Superior Tube – Company Imperative – Grow the Value of the Business

January 11, 2013

During its early years, from the 1930s through the 1950s, Superior Tube was highly successful and generated outstanding profitability.  But during the 1960s and 1970s, the company lost its way and business declined.  Superior kept going through years of highs and lows until the early 2000s when the owners made the decision to divest themselves of the business.  Management was directed to fix the company and make it saleable – or it would be closed.

Shortly thereafter, current President and CEO Tony Jost joined the company and took on the mission of saving Superior Tube and employee jobs by restoring the company’s vitality, and making it attractive to a new buyer.

Jost immediately recognized that the company’s products were highly differentiated from competitive products, that there was strong demand for Superior Tube’s products, and that the business was worth saving if it could operate successfully. While foreseeing the need for changes in the product mix, enhanced customer relations, and other strategic issues, he also determined that the critical components needed to turn things around were process control and employee involvement.  “These can’t be independent of each other,” Jost noted.  “They are your left and right hands.  You need both in the game.”

With a history of often contentious labor and management relations, Jost knew that gaining the buy-in of employees could be challenging.  “We were completely transparent with them about our situation,” Jost said.  “If we could improve the company and prove its value, a new owner could be attracted and everyone would see a bright future.” Helping employees understand this reality paved the way for the company’s eventual transformation.

Unprecedented Commitment to Vision

The Superior Tube turnaround took hold in 2006, when the company negotiated a revolutionary, interest-based collective bargaining agreement with its union workforce, one that laid the groundwork for an unprecedented commitment to a shared vision and company-wide cooperation.   With this agreement in place, Superior Tube was ready to fully commit to initiatives aimed at growing the value of the company. Jost had been working with DVIRC Business Development Director Jeff Gossner. “Jeff understood our business and our goals,” Jost said. “When we were ready to move ahead, his insights enabled us to connect with specific DVIRC capabilities that could help drive our efforts.”

DVIRC provided a package of initiatives designed to address both bottom-line and top-line goals, including training, coaching and project implementation for both Lean and Six Sigma training methodologies. Lean focuses on eliminating waste to improve process velocity and flow, while Six Sigma seeks to reduce variation in the output.  Implementing both Lean and Six Sigma together helps drive broad cultural change, create a common operations language and place great emphasis on creating the internal capability required for continuous improvement.

Six Sigma Training and Project Implementation

Six Sigma uses a data-driven methodology to help employees understand processes and make sense of the data that surrounds a process. Understanding this data enables better decision-making.  DVIRC’s Sr. Advanced Manufacturing Specialist Manny Veloso guided Superior Tube in introducing and implementing Six Sigma methodologies.  A Six Sigma Master Black Belt, Veloso provided Green Belt training and project guidance focused on tools that support the Six Sigma DMAIC philosophy (Define, Measure, Analyze, Control, Improve).  Four Superior Tube employees have achieved Green Belt Certification so far.

  • Applied Learning

DVIRC’s “learn and do” approach enables trainees to apply new skills and tools to value-added projects within the company.  This immediately provides an ROI and helps build enthusiasm as employees see the results that can be achieved.  Six Sigma projects implemented at Superior Tube included improving tooling, reducing energy consumption, increasing product yield and quality of a cardiac tubing product, and increasing scrap yield return.  All projects resulted in process improvements and generated significant bottom-line benefits.

Lean Enterprise Coaching and Training

To prepare for the introduction of Lean waste-reduction initiatives, Superior Tube established an Operational Excellence Team, co-chaired by labor and management, and consisting of 10 employees who worked on the team part time.  This team was tasked with guiding Superior Tube’s first steps on the Lean journey. DVIRC then introduced Lean to the organization and helped employees develop both the technical and team skills needed for Lean success.

DVIRC developed a custom Lean initiative that focused on education in Lean methodologies, consultation as the company took ownership of the process, and robust training that assisted in driving cultural change.  As part of the approach, Jeff Kopenitz, DVIRC  Director of Advanced Manufacturing, worked side by side with Superior employees throughout the process. A certified Lean Master, Kopenitz has in-depth expertise and certification at the highest levels of Lean,

  •  Benchmarking

One of the first steps suggested by DVIRC was visiting other area manufacturers who had been successful in implementing Lean Transformations. Twenty-five Superior Tube employees participated in the visits. The benchmarking resulted in the establishment of a Superior Tube Kaizen Promotion Office (KPO), a group of five employees who work full-time on identifying needs and implementing Lean initiatives. The KPO consists of two hourly employees, two management employees and an industrial engineer hired specifically to support the efforts.

  •  Winning Teams Training

In September of 2010, DVIRC began delivering its Winning Teams Training program to Superior Tube employees.  The program helps participants develop technical skills, problem solving abilities and cooperative, team building strategies – a combination that is critical to the success of Lean efforts. DVIRC training focused on applied learning and creating immediate value for Superior Tube.  Cross-functional teams of five or six people were assigned to a specific task.  Training sessions continued over the past year, and are ongoing.

Marketing Support

DVIRC helped Superior Tube update its sales support materials, creating four new brochures, each focused on a different product segment and target market. “Our sales representatives found these very helpful,” notes Jost. “We also used them during orientation sessions for new employees.”

Export Assistance

Although Superior Tube had a few international customers, Jost notes that “we had no proactive game in export.”  To better position the company for a possible sale, Jost recognized the importance of developing an export capability.  He and three other Superior managers are now participating in ExporTech, a program presented by

DVIRC in partnership with the U.S. Export Assistance Center of the U.S. Department of Commerce.  ExporTech is a group program that assists companies to develop a simple, actionable international growth plan, with the support of a coach and through connections with international business experts.

CEO Forum

Superior Tube has taken advantage of the DVIRC CEO Forum to support staff development.  A selective, small group of leaders from a variety of manufacturing companies meet monthly to share challenges, solutions and ideas. “The very idea of sharing across companies and industry boundaries is the real key to the value of the forums, “Jost says.  “It gets you out of thinking about just your own company.”

Results of Growing the Value

Looking back, Tony Jost recalls that like most companies, “when you begin the Lean and continuous improvement journey, you’re swimming upstream against the status quo.  It’s a big deal.  But when you gain momentum, the tide starts moving in a positive direction.  We’ve reached that point.”

From a company on the brink of closing, Superior Tube has evolved to a company that is making money and positioning itself as a viable investment opportunity for a possible new owner.

Today, Superior Tube is collectively heading down the Lean path, and there is a shared labor/management vision and direction.  That commitment, the implementation of continuous improvement processes, and the top- and bottom-line support provided by DVIRC  has allowed the company to successfully build the company’s value.

  • The company has recorded five consecutive years of profitability, the best five-year stretch in the past 25 years.
  • 40 new employees have been hired.
  • A 50 percent growth in sales is projected over the next three years.
  • A bottom-line increase of 150 percent is anticipated over the next three years.
  • Applied training during the Green Belt certification process resulted in:
  • $32,000 in energy reduction savings in an annealing furnace
  • $100,000 return on scrap yard yield
  • $82,000 in savings on a cardiac product through better alignment of measuring devices
  • $50,000 savings per order from improved tooling on a tube rolling machine.

With momentum now achieved, Jost expects to accelerate the pace of the company’s Six Sigma and Lean efforts. Within the next two to three years, all employees will have been trained and all opportunities for improvement will be in the process of being identified and addressed. Then, past projects will be revisited, revised and fine-tuned. “The very nature of continuous improvement processes means that it will never end,” says Jost.

The Continuous Improvement Journey

Thoughts from Tony Jost on the Superior Tube Lean and Six Sigma Initiatives

“Lean and Six Sigma need to be recognized as a long-term commitment.  It’s a journey. Success won’t happen overnight.”

“Expect that there will be suspicion about change. Managers and leaders will be criticized, because there will be concerns that the normal work of the business is being neglected. You have to persevere through that negativism.”

“Every activity has been planned and conducted for success.  Initial projects should have immediate opportunities for a positive outcome.  That helps encourage buy-in and continued progress.”

“The key to successfully implementing the Lean approach at Superior Tube has been communication. The KPO works with both union and management leadership to plan annual Lean initiatives. Those initiatives are then broken down into quarterly plans and communicated to employees. Volunteers set up teams to take on projects, put together the details and review the implications.  This system helps drive home the fact that everyone’s participation is needed to achieve company goals.”

The DVIRC Advantage

Comments from Tony Jost on the Superior Tube partnership with DVIRC.

My first contact with DVIRC was with Business Development Director Jeff Gossner. He worked with me on a regular basis to evaluate and really understand our business.  Jeff became our go-to guy, helping us to understand all of the things that were coming into play.  This understanding enabled him to recommend the DVIRC services that could help.  When we were ready to implement these services, DVIRC was very strong.”

 “The DVIRC Winning Teams training approach did an excellent job of bringing principles, concepts and teamwork together.  It was a great catalyst for our Lean efforts.”

 “Collectively, the many programs and initiatives we’ve implemented with DVIRC’s assistance have helped us increase profitability and reduce costs.  We’ve been able to use those funds to reinvest in growing the value of the business across all areas of the business.”

Company Profile

Founded in 1934, Superior Tube is a manufacturer of highly engineered, small-diameter, precision alloy tubing.  Throughout its 77-year history, Superior has built a reputation as a problem-solver and innovator, pioneering precision tubing products used for high-profile, critical applications in the aerospace, medical and nuclear power industries.  The company employs 250 workers in its headquarters offices and manufacturing facility located in Collegeville, Pennsylvania.

Postscript

This article was written in December of 2011.

In January 2013, Mark Basla, Vice President, DVIRC spoke with Tony Jost. Superior Tube had achieved and far exceeded its’ mandate to restore value in the company, as a result, was acquired in 2012 by the Watermill Group. Additionally, 2012 was the sixth consecutive year of profitability, and a record year of growth for Superior Tube.