05 03 16 09 KUDU Buyer Seller Presentation

Kudu Industries Journey to Lean : Kudu Industries Journey to Lean The Good and the Getting There


Today’s Discussion : Today’s Discussion What the Heck is a Kudu? Lean Management Our Successes Cultural Change; Commitment & Perseverance; Training; Purchasing Procedures; Inventory Management; Supplier Relations Our Opportunities Measurement; Training; Company Wide Vision; Functional Procedures So What? Questions?


What’s a Kudu? : What’s a Kudu? What’s a Kudu?


Kudu Industries Today : Kudu Industries Today Private company founded in 1989 Based in Calgary, AB with field offices in Canada, Kazakhstan, Australia and distributors in the USA, Asia, Middle East, Russia and South America Manufacture and distribute Progressive Cavity Pumping Systems (PCPs), downhole production tools, driveheads, and power units 140 employees $46mm Sales per year ISO 9001-2000 Certified


Our History : Our History Sales grew at 50%/year to $36.3m in 1997 Staff grew from 2 in 1989 to 110 in 1997 Won recognition as one of the 50 Best Managed Private Companies in Canada in 1997 Then… Had a NDE in 1998


What Happened? : What Happened? Sales per employee had declined from over $500,000/yr to 330,000/yr Quality was declining, i.e., inconsistent Profit margins were declining (to 2% A.T.) Stock-outs and late deliveries were increasing (200+ in 1997 >> 7 in 2004) Inventory and bank debt were soaring Identified $3.7m/yr in Value Not Added!


The Result : The Result Sales crashed by 60% in Feb/98, caused by the oil price collapse Inventories ballooned to 13.8m, due to outstanding over-orders Kudu was insolvent by April 1998 Sales declined another 40% in 1999


We had to do something… : We had to do something… Lean Thinking?


The Meaning of Lean : The Meaning of Lean To become “fit” or “athletic” in terms of business and operational performance To systematically – and continuously – take out waste or “muda” out of every aspect of a company’s operation (across all supply chains) To challenge the traditional and status quo To bring out the best in people and allow teams to develop ideas and implement changes To focus on long-term, sustainable changes as opposed to short-term gains A way of life, never ending journey toward world-class status


7 Forms of “Muda” : 7 Forms of “Muda” Overproduction Producing more or sooner than customer needs Waiting Long periods of inactivity; people, info, machinery, or materials Transportation Excessive movement of people, information, or materials Inappropriate processing Using wrong tools, procedures, or systems Unnecessary inventory Excessive storage and delay of information or products Unnecessary motion Any motion which does not ad value Defects Frequent error in paperwork, product quality or delivery


Kudu Results After Lean : Kudu Results After Lean Very viable company with reserves…Lean generated 10.5mm in cash Capitalizing on market opportunities at a rapid pace Growing at 45% per year Attracting quality people, suppliers and customers


How Did We Do It? : How Did We Do It? Cultural Change Commitment and Perseverance Training Purchasing Procedures Manufacturing Tools Inventory Management Supplier Relations


Cultural Change : Cultural Change Vision Develop a clear vision Communicate the vision Make it easy to understand Accountability and responsibility Flip the org chart Transfer responsibility to shop floor purchasing, inventory, order management Trust Open the books Remove the fear of change… no layoffs


Commitment and Perseverance : Commitment and Perseverance Rome was not built in a day… 18 months of weekly company wide mandatory Lean meetings Maintain the energy Benefits are not immediately visible .. stick with it


Training : Training Jobs are banded Raises ties to increased skill sets through training, not time Training allowance per employee $2500/annum


Purchasing Procedures : Purchasing Procedures Pushed responsibility for purchasing down to the lead hands on the shop floor Eliminated a “go between” department (Muda) Fewer processing errors, faster overall process…those in the know make the decisions


Manufacturing Tools : Manufacturing Tools J.I.T. with Kan Ban, pull through Manufacture of one-offs, no batches 5S Value stream mapping Spaghetti diagrams Shop floor organized by value stream, not function


Inventory Management : Inventory Management Developed tools for inventory management: Pull through with current data Kanban system (2 bins) Visual inventory Supplier involvement in the process


Supplier Relationships : Supplier Relationships Financial success requires a strong relationship with suppliers…one where Muda is mutually eliminated Review your suppliers using your criticality vs clout matrix “Partnerships are the most difficult relationships to manage – that is why the divorce rate is so high”, and “In business competition, why does one partner have to win when the other looses?” Brian Hesje, CEO Fountain Tire


Supplier Stories : Supplier Stories Early on invited two key suppliers to take a Kudu sponsored Lean course One supplier bought in and changed their system to reduce our lead time from 3 weeks to 1 week Kudu rewarded them by paying them 2 times faster Second supplier chose to “keep costs down” by continuing with batches (President of this company is an accountant). Kudu in-sourced this work and the supplier almost went bankrupt.


More Supplier Stories : More Supplier Stories Other suppliers adopted our Kanban system which reduced our inventory costs and freed up shop space One supplier continued with batches…quality issues were multiplied by their batch size…Kudu changed suppliers Another supplier required year long forecasts which don’t fit with Lean…Kudu eliminated the need for their product…supplier adapted to smaller batches Overseas supplier “read the book” & developed their own Kanban system to reduce our shipping costs… total savings $650k/yr


Next Steps with the Suppliers : Next Steps with the Suppliers Continue to work with suppliers who can reduce cost, supply when needed, and improve quality Work on supplier integration program (through CME) that provides both Kudu and supplier timely demand and pricing information Expedite purchasing so Kudu personnel can spend time adding value instead of tracking/chasing PO’s Move toward “all in one” receiving and payments thus removing Muda in the process of matching and paying cheques manually Closer integration will allow us to cement relationships and work towards more removal of Muda


Our Opportunities : Our Opportunities Measurement Training Vision Further Functional Procedures


Measurement : Measurement What does success look like? Benchmarking Metrics Pictures


Potential Scorecard : Potential Scorecard


Training : Training Our success has become an issue for us…


Vision : Vision Did a great job on the Lean vision with our manufacturing and support staff… Failed to include sales and engineering Disconnect on company direction created “outsiders” to the process company “lingo” not universal Lean Product Development Use the value stream teams to streamline the development cycle Design and build product


So What? : So What? Lean works Lean is doable start internal, make it visible, and spread it to your suppliers… the customers will follow!


Typical Achievements of Lean : Typical Achievements of Lean


Kudu Achievements with Lean : Kudu Achievements with Lean Waste reduced by 50% Input cost reduced by 20% Inventory reduced by 65% Production capacity increased 500% $10.5mm in cash generated over 60 months


Questions?? : Questions??


Contact Info : Contact Info Matthew Kenna, CMA CFO and VP Field Operations Kudu Industries Inc Matthew.kenna@kudupump.com