Innovation is as much about culture as technology, as Peter Jackson discovers at one County Durham engineering firm
Precision fabrication and machining firm Dyer Engineering didn’t come unscathed through the economic downturn and credit crunch. It suffered along with much of UK manufacturing outside the offshore sector and its annual turnover dropped from £7.6m to £5.6m for the year ended May 2010.
The owner-managed company, based in Annfield Plain, County Durham, manufactures metal products as a subcontractor for a range of sectors. It makes everything from components for diesel engines to parts for oil rigs, trains and defence vehicles.
“We manufacture everything from little widgets you can pick up by the handful to 15 tonne structures,’’ explains managing director Graeme Parkins. Its processes include laser profiling, forming and fabrication, welding, including robot welding, boring, turning and wet paint and powder coating.
“We do everything under one roof, we are a one-stop-shop,’’ says Parkins. Dyer has come through the choppy economic waters and not only is its annual turnover back to £8m, it is bullish about the future.
“We are looking at a similar level this year and we are looking to hit £12m within the next two to three years,’’ says financial director Richard Bradley. In the last three years the company has invested about £1.75m in equipment, property and software. Investment in machinery in the last year has included a new CNC (computer numerical control) lathe turning centre.
Now Dyer has a £1.5m investment planned for this year to put a 20,000ft extension on its factory with the aid of a Regional Growth Fund grant.
This is central to the company’s £2.6m two-year project to reach £12m turnover and create 60 jobs in addition to the 110 it currently employs, with further investment in equipment and training.
The company is investing because it is confident in its abilities to service its markets.
“We have a very good business and a well run business,’’ says Parkins. “It’s profitable and we are doing the right things, we’ve got a good team and we are developing that team and we are going to invest in that team.’’ He proudly cites the company’s recently awarded title of outstanding supplier by one multinational engine manufacturer.
“The feedback that we get from our clients tells us that we are doing the right things and that we are one of the best in the market place,’ says Bradley. “That’s why the clients we currently have keep coming back to us. We are also doing pretty well in generating new business from new clients.’’
Dyer has identified oil and gas as a boom sector and is positioning itself for that market where there is a shortage of companies with its skills and capabilities.
“We also have the rail industry which is growing again in South Durham with Hitachi,’’ says Parkins. “We see huge opportunities to try to build relationships with the business and get into that supply chain.’’
On the other hand the company is leaving the defence market. “Defence is finished in the North East unfortunately and there don’t seem to be too many doors swinging open in other areas,’’ he says.
Apart from investing in new equipment, Dyer has also undertaken internal restructuring.
“We have changed the whole structure of the shop floor,’’ says Bradley. “When we started there were two supervisors who controlled some 60 people. In that same space we’ve now probably got 90 people, we’ve got three supervisors and 10 team leaders. We have a production manager above them. We have also put in place a works committee and a safety committee.’’
Much innovation at Dyer has been driven by a process of benchmarking itself against other companies, particularly a sheet metalworking business. This is a similar family owned business which Parkins had known for some time. In particular, Dyer has followed them in a process of continuous improvement. Parkins says: “We employed a continuous improvement manager six month ago and his task is to work with everybody in the business and identify any area where we can fundamentally do things safer, faster, cheaper. He has a range of initiatives, some of which are quite high level and some low level, perhaps making changes to the way a product is handled on a job.’’
He cites the example of one product which was a water tank and had a high level of leaks detected which then had to be welded. By modifying the manufacturing process, through training and standardisation of the welding, the company went from about 46 potential leak points to just three. “That saved us a lot of money and made the process more repeatable and much easier to manage,’’ says Parkins.
In another process the parts for a product came in a box and it was not easily identifiable if one was missing or was left out of the assembly. Now the parts are on a shadow board making omissions obvious. The continuous improvement manager will also train the leaders in the methods of continuous improvement so they can identify problems in their own areas.
“One of his biggest remits is to get as many people as he possibly can bought into it on the shop floor so they are coming to him, so they are the ones who are suggesting and then implementing the change,’’ says Bradley.
“The only way we will have a continuous improvement culture out there is if that happens. Even if we can get 20% - but I’d like to think it could be 60% - invested in that, it would make a massive change.
“What we are trying to achieve here is a change in culture and a change in culture is a long process because you don’t just change people’s hearts and minds in the space of a few months. We are probably a year into a five-year culture change.’’
He adds: “But it’s massively different from what it looked like two or three years ago. I’m proud to walk out onto the shop floor now, it looks great, compared to where it was three years ago, but we are still nowhere near where we need to be, we still have a further journey to go on.’’
At the end of that journey Parkins would like to see his company closer to the modern online retail model with the transparency that allows customers to follow the progress of their orders.
He says: “We are seeing more and more shrinkage of our lead times with our customers because everything is needed more quickly now and on some complex engineering projects, if the front end takes longer than expected, we get squashed.’’
As a step towards this Dyer has bought a new ERP (Enterprise Resource Planning) system, called Epicor.
“This plans everything, right through from a quote to the cash coming in at the other end,’’ explains Parkins. “At the moment we know things will inevitably go wrong and things might not be quite right and all businesses in our line are like that. Where I see us becoming market leading is in giving the customer access via a portal into our ERP system. But that’s a vision rather than something we can make happen straightaway. That’s the way we’ve got to go and manage the delivery of the offering so much better and so much slicker than anybody else.’’
Dyer faces the same big challenge as all UK manufacturers – an increasing shortage of engineers, which is due to get worse as the current generation reaches retirement age.
“We have a very skilled bunch of people in the 50 plus age range,’’ says Parkins. “But, younger than that there’s a bit of a gap. So we have 10 years to get some good kids into the business and start the next generation.’’ But Dyer is on the front foot in facing this problem. Out of its 110 employees, a tenth are apprentices and it has taken on three new graduates.
“That is to be a continued focus of the business,’’ says Bradley. “We have made a commitment to take on at least one graduate a year.’’ The aim is to have the apprenticeship and graduate schemes approved by the Institute of Mechanical Engineers. There is also the prospect of sponsoring apprentices to go on to do degrees.
Parkins says: “One of the things I really enjoy about this job is working with people and developing them and helping them fulfil their potential. Now I’m the md of a business I’ve got a really good opportunity to do that.’’