GA 502 | The Importance of Productivity with John Abplanalp

Aside from inducing the need for inspection, your productivity is going to go up, your lead time is going to be reduced, your on time delivery is going to be better and your external failure rate is going to be better, along with downtime issues, etc. For the lead time and the productivity aspects.

Today I'm excited to welcome John Avonat to the show. Now John has a long history in the manufacturing world and he has a true passion, as you're going about to hear, for the whole idea of increasing productivity with the opinion and actually share the opinion that increasing productivity is one of the most significant things that organizations can do and for sure manufacturing organizations, and that's what we're going to talk about mostly today. But I would argue productivity applies to anybody into any company that's providing a product or a service. You can be more productive at that. And so he's going to go into talking about that, that touches a little bit about lean and a little bit about continuous improvement, but it's just more of a general conversation on the importance of productivity and how that can truly impact the bottom line and how it can really make the world a better place. So, yeah, he's super passionate as you're about to hear. And yeah, it was a lot of fun talking to John. So show notes can be found over@gembapodcast.com look for episode 502. Okay, enough from me. Let's get to the show. John, welcome to the show. How are you?

I'm Fin Ron and thank you for having me today. I'm delighted to be here.

Yeah, my pleasure. Hey, so where are you calling in from?

I am actually. It is a gorgeous day in North Stanford, Connecticut.

Oh wow.

I look out my window right here. We're blessed. We're the last house in Stanford. It's that little southwest corner, you know, around Greenwich, Connecticut. Yeah. My property line is New York state on one side, New Canaan on the other. We're the last house in Stamford. But the reason we're here is there's a wild trout stream in my backyard. Oh. Which is really, really 40 miles from New York City, from Central Park. I've got wild brook trout in the, in the, in the stream behind my house which 30 some odd years living here, it still blows me away.

Yeah. Boy, that's a beautiful part of the country. In fact, I know you, we're going to talk a lot about manufacturing and whatnot, but boy, there's some cool manufacturing going on that part of the country too, man. You know, a lot of, a lot of cool Defense stuff going on and, and yeah, man, that's a, that's a really awesome part of the country for.

Manufacturing without getting political aspects of it. We all, we all know that war does benefit, you know, and supporting wars does benefit certain industries. Yeah. And manufacturing. Manufacturing is one of them.

Yeah. Yeah. Well, yeah, in fact, there's a school there, Platte Tech. I can't remember exactly where in Connecticut they are, but it's a high school, it's a vocational school, and we've interviewed the, some of the teachers there and we actually did a, we went and did a sort of a virtual tour of the, of the school and they're teaching kids how to run lathes and how to, you know, how to work in machine shops and. But they're also teaching them manufacturing and lean manufacturing principles and all. It's super cool. But it's actually funded by the, by the Connecticut government. So yeah, it's, it's pretty special. And what they're doing there.

Well, you know, certainly, as we all know, you know, the tax bases etc are based on industries or businesses being in there, you know, and Connecticut at one point started losing everybody, you know, heading south as the tax side. One of the advantages of Stanford was the amount of business, not industry here, but the business part. But you know, north of here, Torrington and the rest of it was, it was the wire industry. You know, the wire and sheet metal was around here to be able to train those kids. So industry has resources. You know what they're doing in the South.

Yeah.

You know the Alabamas and the Carolinas.

Yeah, that's right. Awesome. Well, hey, John, I know that you, you know the drill. We've, we've done a little pre work here and we do like to get started out of the gate with our guest sharing a quote. So do you have one?

My, my favorite quote. And I wish, I don't want to say I wish. I mean the education along the path was wonderful. But there's a quote by a gentleman named William E. Simon and you might be old enough to remember him. He was the energy czar in the Nixon administration and the Treasury Secretary under Gerald Ford.

A little bit before my time, but.

A little bit, A little bit maybe around the dinner table. Maybe your parents mentioned something to you ironically, and we'll get into this a little bit. He was also the progenitor of the private equity world with the leverage buyout of a company called Gifts and Greeting Cards. That was the first one. But anyway, his quote is that productivity and the growth of productivity should Be the first two economic considerations at all times. It is through those two things that innovation, jobs and wealth are created. And I, with my experiences and we'll give maybe you know, go through a little bit of the background of the genesis, the tight lines, et cetera. Came to that realization with it. Even though I had done Lean and Six Sigma training and all the rest of it, the productivity aspect brought it all together in my mind.

Got it, Got it. All right. Well man, good stuff. Well, so, so let's lead right into that. Tell us a little bit about yourself, John. Tell us about, about your background and how you got into this sort of line of work.

Well, the, the line of work, I mean that was not necessarily where I started out this advisory consultant business. Tight Lines Advisors, by the way. Tight lines being from the, the fishing term for good luck or success, you know, just you wish to someone else that'll break a leg. Advisors. Tight Lines Advisors sounded much better.

Got it.

Okay. So my father actually invented the aerosol valve. He got the original patent. I'm looking at it at my wall in my office right here back in 1949. And you know, with that we had 22 plants around the world by the time he passed away in 2003. Did injection molding, high speed assembly, metal theory foreman and go through a little bit of the background with it when he passed away. You know, I have a sister and a brother in law and they decided they wanted to go down a different path. So you go valuation, allocation assets and do everything else, divide everything up and keep it. So we kept the company. They, God bless them, you know, ended up with a lot of great assets, a lot of great stuff. And from 2003 to 2008 we thought we were doing a pretty good job. Well, 2008 came along and our top line reduced by about 40% as everybody from the consumer on up. 2008, 2009, the World Financial crisis. Started conserving cash, working off inventories. And by that point we were still leveraged, making the deal. We were expanding a couple of plants. We were going to sell our historical home and beautiful Yonkers, New York. And so we ended up with the restructuring groups coming in. We ended up with private equity ultimately coming in. When that happened, I had the opportunity to go down. I had a very good relationship with the private equity. I believe I did it. You know, they could tell you otherwise, but I believe it did a pretty good, you know, relationship with the private equity guys. Not the leadership that was in place in the company, but certainly with the Private equity guys and I got a chance to go down to the plant, our plant in South Carolina. And because we were going through the usual, you know, we were having delivery issues, so we raise the inventory and that's consuming cash. We'll drive down the inventories. And we were jerking the whole operation around. So I did a schematic laid out for my private equity partner from operation inventory to operation inventory, said look, I think what we need to do is go after the productivity aspects of what we're doing. They gave me two months to go down the plant in South Carolina that we had at the time. And God bless the employees down there, they bought into it. And what we looked at was the qualitative issue we had. We had a great system in place called the DEMA system. I'm not necessarily plugging them, but somebody could go look with that. It's a great system for keeping track of non conformances, downtime, material losses and health and safety issues. And we took Pareto, went to the various departments, brought the subject matter experts in place, and we started working on the solving of these problems. We had, we did six sigma, we did lean, we did 5s. And I don't usually drop the buzzwords, but everything came into play as it related different aspects. And not in every operation, but we just took the biggest issue in each department first and went after it. What we found out and what we were able to establish without throwing capital at it in the meantime, if I could say that the leadership of the operation was advocating we spend 400 and some odd thousand dollars for a molding mach stem mold, which is a component of the aerosol valve we were running. Our OEE of the plant was probably a little higher than 50%. And the set, the sub molds historical that my father helped design were probably below 50. Dad loved volume and speed. The faster he could get the molds moving back and forth, the better. But we'll leave the design aspects for another day. But the way they would design the runner systems was extremely inefficient. There were a lot of cavitation, but the runners. So what we did was we basically went and looked at that change it from an S from an H format to. Let's consider the NCAA finals. You know, you start in the beginning and just go out, hit each cavitation at the same time. In this one case, where this one mold would take us eight hours to start it up with about a 50% cavitation as everybody's fine tuning it. The day we finally put it back in after making that change for $20,000 instead of 400, we had full cavitation and in 30 seconds the mold was up and running. We had guys on the floor high fiving each other. That same learning could be applied to many other key critical molds. We just took the worst one, applied it there, showed the dramatic performance and went there. We went assembly operations, we went to material losses. So what we were able to demonstrate by doing this type of work is that we could take the 10 to 12% of cost of goods out, which goes right to the EBITDA and the net income, the ebitda. Then because you're showing consistent and sustainable improvement, the multiple you're going to get for it also improves, which drives the valuation up. The other thing that happened that we noticed after going the productivity aspects as a result of getting the obstacles to productivity out of the way, on the qualitative side, we always were of the belief that anything that happens internally is eventually going to happen externally. But if you can reduce the amount of incidents or be able to remove the qualitative issues, aside from inducing the need for inspection, your productivity is going to go up, your lead time is going to be reduced, your on time delivery is going to be better, and your external failure rate is going to be better, along with downtime issues, etc. For the lead time and the productivity aspects. So the other thing that we started finding out is we had certain customers, because of our inconsistency on deliveries, they're about ready to throw us out. That turned around and said, hey, we don't know what the hell it is you're doing, but you guys have improved so dramatically, not only are we not getting rid of you, we're going to start increasing our orders with you. So we had the top line benefit along with the cost reduction. Now the cost reduction, if I could go into this part of it, the biggest part, when you start going through your most inefficient issues, those are the ones that are probably driving your overtime. We were going through the phase and the sort of the discussion we were having, as I mentioned before, about some of the leadership that we had that I didn't necessarily agree with. They were of the belief that everybody in the organization was milking overtime. They're trying to run in the meantime while we're having late orders so we have to employ. I had a woman that was working on an assembly machine and the turnaround on that was dramatic. She had a 16 year old kid that was out playing baseball on weekends. She didn't Want to be running an assembly machine on weekends? Nobody wanted to do it. Yeah, a little bit in your pocket is great, but nobody wants that consistently. And that's time and a half for double time. That was the first that started reducing. And all of a sudden our employees now are happier because they don't have to do it. They're still getting paid, but they're also involved in the solution.

Yeah.

Which is, which is. Let's go back to that mold example I was making. There were guys on the floor. Floor guys, you know, part of the, part of the molding department, etc. Aspects of it that didn't necessarily believe in the process, which was fine. Leadership is a different issue. Guys on the floor. But you saw once they started doing that, the high fiving and the cheers that everybody was doing, that was probably the single greatest moment I had in a leadership position in an organization watching everybody celebrate their successes. I had, I added nothing to do with it except maybe the concepts of pulling everybody together. You start bringing that through the, through a plant. I mean, how powerful is that?

So talk a little bit more then. I mean, you mentioned, I mean, so I, I don't, I guess, you know, like the audience that you, that are listening, they're, they are lean thinking, sort of professional. Continue. Some people. So you're preaching to the choir as far as productivity and quick changeover, smed, whatever you want to call it. Right. The things that you're talking about as far as productivity. So I'm curious to hear a little bit more about, you know, some of the things that you guys were doing, you know, outside of injection molding and, and to get that productivity. And you mentioned oee, so maybe even talk a little bit about that. You know, how are you going against the various components of oee? How are you attack?

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The various components of OEE. How are you attacking that?

So one of the things that struck me about the OEE part of it, and I'd used OEE before, but we never really related it to the financial aspects. And with that 50% overall operating efficiency now the machines ran fast.

Honestly, not awful. I mean, sometimes I've seen 10% OEE, you know.

Right, right, right.

It's Toyota. Yeah, but not many people are Toyota. Right. So.

And 100%. So what we started saying was, wait a minute, if we could get this. And we had the list of all the issues in front of us, the material losses, as we said, that does play into it on the qualitative side and stuff that needs to be scrapped. But the downtimes and especially the qualitative aspect, that was always the key, the backbone of it. If we could start figuring out how to reduce that, the operating efficiency would go up. And so it wasn't. Ron, what I've seen in my experience and with again, all due respect to your audience, in the areas that we're looking at in there, to me, the continuous improvement, it's in the project you guys are doing. Nice project, you're helping us with qualitative issue. But if you got that solution that you could then apply across the board and get all those gains in those other areas. Now you're taking the OE from 50 to 51 to 52 to 55 to 60. You go from 50 to 60 on that and that's a jump. I understand it, but that's a 20% reduction in the labor hours that's necessary with it. Not everybody in your workforce is going to buy into it and you'll let attrition and the rest of it happen. And again, you get that overtime as the first one that starts coming down. But for us to be able to bring that back in the financial. So it's not these little groups with guys with propellers on their heads, you know, that are going through trying to figure out solutions to it. It becomes, again, let's go back to that quote. We started with productivity and the growth of productivity should be the first two economic considerations at all times. It is through those two things, innovation, jobs and wealth are created. To be able to take that aspect in an OEE into the financials and as a backbone for operating your company. Reducing the obstacles to productivity, to me has to be the major aspect of what you're doing, and therefore the company drives accordingly. And if I could, again, I appreciate that your audience is very much into this, but the rate of productivity improvement in the United States over the last 20 years, it's improving, but the rate of improvement has been coming down.

Why do you think that is?

China opens up. The pervasiveness of the success of the private equity world where you're just going in and you're looking to rip costs out. So what are we going to do? We're going to do a better, better win management philosophy. Let's go chase cheap labor in China, let's go chase cheap labor in Mexico. With all due respect to the people that are working in there, they're not going after the productivity aspects of it. You know, they're going back in and taking a look at this. I'm a huge fan. I started watching Fox Business when Imus used to be on there in the morning as the lead into it. So I got used to watching Fox Business later on the afternoon of some of the guys that are there. Charles Payne on the 2 o' clock on the Eastern Time, 2 to 3 o' clock in the afternoon is the only guy I saw that really had a couple of times has brought up productivity after the quarterly reports. So I think again, guys sitting in the corner office, financial statements in front of them, not necessarily having an OEE and what that OEE is all made of the whole aspect of their kingdom in that operating side, by the way, we can go into sales, we can go into product development that all can fit into a process, but it's a focus on the financial aspect without understanding the underlying aspects of it is my belief. And again, because of the success of those areas is my belief why it doesn't get looked at as much.

Yeah, I mean, I mean I would say that from my experience and the people that we're working with, they are. I mean we've featured many companies across the world really who are doing exactly what you're saying. But to your point, it needs to be more. Right? It needs to be more, you know. Yeah. And that's really our mission. How do you help the world? Right.

That's why we're talking.

Yeah.

Let's go back if I could. Let's go back to. You were asking about it. Let's go back to the previous glorious leader in Washington, not the one we have now, but the previous gentleman who was in there that put the tariffs on to bring manufacturing back to the United States. We're all for that. But what happens is you're going from a low labor cost area to a high labor cost area and you're protecting it. So then those companies in a lot of cases can raise their prices. So who ends up losing? Well, the ultimate consumer at the end of the day. And again, I'm not faulting any. I think it's great that we're bringing it back here. But the way you really want to do that is engage the workforce to start figuring out those obstacles to productivity. So yes, we can have higher labor costs, but the labor content of everything we make will be less. The other aspect, if I can get on a soapbox a little bit, is through Covid, through both administrations, we experienced that the amount of debt that we have in the United States is humongous, that we're going to burden our kids and our grandkids and all the rest of it with as we go forward. Well, to me, one of the only ways out of this is to become a real net exporter again. Well, no one's going to import from us just because of us. We have to be able to compete on price and aspects of it. Well, if we can come back in and drive the productivity in our manufacturing areas in those areas, and by the way, get the knockoff innovations that are going to come from solving the obstacle to productivity problems, which can become their own income stream, we have the better chance to be able to extra, to bring foreign currencies back here to be able to relieve us from the debt burdens we're going to have going forward again, in my opinion. So while this works, the approach we're talking about and we're all advocating works in a micro sense. It can also work again, as William E. Simon said. He was saying that for the US As a total economy, not for one operation.

Right.

That's. It'll work in a macro sense. Yep.

Yeah, yeah, it's good. Yeah. It's going to be really interesting just to see what happens just over the next 15, 20 years, even with our, you know, I've got young, young kids and couple girls in college and you know, that age, you know this. So where, how are they, how's this generation coming up that's going to be in charge here, you know, in the next 10, 15 years? What are their motivations going to be? I don't know. I mean, I, I got hope, but also got, you know, a little nerv because, you know, they want quick response. It's social media, it's, everything's fast. And you know, they're going to have the, the patience and the, you know, the perseverance to push through. I hope they do, you know, and, and I know you, I'm sure you do as well. But it's just going to be really interesting to see what happens, you know, over this next 15, 20 years.

100% agree with you. And again, to go back to this just happened to Have a friend stop by yesterday. He was in the business a few years ago. We did a, we did a talk at a place called Westchester Country Club here. And he asked a question, he raised his hand and he said, you know, I got some younger employees here, and I have difficulty keeping him motivated by this point. By the way, I finished my presentation, it was a question and answer period. And he says, I have a tough time keeping him motivated. And before I got the chance to answer it, there was an educator in the back of the room and she raised her hand and she goes, look, speaking to a friend of mine, she goes. And listening to what John is talking about doing here, the fact that he will get the employees involved to help them shape their own destiny, you know, the course of what it is they're doing in their job, as opposed to just being, you know, a pair of hands, a pair of feet and a back to be able to, you know, go to this location. But they can affect positive change. He says, that's exactly what this next generation is going to look for. Now, I believe we all want that. Yeah, but that's even going to be more so for this next generation coming forward. You have to get involved. Not going to fill out this form, do this, you know, answer this phone, etc. It's going to, to me, they want to be able to contribute to the outcome.

Yeah, for sure. Hey, I'm curious to hear your thoughts on, you know, when we think about a value stream and let's say you elevate the, the manufacturing side of the value stream and it's no longer the bottleneck and they're just sort of, they're waiting on the orders. And now, now the constraint is the, the market, hey, our sales organization, we need more sales. So how are you seeing productivity? And I'm using sort of air quotes there, you know, applied in and on that side of the, of the business. Because obviously, if you're not selling anything, it doesn't matter how good you are in the factory.

100% on that. First off, if I might, if you're getting to that point that you've done, you've already affected pretty positively your gross margins. If you, if you've been able to shrink it and be able to do that and take some of those costs out, you've done a nice job on your gross margin. There's nothing wrong with sharing some of that with your, with your, you know, with your customers, you know, which gives you the opportunity to be able to do it. And in the meantime, as I mentioned, to you before. As you do that with a reduced lead time and with more consistent on time delivery and with external failures that you're enhancing your competitive position there right now as that starts being developed. To me that has to be part of the Salesforce. This is where we were last year, this is where we are now. This is, we are with you with your orders, your external failure rates. Show them and at that point you can even be more competitive on pricing. Obviously I am not an expert on Salesforce or any of the CRM processes. Before I would buy or look at any of those, I would lay out what my process is now. Find out where the obstacles, find out where the bottlenecks are and have the guys working on that to begin with. So when they do bring something in, everybody's going to be that much more informed as what our air quotes are overall or their overall process is.

Yeah, yeah. Well and I think you nailed it. I mean really it's a, it's like a spider web. Everything is related. Right. And so 100% your productivity is higher, your quality is higher, your, you know, your, your delivery promises are exceeded. You know it does, it makes it much easier. Yeah, it's the challenges and it's a good challenge. Is your competitors probably also doing it as well. Right. And, and so now it's a race to, to perfection. Right. And who can get there and who wins?

Well, I mean ultimately the consumer wins at the other and the journey to that point is going to be a lot of benefits for the, for the other players.

Yeah.

The other part of it if I might add, with those basic skills that you have now brought the competency of your organization up, both your manufacturing aspect and of your employees, you've got the greater competency and let us say our example, injection molding, metal forming, high speed assembly, but you've got those customers. Now what I would suggest you do is you look for complementary products to both your customer and to your processes. I wouldn't necessarily buy a competitor but I would have gone back and looked at a closure manufacturer or a pump manufacturer. So I would have given my customer a more complete basket to make it easier to be a one stop shop for me, you know, e through an alliance, a JV et cetera, find out those skills, get more profit, maybe go back and acquire them at some point. But those are the things that I'd be looking at from a market development aspect. Again, it doesn't answer the question, okay, we got greater, but how are we going to sell? I'm going to sell this excess time, it doesn't answer that question in the immediate term, but it gives you that forward thinking as you continue to strive and drive towards perfection as you were talking about, these become other opportunities.

Hey, what's your, your take on your, your thoughts, opinions on this whole AI movement coming in and, and really taking, playing a major role in just about any industry. What, what are you, what's your thoughts?

I, I, if it's inevitable, we might as well go back and enjoy it at the end of the day, you know, or celebrate as a going forward. But I would not necessarily, again, I would not necessarily jump into it. Two reasons. One is it's hugely expensive. I would not jump into it. If I came into an operation similar like I was talking and we had a 50%, you know, operating efficiency. To me there's too much inefficiency and too much learning that for me to buy a system that would encompass all of that would be hugely expensive. Plus I think the artificial intelligence is going to have to go through some learning to be able to get to some of the points, to be able to figure some stuff out. And I could be dead wrong on that. I would go back again in the process we talked about initially. Get the employees, you know, the tools, the six sigma, the 5s, the liens, et cetera, do that, drive your profitability. That, that way it is easier for you to write that check and the system will not be as encompassing, I don't think initially because all your variation, a lot more variation is out of the process. It'd be that much easier to allow the AI to start learning the process because you'd be putting in better inputs. Yeah, and let it iterate from there. But that's to me a lot of money up front to be able to do that. But that's, systems don't necessarily solve the problems initially. Let's get the human aspect going and supplement it with this. Let everyone else do the higher level work.

Yeah, for sure. Got it. Well, hey, let's just maybe to wrap things up, John, say there's some manufacturing leaders listening right now and they're all about it. They agree, they're nodding their head and yes, we've got to get better at productivity and so forth. What are some practical tips or pieces of advice that you would give to that leader?

Call 914-282-3469. My advice to them is don't do everything at once. Go back in, make sure you have a good qualitative system in place so you can not just respond to today's issue. But you can go back and look over two, three, four months a year. What is the biggest issues that you have? And not necessarily in dollars. I like looking at in the concept of incidents, how many times does that something happen because that's pulling, pulling away from the operating time and it's pulling somebody in to do corrective action to it. And as you can start reducing those aspects. But I would go back in, as we talked about before, again, the obstacles to productivity, qualitative issues, downtime issues, material losses and health and safety. And again, preaching the choir. I know a lot of guys do that. Go back and look at your overall operating equipment effectiveness, try to relate that to the financial aspects of it and see where your opportunities are.

Yeah, got it. Well, good stuff John. Hey, I appreciate you coming on. Keep up the great work and. And yeah, let's go after some oee.

Amen. Amen.

Take care.

Thank you.

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