Kato Engineering

Source: Manufacturing Digital

Date :7/2/2007 12:07:26 PM

Kato Engineering seeks to redefine how to quickly manufacture design-to-order generators for its customers.

Written and produced by James Buchanan & Patrick Harlow

Kato Engineering, Inc., based in North Mankato, Minn., has managed to define a niche within a niche.

The company is a manufacturer of electric generators and motor-generators that serve a wide variety of industries and needs, from primary power to backup power generation.

However, the company does not sell directly into the marketplace.

“The companies we sell to will take our generator and mount it with the turbine as a package-complete product,” says Gary Burandt, VP and general manager of Kato. “They’ll also test it and sell that product to the end-user or through a distributor.”

He adds that the company’s primary customers are OEMs (original equipment manufacturers) in the markets they serve.

Since the company serves a broad array of industries – oil and gas, mining and manufacturing, military, transportation, co-generation, computers and telecommunications – there is great growth potential, but marketing needs to be targeted to a potential client’s needs, says Burandt.

In certain markets, he says, the company will call on consultants and engineers to get its products specified, which helps get the word out about Kato’s work. Word-of-mouth about the company’s capabilities and unique qualities is a key driver for new business for Kato, say Burandt and Neal Benson, director of lean enterprise for the company.

The general goal, though, adds Benson, is to maintain the current customer base while appealing to new entrants in the market and growing with them.

“We’re in so many different industries, and each area has different power requirements,” says Benson, “and within each industry there are a number of niche businesses that are fairly unique, so there is a relatively broad market for our products.”

Burandt adds that growth has also been driven by increased worldwide demand for its products, economic growth domestically, and economic expansion in developing nations.

“But in the area that relates more directly to what we do,” says Burandt, “we have a very strong understanding of our customers and their requirements, which includes the need for us to meet and exceed the very strict engineering demands of our customers and providing strong after sales support.”

What also distinguishes Kato from its peers, he says, is the emphasis the company places on being a design-to-order manufacturer.

“Our products are heavily engineered to specific customers and applications, so we build a lot of one-of-a-kind products,” says Burandt. “For each generator we build, it must meet the customer’s specifications and tough international standards, and we do this generally in half the time of other companies.”

To meet this demanding routine, Benson says the company puts a lot of its focus on its manufacturing capabilities in order to execute on its business strategy. In other words, the company has developed and nurtured its focus on its core competency, which is Kato’s desire to maintain a high maximum design-to-order production capability, Benson says.

Given that each piece is essentially custom-built; to meet the design and technical requirements of each project the company must support a very flexible manufacturing process.

Essential to maintaining a flexible manufacturing process is strong supply relationships.

“There is likely to be variation of the technical aspect of each job nearly every day,” says Benson, “so to maintain throughput on the shop floor, it is critical that our suppliers are able to support our requirements.”

To enhance manufacturing flexibility the company therefore relies on a variety of supply resources that could be described as a flexible supply base constituted to meet many low-volume, mixed supply requests for the company.

“We don’t buy supplies on a stock basis. Rather, we get supplies in quickly and place them in the process very quickly as well,” Burandt adds.

Kato relies on a number of sources for supplies, but one of the more innovative lines is from its sister companies. Kato is a plant within a division of Leroy Somer, which is a holding company owned by Emerson Electric, a diversified global technology company that provides technologies and services for a wide range of industries.

Within each division of Leroy Somers, the various units – of which Kato is one – have specialized capabilities and services that compliment each other. Therefore, Kato can rely on its sister companies as intra-divisional suppliers for certain materials because - while these companies also build finished products - they produce components that can be used by Kato.

This type of synergistic, inter-reliance increases Kato’s manufacturing capacity, says Benson, and assures that quality products consistently reach its shop floor on time.

Though an effective one, the above is only a partial solution to the company’s supply needs. Kato also works with regional, national and global (primarily China) supply chain companies to help meet customer demands and maintain throughput volume in its manufacturing. Qualifying all of these suppliers, says Benson, is a fairly regimented process.

“We are very thoughtful and selective as to how we set the criteria for our suppliers in China, in order to ensure that we can meet or exceed the quality demands and other requirements of our customers,” he adds.

Manufacturing flexibility is also derived through quality assurance programs. Burandt says Kato is heavily engaged in a comprehensive lean enterprise model for the company’s continuous improvement, which allows it to be very agile in its manufacturing process.

“We produce new products all the time,” says Burandt, “because we produce very customized specialty generators every day.”

The company also focuses on being flexible in its upstream processes as well, says Benson.

“We want to bring orders in with complete and accurate information so that when these orders hit the supply chain and the factory floor there aren’t any hidden or unresolved issues,” he says, “which reduces the possibility of negatively impacting our throughput.”

Burandt goes a step further, saying the objective of the company’s quality initiatives is to design each product exactly right the first time – zero errors in the design process.

To this end, technology plays a role.

The company uses an integrated 3D CAD system and ties it together with its internal MRP (manufacturing resource planning) system and ultimately with the company’s ERP (enterprise resource planning) system, not only for the supply base, but the customer base as well. The reasoning behind including customers, says Burandt, is because they are also heavily involved with engineering processes.

“This is a new initiative,” says Burandt, “and we haven’t seen anything else out there that approaches this level of quality control. Every first-iteration has to be free of defects because every product is the first iteration.”

In total, say Burandt and Benson, the company’s product is sold globally and its supply base is global in nature. Also its processes are well defined and the company is competitive on price, quality, products, and after sale support.

To Burandt, “this makes for an attractive package for the customer.”