Professional MBA

Case Studies

Tripled revenues in three years

Principals: Billy Fulghum, Fulghum, MacIndoe & Associates

Title: Engineers Sought Unique Corporate Culture


The problem: Too often, engineering projects run over budget and past deadline. That’s what Billy Fulghum and Michael MacIndoe discovered after spending more than 20 years working together at several engineering firms. The results were less-than-happy clients and employees with unrealized potential.

Both Fulghum and MacIndoe realized that engineers received little, if any, business training in college. To overcome this lack of training, Fulghum enrolled in the University of Tennessee’s Professional Masters of Business Administration program, which helped the partners refine their business plan and construct a unique engineering corporate culture that was different from other engineering firms they had known.

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Tripled revenues in three years

Principals: Billy Fulghum, Fulghum, MacIndoe & Associates

Title: Engineers Sought Unique Corporate Culture


The problem: Too often, engineering projects run over budget and past deadline. That’s what Billy Fulghum and Michael MacIndoe discovered after spending more than 20 years working together at several engineering firms. The results were less-than-happy clients and employees with unrealized potential.

Both Fulghum and MacIndoe realized that engineers received little, if any, business training in college. To overcome this lack of training, Fulghum enrolled in the University of Tennessee’s Professional Masters of Business Administration program, which helped the partners refine their business plan and construct a unique engineering corporate culture that was different from other engineering firms they had known.

The concept: The two entrepreneurs created an engineering company based on lean principles studied in the Professional MBA program and commonly adopted by some of the world’s most successful manufacturers.

Essentially, lean is a methodology for reducing waste and cost. Lean Principles include specifying what creates value from the customer’s viewpoint, identifying everything that contributes to the value of a product or service, facilitating the flow of information and products, supplying only what is needed by the customer and constantly pursuing perfection.

The concept for their company was to establish a competitive edge by effectively applying lean principles within their service industry. Their goal was an engineering team that was faster, stronger and more flexible.

The company: Fulghum and MacIndoe intentionally rejected benchmarking engineering firms as they structured their new firm. Instead, they studied successful manufacturing firms and entrepreneurial companies found in other industries. They interviewed potential clients to find out what they were looking for in an engineering firm, which was quality, speed and a fair price (although not necessarily the lowest).

The two entrepreneurs founded Fulghum, MacIndoe & Associates in January 2003.

The company works with local, state, regional and federal governments to develop and improve infrastructures and public services. It also works with private developers, architects and contractors to develop and redevelop property throughout the Southeast.

Since its inception, the company has grown to 15 employees and by year-end 2007, $3million in revenues. “Our revenues per employee are1.6 times the industry standard, ”Fulghum reports.

The solution: Several of the lean manufacturing principles practiced at companies such as Toyota, Wal-Mart and Nucor were applied to the company’s engineering processes.

These include:

  • Cross-docking. No employee has a job title. There are no administrative employees, no departments and no draftsmen. All employees are cross-trained and assigned to jobs as needed.
  • Lean principles. “Delivering on-time and with no surprises” is the company’s mantra. One example of the company’s dedication to a fast-paced, paperless process is its refusal to own a copier. In addition, the pool approach to staffing eliminates bottlenecks on time-sensitive projects. The system is set-up to accommodate many people working on one project when necessary.
  • Quarterly strategy meetings. The company’s core values are reviewed quarterly to ensure goals are being met; adjustments and refinements are made as necessary.
  • Weekly “lessons learned” meetings. Every Thursday, project managers review the company’s work load and allocate employees to projects. Every Friday, the entire company gathers, the work plan for the week is presented, and ideas are welcomed.

A unique corporate culture has developed at Fulghum, MacIndoe. Typical engineering firms are structured with departments, job titles and rigid job responsibilities. “Such is not the case at Fulghum, MacIndoe where human resources are ‘pooled’ and then ‘pulled’ as necessary based on the work load,” Fulghum says.

At the end of each year, profits are divided among the employees. In 2008, the ownership aspect of the entrepreneurial culture was strengthened when three employees were allowed to buy stock in the company.

The outcome: In 2004, the company reported $1million in revenues. By 2007 that number had grown to $3 million, earning the company national recognition.

It ranks 2,031 on the 2008 Inc. 5,000 list, which recognizes the fastest-growing private companies in America. It is listed on the Zweig Letter 2008 Hot Firm List, which recognizes the 200 fastest-growing architecture, engineering, and environmental firms in the U.S. and Canada.

When the company applied to be added to the federal vendor list, it scored 94 out of 100 on its evaluation, placing it among the top 20 percent in the nation.

“People told me ideas such as the cross-docking concept would never work,” Fulghum remembers.  However, he reports that the company consistently ranks among the top

90 percent of firms when evaluated against standard engineering industry metrics, such as profits and revenue-per-employee.

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Case Study is provided by the University of Tennessee, Haslam College of Business.

FULGHUM, MACINDOE & ASSOCIATES

Principals: Billy Fulghum and Michael MacIndoe
Founded: January 2003
Business: Engineering firm
Employees: 15
Revenues: $3 million

www.fulghummacindoe.com

 

 


Realized $500,000 annual savings

Principals: Rebecca Barnett, Cummins Inc.

Title: UT Grad Leads Money-saving, Pollution-reducing Project


Company: Cummins Inc. is a corporation of complementary business units that design, manufacture, distribute and service engines and related component technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Based in Columbus, Ind., Cummins serves customers in approximately 190 countries and territories through more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations. In 2009, Cummins reported net income of $428 million on sales of $10.8 billion.

Opportunity: In San Luis Potosi, Mexico, Cummins operates three plants (reconditioned engines, alternators, and filtration and exhaust systems) that produce and ship products daily to U.S. distribution centers.

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Realized $500,000 annual savings

Principals: Rebecca Barnett, Cummins Inc.

Title: UT Grad Leads Money-saving, Pollution-reducing Project


Company: Cummins Inc. is a corporation of complementary business units that design, manufacture, distribute and service engines and related component technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. Based in Columbus, Ind., Cummins serves customers in approximately 190 countries and territories through more than 500 company-owned and independent distributor locations and approximately 5,200 dealer locations. In 2009, Cummins reported net income of $428 million on sales of $10.8 billion.

Opportunity: In San Luis Potosi, Mexico, Cummins operates three plants (reconditioned engines, alternators, and filtration and exhaust systems) that produce and ship products daily to U.S. distribution centers.

The filtration plant ships trailers of light weight air filters. The product is so light that a finished filter can be picked up with two fingers. The engine plant ships trailers of reconditioned engines that weigh 3,000 to 5,000 pounds each. When the engines were loaded in truck trailers, the area in the trailers above the engines was unused, providing an opportunity to load filtration products on top of the engines and thus ship fewer trailers each day.

Background: Rebecca Barnett, a Six Sigma Black Belt and 2009 graduate of the University of Tennessee’s Professional MBA program, was working in Cummins’ Nashville office when she embarked on this initiative for her Professional MBA yearlong company project.

Solution: Barnett assembled a team with members from both plants and held face–to face team meetings in the United States and Mexico. The team mapped the shipping processes used by the plants and engaged in joint problem-solving, ultimately creating a plan to ship both filters and reconditioned engines in the same trailers. The heavy engines were loaded on the floor of the trailer and crossbars were installed above the engines to hold pallets of filters. As a result, space was optimized without incurring excessive weight or putting the high-value engines at risk.

Outcome: By co-loading its trailers with engines from one plant and filters from another, Cummins achieved $500,000 in annual savings.

“The key to cross-business-unit project success is for each business to have a financial stake and share in the savings,” Barnett says. “In this case, the two business units shared the $500,000 savings equally.”

The project has also delivered significant environmental benefits. For each trailer the Cummins plants do not ship—and they now ship up to two trailers less per day— the company’s carbon footprint is reduced by 2.59 metric tons of carbon dioxide.

Through other process improvements associated with this endeavor, the team also reduced days in transit from San Luis Potosi to U.S. distribution centers from a range of five to13 day to an average of 4.8 days. The team also implemented satellite tracking of each load to protect the high-value reconditioned engines.

The team has since identified12 spin-off projects that are currently being implemented.

Barnett’s cross-business-unit project has been used as a model throughout Cummins Inc., and she has presented the project to senior leadership in all business units.

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Case Study is provided by the University of Tennessee College of Business Administration. For more information, contact Cindy Raines at craines1@utk.edu

 


Returned investment four years ahead of schedule with $60,000 savings in year one

Principals: George Coleman, Kingsport Times-News

Title: Lean Times Helped Make a Case for Investment


Opportunity: In December 2007, George Coleman, advertising Director of the Kingsport Times-News, toured the new press operation of the Ogden Standard Examiner in Utah. At the time, Coleman had been enrolled in the Professional MBA program at the University of Tennessee for three months, and he was in the midst of the “macro phase” of his company project.

While on the tour, a large metal box caught Coleman’s eye; it was a computer-to-plate (CTP) imaging system. Instead of making printing press plates from negatives, as was the practice in Kingsport, the Standard-Examiner employed its CTP system to create plate images directly from the newsroom’s editorial computer system. Using an ultraviolet laser to form images on plates, the CTP system required cheaper plates, used no negatives, employed fewer chemicals, and was much faster. Coleman wondered why this new technology had not been adopted at his newspaper.

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Returned investment four years ahead of schedule with $60,000 savings in year one

Principals: George Coleman, Kingsport Times-News

Title: Lean Times Helped Make a Case for Investment


Opportunity: In December 2007, George Coleman, advertising Director of the Kingsport Times-News, toured the new press operation of the Ogden Standard Examiner in Utah. At the time, Coleman had been enrolled in the Professional MBA program at the University of Tennessee for three months, and he was in the midst of the “macro phase” of his company project.

While on the tour, a large metal box caught Coleman’s eye; it was a computer-to-plate (CTP) imaging system. Instead of making printing press plates from negatives, as was the practice in Kingsport, the Standard-Examiner employed its CTP system to create plate images directly from the newsroom’s editorial computer system. Using an ultraviolet laser to form images on plates, the CTP system required cheaper plates, used no negatives, employed fewer chemicals, and was much faster. Coleman wondered why this new technology had not been adopted at his newspaper.

Challenge: Upon his return to Kingsport, Coleman met with Tim Archer, operations manager for the Times-News. Archer said he would love to move to CTP; unfortunately, although operating costs would be reduced with the new system, he could not cost justify the capital investment.

“Fortunately, as a student in the program, I learned all the analytical tools needed to make the case for taking our press operation into the digital age, such as how to cost-justify capital investments, how to determine return on investment, and how to quantify accumulate savings over time,” Coleman says.

Background: Faster, better, cheaper and less risky were the selling points of CTP. Faster was critical, because a newspaper goes from raw material to a delivered product in just eight hours. Better referred to CTP’s ability to make plates that would consistently line up properly on the press. Improper alignment leads to color that is out of register, which means that photographs are blurry. To correct the alignment error, the press has to be shut down to replace the printing plates, wasting both time and newsprint.

Cheaper referred to the lower cost of materials. Finally, the CTP process was much less risky because it required significantly less handling and disposal of hazardous materials.

Solution: Archer, Coleman and the production team mapped out the existing process and identified all the costs associated with it. They met with vendors and developed a proposal to replace the Times-News’s three analog processors (two primary units and one back-up unit) with two CTP units.

Unfortunately, the numbers were not encouraging. At a cost of $480,000, the payback took 6.2 years.

At this point, however, two significant changes occurred that breathed new life into the project.

First, the economy tanked, and orders for major equipment purchases in the print industry came to a halt; as a result, suppliers drastically cut prices.

Secondly, Coleman was introduced to the concept of time studies by one of his Professional MBA professors, Mandyam Srinivasan. By conducting a time study on the new process, Coleman and his team were able to demonstrate that a single CTP processor had sufficient speed to handle the newspaper’s workload; as second CTP processor was not needed.

Ultimately, the CTP vendor offered a price that shrank the return on investment to 2.6 years.

In January 2009, an emergency capital request was made to the owners, and the CTP system was installed nine months later. By October 2009, all plates generated in the Kingsport Times-News production facility came from the new CTP system.

“We spent a lot of time in the Professional MBA program discussing leadership and managing change,” Coleman says. “That was enormously helpful as we worked through this project, which involved a radical change to an operation that had been doing things one way for a very long time.”

Outcome: “We estimated the first year’s operating expense savings to be about $60,000,” Coleman recalls.“ After nearly one year of using the new system, we have easily attained that savings. Press restarts due to color adjustments are down by half, and that is expected to improve.”

Coleman adds the timing couldn’t have been better.

“The drastic loss of advertising revenues for the newspaper industry impacted Kingsport’s operation, as it did every newspaper in the country,” he explains. “The ability to reduce operating expenses while simultaneously improving speed and quality was an incredible asset to us in a difficult operating environment.”

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Case Study is provided by the University of Tennessee College of Business Administration. For more information, contact Cindy Raines at craines1@utk.edu

KINGSPORT TIMES - NEWS

Circulation: 40,000
Parent company: Sandusky Newspapers
Contact:George Coleman,advertising director, 423-392-1393, gcoleman@timesnews.net

www.timesnews.net


Won award for smart process thinking

Principals: Wes Williams, Scripps Networks Digital

Title: Applying Traditional Process Improvements to Virtual World


Opportunity: Can continuous process improvement techniques be used in a production environment where products can’t be held and touched? How do you identify defects in a production process that creates Web sites serving millions of users daily?

That’s what Wes Williams wondered. Williams, a 2007graduate of the University of Tennessee’s Professional MBA program, is director of SN Digital Online Production at Scripps Networks in Knoxville. SN Digital produces Web sites for Scripps’ television networks, including Food Network, HGTV and DIY Network.

SN Digital did not have a process for identifying or tracking broken pages and links. Instead, the production team relied on catching problems themselves or hearing about glitches from its customer service department.

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Won award for smart process thinking

Principals: Wes Williams, Scripps Networks Digital

Title: Applying Traditional Process Improvements to Virtual World


Opportunity: Can continuous process improvement techniques be used in a production environment where products can’t be held and touched? How do you identify defects in a production process that creates Web sites serving millions of users daily?

That’s what Wes Williams wondered. Williams, a 2007graduate of the University of Tennessee’s Professional MBA program, is director of SN Digital Online Production at Scripps Networks in Knoxville. SN Digital produces Web sites for Scripps’ television networks, including Food Network, HGTV and DIY Network.

SN Digital did not have a process for identifying or tracking broken pages and links. Instead, the production team relied on catching problems themselves or hearing about glitches from its customer service department.

Challenge: Large media Web sites are complex operations involving different publishing systems and dozens of staff members making manual and automated updates to text, images and video. A single wrong character in the programming code can cause a Web page to fail. Although this happens on a small percentage of pages, problems can become costly. If a Web link to popular content breaks, this “product defect” could mean dissatisfied customers who can’t access the content, lost advertising impressions and the potential forfeiture advertising dollars. These defects may also cause users to leave the site.

Concept: Williams aimed to apply continuous process improvement principles to the electronic assembly line that products out Web pages. “My Professional MBA classes at UT showed me it should be possible, but only if you know what to measure, can actually measure it, and can analyze what you’ve measured to take action,” he said.

Solution: Changes to Scripps Networks’ Web sites had made it possible to measure how many times users encountered broken Web pages and determine precisely where users had clicked on broken links. This information was being saved, but the staff was unaware, because the information was buried in a huge volume of data.

Williams set up two layers of reporting for when broken pages occur.

First, an automated alert notifies support staff when the number of errors per hour crosses a certain threshold. This is similar to an electronic canary in the coal mine: problems are discovered quickly rather than lingering until staff happen across it or users complain.

The second report layer is a morning summary of broken pages recorded the previous day. That data helps prioritize issues that need attention, Williams says.

These reports also give staff a way to track the defect rate and focus on continuous improvement. The SN Digital team now is identifying the root causes so the pages can prevented from breaking again.

“By finding the right data and understanding it, we’re able to improve our product quality, preserve advertising revenue and keep our users happy,” Williams said.

Williams received a ScrippsNetworks Interactive Chairman’s Award in November 2009 for applying Professional MBA lessons to the real—or, in this case, virtual— world.

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Case Study is provided by the University of Tennessee College of Business Administration. For more information, contact Cindy Raines at craines1@utk.edu.

 

Parent company: Scripps Networks

Mailing address: 9721 Sherrill Blvd., Knoxville, TN37932

Director: Wes Williams
Phone: 865-560-4940
E-mail: wwilliams@scrippsnetworks.com

GREATER KNOXVILLE BUSINESSJOURNAL
KNOXVILLEBIZ.COM

 


Breathed new life into a lagging product line

Principals: Bill Broussard, Emerson Process Management

Title: Breathing New Life into a Lagging Product Line


Challenge: When a once hot product is no longer new and exciting, how do you maintain record-breaking sales performance?

Company: Emerson Process Management, a division of Emerson Electric (which purchased Knoxville based Computational Systems Inc. in 1997), manufactures health monitors and technology that provide advance warning of pending machine failures. These monitors enable organizations to plan and implement cost-effective maintenance procedures before failures occur, thereby avoiding expensive repairs and shutdowns. One such monitor, the CSI 4500, is an online application often employed in the paper, chemical, power, petroleum and pharmaceutical industries. For example, a CSI 4500 Monitor may be used to predict failures in a turbine at a TVA power plant.

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Breathed new life into a lagging product line

Principals: Bill Broussard, Emerson Process Management

Title: Breathing New Life into a Lagging Product Line


Challenge: When a once hot product is no longer new and exciting, how do you maintain record-breaking sales performance?

Company: Emerson Process Management, a division of Emerson Electric (which purchased Knoxville based Computational Systems Inc. in 1997), manufactures health monitors and technology that provide advance warning of pending machine failures. These monitors enable organizations to plan and implement cost-effective maintenance procedures before failures occur, thereby avoiding expensive repairs and shutdowns. One such monitor, the CSI 4500, is an online application often employed in the paper, chemical, power, petroleum and pharmaceutical industries. For example, a CSI 4500 Monitor may be used to predict failures in a turbine at a TVA power plant.

Opportunity: The CSI 4500 product line was launched in 1999 and quickly exceeded sales records. Three years later, however, sales began to decline. Bill Broussard, who had just completed the University of Tennessee’s Professional MBA program, was tasked with resurrecting the product line.

Solution: “I used every skill I learned in UT’s Professional MBA program to turn the business around,” says Broussard. “From accounting to logistics and everything in between, it all came into play.”

Broussard shares these highlights:

  • Management: One of the critical first tasks was to refocus the sales team. Five sales consultants, or application experts, began reporting to Broussard, who instituted weekly conference calls. Goals were set, forecasts were regularly updated and much-needed education about the product was provided. In addition, younger reps were assigned to mentors. A change-averse staff became an informed, empowered and goal-aligned team.
     
  • Accounting and finance: Another focus was maximizing the profitability margin of each solution sold to a customer. In this business, rarely are two solutions the same. Each solution is customized for the customer, and the bill of materials needed for each solution often involves a mix of high-margin and low-margin products and services, as well as outsourced buy-in items. In the past, the proposal process had been time-consuming and ultimately produced less-than-ideal results for the bottom line. Using accounting and financial tools, Broussard analyzed revenues, cost of goods sold and overhead expenses to understand what each proposal component actually cost the company. Now his management team can make informed pricing negotiations knowing the margin contribution of each sale. With the proper data for decision making now in hand, the effort required to prepare accurate, timely and profitable proposals has been significantly reduced.
     
  • Marketing: At UT, Broussard learned “customer value determination,” in which customer satisfaction measurements are based on the concept of value. Measured quantitatively and qualitatively, customer value determinations then are applied to specific product features. Broussard said this strategy was used to develop a new product feature for the CSI 4500 line.

    “We shifted from an engineering approach to a marketing approach,” explains Broussard. “We assessed what our customers valued and designed the product accordingly, instead of engineering a product we thought would work and then expecting our salesforce to figure out how to sell it.”

    The old cycle of development — develop, launch, get customer feedback, re-engineer and begin again was replaced with a new style — identify the customer’s requirements and then engineer a solution to meet them. “For all intents and purposes, the new feature ‘hit the nail on the head’ with respect to what our customers wanted,” says Broussard.
     

  • Global perspective: The CSI 4500 line is sold all over the world, but each market is unique. “We must address different distribution models by country, such as currency fluctuations, transfer price factors, cultural differences, and service capability —and still figure out how to make money for the company,” explains Broussard. “For example, in Latin America, we had a representative with very strong service and technical capabilities, but he faced significant competitive pressure and price challenges. We were able to support his efforts by devising creative approaches to his unique market environment. As a result, he succeeded in securing one of the largest contracts in the product line’s history.”

Outcome: These techniques helped a promising product line realize its potential, with sales meeting Emerson’s high expectations over the past four years. Moreover, in 2006, Emerson began a strategic partnership with a key supplier in Germany that led to an evolutionary release of the CSI 6500. Investing in further growth of the line, Emerson recently acquired that manufacturing facility and promoted Broussard to oversee its integration into the Emerson family.

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Case Study is provided by the University of Tennessee College of Business Administration Professional MBA program. For more information, contact Cindy Raines at craines1@utk.edu.

 

EMERSON PROCESS MANAGEMENT

Parent company: Emerson Electric (NYSE: EMR)
Address: 835 Innovation Drive, Knoxville, TN 37932
Phone: 865-675-2400
www.mhm.assetweb.com