By Beth Bily
Customized training offered through AdvancedMN has changed the working landscape at Minnesota Diversified Industries, which manufactures and assembles corrugated plastic products, as well as providing a number of commercial services to its customers.
MDI, with a mission of providing employment opportunities to disabled and/or disadvantaged workers, manufactures plastic corrugated products for industrial applications. The company’s most notable product is the plastic box – used for a variety of applications but probably best known as a postal tote.
Nonprofit MDI, with operations in St. Paul, Grand Rapids and Hibbing, has a long history of up and down financial results – tied to heavy dependence on its top customer, the United States Postal Service.
Individual personnel weren’t the only casualties of MDI’s financial woes. The company’s rocky history led to excessive turnover and ultimately an overall loss in workplace efficiency. After running the numbers, management realized that the corrugated plastic waste they weren’t able to recycle or reuse (because it fell on the floor or was otherwise contaminated) was leading to organizational losses estimated at 15,000 pounds – at a $124,000 annual cost.
“The level of dirty scrap we were producing seemed to be increasing,” said Rodney Wood, operations vice president. “There was a definite push for a high performing organization.”
Company executives decided to enlist AdvancedMN help. Late last year they began the implementation of Six Sigma – a workplace excellence methodology developed by Motorola in the 1980s and later popularized by Jack Welch at General Electric. It not only has reduced unrecyclable waste but also transformed the entire workplace environment.
The initiative began when MDI received a Minnesota Jobs Partnership Skills grant (a 50/50 matching funds grant) more than one year ago.
“It (Six Sigma) was a pilot program,” said Gail Anderson, who worked with the company through the Itasca Community College arm of AdvancedMN’s Customized Training program. She also earned her Six Sigma black belt (a high level expert) in the process.
AdvancedMN is an umbrella customized training, continuing education and partnership initiative among the five colleges that comprise the Northeast Higher Education District – Itasca (Grand Rapids), Hibbing, Mesabi Technical (Virginia), Vermilion (Ely) and Rainy River (International Falls) community colleges. That collective initiative was launched by NHED late in the fall of 2012.
Anderson describes Six Sigma as a “process improvement methodology.” It’s technically defined as 3.4 defects per one million opportunities. She noted, however, that few businesses or organizations actually achieve a level that close to perfection.
The program is statistically driven, and in her work with MDI, Anderson merged lean management and Six Sigma principles. In addition to Anderson, MDI management including Wood, Brad Olson, Dan Prusi and Duane Docktor got on board with the principles of the program.
The management team reported that their efforts centered on employee awareness.
“We defined what dirty scrap is and developed a process so that it (corrugated plastic) doesn’t become dirty scrap,” said Anderson.
“Our supervisors spent lots of time on the floor,” said Wood of the transition.
The Six Sigma effort began in late 2012 and so far, the net results are on track for $69,000 in annual savings.
Cost savings haven’t been the only positive, said Wood. A more disciplined approach, improved safety, skills acquisition and process developments also have been outcomes of MDI’s Six Sigma project.
Six Sigma and lean management are only part of an improved financial outlook for MDI, which has five key goals: Providing more employment opportunities to people with disabilities; business development; diversification; financial stability, and to become a high performance organization.
The nonprofit still depends heavily on the USPS for business, but has expanded its commercial sales – from $1.9 million in 2009 to $6 million in 2013, said Barbara Majerus, vice president of sales and business development.
Percentages of public to private sector sales are difficult to trend over time. That’s because orders from the USPS still fluctuate greatly. Nonetheless, numbers do appear headed in the right direction.
In 2012, the last year final financials were available, total MDI revenue was $31.5 million. Of that, nearly 20 percent came from commercial plastics and assembly. In some recent years, the revenues derived from USPS contracts were in excess of 90 percent.
In December 2013, the company reported FTEs of 205 to BusinessNorth. That’s down from 243 the previous year, but executives say that layoffs would have been worse if not for diversification and improved processes.
Repackaging inventory through contracts with firms like Jacobs Trading helped see the nonprofit through a months-long period with no USPS contract in place, said executives. Wood noted, however, that MDI now has an active USPS agreement.
Long-term, it has developed sales relationships through distributors and resellers that include orders from companies such as Frito Lay, FedEx, UPS and Amazon.
The development of a collapsible plastic box has been instrumental in securing new contracts with private sector firms, said Majerus. MDI also has successfully grown its commercial services sector – primarily out of its St. Paul office.
Further, MDI has developed an affiliation with Hired Hands, a recycling service in Itasca County that also employs the disabled and disadvantaged. The two organizations are now operating under one umbrella and one board of directors.
That doesn’t mean MDI won’t still experience staffing ups and downs, but executives report the nonprofit is at least headed in that direction.
“It’s new customers, it’s new products and it’s a new culture at MDI that allow us to support growth,” said Majerus.