Lebnen Gasl

ISSN 1940-204X

Creating a Lean Enterprise: The Case of the Lebanon Gasket Company

Peter Brewer Miami University IntroductIon

The Lebanon Gasket Company (LGC) hired Tom Walsh as the plant manager of its Topeka, Kansas, facility in January 2004. LGC was impressed by Walsh’s 20 years of experience as a manufacturing engineer, including four years of employment as a manager in Toyota’s Georgetown, Kentucky, facility. Walsh’s charge at Topeka was to turn around a plant that had been suffering from declining profits and margins, excessive waste and inventory levels, unsatisfactory on-time customer delivery performance, and shrinking market share. His game plan for overcoming these problems was to focus on one core strategy – operational excellence. He intended to abandon the mass production mindset that had guided the Topeka plant since its inception in 1979 in favor of the lean thinking approach that he had seen work effectively at Toyota. After 18 months on the job, Walsh and his co-workers had accomplished many goals related to the plant’s lean transition. Two value streams and four manufacturing cells were up and running. The lean training program was proceeding on schedule. The production, engineering, and maintenance employees had started to buy in to lean thinking. Customer order-to-delivery cycle time had drastically improved, which in turn was growing sales. Nonetheless, the financial results were disappointing. The absorption income statements shown in Exhibit 1 indicated that the plant’s net operating income and return on sales had continued to decline from the 11.5% that was reported for the fourth quarter of 2004. To make matters worse, organizational in-fighting was at an all-time high – the Finance Department was blaming the Production Department for the plant’s declining performance, and vice versa.

Frances Kennedy Clemson University

Exhibit 1 LGc Absorption Income Statements For the quarters ended March 31 and June 30, 2005

Quater ended...