McConnell Seats has emerged from its days as a ‘jobbing plant’ to manufacturing powerhouse
Preparation is everything when you race a car.
Heading down into the first corner at Sandown at more than 160km/h in a race-prepped Mazda MX5 is not the time to discover, say, you forgot to tighten your wheelnuts or you should have bled your brake system.
Success on the track is all about attention to detail before the race and an acute awareness of what is going on around you during the event.
These are the qualities that Alan Smith brings to his role as CEO at McConnell Seats, the Australian bus industry’s biggest seat supplier.
As with his Mazda sports car, which he has built into a lean, agile racer, Smith has reconfigured McConnell into an efficient and profitable operation able to hold its own in trying times.
Under the watchful gaze of owners Denis and Chris McConnell, Smith has implemented a significant capital reinvestment program that has thoroughly remodeled the company in the 12 years he has been there.
Around $12 million has been invested in new plant and equipment, while a further $3 million was spent on refurbishing the premises in 2009 to make it a cleaner, safer, more comfortable place to work.
It has been a big program for a company turning over $20 million a year, but it has given McConnell a strong foundation on which to grow as the bus industry expands.
McConnell was formed in 1952 by the late James McConnell and celebrated its 60th anniversary on March 29.
James brought his 13-year-old son Denis into the business as an apprentice in 1956, just four years after starting the business.
Denis will celebrate his 56th year with the company later this year, and he is still actively involved in the business. He heads up the design and engineering department, which is responsible for developing new products, while Smith wrestles with the day-to-day issues.
Denis, in fact, designed Australia’s first bus seat that complied with ADR68 back in 1994.
In 2000, Smith came across to McConnell after 11 years at Volgren, having absorbed a lot of production and management skills while working at the country’s biggest bus body builder.
He immediately put that knowledge to work at McConnell, introducing up to date production systems and quality standards that transformed the seat manufacturer.
McConnell was doing around $8 million a year at that point, and offering a profusion of seat variations based on no less than 14 different designs.
“We had many products that were not beneficial to the company. So we standardised the products and we also started to grow the business into a long-term contract business, in both bus and rail,” Smith says.
“In the past we were a jobbing shop, not a manufacturing plant. You’d get an order for a seat and you’d make the seat. We’d get another order, for a different seat, and we’d make that seat.”
Customers expected to be able to make a whole raft of changes to the designs offered: a different color, longer legs, a bench 2 inches wider.
“Every thing you made was a different size, every weld was different, every seat cover was a different shape, every piece of foam you cut was different. So, what you had was very high cost, very low volumes and very little profit.”
For instance, in 2000 there were five seat-belted seats, all with different components. Now there are five seat-belted seats but they all use the same components. Customers can still have variation, but their seats will be based on one of the five basic designs.
McConnell makes 250 seats a day, although it has reached 350 in busy times. Output has doubled from 31,000 seats in 2000 to 60,000 now, with about 10 percent going to rail carriages. Staffing is essentially unchanged around the 70 person mark and turnover is now around $20 million.
“That growth [in volumes and revenue] is explained by an increase in market share and the addition of the rail business. We have about 57 percent of the bus seat market after securing government bus seating contracts in most states,” Smith says.
“If we were still using the same methods we were using in 2000, we would be employing 230 people.”
Clearly, there was more than just product standardisation going on. Smith uses a statistical approach to organising the plant and the workflow, employing the latest technology wherever possible.
Everything that can be measured is measured as a means of understanding what the company is achieving and where improvements can be made.
SUPPORT SEWN UP
The switch to mass production has also received strong support from Denis and Chris, who have supported a rolling capital expenditure program that has, 12 years in, transformed the way McConnell makes seats.
Part of the $12 million invested over the last 10 years went on a $450,000 textile-cutting machine.
Previously, workers would have to lay out the fabric on the cutting table, mark the patterns and then use an electric knife to produce the shapes required in the sewing room.
To cut the fabric for a full set of 57 seat covers for a benchmark seat design would take them 5.6 hours.
The new computer-controlled cutting machine now automatically feeds the cloth and cuts the trim for 57 standard seats in 22 minutes.
“We have a number of machines that have achieved that sort of turnaround,” Smith says.
Another problem besetting the company in 2000 was repetitive strain injury. Many employees would be struck down, particularly in the assembly area where they had to use brute force to compress the seat cushion while they pulled the seat cover into place so it could be stapled.
Smith, an engineer himself, was involved in the design of three compression machines and one stuffing machine which helped overcome the problem, and had them made locally. One compresses the bench cushion, leaving the employee with two free hands to adjust the upholstery and use the stapler with no muscular strain.
The other machine accomplishes the same result when assembling the seat back, making its easy to slip the seat cover into place.
Smith says analysis showed that, before he designed the two machines, it would take a worker five minutes to put the cover on a seat in the morning. By the end of the shift it was taking eight minutes because the workers were tired and stressed.
McConnell had to impose a limit of 10 covers before the workers had to be rotated onto another task. Now the machines help the workers do it in one minute.
“We have eliminated workplace injury,” he says proudly. “And, on top of that, the machines save many hours of labour.
“We run risk analysis on every machine we have.”
WORKERS COME FIRST
But that’s not the only way McConnell looks after workers. If someone has a meltdown, whether it’s caused by disease or family issues, McConnell has a track record of helping workers back onto their feet and helps them stay employed.
In one instance, an employee had to spend time in hospital and, during that period, their car was towed from the street and the electricity to the house turned off. McConnell helped the employee get their life back together and ensured there was a place for them back at the plant.
Coburg North is situated in Melbourne’s northern industrial suburbs and, in its early days, McConnell provided work for Italian, Greek and English migrants.
Now, many families boast second-generation workers at McConnell, and a few even have a third-generation working there.
It is perhaps superfluous to note that labor turnover is almost nil. Smith says pay at the plant is as much as 30 percent above the minimum award wage, which may explain why McConnell in a non-union shop.
All the company’s achievements in improving efficiency and cutting needless cost like workplace injury claims have helped keep McConnell competitive in a market increasingly under pressure from imports.
McConnell has not only been able to minimise price rises over the last 12 years, it has actually lowered prices.
“We have been building seat-belted seats for 17 years. In 1995 a two-passenger seat for a coach cost $1,015,” he says. Adjusted for inflation, and with no efficiency changes in the plant, that would be $1,551 in 2012.
“In 2012, the same seat is $998.”
“In 1995, a school bus seat with seat belts was $860 [$1,314 in 2012 dollars]. In 2012, an equivalent two-place school bus seat is $616.
“That’s the benefit of going from a jobbing shop to a manufacturing process. You have like-type volume, you don’t have to reset machines for every little part, you can make thousands at a time.”
Of course, there are market forces at work, too. Pricing practices have changed dramatically in recent years as more buses are being imported.
“Back in 2005, everyone in the bus industry used to have a price book,” Smith says. “A customer would ask for something and you just looked up the price, and it would be adjusted every year for inflation, or whatever.
“Now it’s the market that tells us what they will pay.”
For instance, back in 2007, a set of school bus seats would cost $21,000. Now McConnell supplies them for around $15,000.
A lot of the downward pressure comes from imports, of course, but Smith says cheap foreign seats don’t actually set the benchmark price.
“Our customer is prepared to pay more than what an offshore supplier will charge. They pay more because we are local and they have ready access to us, because service is easier and because warranty claims can be quickly dealt with. That’s worth paying for.”
There is another factor at work, too. Smith does not question the customer’s right to specify imported seats in an imported bus, but he does wonder why they do it.
“When you look at the whole-of-life costs of imported seats, it is actually three times the list price of the imported seat.
It is generally the case, he argues, that imported seats need to be repaired and/or refurbished after five to eight years. He says the main issue is that welds crack because the steel is often inferior.
McConnell had real-world experience with this, in the sense that it was once supplied with foreign steel.
“We got some [rolled hollow section] from our steel supplier on one occasion and the blokes were coming in from the shop floor complaining that the welded seam on the RHS was breaking when the metal was in the press,” he says.
“That’s not good.”
When he tackled the supplier about it, he was told the supplier had decided to bring in some RHS from China. It seems that the imported steel was recycled material that was not up to the high tensile specification expected. McConnell now specifies exactly the type of steel it wants.
Smith says he does wonder when an operator does opt for the imported seats.
“Given a bus can cost as much as $500,000, the cost of a good set of seats is nothing,” he says.
The quest for a better seat has led Smith and Denis McConnell into a radical research and development program aimed at replacing steel in the seat frames.
The company is developing an aluminium seat for use in rail carriages, and it is also examining the possibility of using plastic composites, which offer strength with lightness.
Perhaps surprisingly, a composite seat would be more attractive for its reduction in labour costs than its weight advantage, but Smith says there is still a long way to go on the project.
The fact that McConnell is still questioning everything it does and the materials it uses suggests that it is well placed to race into the future.