Ceramic Industry

INSIDE CI<br>Going Lean

May 30, 2003
Wouldn’t it be nice to know exactly when the high-tech markets are going to rebound? “Tech is Back,” touted one recent headline. But we’ve all heard it before, and as much as we’d like to be optimistic, no one has a crystal ball that can accurately predict what tomorrow’s sales will be. Many technical ceramics companies saw their orders increase in the first quarter of this year, but persistent price erosion has made it difficult to translate those orders into higher profits. Additionally, as one company reported, “customers continue to order products based on near-term requirements that limit our visibility for the next quarter.”*

At first glance, it appears that companies manufacturing ceramic armor are currently immune to this problem. Armor sales have been booming over the last several years, thanks to the U.S.’s recent military efforts. For instance, Ceradyne, Inc., saw its sales increase 35 percent in 2002. In the first quarter 2003, its sales were up 31 percent compared to the first quarter of last year, and its operating margins increased from 6 to 12 percent.

But in armor, as in telecommunications, semiconductors and other high-tech areas, there are no guarantees as to how long a given surge—or drop—in sales will last. As a result, companies serving these markets must be able to constantly adjust their manufacturing capabilities to meet the cyclical demand.

Many companies are turning to efficient manufacturing initiatives to find this level of flexibility. In 2002, after experiencing poor product yields and other manufacturing inefficiencies while trying to meet the rising demand for personal armor and diesel engine components, Ceradyne began using lean manufacturing techniques and investing in and improving personnel training. To increase gross margins and reduce inventories, the company also implemented Demand Flow Technology—a scaleable, mathematically based business strategy designed to enable manufacturers to respond faster and more efficiently to meet the needs of their customers and the marketplace.

According to Joel Moskowitz, Ceradyne’s president and CEO, these initiatives are already beginning to pay off. “The implementation of lean-measure initiatives…has contributed to [the company’s] positive results,” he said.

Other ceramic manufacturers are also finding increased success through efficient manufacturing strategies. For instance, M Cubed Technologies Inc. was able to quickly scale up its manufacturing capabilities for ceramic Small Arms Protective Insert (SAPI) armor largely through its use of lean manufacturing and Japanese Kaizen methodologies. And CoorsTek uses lean manufacturing and its own internal systems to balance its manufacturing operations, both in ceramic armor and in other areas. (See the article "Saving Lives with Ceramic Armor" for more information about ceramic armor.)

The bottom line is that no one can accurately predict when a given market will be up or down. Whether we manufacture ceramic capacitors or ceramic armor components, we have to be able to adapt to the market demand, and maintaining this level of flexibility requires us to operate as efficiently as possible.

P.S. New for this issue, Ceramic Industry has begun adding Web addresses to our advertiser index to make it easier for you to find suppliers online. Be sure to check out the new format.

Reference:

*Company information was obtained from fourth quarter 2002 and first quarter 2003 financial reports.

Editor’s note:

For more information about efficient manufacturing initiatives, visit http://www.jcit.com or http://www.sme.org/leanmanufacturing/lean_gateway_page.htm.