IKEA Supplier Gets Lean

Shaw Wood implements big and small improvements to curb production costs and become more globally competitive.

By Rich Christianson

When the first units of ready-to-assemble pine furniture rolled off the packaging line at Shaw Wood’s Cornwallis, Nova Scotia, plant in December 1998, the company became North America’s first independent furniture manufacturer dedicated to supplying IKEA.

Shaw Wood, Division of The Shaw Group Limited
Halifax, Nova Scotia

Shaw Wood manufactures solid pine RTA furniture sold through IKEA’s 23 North American stores. The company’s 100,000-square-foot plant in Cornwallis, Nova Scotia, employs 210 people, including 180 production workers. Company sales were approximately $25 million (Canadian) in 2001.

Three Keys
1. Partnering with global retail giant IKEA provides Shaw Wood with an expanding North American retail market and technical support.

2. Applying lean manufacturing principles leads to reorganizing machines into production workcells. This represents a “quantum leap” for improving workflow and reducing batch sizes, work in process, rejects, lead times and manufacturing costs.

3. Committing to continuous improvement establishes a system for identifying problems and opportunities to further eliminate non-value-added activities.

Ever since, Shaw Wood has striven to improve quality, reduce lead times, cut costs and meet other stringent demands set by one of the world’s largest furniture retailers.

To achieve these goals, Shaw Wood has embarked on a plant-wide initiative to identify and eliminate as many nonessential activities as possible through the use of lean manufacturing and continuous improvement concepts. General Manager Dean Robertson says the successful long-term culmination of these efforts will result in Shaw Wood becoming a “world-class furniture manufacturer.”

Faster, Better, Cheaper
According to Robert Shaw, president of the Shaw Group Limited of Halifax, Nova Scotia, though Shaw Wood has a seven-year contract with IKEA, the company still has to compete for IKEA’s North American orders against manufacturers based in Eastern Europe, China and elsewhere.

Shaw Wood makes RTA solid pine case goods exclusively for sale at IKEA’s 23 North American stores. (All photos by Chris Reardon)  

To offset the major labor-cost advantages of its Eastern European and Chinese competitors, Robertson says Shaw Wood is trying to leave no stone unturned to reduce product costs and speed throughput without sacrificing product quality. The company is especially bent on capitalizing on its close proximity to IKEA’s 23 North American stores and its distribution centers in Montreal, Trenton, NJ, and Orange County, CA.

“Our goal is to make quantum leaps in all departments by identifying and correcting the most glaring problems and then putting in place a process for making continuous improvements,” Robertson says. “By eliminating non-valued-added activities in all departments and increasing response times throughout our plant, we can become more reactive to customer orders and reduce our lead times.

“We are completing phase one of our program and already have substantially lowered our production costs and reduced manufacturing lead times from eight to 12 weeks to four to eight weeks,” Robertson continues. “In phase two, we’ll try to reduce turn-around to a few weeks.”

A Chance Encounter Leads to a Partnership

Shaw Wood is the newest start-up division of The Shaw Group Limited of Halifax, Nova Scotia.

The Shaw Group’s roots stretch back to 1861, when it began manufacturing bricks. Over the next 140 years, the company evolved into a vertically integrated manufacturer of building products. It now makes everything from paving stones and small architectural retaining walls to large concrete beams and drainage culverts.

President Robert Shaw, who has no relation to the founding Shaw family but finds the coincidence to be “quite convenient,” says Shaw Wood was borne out of a desire to find “another renewable resource in this part of Canada that we could add value to.”

One of Nova Scotia’s natural resources that caught the Shaw Group’s attention was pine. “Our original idea was to start a sawmill operation. In doing our homework, we touched base with several government departments, lumber bureaus and lumber companies. We also interfaced with banks and investment groups.”

Local Pine Attracts IKEA, Too
Meanwhile, unbeknownst to Shaw and his colleagues, representatives from IKEA, the Swedish retail giant, were scouting the area’s forests for sources of furniture-grade pine. IKEA, which has approximately 160 stores in 30 countries, rang up $8.5 billion in sales last year; a substantial amount of the total was furniture related.

”As it turns out, the IKEA representatives were dropping in to see some of the same people that we were meeting,” Shaw recalls. “I received a phone call from a government official who told me he had met with IKEA engineers and knew of their interest in finding someone who could add value to our local pine for their furniture products. He helped arrange for us to meet.”

Ironing Out the Details
Shaw says the initial meeting with IKEA officials led to more detailed discussions involving the potential start up of a furniture factory that would be dedicated to manufacturing solid pine furniture for sale in IKEA’s 23-and-counting retail stores in North America.

Over the next several months, representatives of the Shaw Group researched IKEA and its manufacturing supply chain. “We wanted to get a sense of how a relationship could be built around a plant dedicated to serving one very large customer,” Shaw says.

A Shaw Group delegation visited several furniture factories in Europe, including some operated by IKEA’s Swedwood manufacturing division in Poland. Since its formation in 1991, Swedwood has swelled into a multi-dimensional industrial group consisting of 30 furniture and board production plants and sawmills in 10 countries. Swedwood’s only North American plant, which makes composite-panel-based RTA case goods, is located just outside of Halifax.

“After we came back from Europe we told IKEA officials that we would be glad to make furniture for them under certain circumstances,” Shaw says. “I won’t share all of them but it culminated in negotiating a seven-year capacity agreement in which we would dedicate all of our production to their designs. It was geared immediately to the family of products that they were interested in taking to the North American market.”

A Two-Year Ramp Up
Shaw Wood’s 100,000-square-foot furniture factory is an L-shaped structure located on the grounds of a former naval base in Cornwallis, about 2-1/2 hours east of Halifax. The company began remodeling two of the training center’s buildings in early 1997. One had housed an ice hockey rink and the other had served as a helicopter hanger. The two buildings were joined together with the addition of a 20,000-square-foot connector wing.

Shaw says IKEA provided critical technical and engineering assistance during the startup, including the selection of production equipment based on “performance-based specs. In the end we wound up with a list of equipment that could be run to create the most productivity to meet our needs at the right value.”

Staffing the plant posed a particularly interesting challenge because of the dearth of furniture plants in the area, Shaw says. “We did not have a single furniture maker in our business nor was there a furniture factory near our plant. With few exceptions we all learned to operate the equipment and make the furniture together,” Shaw says.

Dean Robertson, general manager of Shaw Wood, says, “We formed sort of a Shaw Wood university before the plant opened up. We worked with community colleges and developed a lot of our own training modules so employees could go through training courses on IKEA grades, the types of parts the furniture is composed of and the processes involved for making each part.”

Now, three years after the Shaw Wood began manufacturing furniture, Robertson says the company has a “great bunch of supervisors and department heads and a great bunch of employees.”

“We’re still a relatively young business,” Shaw says. “All of the opportunities and problems are probably still in front of us. But we’ve enjoyed the experience so far and are quite proud of what we have accomplished in a couple of years.”

— Rich Christianson

Looking further down the road, Robertson says Shaw Wood’s penultimate goal is to reduce manufacturing batch sizes and lead times to the point where it can ship products directly to any of IKEA’s North American stores, which will save IKEA warehouse and distribution costs.

Learning to Run Leaner
While IKEA was extremely helpful in the ramp up of Shaw Wood’s manufacturing plant (see “A Chance Encounter Leads to a Partnership”), the three-year-old furniture company’s managers know its long-term success rests squarely in their hands.

The Busellato feed-through drill was recently installed to boost productivity in the panel machining workcell.  

Robertson says he views the implementation of lean manufacturing and continuous improvement programs as vital steps in Shaw Wood’s evolution. He adds that getting employees to understand how the sometimes-dramatic procedural changes required by the programs will benefit the company and their livelihoods was of paramount importance.

“We started our lean manufacturing program in the last week of

March by hiring a consultant who has expertise in lean concepts,” Robertson explains. “The consultant came in and helped us train everyone in the organization with a one-day session on what lean manufacturing is and how it may work at Shaw Wood.” (The company later hired an in-house lean manufacturer to pick up where the consultant left off.)

The next step, Robertson says, was choosing a department and creating a “lean team” to initiate a pilot program.

“We picked the packaging department because we thought it would be the easiest to implement. Then we selected a team made up of nine employees pulled from various departments, making sure that we had some people who we thought were against lean as well as some of our better team players. We thought if we could convince them (the naysayers) that this was a legitimate project that they would become our salespeople for selling changes throughout the other departments.”

Robertson says the lean team worked with the consultant to audit the packaging department’s processes and procedures. The team scrutinized every detail in developing a laundry list of non-value-added activities. Then the team broke up into three groups to develop ideas for improving the packaging department’s operations before coming together once more to develop a prioritized list of improvements.

“I was extremely impressed with what they came up with,” Robertson says. “We had an industrial engineer working on the packaging department for almost eight months prior to that. His solutions ranged anywhere from $250,000 to $500,000 for purchasing automated material handling equipment. I thought the team came up with much better solutions at the end of the day and we may have spent $20,000 to $40,000 total to implement them.”

Workcells Are a “Quantum Leap”
To really get the packaging department humming, though, meant whipping the departments that feed it into shape. This in turn required balancing labor-reduction and other cost-saving measures in the dry kiln, edge-glued panel making, machining and finishing operations with the need to improve workflow throughout the 100,000-square-foot plant.

Another of the quantum leaps that the lean manufacturing team helped propagate was the implementation of production workcells, Robertson says.

“We were constantly moving around pallets of parts from one machine to another. Now with the workcells we have more of a continuous flow. We’re controlling the amount of material that is being processed at a given time better and have a lot less inventory,” Robertson says. “We’re doing a better job of making sure that the right parts show up at the right time.”

To illustrate his point, Robertson explains how legs were made before and after the production workcell concept was implemented.

“Before, one of our legs would probably have gone through three or four different machining steps. The legs were profiled on the Weinig moulder then put on pallets and transported to the Friulmac double-end machine. They would be carted to another station to have a cleat added to it and then taken to another station to add a little notch to the top,” Robertson says.

Because the parts were often left to languish on pallets between each operation, a leg may have taken five days to complete, and that might not even include the time for repairs and finishing.

“Now that these machining operations are grouped together as a workcell, a leg can go through the entire process and be ready for lacquer in as little as half an hour after exiting the moulder,” Robertson says.

As a side benefit of this streamlining, he says employees can more quickly identify and resolve any machining problems. “If we have a problem creating a high rate of repair, we’re going to know it right away during the process and not two or three days later,” he says.

While the manufacturing workcell for making legs did not require any capital investments, Robertson says Shaw Wood is looking to upgrade some of its processes. It recently installed a Busellato feed-through drill for machining panels, while awaiting delivery of a Cantek moulder.

“The Cantek moulder will be dedicated to producing rails,” Robertson says. “Right now the Weinig moulder is used for rails and legs, so it’s not a true workcell yet. By having two moulders we’ll be able to dedicate one to each cell so part production will flow in line.”

“The workcells are a quantum leap because they have reduced manual material handling dramatically,” Robertson says. “They have made the scheduling of the machining department go from being complex to something that is simple.”

Fine Tuning Is Ongoing
The leg and rail operations are among 10 workcells that have been or are in the process of being created throughout the plant. The other workcells include two more in machining, one in packaging, one in finishing, one in the lumberyard and three in the solid panel manufacturing department.

Shaw Wood has reorganized its manufacturing plant to improve workflow and eliminate the clutter of excessive work in process.  

Once one of the workcells is implemented and initial improvements are made, Robertson says the next step is to continuously improve its operation and flow. Some of the improvements that Shaw Wood has implemented are little, such as reorganizing stations to neatly house basic hand tools, brooms, etc., and posting daily production quotas and the progress toward meeting them where all employees can see.

A more substantial component of the continuous improvement program has been the use of SMED — Single Minute Exchange of Dye — to reduce the time required to changeover tooling.

“SMED involves videotaping changeovers and documenting every step,” Robertson says. “We look for changeover steps that can be done while the machine is still running.

“Typically what happens for a new setup is the operator shuts down the machine and then goes to get his tools or a rag or to find instructions for what to do next. All of these steps could have been done in advance before the machine was turned off.”

By employing SMED, Robertson says changing over the Friulmac double-end machine has been reduced from one hour to 35 minutes, “because we found that 40 percent of those activities could be done while the machine was running.”

The use of workcells and reduction of set-up times has given Shaw Wood the ability to reduce batch sizes, Robertson says. “In the past, production wanted big batch sizes of say 3,000 chest of drawers. Now we’re pretty much down to one or two days of packing so a batch of 1,000 makes sense.”

Next in Line
While Robertson is pleased with the progress that has been made, he says there is plenty of room for improvement. “We still have tons of areas to improve and that’s a good thing. If we were as best as we could be at this stage of the lean manufacturing process then it would be tough for us to become more competitive, especially against factories in China.

During Wood & Wood Products visit, Robertson and his lean team were contemplating major changes related to the manufacture of edge-glued panels that will improve flow, eliminate material handling steps and streamline grading procedures.

An important goal of this project is to reduce the amount of finger-jointed wood that is used in panels, which currently makes up about 5 percent of Shaw Wood’s products. “Sometimes it’s just a matter of putting a ripped board with a knot in its side in the middle of a panel where it can’t be seen. By putting the panel maker in charge of making these decisions we can avoid a lot of unnecessary grading, reduce our reject rate and finger jointing and put out more higher-valued products.”

Eight months after embarking on lean manufacturing there is no going back, Robertson says. “Lean is here to stay and I think our people are beginning to understand that. They have seen a lot of dramatic changes but I think they appreciate that they can contribute and that their suggestions will be listened to.”

After the workcells are all in place, Robertson says the company will look at creating a second shift so that it can nearly double the plant’s production capacity.

“While we are in the process of eliminating a lot of material handling-type jobs, I don’t think we’re going to eliminate many people. The second shift will provide advancement opportunities for some very smart and capable people. I think these changes are going to be mostly positive for our employees.”

IKEA Imposes Tough Standards on Suppliers

If Shaw Wood has learned anything during its five-year relationship with IKEA, it’s that the global retailer has little tolerance for suppliers that do not push themselves to live up to its exacting standards.

“Price of course is important,” says Robert Shaw, president of the Shaw Group, “but quality is one area where IKEA is relatively unforgiving. It also has environmental, working condition and quality system policies that must be met. IKEA’s quality people are in our factory constantly, as they are everywhere (its furniture is made).”

“IKEA is a good customer but tough and very demanding on quality,” echoes Dean Robertson, general manager of Shaw Wood. “You don’t even get in the door if you don’t measure up to their quality.”

Robertson says IKEA auditors have graded Shaw Wood at level three of its four-level quality program. To reach level four requires having ISO 9002 certification, a goal Shaw Wood is actively pursuing.

Robertson adds that Shaw Wood is also in compliance with IKEA’s forestry practices program. “We have a long paper trail between all of our lumber mills and harvesters to show IKEA that our lumber did not come from any old-growth forests or national parks, and that it was harvested in the right way,” Robertsons says.

IKEA has also established rules for environmental and working conditions. “They inspect all of their supplier plants around the world in these areas and apply the toughest laws set by any one nation as their standard,” Robertson says. “They do this to level the playing field among competing suppliers.

“It’s a bit of a pain to meet all of these things but it sets us up to be more competitive and a better supplier down the road.”

— Rich Christianson

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