Walking the Walk

Success is measured in many ways. For public companies in North America, there are a number of key parameters. Revenue growth, stock price, shareholder equity, and earnings per share are some of the more visible metrics.

Based on these measuring sticks, Multi-Color Corporation (MCC), headquartered in Sharonville, Ohio, is a very successful company. Under the leadership of Frank Gerace, president and CEO, its revenues have increased 123 percent during the last five-year period, coming in at $222 million for its 2007 fiscal year. Its impressive earnings growth during that same period has provided shareholders with an overall five-year annual return of 22 percent.

In October of last year, Multi-Color was listed, once again, on the Forbes Best Small Companies list, ranking 86th. Forbes judges the companies based on return on equity, along with sustained sales and net-profit growth over 12-month and 5-year periods.

According to Dirk Edwards, director of marketing for MCC, the company provides innovative decorating solutions to many of the world’s largest consumer goods companies in markets including automotive, beverage, food, health and beauty, and household products. It can supply primary product labeling incorporating any of five primary technologies—cut-and-stack, in-mold labeling, heat-transfer, pressure-sensitive, and shrink-sleeve.

Not a company known to rest on its laurels, Multi-Color recently signed an agreement to acquire Collotype International Holdings. The acquisition of Australian-based Collotype, with operations in Australia, South Africa, and the U.S., will add a major presence in the global wine and spirits market to go along with MCC’s strong position in the consumer products markets.

There are many factors that contribute to this level of growth and success, not the least of which is strong leadership that sets direction and provides the resources and rewards to support implementation. One course of action that has contributed to MCC’s bottom-line success has been its embrace of Lean Manufacturing principles.

Being Lean

There are many aspects of Lean Manufacturing that are important, but two of its overriding tenets are: focus on the customer and focus on value. Put these two concepts together and one gets a focus on adding value for the customer—anything in an operation that doesn’t add value for the customer is waste and should be eliminated from the operation.

Implementing Lean Manufacturing principles encompasses all aspects of a business and involves all of its people to make it work as intended. Because of this, “Lean commitment starts at the very top of organizations,” says Bret Arnone, director of operations at Multi-Color.

The company has taken this to heart. “Last year the entire executive team of our business including our president, VP of operations, director of operations, VP of human resources, and all plant managers participated in a day-long training event to cement the disciplines involved with Lean,” says Arnone. “External consultants and internal trainers have been used in these sessions, as well as at [MCC] facilities for week-long Kaizen events.” Kaizen sessions are designed to involve operators in analyzing and improving specific processes and workflows.

In addition to training at all levels of the organization, MCC also gives its employees a personal stake in its implementation and outcomes. “All of our plant personnel participate in a variable compensation plan and know how their effectiveness and efficiencies directly impact the bottom line and their quarterly bonuses,” he notes. “In addition, as part of our performance management system, an element of each associate’s performance review is based on active participation in Lean Manufacturing activities.”

A key element of making improvements is the ability to measure results. This is clearly part of the equation at MCC. “Lean/Kaizen events include the tracking of efficiencies gained and the tracking of any potential offsetting metrics to assure the core initiative is truly successful and sustained,” reports Arnone. “We realized significant makeready reductions across multiple facilities last year using Lean events, which have resulted in increased capacity and total throughput.”

Tracking potential offsetting metrics recognizes that efficiencies gained in one area might require more efforts in another area. The key is that the overall initiative is successful on the bottom line, with lasting, sustained results.

It is also important to note that some of these Lean initiatives resulted in increased capacity without requiring significant capital expenditures for equipment. For Multi-Color, with seven manufacturing operations in the U.S. (before the integration of Collotype), the potential for increased production capacity can be significant. To leverage gains across all of its plants, MCC benchmarks the performance of each of its operations. “Monthly key performance indicators for all plants are tracked and compared across our business,” says Arnone, explaining that “best demonstrated practices are implemented as results of exceptional performances are noted in any single metric.”

Information is key

One area in which companies may need to invest when implementing Lean Manufacturing is information technology in the form of management information systems (MIS). Much of what Lean Manufacturing requires depends on accurate, timely information available throughout the organization.

Multi-Color addressed this need by introducing a new IT directional strategy at the beginning of last year that “focuses on better aligning our systems with the business strategy,” reports Greg Myers, VP of information technology. “Improvements over our current operations include standardization of production systems to leverage best practices, streamlined processes, and improved information availability. We are also focused on delivering solutions that will better scale in size and global reach to support the company’s global growth direction.”

As part of this effort, the company turned to Radius Solutions and its flagship PECAS Vision software. There were several criteria that were important to MCC in this selection.

“Radius Solutions provides an integrated system that is developed specifically to handle the unique processes and data requirements in our industry, and is integrated across the entire production process and across multiple manufacturing facilities,” says Myers. “Additionally, it was important to implement a single solution capable of handling the additional complexity of multiple labeling product and production technologies.”

According to Myers, aligning the objectives of the MIS with the goals of the organization is a critical piece of the puzzle. “The most important thing is to ensure that the MIS is properly aligned strategically, organizationally, and operationally with the business,” he stresses. “This ensures that we share common goals with the business—including Lean—and we work closely with the business to deliver integrated technology solutions that enable streamlined business processes, facilitate efficient cross-functional hand-offs for continuous flow, and provide information including the Key Performance Indicators (KPIs) that measure success, as well as help us to identify improvement opportunities.”

Multi-Color is keeping its Lean Manufacturing efforts going full bore. Myers spells out two important efforts and their expected outcomes.

“A business process optimization project is just getting underway with a focus on streamlining production processes within the system and eliminating waste in the process flow hand-offs between functional groups or work centers,” he reports. “We are also preparing to develop a business warehouse, leveraging the technology introduced as part of our SAP financial system initiative, to provide better analytical tools and improve the availability, usability, and timeliness of the key production performance data.”

Values

According to MCC, its mission is to “be the premier global supplier of decorating solutions and services for our valued shareholders, customers, and associates.” To support this mission, MCC has developed a Company Value Statement. Several of the core values listed encompass the essence of what Lean Manufacturing is about:

• We will listen to the voice of our customers and will match our capabilities and processes to their needs.

• We will relentlessly pursue continuous improvement.

• We focus our resources to drive predictable, sustainable sales and earnings growth.

• We believe the continuous learning and tenacity of our associates is key to their development and success.

Based on its track record during the last five years, it’s apparent that Multi-Color “walks the walk.” pP