Federal Funds Helped Blackhawk, Sivyer Survive Foreign Competition.

Federal assistance for strategic planning, training and certification initiatives is available to help foundries improve operations and remain viable with customers.

When two Midwestern foundries saw sales and employment levels decline sharply in the early 1990s, they realized that, to keep up with customer requirements and hungry global competitors, they would have to make changes in the way they conducted business. However, when they discovered that these changes required more than they could handle alone, both in terms of strategic planning and funding, they turned to a little-known federal program designed to assist manufacturers hurt by foreign competition.

In an effort to make themselves more viable and attractive to a wider range of customers, Blackhawk Foundry and Sivyer Steel contacted their regional Trade Adjustment Assistance Center (TAAC). The assistance program, which is administered by Applied Strategies International (ASI), Ltd., for the U.S. Dept. of Commerce, has helped hundreds of companies nationwide reverse negative trends triggered by foreign competition.

Currently, the Midwest TAAC is working with 75 companies that employ more than 11,000 manufacturing workers in the four-state region. Each company that applies for assistance may receive a grant up to $75,000, based on a cost sharing of $150,000 in improvement projects that can make a real difference in the way business operates.

Both companies were able to take advantage of this program and, as a result, made a strong comeback in the marketplace.

Blackhawk Foundry

In 1993, Blackhawk Foundry and Machine Co., Davenport, Iowa, experienced a significant drop in sales due to a surge of foreign competition in the U.S. casting market. Blackhawk, a gray iron caster, supplied components to agricultural, construction and industrial equipment markets. However, in the face of intensified, offshore competition, Blackhawk's outdated information and quality systems emerged as constraints to competing successfully.

Blackhawk faced two critical issues that demanded fast attention. The first was the need to upgrade its ability to respond to requests from customers and prospects for dimensional information about the castings it produces. In the early 1990s, the company was using a manually operated layout machine that was slow and had a Gage R&R error factor of about 12%. The company needed to improve the accuracy of its information to support its selling effort.

Working together, Blackhawk and ASI conducted extensive strategic planning to identify the organization's strengths and weaknesses and evaluate opportunities and threats in the marketplace. As a result, Blackhawk was able to target a new market segment, ductile iron castings, as a high-potential market for the company. The strategic planning effort also identified the quality-control technology the company needed to compete more effectively.

While TAAC funds cannot be used to purchase equipment, they can be used to purchase research, consulting, training and other strategic services. The cost-shared funding provided to Blackhawk was used for:

* executive management training in Total Quality Management (TQM) principles and tools;

* the acquisition of software for a new coordinate measuring machine (CMM);

* training for employees in how to use the CMM.

"Because we recognized the need for effective leadership from the top, a portion of our training dollars were allocated to training top executives in the principles and technologies behind our improvement effort," said Jerry Hanson, Blackhawk treasurer. "We wanted to be certain all our top executives collectively understood the marketing strategy, technological upgrades and business process improvements we planned in support of our TQM effort. With such knowledge and consensus, they would be able to provide the most effective leadership."

Blackhawk's most demanding customers wanted the company to conduct extensive measurements of production castings from the start of a new job, then continue with periodic dimensional evaluations throughout the lifetime of that part number. This involved repeating identical dimensional inspection routines for each part number. Under the old system of manual measurement, the first and each successive inspection took the same time.

In addition, Blackhawk purchased a CMM, which represented a significant investment during a sales downturn. It enabled the company to generate a higher volume of extremely accurate dimensional data about its castings.

"TAAC funds helped us pay for software and training on the new CMM, which helped us build momentum in two key areas: providing more accurate information to customers and building a quality system that would satisfy the most demanding customers," said Robert Sass, Blackhawk director of quality. "Best of all, the new system enabled significant productivity improvements by cutting more than half the time and expense of responding to requests for dimensional information."

Once the new system was installed and employees were trained, productivity took a major jump. The first inspection routine for a given part number required the programming of the CMM, which takes approximately the same time as a manual inspection routine, but, once the program has been written, the CMM can run any future inspection routines in a fraction of the time. This translated into a savings of inspection time for each part number as well as added capacity to handle the new work coming in from the recently developed marketing strategy.

In addition, if a customer wants to reconfirm consistency, spot check quality or execute a preemptive step a year or two later, Blackhawk can access that measurement program and check anywhere from 5-500 parts taking only a few minutes per part to verify quality.

"Because we serve progressive customers such as John Deere, Emerson Electric and Caterpillar, we must have fast, efficient access to a complete historical database of past casting measurements," Sass said. "That way, we can quickly respond to a quality- or customer service-related matter by utilizing the written measurement routine to generate new measurement data."

Training operators in using the new CMM technology reduced Gage R&R error rates from 12% to 1.5%. The technology upgrade came at a critical time. "During this period all of our customers were rationalizing and downsizing their supplier bases," Sass said. "By making rapid improvements to our customer-service capabilities we were able to remain a viable supplier to important customers while other companies that were slow to change were shut out of future business opportunities."

With the promise of competitive enhancements made possible by new equipment, training systems and procedures, Blackhawk's management felt confident that it had positioned the company to diversify successfully into the ductile iron market. Diversification proved to be an effective strategy for Blackhawk. Sales and employment levels for the company both have doubled since 1994--sales went from $14.4 million to more than $30 million and employment levels increased from 160 to 330.

Sivyer Steel

Blackhawk's experience is echoed by that of another Quad Cities-area foundry, Sivyer Steel Corp., Bettendorf, Iowa. Sivyer, which serves the mining, pump and valve, power generation, defense, construction, railroad and recycling equipment markets, was hit with unexpected foreign competition in the early 1990s. Steeply discounted imports from South Africa, Australia and Asia cut deeply into sales. The South African foundries were particularly aggressive in capturing a share of the market for components that went into recycling machinery, an important segment for Sivyer.

"Customers were defecting to take advantage of lower prices offered by foreign casting suppliers," said Sivyer Vice President Patrick Comparin. "Our sales plummeted and we were forced to lay off workers. These were trends that demanded fast action. We scrambled to reassess our strengths and opportunities, so we could find the best path for competing more effectively, recouping--and even increasing--our sales volume and managing the business more profitably."

Comparin contacted the Midwest TAAC, and, shortly thereafter, an ASI consultant visited the plant. Working with Sivyer management, the consultant helped the company identify specific consulting and technical projects, such as ISO 9000 preparation and certification programs, that would help arrest the downturn. Upon completion of the application process, Sivyer became qualified for assistance that would cover 40% of new business development work.

In a preliminary needs assessment of the business, the team focused on the quality system as the key to future improvements. Sivyer faced a variety of quality issues such as procedures for handling nonconforming parts, customer complaints, documentation and follow-up. "Sivyer did not have ISO certification in the early 1990s, and that deficiency placed the company at a distinct disadvantage when competing internationally with companies that had already earned their certification "said Sivyer Technical Director Philip Bruno. "We had to correct this shortcoming."

The first step toward certification involved bringing in an assessor to conduct a "gap assessment," which mapped out the discrepancies between the company's current quality system and the level needed to pass an ISO 9000 audit. From the assessment grew specific suggestions for improvements that would enable the foundry to successfully compete with foreign suppliers. These suggestions included:

* clarifying the role of each employee in the quality system;

* establishing documentation and traceability procedures;

* writing detailed job descriptions and procedures.

The second step in the certification was to focus on technical training that would meet these goals. Improvements were outlined by the assessor, and in response, Sivyer drafted plans that included in-depth employee training in the new system. "We wanted to make sure every employee understood the new quality system and the strategy behind it," said Bruno. "For us to be successful, employees had to know the system's fundamentals, and in particular, how they fit into the new system."

Because ISO preparation consultants explain what an organization has to do, but not how to do it, the Sivyer team saw the benefit of developing its own certified auditors. "No one understands our process better than we do; it made sense to have our own people acquire the skills needed to get us certified and keep us certified," Bruno said. Before training Sivyer employees in the quality fundamentals that were critical for a successful application for ISO 9000 certification, a select group of people received "Lead Assessor" training. Subsequently, management gave this team the responsibility for designing a total quality system for Sivyer that embodied ISO 9000 standards.

The Sivyer team's next step was to understand ISO 9000 standards, then write procedures to bring the company in step with them. "For example," said Bruno, "one of the things we discovered was that we had a different definition of `customer-supplied products.' We never would have included patterns and coreboxes in this category. We used to think of these items as tooling. However, ISO auditors think of these items as `customer-supplied products.' Without our training, we might have overlooked an entire class of customer-supplied products that could have led to vulnerabilities during an audit. Lead Assessor training helped us to avoid all problems of this type."

The Sivyer team took two additional steps that helped prepare the company for a successful certification. First, the team visited other ISO-certified plants to learn what they were doing to comply with requirements for document, product and process control. This step provided insights that proved useful when the company began rewriting its procedures. In addition, the company developed a procedure for writing a procedure. This effort provided a format that ensured that the purpose, scope and responsibilities related to every procedure written would be consistent, clear and easy to follow on a company-wide basis.

Second, Sivyer worked to set up a comprehensive training program with help from Eastern Iowa Community College. Using TAAC funding, Sivyer worked with instructors to develop and execute a formal training program to address the needs of employees.

With all of the prerequisites for a successful ISO preparation in place, Sivyer began team training, using the technique of mock internal audits so other employees could see how the company was using the new quality standards to drive improvements. The mock audits also served to relate shop-floor activities to the principles and techniques employees were beginning to learn in their training sessions.

Sivyer Steel's quality and training programs were completed in just over a year and had a positive affect on sales. According to Comparin: "the ISO 9000 certification began to open doors that were not open to us before. We began getting requests for proposals from companies such as GE and Siemens to supply components for their power generation systems. This represented an attractive new market for us."

Sales have rebounded 82% since the onslaught of foreign competition, and the company has created 121 new jobs. "Certainly an improving market helped raise sales for all casting companies over the last few years, but we know that the trade assistance we received provided tens of thousands of dollars of strategic funding at a time we had a real need," Comparin said. "That funding made a measurable difference in the rapid rate at which we were able to recover from our slump."

Making Trade Adjustment Assistance Work for You

The Trade Adjustment Assistance Program is designed to help manufacturers who have been adversely affected by imports. The program features cost-shared assistance for activities that help regain competitiveness. Typical assistance projects cover areas and activities such as:

* manufacturing and engineering;

* marketing;

* information technology;

* financial and general management.

The process begins with ASI preparing an application on a candidate firm's behalf to demonstrate that the basic eligibility criteria have been met. Once the application is approved, ASI prepares an analysis of the company, along with a plan, which identifies specific improvement projects for which outside assistance is needed. Typically this assistance involves consultants, engineers or other professional service providers.

After the plan is approved, an outside consultant is chosen through a competitive bidding process. Both the participating firm and Applied Strategies then contract with the consultant, each issuing a purchase order for 50% of the project cost.

The time span for this entire process, from initial contact, to project commencement, varies considerably and is dependent on how quickly a firm is willing to move through the process. Typically, the process takes 16-18 weeks.

The program is not meant to be a life-support system for dying companies--it's designed to assist companies that are well run and are likely to recover eventually from any temporary setback. "We look for companies that have solid business fundamentals, because we want to invest in winners," said, ASI President Howard Yefsky.

In a study covering the last 6 years, the companies that have participated in the Trade Adjustment Assistance Program have enjoyed, on average, an increase in sales of 46% and employment of 19%. In addition, the federal government's return on investment has been more than 10-fold, in the form of increased tax revenues from participating companies and reduced unemployment compensation obligations resulting from job retention.