STI-CO Industries, Inc.

ISO9000 & Lean Implementation

> RESULTS

  • 70% reduction in lead times
  • 90% improvement in on-time delivery
  • Increased inventory turns from 3 to 7 annually
  • ISO 9001:2000 Standard certification received in required time frame
  • 43% increase in annual sales
  • >500% increase in net operating profit
  • Improved internal processes and reduced customer rejects

> COMPANY

STI-CO Industries, Inc. (STI-CO) specializes in the design and manufacture of covert, tactical, and public safety antenna systems. The majority of STI-CO's customers are local, state and federal government agencies within the continental U.S., Canada, and Mexico. In addition, they partner with major high profile OEM customers.

The woman-owned business, founded in 1967, had sales exceeding $3 million for FY 2006. Manufacturing operations are conducted within a single level facility of 10,000 square feet located in Orchard Park, NY. The company currently employs 30 people including about 20 non-union production personnel. STI-CO's primary competitors are generally large, multi-national companies that have significantly more financial and people resources. STI-CO successfully competed with these manufacturers based on its ability to develop and introduce technologically advanced products as evidenced by the number of patents awarded to the company.

> SITUATION

For several years following record sales in 1999, STI-CO experienced a stagnant sales base and marginal profitability. Part of this was attributed to sales and marketing issues, including an over reliance on federal government business. However, there were also a number of operational and quality issues that also contributed to this situation. Even though considerable investment was traditionally made into R&D and new product development, there were some design issues that limited market penetration and customer satisfaction. In addition, the company experienced more customer returns than desired — potentially putting a key account relationship in jeopardy.

STI-CO's ability to effectively service its customer base also required improvement. Lead times were generally 2-3 weeks in a market that needed quick response, and on-time delivery averaged less than 50%, which further exacerbated the situation. Related to the above performance, the company's inventory turns were low at about three turns annually.

Company management believed that a lean manufacturing approach could help address and resolve the operational issues, and that an ISO 9001 quality system could improve quality and provide marketing impetus. Due to limited internal resources, STI-CO engaged the services of Insyte Consulting (Insyte) to simultaneously support these two initiatives.

> SOLUTION

The first step was to introduce all employees to the principles of lean manufacturing through a full-day workshop which combined classroom lecture with a live simulation. Not only did this session provide basic knowledge in lean manufacturing methodology, but the participants were also able to relate to applying these concepts in their specific work areas.

The next step was to complete a high-level value stream map of the entire organization for both current and desired future states. Subsequently the value stream mapping exercise enabled the combined teams of STI-CO and Insyte to formulate a comprehensive implementation plan utilizing the appropriate tools of lean manufacturing for each of the major product lines. Based on the results of the mapping process, cross-functional teams of 3-4 members each were established for work place organization (5S), cellular flow and pull systems (Kan Ban). After receiving basic training and orientation, the teams began introducing these concepts into key production areas. Following that the teams worked with the entire employee base to proliferate these improvements throughout the organization.

STI-CO and Insyte began the process of building and implementing an ISO 9001:2000 compliant quality system, with the goal of achieving certification within one year. An internal project leadership team was formed and, combined with facilitation from a certified ISO 9001 system consultant, they expeditiously guided the organization through the project.

An initial review of existing procedures and documentation was conducted at the outset in order to develop a realistic project plan. An overview of the ISO 9001:2000 standard was presented to all employees. This overview set a strong, common foundation of understanding across the organization and validated the importance of the ISO implementation to the company's future.

The management team developed a quality manual, along with a quality policy and quality objectives to provide the structure for a system that was aligned with the company's vision. An ISO registrar was also selected and scheduled for the formal audit. Personnel were trained in process mapping to assist in development of internal procedures. Teams were assigned to develop area and process specific procedures, while Insyte reviewed the created documentation and coached the team to ensure compliance to the ISO standard.

Internal auditor training was also completed. The internal audit schedule was created and one complete audit cycle implemented. Review of the quality system was done through weekly meetings with the project management team. This aided in the system implementation while developing the practice of management reviews required by the standard. An accredited registrar conducted STI-CO's registration audit and the company received their formal ISO 9001:2000 Standard certification in November, 2006.

Over a two year period STI-CO experienced phenomenal results in terms of operational and quality improvement. Lead times were reduced from an average of 2-3 weeks to less than 5 days. Likewise, on-time delivery improved from as low as 46% to 90%. This enabled the company to increase inventory turns from 3 to 7 annually with the expectation of increasing to monthly turns on a regular basis.

From a quality perspective, the ISO 9001 quality system enabled the company to improve internal processes and minimize customer returns. Most importantly, these significant improvements enabled STI-CO to accelerate growth and substantially increase profitability through business expansion. Annual sales increased by 43% and net operating profit increased by more than 8 percentiles as a percentage of sales. This was accomplished by solidifying business with current accounts as well as obtaining 150 new customers with a more diversified business base. Finally STI-CO's management believes that these improvements have established the foundation for continued growth, particularly in regard to new product development, increased inventory turns and a formalized supply chain management/ purchasing agenda.


"The lean manufacturing and ISO quality programs initiated with assistance from Insyte Consulting have enabled us to gain a competitive advantage within a very demanding market. The ability to better meet customer expectations has been critical for us to sustain sales growth and profitability over the long term." - Kyle Swiat, Vice President, STI-CO Industries, Inc.