10/15/13. Lean Accounting Conference Orlando, Florida October 17, Growth: The Quiet Half of a Lean Business Strategy

Transcription

1 Lean Accounting Conference Orlando, Florida October 17, Growth: The Quiet Half of a Lean Business Strategy 1

2 Mission Statement: To consistently design and deliver high quality, innovative products and services to our customers, and become the industries best time-based competitor. Core Business Strategy for Ruger 1) Fix the Base Business 2) Double in Size every three to five years through organic growth and acquisition Product Development 2

3 Current State (August 2006) Operations: 1) Enormous batches Inventory Turns less than 1 turn per year 2) Piece Work Incentive 3) Disjointed Operations 4) Culture Safety not CA s poor recording, no emphasis to improve Autocratic management We have always done it that way Hard on people, not process Incentive System Bad Parts paid individually, Rework was profitable Lead to lax management, Promoted poor work habits New Products 1) Design Engineers (3) - Derivative products and line support 2) Product Plan Anniversary and special makeups 3) Long, Long lead times on any new platforms (2-5 years) 4) Had RIF d a lot of engineers in 2004/5 How did we grow the business? 1) Established a concurrent, tollgate process for PD 2) Voice of the Customer on all new projects 3) Identified a product plan and prioritized the projects 4) Built product development teams for each product family 5) Establishing a learning culture, with lunch and learns 6) Concurrent development of mfg process with the product design 3

4 Phase Gate Process Tollgate 1 Tollgate 2 Tollgate 3 Product Plan Product Definition Product/ Process/Mktng Design Product Launch Hoshin Deployment Product Mapping Co-Location VOC QFD First House KJ Affinity Brainstorming/Creativity Pugh Concept Selection Production Preparation Value Engineering VOC Feedback Project Management Phase Gate Process Tollgate 1 Tollgate 2 Tollgate 3 Product Plan Product Definition Product/ Process/Mktng Design Product Launch Hoshin Deployment Product Mapping Co-Location VOC QFD First House KJ Affinity Brainstorming/Creativity Pugh Concept Selection Production Preparation Value Engineering VOC Feedback Tools Project Management 4

5 Voice of the Customer - Started in 2007, 1 st project was the LCR - Develop a questionnaire for the product - Poll distributor, dealer and end user customers - Use on all new platform or breakthrough projects - Deploy customer voice the QFD House of Quality - Identify the critical characteristics that will make your product a success - Establishes a target cost for the project based on the market input and where you want to position it KANO Model Very SaHsfied Excitement Unexpected, pleasant surprises 3M calls them customer delights Unspoken Spoken Degree of Achievement Did not Achieve TIME Fully Achieved Performance One- Dimensional Most market research Basic Expected Typical of invisible products Very DissaHsfied Customer Sa5sfac5on 5

6 Who is your customer? Draw out the value stream for your products. How is it sold? Literature Network Eng Architect Electrical Engineer Key Influencers Sales Force Building Owner End User Manufacturer Distributor Contractor Why is this chart so important to understand if you are trying to develop new products? Bo^om Line: When looking at our product in a retail shop, why would a customer select ours out of the case and purchase it? Right Features at the Right Price = Value to that target customer You must understand who your target market is.. 6

7 Product Plan - Do a giant brainstorm initially to capture all the ideas tucked away in the organization - Prioritize the list, assign resouces - Quarterly meetings continue, with updates, tollgate reviews and re-prioritization of scarce resources You don t have enough engineers! 2010 Product Plan Sales Price Dist. Units/ Year Incremental Sales Incremental % GM Gross Margin Dollars Daily Gross Margin Product Target Launch $350 4,000 $14,000,000 40% $500,909 $2,212 ABC Feb-10 $285 6,000 $1,710,000 58% $ $3,374 DEF Sep-10 $440 5,000 $600,000 40% $ $1,000 GHI Nov-10 7

8 R&D New Core Product Next Generation of Core Product Addition to Product Family Derivatives and Enhancements New Core Process Radical Breakthroughs High Next Generation Process Next Generation Platform Single Department Upgrade Enhancements, Hybrids & Derivatives Tuning and Incremental Change High Types of Development Projects (Wheelright & Clark, Revolutionizing Product Development, 1992) Low Alliances & Partnerships R&D New Core Product Next Generation of Core Product Addition to Product Family Derivatives and Enhancements New Core Process Radical Breakthroughs High Next Generation Process Next Generation Platform Single Department Upgrade Enhancements, Hybrids & Derivatives Tuning and Incremental Change High Types of Development Projects (Wheelright & Clark, Revolutionizing Product Development, 1992) Low Alliances & Partnerships 8

9 Built Product Teams for each Product Family - Hire some of the top chief engineers in the industry - Hire people and build product development teams comprised of product management, chief engineers, engineers in training, FEA eng and CAD designers - Establish relationships with schools (WPI, RPI, UNH, Youngstown Univ, Purdue) - Establish a summer internship program (23) which leads to new hires (4 this year) - Find some Mechanical Engineering professors to work with you during their vacation/sabbaticals - Establish product management for each of the value streams - Establish project management for each of the major projects You don t have enough engineers! Co- LocaHon On larger projects have the core team sit together for the durahon. CommunicaHons improves and it minimizes the need for unnecessary status meehngs between the core members. Schedule reviews require the a^endance and commitment of the support members as well. first a^empt final revision 9

10 Concurrent Development Today. Learning Culture - Build an engineering knowledge base - Monthly lunch and learns on topics of interest taught by internal staff, vendors, experts - Continue to improve your PD process with Kaizen - Don t forget the basics - CAD tools for FEA (Ansys), CAD/CAM Training, GD&T - Teach communications, project management skills, teamwork challenges (Joiner) - We re a big fan of capturing the learning in checklists 10

11 Concurrent development of mfg process with the product design - Process discussed in initial product concept brainstorm session - 3P on process selection shortly after TG1 - Manufacturing cell design concurrent with feedback to product design How are we going to make that thing? - Design a one piece flow super cell for new products - The whole team moves out to the floor and works on the cell. (Chaku/Chaku, in-line inspection tools, Poka Yoke, rugged fixtures, etc.) Take major innovation off line Technology Path Known Proven New Technolog y 1 Technolog y 1 Development Technology 2 Start NPD Effort A A Product Plamorm Path Time 11

12 Lessons Learned: 1) Create standard standard work that you can live with. 2) Engineering design must support one piece flow 3) Keep design engineers engaged as you build and try out the cell 4) Production line is not complete unless it can perform to takt time Key Metrics in each Cell - Quality - Cost - Productivity - Delivery - Cell members - Run by Hour Charts - CCA List 12

13 Picture of Visual Control in the Cell Because this is a lean accounhng conference.. Some numbers 13

14 Trends in Retail Demand (in Thousands) NICS checks 20,000 18,000 16,000 14,000 12,000 1,800 1,600 1,400 1,200 1,000 Sell-through 10,000 8,000 6,000 NICS 70% Growth The adjusted National Instant Criminal Background Check System data presented above was adjusted by the National Shooting Sports Foundation to eliminate background checks associated with permit checks rather than firearm sales. Trends in Retail Demand (in Thousands) NICS Checks 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 Ruger 270% Growth NICS 70% Growth ,800 1,600 1,400 1,200 1, Unit Sell-Through The adjusted National Instant Criminal Background Check System data presented above was adjusted by the National Shooting Sports Foundation to eliminate background checks associated with permit checks rather than firearm sales. 14

15 700,000 Quarterly Production vs. Shipments (in units) 600, , , , , ,000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Production Shipments 700,000 Shipments vs. Sell-through 600, , , , , ,000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Shipments Distributor Sell-through 15

16 New Product Impact (in Millions) $600 $500 $485 $400 38% New Products $324 $300 $200 $252 25% 30% Mature Products $100 $ New Product Impact (in Millions) $160 $153 $140 $120 $100 $111 37% 35% New Products $80 $60 Mature Products $40 $20 $0 Q Q

17 Inventory Reduction (in Millions) $120 $100 $80 $60 $40 $20 $ Raw Material & WIP Finished Goods Inventory Reduction (in Millions) $120 $100 $80 $60 $40 $20 $ Raw Material & WIP Finished Goods Inventory Turns Turns 17

18 Inventory Reduction (in Millions) $120 $100 $80 $60 $40 $20 If inventory turns had not improved in 2012, inventory would have been $15 million greater than Turns $ Raw Material & WIP Finished Goods Inventory Turns Inventory Avoided by Increased Turns - $1.80 Quarterly EPS $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $- $(0.20) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q Actual EPS 18

19 Return on Shareholders Equity (in Millions) $ % $ % $100 80% $80 $60 $71 60% $40 $40 40% $20 20% $ % Net Income Return on Shareholders Equity (in Millions) $ % $ % $100 80% $80 $60 61% 60% $40 40% $20 20% $ % Net Income Equity ROE% 19

20 $7.0 R&D Expense $6.0 (Dollars in millions) $5.0 $4.0 $3.0 $2.0 $1.0 $ $16.0 Capital Expenditures (Dollars in millions) $14.0 $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 $

21 100 R&D Resources (Heads) Capital Allocation (in Millions) Capital Expenditures $27 Special Dividend $87 Regular Dividend $25 21

22 Conclusion 1) New Products are the lifeblood of our business 2) Continue to improve our new product development process 3) Look for ways to constantly improve speed to serve the marketplace 4) Develop suppliers (quality, cost, delivery) 5) Continue to develop a learning culture 6) Streamline demand information flows from our customers, get more connected to the end user customer Thank you! 22