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Leatherman's promise to keep it local

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Articles - June 2011
Wednesday, May 18, 2011
Workers are divided into pods shaped in a "U," with each pod dedicated to a specific product. This process is part of the highly efficient manufacturing process. // Photos by Katharine Kimball

It’s a late winter day, and Jake Nichol is between places. For the past week or so, the 58-year-old has been in Asia at a trade show, trying to pry open new markets for the company’s growing array of multi-tools. Tomorrow he’s off to Germany to put the final touches on a deal that will see Leatherman take over German flashlight maker LED Lenser.

But for now, Nichol is pacing the production floor of the Leatherman complex, just a touch jetlagged, comfortable in CEO-cum-everyman jeans and blue tartan shirt, cowboy boots clacking against the painted concrete. Around every corner, he points at some piece of the Leatherman production program needed to compete and grow the company’s market share.

He points at an assembly table where three people stand in a kind of pod, attaching knife blades to fasteners. That, Nichol says, is an example of the Toyota-inspired production methods Leatherman prefers: an efficient, almost singular motion from one phase of production to another. Its employees work as close-knit teams.  Spreadsheets hang from each pod, charting out production goals, whether those goals were met and, if the group fell short, why that particular pod struggled.

The system is designed to weed out those things that American manufacturers can’t afford: inefficiencies, waste and inconsistencies. The process, which the company unabashedly calls the Leatherman Operating System, combines lean manufacturing and management techniques designed to wring every last drop of efficiency out of the production process.
The company’s lean manufacturing process, based on the Toyota Production System model that has been touted for decades as the best in the business, is apparent. It’s part of everything Nichol points out as he walks the Leatherman production floor. But the “breakthrough management” style Nichol has adopted to help lower costs is slightly more curious.

The management style, named after a Japanese leadership technique developed by management expert Shoji Shiba, preaches breakthroughs in business as a way to survive in a rapidly globalizing world. At Leatherman, the philosophy has meant establishing two or three key goals every year toward which the company invests serious time and resources — goals that would require the company, as Nichol puts it, “to completely change the context, and rethink the whole methodology of what you’ve done.”

Two years ago, for example, Nichol challenged his team to develop a multi-tool that would sell for a paltry $30 – exactly what the company’s competitors were selling their tools for, even though they were made in China for far less.

“We challenged our teams, and said: Rethink all that you do, and find a way to get to those kind of cost take-out levels.”
Factory workers on the Leatherman floor couldn’t just work harder or longer hours; that wasn’t enough. It took a close examination of costs throughout the proposed product and some real critical thought about every step of manufacturing. The jaws of the tool would have to be made a totally different way. Some subcontracted work had to be brought in-house to cut costs.

Once every month after Nichol challenged his team, the company conducted rigorous analysis of the tool’s development, looking at potential costs and savings to gauge how close they were to hitting their proposed price point. Eventually, the breakthrough came. Nichol's team found a way to rework their system to cut costs at every step. The new $30 multi-tool was officially announced at a trade show in February, and will hit store shelves in September.



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