Do You Know the Financial Health of Your Suppliers?
Long term financial strength is a business plan priority for a spring manufacturing company that practices Open Book Management
If you're looking for a supplier of high quality, low cost parts and would like to talk with Springfield Spring Corporation President Norman Rodriques about the possibility of bringing his company into your supply chain, be prepared for an offer to check out his company's financial Z-Score. The spirited head of the East Longmeadow, Massachusetts-based manufacturer of springs, wire forms, and stampings takes justifiable pride in his company's financial solvency--not to mention its year-after-year growth in sales, profit, and capital investments--after having steered the firm through some turbulent economic storms over the last dozen years. Rodriques, a passionate practitioner and advocate of Open Book Management, willingly documents Springfield Spring's financial stability for prospective OEM clients, many of whom request that their suppliers offer financial transparency before entering into a manufacturing relationship. He knows that many corporations have been burned by supply chain disruptions resulting from the financial insolvency of companies that had formerly supplied critical components.
"During the recession, supply chain disruptions were happening all over the place," he says. "We were trying to tell customers, we're a supplier you don't have to worry about. So if you've got five spring suppliers, and one's not shipping on time that used to be, could it be potentially that they can't get raw material? How many people have been laid off? What's their turnover? What's their debt service ratio? Are they over-leveraged? And all of a sudden, it really doesn't become a discussion in ISO."
Springfield Spring Corporation (www.springfieldspring.com), a privately held company with headquarters in East Longmeadow, Massachusetts and a division in Bristol, Connecticut, manufactures precision-engineered compression springs, extension springs, and torsion springs, as well as wire forms, stampings, light assemblies, and air filter holding frame clips. The company services a variety of industries, such as firearms, medical devices, lighting, filter frame hardware, electrical distribution controls, window screen hardware, and military. Many prominent OEMs--including Cook Medical, Toyota, Covidien, Bose, Cooper Lighting, Otis, and Smith & Wesson--are among the firm's customers.
As a practitioner of Open Book Management, Springfield Spring teaches its employees basic accounting principles and openly shares relevant financial information--including revenue, profit, cost of goods sold, cash flow, expenses, and key financial operating ratios--with them. Team members are trained to understand income statements, balance sheets, and other metrics of business success, but also where their job fits into the company's overall financial plan. They are taught to understand the correlations between efficient process methodologies and improvements in the company's financial position, and are given a direct stake in the company's potential success and risk of failure. Recognizing that they have a stake in the action, team members are empowered to do their jobs in ways that improve the company's financial performance.
"It's transformed this company," Rodriques says of the impact that Open Book Management has had on Springfield Spring. "Every customer wants low cost, right? We can be low cost because of efficiencies that we've built into our processes. I don't want to be lowest cost all the time. But if I have my act together in terms of how we run this company financially, then we're able to offer lower cost because we're so in tune on financials."
Design and Engineering Assistance
Springfield Spring routinely offers design, material, and tolerance review of a customer's component. The company's Early Design Intervention Team (EDIT) works with customers at the beginning of their product development programs to help them save money, minimize errors, and reduce their time to market.
"The 'value proposition' begins with us first interviewing the client to gain knowledge of exactly how the component will perform in its respective application, and then determining an economical and efficient manufacturing strategy," says Rodriques. "When a component is at a formative stage of development, we look at all the processes and manufacturing methodologies to ensure that the part will eventually meet statistical tolerance capability during production."
Despite Springfield Spring's wealth of manufacturing equipment, Rodriques is firm in stating that the company won't quote on something "just for the sake of offering a price." "We don't just quote any and everything. We have our competitive advantages and we work to utilize those advantages," he affirms. "We work hard to understand how the product will be utilized by the customer, and we offer our insights, experience, and expertise in designing the product to meet the need."
To verify designs for fit and function, the company's model shop department can assist in the manufacture of short-run prototypes. Customers can also use the company's online Design-A-Spring RFQ tool for assistance with the design of compression, extension, and torsion springs.
Springfield Spring also offers Supplier Value Analysis (SVA), a custom cost reduction program aimed at helping customers save money on the production of spring products. Scouring the entire process from design and fabrication to packaging and stocking, the company's engineers look to save money at each step. Potential areas of cost savings include the use of alternative materials or manufacturing techniques, as well as the evaluation of tolerances, economical run quantities, packaging methods, stocking programs, and overall logistics.
But in Rodriques's eyes, technical expertise is only one part of a broader value chain. For him and Vice President Tina Malley, business is about working hard to create sustainable, long term relationships with their customers. Achieving that goal requires that all employees buy into the "Springfield Spring Experience," which basically requires the company to become an extension of its customers through the collective efforts of each team member.
"Our goal is to create shared values where we work collaboratively to accomplish the goals of all parties in the relationship," says Rodriques. "We have begun this internally with our employees in pursuing Open Book Management, and we have been involved in customers' supply chains to the point where we act as part of their value chain."
Rodriques says it's important to draw a connection between what an employee does every day on the shop floor and the fruits of their labor--the finished products that they see on store shelves or in the hands of consumers and end users. They're not just making parts, he emphasizes.
"What is made on that floor eventually ends up in automobiles, medical devices, you name it. We make parts that go into military rifles; we make stuff that goes into law enforcement pistols. A gun that jams might mean someone's dying. A surgical staple that doesn't work well might be the difference between closing the artery and not closing the artery. So let's not focus on the parts; the primary focus is who uses them, what are they used for, and for what benefit? And how does my employee benefit from understanding that yes, we have to make a profit? That when it's all said and done, the only one who keeps us in business is the customer, and they have choices."
Rodriques bought into Springfield Spring in 1986, when he purchased 10 percent of the company's shares. At the time, the company had 14 employees, "four or five" major accounts, and no real marketing plan. "My job was to go out and get customers--try to find people who needed springs," said Rodriques. "I already had some experience selling for a screw machine company--it was really selling a service. I didn't know the first thing about springs or stamping, but I knew, from my prior experience of knocking on doors, that I could find people that used components."
When he needed an office manager in 1990, Rodriques hired Tina Malley, who would later become the company's vice president. He credits her with "transforming the office" from one with an outdated, manual accounting system to a highly efficient, computerized operation. Malley joined Rodriques as a co-owner of the company in 2000, when the two of them bought out the last remaining shareholder.
Springfield Spring's exposure to Open Book Management began one day in 2001, when, on a business trip, Rodriques pulled a book off a shelf. It was Less is More: How Great Companies Use Productivity as a Competitive Tool in Business, by Jason Jennings.
"I just started reading that book, and it was about five high performing companies and what differentiated them from competitors. Why were these companies always defying the odds in the face of disasters, tragedies, and everything else? There was a common theme, and one of the companies highlighted was Springfield Remanufacturing (www.srcreman.com). The book defined their Open Book Management program, philosophy, and culture."
Rodriques devoured the book and went online to learn more about Open Book management. For the next six months, he immersed himself in learning about the business and management techniques that Springfield ReManufacturing Corp. Founder and CEO Jack Stack employed to take his company from a teetering division of International Harvester to a corporation with sales exceeding $400 million per year.
To understand how Rodriques became a believer in Open Book Management, it helps to know a little bit about where he was coming from as the fledgling owner of Springfield Spring Corporation.
"I can still remember driving home one day and pulling my car over and throwing up, because I wasn't sure if we were going to make payroll," Rodriques remembers. Everything that I owned was on the line, and we didn't want to go to 'workout.' Thousands and thousands of companies closed, and thousands and thousands of people went to workout. You know what workout is? It means your banking relationship is over," he said, going on to describe the all-too-common scenario of property being seized.
"I said to Tina, 'We're in the cockpit and we're losing altitude. Now, we don't think the plane's going down, but if we do, we're not hitting that corn field alone. We are going to tell every passenger on this plane--stewardesses, everyone else--that we're going to teach them how to fly."
Two years ago, Springfield Spring was chosen as one of the top Open Book Managed companies in the country. According to Rodriques, the recognition wasn't based on revenue or size of the company. "It was based on efficiency and productivity, and on how we teach and celebrate this thing called Open Book Management."
The company is disciplined in its approach to financial solvency, structuring it around Open Book Management and a Lean/Six Sigma, employee-driven culture. For Rodriques, the benefits derived from the company's Lean/Six Sigma and Open Book Management approach--efficiency, productivity, customer satisfaction, and, ultimately, profits--are front and center in his approach to convincing prospective customers that Springfield Spring is superior to what they currently have in their supply chains.
"We have to show them, and we're not going to do it by showing up with a bag of parts, saying, 'We've got quality and service, and we're ISO registered.' When I go out and sit in front of a customer, I don't really talk about parts. I talk about business process excellence."
"How does that customer know every single year that we are their optimal and best choice?" he asks. "Because they can come and audit my company. They get to look deep into the company. And every time they come here, we should be improving in financials, as well as all the rest of the metrics we set up."
Open Book Management (www.greatgame.com) has been the catalyst behind Springfield Spring's resurgence, driving year-over-year growth in sales and profits at a time when many other small businesses haven't fared nearly as well. Rodriques describes it as more than a management philosophy.
"It's a management practice that the company works hard at perfecting, and it's based on accountability," he said. "We take very seriously the role of teaching our employees what it takes to run a business--what the agenda of the company is; how we set and attain goals," he said. "We also work hard at celebrating success, and we share our expectations of the employees up front and give continuous feedback. Tina and I are accountable for maintaining the health and success of the company from a strategic view. The plants are held accountable for results, and the employees are each held accountable to perform to the agreed upon expectations.
"We recognized there was a lot about the company the employees didn't know," he continues. "Because we ask them to give us their best, we felt it was fair to explain the 'why' and 'what's in it for us' to them. When someone joins us and they see the transparency of work, performance, and results, they are almost always blown away by it. It's something they just don't see elsewhere."
"When you open up your company, the possibilities of how you measure and reward employees for making these financial gains are immeasurable. We're always trying to catch people doing things right. We're giving them the tools to measure doing things right. And what we have is a very successful Open Managed company, a very transparent business. I think 'Open Book' is too accounting related. It's evolved into every other part of this company, and at the end of the day, it's the customer who benefits by doing business with Springfield Spring."
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