Wabash National

Wabash National has made continuous improvement a way of life for its employees in recent years, and now the supply chain is getting the lionÔÇÖs share of the attention, as Keith Regan learns from the team leading the push to embrace change as a way to remain competitive In the first two years of its continuous improvement journey, Wabash National conducted some 375 different improvement events, many focused on making small improvements in operations. Today, the lean efforts are focused on the supply chain as well and have gone from seeking what vice president of manufacturing Brent Yeagy calls ÔÇ£single base hitsÔÇØ to trying to ÔÇ£hit more doubles and even some home runs.ÔÇØThe new targets include major shifts in the supply chain, to transform it from a narrowly focused local or regional supply chain to a truly global organization that can supply what is needed for manufacturing when it is needed. It also involves transforming the companyÔÇÖs main manufacturing facility in Lafayette, Indiana. The changes are all part of an effort by Wabash to become as lean as possible, a necessity in a hard-fought marketplace that is highly cyclical in nature and where the ability to control costs can quickly become a competitive advantage. Wabash is already a leading producer of tractor trailers, including aluminum and composite-plate trailers for dry freight, refrigerated trailers, and its dual-mode RoadRailer trailer, which can travel both on roads and railways. Customers include major carriers, private fleet operators, leasing companies and others in the trucking industry. All told, Wabash has now run some 580 kaizen and other continuous improvement programs, driving a greater than 50 percent improvement in labor productivity and an 85 percent improvement in safety performance simply through changes in how the factory floor operates and is organized. Wabash has also introduced automation where appropriate, testing new methods of production along the way. In 2005, it launched its Alpha Line, which leaned heavily on automated production and was one of the first attempts by the trailer industry to create an automated and integrated assembly line. ÔÇ£It was a $12 million investment, which is unheard of in the trailer industry,ÔÇØ Yeagy says. ÔÇ£We have the type of leadership that is willing to take that risk and learn how to grow in the future. Aspects of that line exceeded our expectations, and there are aspects we would not repeat. But thatÔÇÖs invaluable experience for us as we look to move forward with other innovations.ÔÇØThe latest transformations inside the Lafayette facility are aimed at standardizing product designs to enable the consolidation of assembly lines and managing production with a mixed model scheduling system. This will enable better utilization of the shop floor space over the course of multiple shifts. In the future it will enable the company to change how it stores and delivers materials to the assembly areas. This will help create a higher velocity of material flow, while reducing days on hand inventory and work in progress. Already the shop floor is dramatically transformed, thanks to visual factory tools that ÔÇ£made it clear that we had material sitting around that we didnÔÇÖt need to have there,ÔÇØ according to Yeagy.To boost the supply chain improvement efforts, Wabash invested in an SAP enterprise resource management system that has helped the company better track the various materials that come into its facilities and better plan for when they should arrive. Steve Miller, the companyÔÇÖs vice president of supply chain, said Wabash found it was large enough to go directly to mills that produce steel and other commodities it uses. ÔÇ£We donÔÇÖt have to go to the middle man; we can get our hot-roll, galvanized and stainless direct from the mills,ÔÇØ Miller says. While Wabash doesnÔÇÖt formally hedge against climbing cozmmodities prices, it does follow a feathering policy such as the one popularized by General Electric. It has 100 percent of its aluminum locked in for this quarter, 75 percent for the coming quarter, 50 percent for the third quarter, and so on. ÔÇ£WeÔÇÖre just trying to protect against that thing called ÔÇÿvolatilityÔÇÖ,ÔÇØ he adds. Already the supply chain has gone global, with about 5 percent of materials now coming from low-cost country sourcing and more opportunities being examined all the time. ÔÇ£ItÔÇÖs a global supply chain, so weÔÇÖre always looking at how we can minimize risk and bring down that total landed cost,ÔÇØ says Kurt Gogolin, director of materials. As recently as a few years ago, 85 percent of materials were being sourced from within a 200-mile radius of the companyÔÇÖs main assembly plants. ÔÇ£WeÔÇÖve quickly gone from a very localized to a very global supply chain,ÔÇØ he adds. Assisting with the supply chain revamp is a data warehouse put in place within the past 18 months that enables a range of analytics to be applied against total spending, with data from across WabashÔÇÖs retail network fed into a single location where spend analytics are constantly being updated. ÔÇ£WeÔÇÖve always been a continuous improvement organization, but weÔÇÖre in a cyclical industry that is in a trough of a down cycle right now, while at the same time weÔÇÖre facing rising commodity costs,ÔÇØ Yeagy says. ÔÇ£We know in this market that raising price alone isnÔÇÖt going to compensate for those rising costs, so it forces us to be more aggressive and comprehensive about our improvement efforts.ÔÇØ The supply chain is being viewed as a potential competitive advantage. ÔÇ£We have a very diverse senior leadership team that brings a lot of different experiences to our operations,ÔÇØ says Miller. ÔÇ£We bring these capabilities to bear on our market, and a big part of the strategic plan is to have a supply chain poised and ready to help us take advantage of that capability,ÔÇØ he adds. ThatÔÇÖs especially true as Wabash continues to grow. The company has made several acquisitions in recent years, which help it on the materials and supply chain side and help lower the cost of goods sold. With materials making up some 70 percent of the final cost of a trailer, growing bigger can give Wabash important leverage with suppliers and opportunities for volume discounts. ÔÇ£When we close a significant acquisition, it definitely plays to our advantage,ÔÇØ says Miller. ÔÇ£Almost from day one weÔÇÖre looking at substantial reductions in materials costs.ÔÇØ┬á