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InnovationNew product innovation canfree a company from productcommoditization and pricebasedcompetition. Supporting thatwith the capability to manufactureflexibly and efficiently, and to scalerapidly when a product really hits asweet spot, a company can quicklycapitalize on a new product’s potential.Flipped around, continuous improvementin the production system freesup resources. To capitalize on thatpotential, a company’s strategy mustinclude product and sales developmentto bring in new business. Employeeengagement is a fundamental requirement.People must be confident thattheir work will create opportunities,not layoffs.Mity-Lite, Inc., in Orem, UT is anexample of a manufacturer thatengages everyone in learning to synchronizeinnovation with operationalexcellence. Their story is one of deliberatestrategy, along with some surprises,resulting in category-beating products,entrance into new markets, andrapid expansion. The implementationof lean has resulted in dramatic operationalsavings, and has kept manufacturingjobs in Utah when they couldeasily have gone to Asia.Randy Hales leads an investmentgroup that acquires “broken” companiesand turns them around. Halesdoes much more than manage by thenumbers. Full of infectious enthusiasm,he is a hands-on owner and businessstrategist who respects the abilityof people to innovate and improve.Adding lean to his business arsenal isnew, but he’s become an example oftop management that “gets it.”Although proud of what lean is doingfor the company, Hales is upfrontabout saying that the company is atthe very beginning of its journey, withmany opportunities for improvementahead.In 2007, when Hales took over the20-year-old, 300-person company, itwas a staid and respected producer offolding chairs and tables for the institutionalmarket. He saw that its business-to-businessdirect sales modelconnected it more closely to customersthan competitors that sold throughdistributors. Mity-Lite’s products weregood, but tired, and vulnerable to newcompetition that could undercutprices. An urgent problem was that itsaged manufacturing and distributionsystems were limiting the company’sability to deliver on promises.Hales saw a company that couldtake market share with innovative category-breakingproducts, new markets,and extensive operationalimprovement. To achieve greater profitability,Hales set three overarchingobjectives:1) Provide the best customer experienceof anybody inside or outsideits class. This meant stabilizingmanufacturing and distributionso that products would be defectfreeand orders would be complete,accurate, and on time.2) Sell more of its existing productsto current customers. An analysisshowed that simply selling them abroader range of Mity-Lite’s productline could triple the company’sbusiness.3) Develop innovative products tobring in new customers andexcite existing ones. New productswould reinvigorate astagnant industry and capturemarket share. They would alsoopen the door to other markets,such as consumer retail.Improve Operations toAssure Best Customer ServiceIn their current state, operationsareas were not meeting Mity-Lite’s primarygoal of providing accurate, complete,and on-time shipments to fullysatisfy customers. Without improvement,there was little chance internaloperations could support expansionOperational Improvement by the NumbersMity-Lite has clear, simple (and few) operational goals to support thecompany’s overall objectives.Manufacturing had to deliver on:• Shop order completion• Productivity — tables per labor hour, for example• Defect rate per unitShipping and receiving needed to concentrate on:• Accurate and complete shipments• On-time shipments• Shipments without freight damageGains in the period:• Productivity up 60%• Shop order completion up from 60% to 99+%• Accurate and complete shipments up from 60% to 99+%• On-time shipments up from 62% to 99+%• Defect-free product up from 68% to 95%• Shipments without freight damage up from 92% to nearly 100%• Variable at-risk (incentive) compensation increased by a factor of four.M2 Target First Issue 2011 Target.ame.org

Mity-Lite AwardsUtah’s Manufacturing Extension Partnership (MEP Utah) recognized Mity-Liteas its 2009 Manufacturer of the Year – 100+ Employees, recognizing the companyfor transforming its operations into an innovative, performance-drivenorganization. As one of the key business drivers, the company has encouragedinnovation in all aspects of the business, which has spawned the launch of severalsignificant, game-changing products just beginning to impact the revenueand profit streams of the company.The Mesh•One chair was also selected as a 2010 finalist in the UtahInnovation Awards competition conducted by Stoel Rives LLP and the UtahTechnology Council.One Chair Leads to Many VariationsInnovation breeds innovation. Variations on the Mesh•One chair are starting tocome online, along with more innovation in manufacturing engineering.Customers asked for a stacking version for conference rooms, with wheels andarms. The Mity-Lite team went to work and as they designed the chair, foundthey could use the same back, modify the seat, and come up with a processdesign that didn’t require going through the fabrication shop. Another versionsports a silver frame. The company has four patents for attaching the steel tothe seat and configuring the steel to provide the same lateral support as theMesh•One chair. With such improvements, the armchair is less expensive tobuild than the folding chair, and is sold at twice the price.created by meeting the second goal,better penetration of the customerbase. There was no way they wouldhave either the capacity or capability toproduce the new products envisionedin the company’s third goal. Mity-Liteneeded an experienced operationsleader and Don Blohm fit the bill.When Blohm first looked at thecompany he evaluated it on three keyoperational drivers: quality, delivery(schedule performance), and cost. Thedevelopment of appropriate andshared metrics was a key process. Hetook the operations management teamthrough a rigorous exercise to determinewhat to measure. Blohm counsels,“It would have been easy for me tocome in and say this is what we’regoing to do, these are the metrics we’regoing to use, but I thought it was worthtaking them through the process toenable them to see why those were thekey metrics. It isn’t as easy as youmight think, but it’s critical. As theydebated, each person had a chance toweigh in, and by the time we haddecided what metrics to use, theyknew the genesis and why it wasimportant, and why it was going toaffect the business.” Now people hada focus. Of all the things they do,these were the things to do right, andthese were the measures of how to getthem right. These were the measuresof success.Blohm says, “One of our operationsmanagers told me what helpedthe most was that we defined the prioritiesin very clear terms, and putrealistic measures on them so thatwe could measure our progress.”Order-specific quality, delivery,and cost now functioned as decisionmakingpriorities. Blohm’s approachis to keep working those three prioritiesusing lean and six sigma techniques— whichever apply. Thesequence is important.At Mity-Lite, quality was fine butimproving schedule performance wasurgent. Leadtimes were long and thecompany was missing delivery commitmentson a high percentage of those.The sales team had lost confidence inthe ability of operations to deliver ontime. Blohm says, “We had almosteverything we needed to build almostevery order, but we didn’t have everythingwe needed to complete many.”A root cause analysis revealed thatthe biggest problems were due tostockouts, so resolving stockoutissues became a major project, andresults came quickly. Having animmediate success story made it easyto get support for the next stages ofimprovement.Once delivery problems began tobe solved, the operations team focusedon the cost side of the business. Theystarted to show significant improvementsin productivity and efficiency,partly because the focus on deliverymeant the company was able to getproduct finished and out the door.Then they went on to increase thequality standards. Blohm said, “We setup quality criteria for each of the products,and then we measured ourdefect rate against that.”For manufacturing, the metric fordelivery is shop order completion. Forcost, the focus is on productivity —units produced per direct labor hour.Quality is measured by defects perunit. Metrics were set on team performanceto support each of the threedrivers and people worked hard tomake progress against them. Anincentive program for the productionteams allowed them a share in thegains, so progress in each of the threeareas gave them a financial benefit.Buy-InBlohm believes you need buy-infrom both management and thevalue-adders on the shop floor, butyou secure that in two different ways.Management needs to see businessresults. Operations people need tosee how their day-to-day work will beimproved.Target.ame.org Target First Issue 2011 M3

InnovationFor factory floor people, he says,avoiding jargon and Japanese terminologyreduces confusion and savestime. “People on our floor don’tunderstand those terms, they don’tmean anything to them, so when youuse jargon, you have to go through aneducation process before you canbegin to get results. I try to demystify‘lean’ — move away from an academicapproach to a more practical one.”“Our factory guys can relate betterto the more practical than academicapproach,” he adds. “Whenyou go through and say you’re goingto clean out their area and get rid ofold tools and equipment, and theypush back — which they normally do— you say, what we’re trying to do isget you exactly what you need, whenyou need it, where you need it, nomore no less, no sooner, no later.We’re getting you what you need to doyour job.”Getting Managementon BoardBlohm says, “You can lose managementif it’s talked about too longor if it doesn’t show up in the numbersfairly quickly. Management isnot going to buy in just becausesomebody else is successful with leanand it helped their business. Managementis impatient. They get disillusionedand lose confidence in a newway of doing things when they don’tsee results. Then at the first sign oftrouble, and these things are not easyto implement, management peoplerevert to the old way of doing things.The only way to get buy-in from managementis to show results. I thinkthis is where Randy got sold on theprogram — we watched those measuresin quality, delivery, and costshow significant progress quickly.”Sitting on the AnswerWhile Blohm was improving operationalperformance, Hales was lookingfor new product ideas. It was a newproduct — a folding chair called theMesh•One — that became the catalystfor Mity-Lite’s transformation.As Hales explored the company,he realized that employees were sittingon something that could shakeup the folding chair market — theextremely comfortable Herman MillerAeron office chair. He asked the productdevelopment team, “Why can’tthere be a folding chair with the samekind of comfort?”The Mesh•One folding chair wasthe result. Like its inspiration, thechair’s durable mesh fabric allows forair circulation and a bit of stretch. Itis slightly wider than the averagefolding chair and will support aweight up to 1000 pounds. It’s lightweightand easy to set up, take down,and store. Its price point is $40, in amarket where folding chairs sell anywherefrom $20 to $80. At the end of2009, it was introduced to a marketthat had seen almost no innovationin the past 20 years. Sales and marketingwould now have what theyneeded to expand the top line — anexciting, breakthrough product.Innovation breeds innovation.Variations on the Mesh•One chair arestarting to come online, along withmore innovation in manufacturingengineering. Customers asked for astacking version for conferencerooms, with wheels and arms. TheMity-Lite team went to work and asthey designed the chair, found theycould use the same back, modify theseat, and come up with a processdesign that didn’t require goingthrough the fabrication shop.Another version sports a silver frame.Stacking conference room chair withwheels and arms. Revisiting the originaldesign resulted in new features and animproved manufacturing process.M4 Target First Issue 2011 Target.ame.org

Innovationwhiteboard in my office you can seewe have mapped out what it wouldcost to outsource a new chair andwhat it would cost to do it in-house.We’ve determined that we need acombination. We will do all the steelfabrication and the assembly here,and the injection molding at a companyjust up the street.”Rapid ScalabilityNew products and new marketswill require a fourfold increase inMity-Lite’s production. New researchsays that institutional customers’budget constraints are loosening up.And, they say, when they are ready tobuy, they want to get service quickly,and the domestic manufacturers aregoing to get their business. Halesexpected that channel to account for400,000 folding chairs in fiscal year2011 (April 1, 2010-March 31, 2011).Not counting other retail contracts,the one with Sam’s Club would meanmore than tripling 2009’s production.RecipeHow is Mity-Lite doing with itsstrategic recipe? Concentrating onbest customer service, selling more toexisting customers, and creating newproducts to excite current customersand create new markets is indeedenhancing profitability.Mity-Lite nearly doubled EBITDA(earnings before interest, taxes,depreciation, and amortization) on apercentage basis in 2009 comparedto 2008, at a time when revenueshrank by about 25 percent. Nearlyall of the EBITDA percentage gaincame from operational improvementand higher productivity, just when itwas most needed. Selling more toexisting customers appears to bemore attainable, with a rebound inthe market.New products such as theMesh•One folding chair will challengecompetition in the institutional marketand the consumer chair promisesto be a game-changer. Mity-Lite alsohas laid the groundwork for a globalfuture with sales offices in Dubai,Spain, the United Kingdom, andAustralia. Each part of the companyis tuned to support the others, allfocused on ultimate customer satisfaction.Karen Wilhelm is a Target contributingeditor and publisher of the blog LeanReflections.M6 Target First Issue 2011 Target.ame.org