How’s this for an incentive to get the fat out of your operation? You meet with a $2.8-3,000,000-a-year customer, who says, “We want a 15% cost reduction up front, plus we want an additional 6% a year reduction after that. If you want to keep our business, write us a check for the 15% now. Take it or leave it.”

That may sound crazy, but that’s exactly what happened a few years ago to Torrance, CA’s Ace Clearwater Enterprises, a 57-year-old aerospace job shop serving such customers as Honeywell, General Electric, Boeing, Lockheed Martin, Textron, Cessna, Pratt and Whitney, just to name a few.

“Our sales back then were $16 to $18 million a year,” says Gary Johnson, Ace Clearwater vp. “So, when Allied Signal (now Honeywell) said ‘Either write us a check for 15% of the value of the business you do with us, or we’re pulling all of it out,’ we were shocked.We didn't even know what our costs were at that time. We had no tracking system. We knew we were making money, but we had no idea where the profit came from, what products were winners or losers. All we knew was that we didn’t want to lose the customer. We wanted to stay on their team, so we paid.”

Like an overweight football player determined to make the cut for a pro team, Ace Clearwater put itself on a strenuous regimen that included collecting information about internal and external operations and finding ways to improve efficiency.

“My wife, Kellie Johnson, whose maternal grandfather founded the company, has been running Ace Clearwater since the early 80s,” Johnson says. “She loves this company and is determined to make it the best it can be. She’s been the driving force behind our growth to our present size, which is about $30 million in sales with 180 employees working in our three divisions.”

Team for Progress

One of the things Johnson did when he first joined Ace Clearwater in 1992 was to survey all their customers, trying to find ways to improve service.

“I did a pretty comprehensive survey,” he says. “Partly it was to help me get a feel for the business, but the result was eye-opening. What came back was ‘Ace is a really great company, but you’re always late. We put up with late deliveries because your quality is good.’”

When the Honeywell ultimatum came, that knowledge served as a good starting point for change, Johnson says.

“One thing we did was hire a very bright gentleman named King Lum,” he recalls, “who had been a consultant for the California Manufacturing Technology Center. When King came on board, we formed a management team for progress. Kellie, me and King. King’s original title was director of change, but we soon learned that wasn’t such a great idea. A lot of our people back then didn’t like the idea of change, so we changed his title to director of progress, which is really what he is anyway. That’s been his title for 12 years now.”

Identifying the Problems

The team took a typical approach to solving the company’s problems. The first step was to identify the problems they faced. The second was to solve them.

“For that we needed a way to get maximum visibility of costs, of where jobs were in the shop, of where the bottlenecks were,” Johnson explains. “At about the same time, Kellie already had been wanting to implement a new MRP system, which back then was a big deal. We wanted to track everything, purchasing, we wanted bar coding, you name it. We bought a system called Symix and tied everything into it, including time cards, shipping, receiving, estimating and accounting. That was a huge project that took a few years and a lot of money to implement, but in the end it was worth it. We finally began to see what we were doing right and what we were doing wrong. Recently we’ve bought a new MRP system called Vantage by Epicore, which we implemented about eight months ago, though we’re still running both systems for a while just to be sure it’s working right.”

Johnson says that at any given moment, Ace Clearwater can have as many as 40,000 parts in some stage of production on its floor.

“King Lum has fully digitized our system,” he says. “All our prints are now digitized, which means any one who needs to can go to a terminal out on the floor and call up drawings, specs, anything. They can't print them or modify them, but they can look at them. Another thing is that with the new Epicore system, which is a .Net system, our customers will be able to log onto our website and check the status of their parts. If the program manager tells a customer, ‘Your part’s in the weld shop,’ the customer can log on and find out. We’re beta testing that right now with Lockheed Martin.”

Making the Cut

One of the major bottlenecks the progress team discovered was their machine-shop vendor base.

Johnson: “We were subbing out a lot of stuff back then, but most of our jobs are high-quality, low-volume parts. Because of the low volume, we often got put on the back burner at our vendor’s shop. We didn’t like it much, but we couldn’t really blame them. They took care of their big, bread-and-butter customers first.”

The Ace Clearwater management team sat down and reformulated their business model to give them as much control over the flow of their work as possible.

“Ace was not fully integrated back then,” Johnson says. “A lot of our machining was done outside. Some of our non-destructive testing was done outside. Some of our forming, unless it was drop hammer, was done outside. So there was a need to integrate and bring as much work as possible inhouse. Just about then there was a big aerospace down turn going on, too. Shops were going out of business. The prime contractors, Boeing in particular, were consoliding. They were going from 15,000 suppliers down to 1500, and then they were rating those 1500 suppliers with an eye to cutting them down to three or four hundred. Basically, if you wanted make the cut and stay on the aerospace team, you had to get your stuff together, get lean and mean and become competitive. We were determined to make the cut.”

Going In house

Making the cut meant speeding turnround times by bringing jobs inhouse. Doing that meant Ace Clearwater needed new big equipment.

“What we found was that some of our dies can be 15, 18, 20,000 pounds,” Johnson says. “The biggest one we ever made was 44,000 pounds. And that was an end cap on the Triple 7. We were farming out a lot of the CNC machining on these big dies, because our inhouse equipment was mostly small machines that couldn't handle the weight. Our delivery problems were aggravated as business began picking up again, because our vendors were pushing us to the back of the line again. So, we made the decision to get some big equipment so we would no longer be dependent.”

Big Jobs, Big Machines

To handle the big stuff, in the past year and a half Ace Clearwater bought 3 new machining centers.

Johnson: “In ‘05 we purchased a 3-axis YCM vertical mill with 80” x 40” x 40” work envelope and a 15,000- weight capacity. In ‘05 we also brought in a new Okuma MA-650 VB, 5-axis, high-speed machining center. For the really big stuff we just took delivery of a new Johnford DMC-2600 SH machining center with a 102” x 70” x 42” work envelope and a 22,000-pound capacity. Together, these three machines really remove a lot of our dependency on outside vendors. For us now the name of the game is rapid turnaround. These machines make it possible.”

To decide which machines to buy, the progress team went to their floor people and asked for a wish list and a set of specifications for the kinds of machines they needed.

“We got a lot of very useful input from the floor,” Johnson says, “but in the end the equipment vendors themselves helped us decide. We were looking for maximum capability for the price, and when we priced everything out the YCM and the Johnford had the best deals. The Johnford came in at half the price of any other machine with similar capacity. And, their attitude was great. When we discovered that their chip handling system was too light for our kirksite machining, they changed it immediately with no charge. They were most cooperative.”

Ace Clearwater needed its equipment fast, which was another decision factor.

Johnson: “They did everything they said they would do. We needed the machines fast. They delivered. We needed the machine modified. They did it without a squawk. And, so far the equipment has performed up to spec.”

Top Draft Pick Now

Did Ace Clearwater make the aerospace cut?

“You bet we did,” Johnson says. “We’re steadily getting new projects, but even though we made the cut, we’re still working on improving ourselves. Improvement is a continuous operation with us now. King Lum is still director of progress and Kellie and I are still heavily involved in making our business better. With all that we’ve done and are doing to become faster and more efficient, you might say we’re a top draft pick now, when it comes to aerospace work. We’re proud of that.”

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