Assume you are a Business Analytic consultant; explain the process of adopting analytics process for LNT and state the implications on LNTs business
Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique Small Manufacturer
Case
Author: Joseph Warren Clark
Online Pub Date: January 15, 2020 | Original Pub. Date: 2017
Subject: Management Information Systems, Family Business
Level: | Type: Direct case | Length: 8804
Copyright: © 2017, JITTC, Palgrave Macmillan. All rights reserved.
Organization: Lie-Nielsen Toolworks | Organization size: Small
Region: Northern America | State: Maine
Industry: Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles
of straw and plaiting materials
Originally Published in:
Clark, J. W. ( 2017). Analytics at Lie-Nielsen Toolworks: Custom-built data tools for a unique small
manufacturer. Journal of Information Technology Teaching Cases, 7, 79– 91.
Publisher: Palgrave MacMillan UK
DOI: http://dx.doi.org/10.1057/s41266-017-0017-3 | Online ISBN: 9781529700640
© 2017, JITTC, Palgrave Macmillan. All rights reserved.
This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2021 SAGE Publications Ltd. All Rights Reserved.
The case studies on SAGE Business Cases are designed and optimized for online learning. Please refer to the online version of this case to fully experience any video, data embeds, spreadsheets, slides, or other resources that may be included.
This content may only be distributed for use within Seneca College. http://dx.doi.org/10.1057/s41266-017-0017-3
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 2 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Abstract
Lie-Nielsen Toolworks (LNT) is a small, family-owned company manufacturing very-high quality woodworking tools in coastal Maine. They face three major challenges: the sparse rural labor market makes it difficult to find and retain talent; their extreme quality standards lead to scrap and rework; they struggle to forecast demand and schedule production due in part to offering a large number of SKUs in small quantities. Having reorganized the factory layout and upgraded its CNC machines over the past two years, LNT is now turning to information systems and analytics as tools for improvement. Advised by an internal IT staff of one, an external ERP partner, and a consultant from the state university, Tom Lie-Nielsen must decide how to approach these information technologies, what benefits he can expect, and what organizational changes might be necessary to effectively leverage them.
Case
Keywords: business analytics; manufacturing; ERP; Lean; API; family-owned business
An Heirloom-Quality Tool Maker
It might be fair to say that no other company in the world does what Lie-Nielsen Toolworks (LNT) is trying to do: manufacturing over 100 different products in small quantities, while holding themselves to extreme quality standards, and doing it all with a labor force drawn from a sparsely populated rural area.
Here in a small factory on Route 1, the scenic highway along Maine’s coast, the world’s premier maker of wood-working hand tools brings long-vanished tools and techniques back to life. Now a veritable pilgrimage site for woodworkers, the company began in 1981 with one man casting bronze in his backyard in nearby West Rockport to re-create a discontinued Stanley hand plane, the “no. 95” (Figure 1). In just over 35 years, Tom Lie-Nielsen’s company has grown to about 90 employees making a broad assortment of tools including planes, chisels, saws, and more.
Three issues in particular combine to make this small manufacturing business uniquely challenging:
• Because LNT offers over 100 tools that sell in relatively small (hence unpredictable) quantities, LNT struggles to forecast demand and schedule production of the right tools at the right time, resulting in stockouts and backorders.
• LNT’s uncompromising quality standards mean it must cope with scrap and rework when raw materials or finished products do not pass inspection; and re-orders of some parts, such as metal castings from the foundry, can create substantial delays in production.
• The small-town setting means that experienced local talent is rare-to-unavailable, so LNT must work hard to find workers with potential, train them from scratch, and retain them once they have acquired marketable skills.
These challenges have increasingly been at the top of mind for Tom Lie-Nielsen and his management team. Despite revenues of approximately $9 million, sales growth of about 10% from 2015 to 2016, and a cult following of enthusiastic customers, LNT is making almost zero profit. The business needs some kind of change if it is to be sustainable for much longer. With this in mind, over the past two years Tom has made major changes to LNT’s manufacturing space, redesigning the shop layout, adding more square footage, and replacing aging Johnford CNC machines with a dozen new American-made CNCs from Haas Automation.
Figure 1: A Lie-Nielsen no. 95 bronze edge plane.
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 3 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Now satisfied with improvements to the physical space, in 2016 LNT is increasingly focusing on information systems and analytics initiatives to try to achieve further strategic and operational improvements. Drawing on the skills of an internal IT staff of one, an offshore ERP partner, and with help from a faculty member at the University of Maine acting as an analytics consultant, Tom is working out how best to implement information technologies in his operations, what benefits he can expect from them, and whether and how the business might have to transform in order to leverage them effectively.
Struggling to get manufacturing working right over the past few years has dampened spirits in LNT’s management team, forcing them to divert precious attention away from what they would really love to be doing: rediscovering classic hand tools, bringing them back to life for modern wood-workers, and sharing the art of hand tool woodworking with the world. Sitting for an interview in a classroom surrounded by antique tools, LNT’s marketing director, Robin Nolan, put it this way (Figure 2):
Let’s just imagine that we live in a world where the shop just hums. Things go in, things come out, it’s the right thing, the right quantity, the right time. Customer orders are being filled in a timely manner and there’s no big hiccups. Let’s just pretend, because that is a fantasy. Well, now, what should we do?
It would be really great to, number one, get back into the tool prototyping mode. Look around us! We are in LNT’s classroom, surrounded by an eclectic collection of old and new tools. We’ve got all these treadle tools, all these human powered… works of art, basically. It’s not like Tom’s going to be making a pedal-powered scroll saw any time soon, but why not bring back to life a bunch of other cool, simple things? They just take the time and energy to produce. It’s not difficult, it’s the attention.
And then, the whole other side of that is, community building and reaching out to the people who use the tools, or who are interested in using the tools. A lot of children, a lot of women, people who maybe never had exposure while they were growing up to what this is all about. That’s where I get really excited.
Figure 2: Lie-Nielsen Toolworks factory and employees.
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 4 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
The Particulars
Legal name: Lie-Nielsen Toolworks, Inc. (Figure 2)
How to pronounced Lie-Nielsen: lee NEEL sen Web address: https://www.lie-nielsen.com/
Founding date: 1981
Mission statement: “Our Mission is to design and create beautiful, heirloom quality, hand tools that inspire wood-workers and other artisans. Through exceptional support and education, our customers receive the same personal attention we put into our tools.”
Ownership: privately owned by Tom Lie-Nielsen and family
Revenue: about $9 million in 2015
Workforce: about 90
Main product lines: hand planes (several types), saws, chisels, other cutting and joinery tools, and workbenches, manufactured by Lie-Nielsen Toolworks; as well as carving tools, axes, sharpening supplies, books, and DVDs made by other manufacturers. About 90% of revenues come from sales of Lie-Nielsen products and 10% from resale.
Sales channels: e-commerce website, hand tool events and workshops nationwide, storefront on Route 1 (a coastal highway with heavy summer tourist traffic), and resale by authorized dealers (mostly outside the USA). Orders are about 80% retail to individuals, 20% wholesale.
Key suppliers: ductile iron castings from Enterprise Foundry in Lewiston, Maine; bronze castings from Babs Foundry in Massachusetts; steel for blades ground and laser cut; wood from several sawyers in New England and Pennsylvania; custom turned parts from three small family-owned vendors; Swedish steel for saw blades.
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 5 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Tools for resale from, for example, S.A. Wetterlings (axes) and Forge de Saint Juery (carving tools).
Manufacturing activities: Metal castings fresh from the foundry are shaped first in computer-controlled Haas CNC machines. Machining is finished on manually operated Bridgeport milling machines, and parts are hand- polished. Wooden parts such as handles and knobs are, similarly, machined then hand-finished. Tool blades are CNC-machined but also heat-treated and cryogenically treated for hardness, then ground and honed to a sharp edge. Finished tools are assembled by hand. Saws and workbenches have their own distinct manufacturing processes not detailed here.
The Challenges Human Resources
When asked what was the biggest challenge they faced, without exception LNT’s managers mentioned human resources first. Tom said, ‘I think our biggest challenge at the moment is finding good people in mid- coast Maine. Because we’re in a small population area, [where] the primary industry is tourism and fishing, there aren’t a lot of people with the qualifications that we need, not only for the shop but more specifically for management.’ Robin answered that ‘the biggest challenge that we face, and maybe this is true of most organizations, is mobilizing the right people at the right place at the right time and getting them the tools to succeed and a clear set of expectations to fulfill, and if they don’t, then have a measurable way of identifying that and doing something about it.’ Even the IT manager, Caleb Pusey, replied that the biggest challenge for the company is ‘finding qualified employees and retaining them’ before saying anything about IT.
As part of its commitment to quality, LNT is “stubbornly local” and relies on a local labor force rather than outsourcing. However, Maine is a sparsely populated state with a relatively weak economy and a shrinking labor force (see, for example, Murphy, 2015), and like many rural states it suffers from “brain drain” as many of its best and brightest move south and west for higher-paying jobs. It is now the oldest state in the nation, narrowly beating Vermont and New Hampshire to have the highest median age according to the U.S. Census Bureau. For local businesses like Lie-Nielsen Toolworks, this means that they cannot count on finding many skilled machinists hanging around unemployed in the area. (Or management, or IT talent, for that matter.) Instead, they must train skills and cultivate talent in the workers that mid-coast Maine provides. Tom said ‘I have always taken people who are inexperienced, who have some basic mechanical aptitude, and been able to train them to do good work in the shop.’ LNT has sometimes been fortunate enough to recruit talented people from out of state, either attracted by his company’s reputation or by the geographic setting of coastal Maine. ‘If I can find people from away, I’m mostly looking for people with skills to bring to the table. … We’re not looking fora lot of people, we’re looking for some good people.’
An additional challenge is that of retaining employees once they have been hired and trained. Once a worker becomes an experienced machinist or CNC operator, for example, he could then market those skills to obtain a job elsewhere, where salaries are higher than those typical in Maine. Thus, Lie-Nielsen continues to suffer a very high turnover rate in certain categories of employment, especially but not exclusively on the shop floor. Robin relates that three years ago at Christmas (the busiest season for almost any retail company) the entire sales office was staffed by only one person. “So people gravitated toward that need and filled it as best they could.” This company of only about 90 people has adapted to occasional human resources crises by taking an informal attitude toward job titles and pitching into help with whatever needs to be done.
Planning and Factory Management
Although management believes that LNT has the capacity (in theory) to make all the tools its customers want to buy, its huge backlog of backorders (both wholesale and retail) testifies to the fact that it has not been making the right tools at the right time. Robin explained, “It’s always been apparent how much we can’t keep up with demand, so that if there were a place to really push on it would be production, to make sure that we can create tools of our quality standards and get them into customers’ hands when they ask for them. The situation has never quite been that way.”
Some of the reasons for this were an inefficient shop layout and aging, poorly maintained machines, but over the past two years Tom has made a major overhaul of the factory and purchased all new CNC machine tools
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 6 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
from Haas Automation. Now the main challenges are first, planning what to produce, and second, improving management in the factory. One of the biggest challenges for production planning is the problem of scrap, or waste. With LNT’s exacting quality standards, a large percentage of work in process may be scrapped either due to casting defects discovered while machining, or from a manufacturing error. Even in cases where the problem is a defect in the metal casting that comes from the foundry, not LNT’s fault, it is often only after several man-hours of wasted effort that the defect is discovered. The critical effect of either type of waste is that it disrupts the company’s ability to forecast its own production. A typical example is that LNT might order 100 castings for a particular hand plane from the foundry and make its forecasts based on an expectation of having 95 finished tools in three weeks’ time, but a bad batch of castings or a new trainee in the shop might mean that, at the last minute, only 75 are finished and ready to sell. The store could find itself out of stock, and customers might cancel their orders or buy something else. In response, management often finds itself putting other plans aside in order to make new, emergency production plans to cover the shortfall.
Complicating the issue of production planning is the fact that some parts, such as tool blades, require a much greater lead time than others, and therefore must be started earlier. Not only does this require that forecasts of demand extend even farther ahead, it also makes production more complex to manage because different parts of the shop will be working on different tools. Machinists might be working on this month’s tool bodies while the blade shop is working on next month’s.
In addition to planning, Lie-Nielsen has had trouble translating high-level plans into directions for its manufacturing workers. “Something that we have always talked about,” said Robin, “and not been able to hold on to over a long period of time, is good scheduling, and sticking to the schedule, and then disseminating the plan all the way down and having every step of the way work. It doesn’t do any good to look at the demand, set up a schedule, and then have the operator produce only a fraction of what you wanted because of whatever reason, either poor planning, or not enough advance notice, or nobody could find the setup sheet or the drawings or the actual program for the CNC.”
With so many different types of tools made on the same machines, it can be surprisingly difficult for factory workers to find out at the beginning of the day what they should be working on. These workers depend on instructions from a few department managers who have traditionally kept notes with pencil and paper, then entered production and scrap totals into a spreadsheet report at the end of the day. This takes time away from the work they need to be doing on the shop floor, and also means that the data are often entered late and inaccurate. As a result, Tom cannot fully trust the numbers and must visit the shop floor himself throughout the day to get an accurate picture of what is happening on the machines.
It comes back to human resources, as does every aspect of this business. For Tom, “the most important decisions right now have to do with the production area, in the shop. Not the day to day scheduling, but the management of the production areas, which include machining, grinding, polishing, wood shop, assembly… and organizing that. Since we’ve reorganized the physical environment in the shop, workflow is a lot better, and now I’m trying to stabilize and organize the management structure in there so that we have a good group of lead people in each area. And I don’t have as many as I would like right now, because of the fact that we move around some, and we’ve lost a few people in the last couple of years who had those responsibilities previously.”
Robin also notes that “with the high turnover rate there’s not a lot of ownership and accountability.” As Tom has to become directly involved in solving problems on the shop floor, some workers have become overly dependent on him. “Tom has a very, very focused vision and he’s relentless in getting there. But I think that also creates this weakness, a dependency on ‘Well, what does Tom say?’ … A lot of times people sit back, and they ask to be fed, they ask to be driven, which is something that Tom is very effective at doing, but it shouldn’t be his role to the degree that it is currently.”
If Tom is going to be able to free up his own time for more valuable work, he may need to both shore up factory management and make LNT’s production workers more self-directing.
LNT’s Search for Solutions
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 7 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Solving the problems LNT hopes to solve may involve IT and analytics, but there isn’t one obvious best way to apply them. Moreover, other forms of organizational change are also on the table.
Lean Manufacturing
Since so many of Lie-Nielsen’s current problems have to do with not making the right tools at the right time, its management team has done a lot of thinking and talking about lean manufacturing. Also known as “just-in-time manufacturing” (JIT), the Toyota Production System (TPS) or just Lean, this is a philosophy of manufacturing that views the system or process as a whole, and seeks to eliminate waste, thereby improving throughput, at individual steps in the process. Pioneered in Japan, and particularly at Toyota, lean manufacturing is actually a collection of different techniques that can be used to streamline a production process (Deming, 1986; Liker, 2004; Womack & Jones, 2003). Some of its core practices are:
• Single-piece flow of work through a value-creating process as opposed to batch processes with large stockpiles of work-in-process (WIP) inventory.
• Production smoothing (or heijunka) often implemented as “make every product, every day” to ensure steady and predictable rates of work throughout the value stream.
• Pull production in which production orders are triggered by demand from customers rather than by management’s forecast or plan.
One of the best known Lean tools is a mechanism for pull production known as kanban, from the Japanese word for a signboard. In a kanban system, when a product is consumed “downstream” from a work center, that event sends a signal (traditionally, a paper card) “upstream” to tell the work center to produce an additional unit. In an ideal scenario, such a production line would require no “push” in the form of a production plan, but would throttle production at the rate of actual demand. In such an ideal example, if a finished product was sold from the retail store, the store would be one unit short of its usual inventory, so it would request one new unit from the assembly workstation. The assembly station would pick up parts from a finished parts stockpile to make one more unit. Machinists would use raw materials to make just enough new parts to replenish the finished parts stockpile, suppliers would replenish the raw materials in just the right amount, and so on. Thus no more is produced than necessary, the rate of production matches demand, and waste is minimized (Figure 3).
It is sometimes said that lean manufacturing does not solve manufacturing problems so much as it makes them visible. With a pull production system, if limits are placed on the inventory that may be kept in each work-in-process (WIP) stockpile, it quickly becomes apparent which stations work faster than which others – the ones that are idle, waiting for work. In theory, managers can tune the sizes of the WIP stockpiles to the amount of lead time required at each step of the process, and can focus their investments on the bottle- necks. In practice, Lean may be a relative term, as no business implements all of the ideas grouped under this umbrella.
Tom believes that not all parts of his production process are equally suited to Lean:
Some time in the mid-nineties I made a big effort with Lean with respect to inventory and on-time delivery of raw materials. And that took about fifty percent of the value of inventory out in a year and a half, which was really, really good. And I taught my managers Lean, perhaps too well, because we were for a period… not what I would call just-in-time, we were ‘almost-in-time’. We were right on the edge, and I think that for the kind of work that we do, and the difficulties that we encounter, with castings in particular, we need to have some buffers of stock.
Once again, a human resources challenge has shaped the direction LNT could take.
So this year, not only have I been building up inventory a bit more, but I’ve been working a lot with batch size. Which is a very interesting thing to play with, related to the real world and how it affects the real world. One of the constraints you have with machining is the setup time it takes to set up a new job. And with a fairly inexperienced setup crew right now, I have found that I’ve been forced to do larger batches, to not have to have so many setups done every day.
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 8 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Figure 3: An idealized pull production system.
Larger batch sizes are usually discouraged in the lean production world, but Tom has seen some benefits from it that are more in line with the traditional economic idea of economies of scale.
That was a decision forced on me, but at the same time, I have found benefits to that. Because we are making enough tools in some cases to last us three or four months, which means we don’t have to make that batch again for three or four months, so I would consider that within the just-in-time umbrella. But certain operations, particularly machining, if you can do it in a larger batch it’s more efficient. As long as the batch isn’t too big. So I’ve been playing with what’s ‘too big’.
And our most popular tools, instead of making them every month, which is what we generally have done for a long time, I would prefer to make them once every two months, and have the opportunity for a longer run but also to really debug it, get it working great, spend a lot of time on that batch to make it easier and easier next time, so, that’s I think working pretty well. I think I’m headed in the right direction (Figure 4).
This raises a point that may be particularly relevant to a business that relies on a substantial amount of human knowledge in its processes. LNT is almost always training new production workers, and this year in particular, it is also getting familiar with a new brand of CNC machines, so “debugging” in this case may refer to retraining its machine operators, or to adapting CNC programs to the quirks of the machines. Thus, a case is made for larger batch sizes not based on economies of scale, but also as an investment in knowledge.
Finally, Tom explained that some of the post-machining processes are much easier to adapt to Lean.
Now, finishing is different from machining. ‘Finishing’ would be grinding and polishing, assembly, and that can be done just-in-time very easily. Even to order, if we have things queued up that are ‘ready to finish’. And that’s another idea I’m playing with: some tools, where I might only sell a few hundred a year, I might [machine] enough for six months and put half of that batch back in the warehouse to finish it later. And that actually is extremely nice, to have that flexibility. I can grind and polish and assemble a large variety of tools in a given day, where I cannot do that with the machining. So once it’s machined, I have the opportunity to do things a little differently.
Information Technology: ERP and Analytics
SAGE © 2017, JITTC, Palgrave Macmillan. All rights reserved.
SAGE Business Cases
Page 9 of 20 Analytics at Lie-Nielsen Toolworks: Custom-Built Data Tools for a Unique
Small Manufacturer
Caleb Pusey has been on the IT staff at LNT off and on since 2009, sometimes solo, as was the case in the early summer of 2016. Asked what it was like to do IT at Lie-Nielsen, he replied, “Well it’s only me, so you get everything possible from… my printer won’t work this morning, to [developing] web apps, or whatever comes along. It can be a wide range of things, like yesterday, the power was out so I had to reboot servers and figure out why DNS wasn’t working. So it’s a good job to keep all your skills!” As with every job title at a company this size, one has to be willing to wear multiple hats depending on what the company needs.
Caleb related the history of major IT systems at LNT. About the time he arrived, the company was outgrowing a simple accounting system called MYOB, and had decided to purchase an enterprise resource planning (ERP) system. ERP systems are large systems that encompass diverse business applications such as sales, shipping, inventory, manufacturing, accounting, and finance, and tightly integrate all of these applications so that they can work together. For example, employees using the sales application or customers using an e- commerce website can also see which products are in stock, because sales is integrated with inventory, and can get accurate estimates of shipping costs, because it is also integrated with shipping. ERP systems are major investments that affect the whole business, and are believed to convey significant advantages for decision making and management… if done right.
Figure 4: Push and pull production at LNT (simplified). LNT is just-in-time only in the “finishing” stages.
LNT decided to go with SYSPRO, an ERP stalwart, about the time Caleb began working there in 2009.
I interviewed here just as they were going to implement it … I was hired just to be desktop support and light app support. They said, you won’t have to do anything with SYSPRO because we have the SYSPRO guy… The first day I got here I said ‘Hey, where’s the ERP guy?’. He got fired, so then I kind of had to learn it, just read the books, and I didn’t know anything about manufacturing or anything. So it was just, learn it from scratch.
SYSPRO was a very expensive system designed for a huge enterprise, and proved to be too much for LNT’s needs. As a proprietary system, it could not be modified or adapted, so just getting help with technical problems required expensive service calls.
And of course people ask them in a company this size, ‘Can it do this?’ … ‘Oh yeah, it can do tha
Collepals.com Plagiarism Free Papers
Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers.
Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS
Why Hire Collepals.com writers to do your paper?
Quality- We are experienced and have access to ample research materials.
We write plagiarism Free Content
Confidential- We never share or sell your personal information to third parties.
Support-Chat with us today! We are always waiting to answer all your questions.
