. Lander didn’t want to lose its permanent employees and all of the skills they held and the employees didn’t want to leave, given jobs at that time were few and far between. But costs had to be cut. Instead of laying off employees, Lander agreed a deal with its engineers and technicians that they would, in effect, take a temporary demotion and have their salaries adjusted accordingly.
Then, when the new work requiring extra talent began to flow back in, positions and pay packets would be restored. Around 30 employees were affected. The cost reduction was a success and all those involved returned shortly after to their original roles and salaries.
Operating with the same values and focus that had been borne out of the culture change prior to the downturn, the business returned to profit in 2009. Now, in 2010, profits are expected to be higher than pre recession levels and almost back to Industry norm.
“The downturn hasn’t stopped us doing the things that we’ve believed are right to sustainably grow our business,” says Steve. “We’ve invested over the latest three years in new technology to support our core lines and we’ve also invested in our workforce. If a customer has a chunk of business and they want to move and move quickly, you have to have the right people who can grab it and run with it and get it done properly in a very short period of time. We took the view that we needed to keep highly qualified, highly skilled programme managers on board, who could function in other areas of the business, until such time as we won new contracts. Recruiting the right person takes at least three months and, by that time it’s too late. The decisions – things like – what tooling we need, what process equipment is required and where to source it – need to be made right at the beginning of a new contract.” Overall, Roger is confident that Lander is pitched perfectly to grow its market share both home and abroad.
“We have harnessed the intellectual capability of everyone within this business and combined that with a clear set of goals and cutting edge tools and techniques to give a world class performance.” The eagle, it seems, has well and truly Landered.