A Wise Investment in Human Capital Pays Off

When it comes to salty snacks, Wise is one of the premier names in the United States. Founded in 1921 and acquired in October of 2000 by investment firm, Palladium Equity Partners, it is one of the largest regional manufacturers of salty snacks, with the number two market position in its core market, a region that encompasses 21 eastern states from Florida to Maine.

The company got its start when grocer, Earl Wise, Sr., discovered he had too many potatoes in inventory and decided to use the extras to make potato chips. Today's challenge is much different than a surplus of potatoes. It involves a highly competitive snack food industry where taking price in any category is very difficult. Therefore, for Wise to become competitive and afford to invest in the marketplace to ensure future growth, the company had to work on its overall plant operations and take a serious look at the cost of doing business.

The solution for Wise came in the guise of lean transformation . . . a strategy new to the snack food industry. Although lean thinking was basically unheard of in the food manufacturing, after meeting Lean Learning Center (Novi, Mich.) partner Dennis Pawley, and listening to him discuss the Center and its lean principles, Wise President and CEO, Terry McDaniel, was hooked!

"We were under the misconception that lean thinking was just for the automobile industry and certainly not applicable to the food industry," reflects McDaniel. "We are more simplistic on the manufacturing side and yet more complicated on the distribution side. But when you think about it, we're really just like most companies out there today that are being squeezed by the market. We realized that we needed to increase our efficiencies."

Wise's preconceived notions about lean thinking would quickly be dispelled. Lean thinking, the company concluded, applies to any industry.

A common sense approach

For Wise management, the idea of transforming the company into a lean organization by changing the way people think and involving them in the process made a lot of common sense. "So many times," McDaniel says, "we, as managers, try to manage by pushing our own vision down through the organization. The Lean Learning Center method takes an opposite approach by engaging the people who do the work in developing ways to do things better. It was a natural fit for us and for what we were trying to create."

Wise management team heads to class

Wise demonstrated a major commitment to lean transformation when it sent its top five officers plus key plant managers to a week-long class at the Center. A total of thirteen Wise people immersed themselves in the five-day "Lean Experience" workshop where they learned the rules, tools and philosophy of lean manufacturing systems. Here they experienced lean from basic concepts to hands-on applications, working with the traditional tools of lean manufacturing such as standardization, waste elimination and process redesign. But they went far deeper than this by exploring powerful, more effective and more flexible concepts enabling them to return to the organization better equipped to face Wise's own unique operational challenges.

Wise management had been through continuous improvement processes before, but compared to their prior experiences, the Lean Learning Center sessions were "uniquely amazing," due in large part to participation in "real-life" activities.

Day two of the workshop had the group involved in factory simulation by assembling a model airplane. In the first go-around, McDaniel's group, for instance, was able to produce two completed planes in the time allotted. Then the group went to work as a team learning the specifics of lean principles; discussing systematic waste elimination; and employing techniques to map process, material, and information flows. The second time around, by putting out work instructions, labeling pieces, and by having a process with a defined flow in place, the group was able to complete an impressive twelve planes to win the simulation contest. The same parts were used and the same people were involved. But, application of lean principles allowed better work flow with better coordinated and thorough connections, activities, and flows; allowing for a major increase in efficiency and productivity.

One thing that the Wise "students" really liked about the Center was that its instructors had actually been in business and had successfully implemented lean principles into real situations. They had lived lean . . . and for the Wise team, this had a huge impact on their learning experience. Pawley and his partners, Andy Carlino and Jamie Flinchbaugh, were not just promoting a program or even a process. They were teaching a way of thinking that had actually worked for each of them.

Out of the classroom and into the plants

The next step in Wise's lean transformation was taking what the company's management team had learned in class and applying it to real manufacturing situations. Understandably, this can be a challenging step. Change is often difficult for people to accept, especially in an entrenched culture like Wise's. For example, in the Berwick, Pennsylvania plant, built in1923, it is not at all uncommon to find a son or daughter employed in the same plant from which a parent had retired after decades of service.

"When change is proposed," says McDaniel, "even with the good people we have at Wise, it's only natural that they would think that there was something wrong with what they were doing. But, our desire to change was certainly not an indictment against our workforce. It was a matter of what we needed to do to improve our everyday operations."

Nor was change about job elimination. Wise management is quick to point out that going the lean route is not about cutting heads, but about working smarter to preserve heads and even grow the workforce. It's about being more efficient to drive costs down and improve customer service so that the company is in a better position to grow and hire more people down he road. The net result may be fewer people on a particular line, but if you do things right, in the opinion of Wise management, you will end up needing more people to support growth.

Lean Learning Center's involvement with Wise certainly didn't end in the classroom. Carlino and Flinchbaugh went on-site to do an assessment of the Wise operation, familiarizing themselves with people and processes. During this initial phase, the Lean Learning staff helped Wise define the company's current reality as well as its ideal state. They also helped the Wise management team craft a communication strategy and presentation to share with employees. In subsequent meetings, management discussed the lean journey on which everyone was about to embark and the reasons for taking the journey. These initial meetings outlined the basic lean plan and laid out the process involved - where they would start first and who would be involved. This led to the appointment of the first lean leaders who formed the core of the lean team.

Investing in Human Capital

Employees at the company's Berwick and Spartanburg, SC plants are enthused about the transformation and it is easy to sense the pride they have in what's taking place. Plant activities are visually measured and tracked, with excitement that's akin to watching a scoreboard light up after a favorite team scores a touchdown. And employees in Wise's Bristol, Virginia plant are eagerly entering the process. Management sees this as a good sign . . . as is the fact that so many Wise employees are coming up with ideas for improvement. Forty-five "formal" suggestions were made by employees in May; 29 of which have already been implemented. In fact, a current challenge is to rein in some of the enthusiasm and not go too fast in order to make sure that the new processes are working well before moving to a new area of improvement.

Results thus far have exceeded all expectations. Though the process only began in earnest with the first kaizen workshop in February of 2002, Wise can already document over $500,000 in real savings. Company-wide involvement has been a major benefit. Improvements include faster changeovers, waste elimination, and greater manufacturing efficiencies. Other notable signs of success are illustrated by the strongly involved safety committee and improvement in employee morale as reported by the union officials. Lean fever has definitely caught on. And, as a result, the company is making a better product, more efficiently and cost effectively.

For instance, as a result of thinking "lean", a $50.00 improvement led to solving a persistent problem with corn lumps in the tortilla chips the company was experiencing on one of the manufacturing lines. By studying the process at its basic level through a kaizen, the problem was solved in a minimal amount of time and with minimal monetary investment. Also, lean thinking led to better inventory control, eliminating the need and lease costs for a secondary warehouse.

What began with 75 people involved in evaluating processes and conducting kaizen workshops, will involve 500 Wise workers in an enterprise-wide transformation process by year's end. This process has impacted how Wise plants communicate with one another and the sharing of information is moving the company away from individual plant thinking to a single way of thinking for all manufacturing facilities.

The overall target for 2002 cost-savings is set for $1.5 million, which by the way, when met will not signal a final victory. The company is in this for the long-term and has its sights on getting even better, each and every day. More than 35 people have been sent to class at the Lean Learning Center since the initial team attended and the company plans to send even more. Not just a manufacturing issue, class participants come from sales as well as human resources. As a matter of fact, HR will play a major role in the ongoing process as it becomes involved in "training the trainer" which is at the heart of the Lean Learning Center's approach of identifying and educating the leaders within an organization to spearhead continuous improvement.

Wise is deeply committed to lean transformation and during this past year has become an avid proponent of the Lean Learning Center's focus on changing the way an organization thinks. In order to make sure they continue to work toward their ideal state, Wise will have periodic visits by the Center's management, who will evaluate their progress and to help coach where needed.

"Working with the Lean Learning Center has given us a new perspective on our business and a competitive advantage", says Terry McDaniel. "Interestingly, we just assumed that if there was an issue at Wise that needed to be addressed, the answer was to invest in more capital equipment. What we found, though, having worked so successfully with the Lean Learning Center, was that the answer often lies with 'human capital'. And, this investment is really paying off."