What looks like a tool crib is actually something more. Two years ago, David Miller Jr. would have said that Lemco-Miller Corporation didn't need a crib, or anything like it. Tools are best stored at the point of use, he thought. So at the 50-employee job shop run by his family in Danvers, Massachusetts (near Boston), the system was to have a purchasing agent buy the tools, then deliver each order to the operator who needed it.

Mr. Miller has changed his mind since then. Does Lemco-Miller need a tool crib now? Yes and no, he says.

Yes, because a tool crib is indeed the right idea.

No, because Lemco-Miller has taken this idea one step further.

The shop now does store tools in a central location. Wherever possible, it also standardizes on what tools it uses. Centralizing and standardizing would be key to any well-run tool crib, and both practices have proven their effectiveness to Lemco-Miller. The new system captures unused tool life that was lost before, and has cut setup time for the average job by 40 percent. More on that later.

What makes this shop's tool storage area different from that of other shops is the ownership of the tools residing there. Lemco-Miller does not own any of them. Nor does it employ the attendant. Instead, the company rents this space to its tool supplier—Todd Tool and Abrasive Systems, also of Danvers. The supplier not only stores enough of its inventory there to keep the shop running, but also allocates an employee to managing this stock on the shop's behalf. Lemco-Miller does not officially take possession of any tool until it passes through the service window and into an operator's hand. Therefore, the room where tools are kept is not a tool crib—it's a tool store.

The difference is more than just semantic. Two companies simultaneously benefit from the tool store system, in ways they never could before. For Todd Tool's part, it now gets all of Lemco-Miller's business, where once it competed with four other suppliers. It also has the opportunity to perfect a new and unconventional service that it can market to other customers. Meanwhile, Lemco-Miller is spared from having to pay any of the inventory expenses for cutting tools it isn't using. The shop also is spared the cost of an in-house purchasing agent.

Not every shop will be able to partner with a tool vendor the way Lemco-Miller has. However, the shop's success with the tool store does reveal that tooling costs don't have to be fixed costs. This is particularly true of the hidden costs associated with tracking—and losing track of—such a small and widely varying product. Lemco-Miller discovered that there were many subtle ways for inefficient tool management to drain its resources. It discovered this, in part, when it saw the variety of savings it could credit to the tool store system.

The Streamlined Process

The room past the window (above) is under Lemco-Miller's roof, but the cutting tools inside all belong to Todd Tool,the shop's tool supplier. In return for all of Lemco-Miller's cutting tool business, Todd Tool carries the shop's tool inventory costs. Thrown in with the deal are the sevices of Todd Tool's "Woody" Wood. He not only manages the store, but also gathers the tooling required for each job. Lemco-Miller's operators don't have to spend time locating the tools they use--they just tell Mr. Wood the job number.

Machining such small batches profitably meant shrinking the costly inventories of consumable products the shop was accustomed to carrying. These inventories included supplies and raw material, as well as finished and in-process workpieces. The key to reducing all of this excess, the shop found, was to nurture closer relationships with both customers and suppliers. Where there are stable and trusting relationships between companies, free-flowing information can take the place of large stockpiles.

Today, customers keep Lemco-Miller informed with projections of what their short-order requirements will be. This lets the shop deliver parts almost as they are needed, so customers don't have to maintain large inventories of their own. On the opposite side, Lemco-Miller keeps key suppliers similarly informed, so it can get short-order service, too.

However, streamlining the cutting tool inventory demanded the closest relationship of all.

Tooling proved to be the most difficult job shop inventory to tame. Just like inventories of raw material or workpieces, a supply of cutting tools costs money to store and track, while it ties up capital that could otherwise be put to work. However, when excess inventory takes another form, the shop at least knows where the excess is. Finished workpieces may be stacked near the shipping dock, and raw material may wait on skids near one of the machines. Not so with tooling. Some fraction of the tooling inventory that has been paid for but not used can be found in various machines' tool magazines, as well as within the drawers of almost every toolbox in the shop.

Lemco-Miller's old system of delivering tools directly to the point of use only encouraged this type of dispersal. The system did get tools into the operators' hands sooner. However, what the operator did with the tools at that point varied a great deal. The system thus had an unintended consequence: It made cutting tools hard to find.

The resulting efficiency drain wasn't as noticeable when the shop ran batches so large that they accounted for a year's demand for a given part. But as the shop went to smaller and smaller batches, this translated to more frequent changeover between jobs. Shorter setup became more and more important for meeting commitments to customers, so Lemco-Miller began to track its jobs to see where this time was going. Even without any tracking data, however, it was clear that a large part of setup consisted of the operator gathering the tools required for the job. As Mr. Miller says, "If you filmed our shop in action back then, what you would see is a lot of operators roaming around the shop and rooting through drawers to find tools."

And the lack of centralized storage wasn't the only reason for the inefficiency. The company's approach to selecting tools also contributed, says Mr. Miller. Machining cycle time used to be the only focus, and programmers were permitted to select whatever tool could machine each feature the fastest. However, one result was that work often was delayed—sometimes leaving a machine sitting idle—while the shop waited for a special tool to arrive from a vendor. Another result was a proliferation of this specialty tooling throughout the shop. This very proliferation kept the tools from being used economically. A partially worn tool of a type that was used only infrequently might be stashed somewhere in the shop, but difficult to find again the next time that tool was needed. Worse, the leftover drills, mills or inserts from a package of four or six also might be misplaced, after the one tool that was originally needed from that package had done its job.

The ultimate result of all of this was unused capacity. Lemco-Miller saw that the time spent on acquiring tools and searching for them in the shop, as well as the unused life in tools that had been lost, could all be devoted to profitable work.

The tool store lets the company harness these resources. With the tool store in place, operators no longer need to stockpile tools. They also don't have to search for the tools they need. Instead, every operator knows that the first step for every new job is to give the job number to the tool store attendant, who already has all of the necessary tools for that job ready to hand off. Gathering tools for the next job is thus reduced to a transaction requiring only a minute or so.

Mr. Miller has the shop's process data to show that this change has cut setup time by 40 percent. The new system is so much more efficient, he says, because it lets each company in the partnership focus on its own specialty. Lemco-Miller knows machining, but can't be expected to maintain a cutting tool inventory as well as a tool supplier like Todd Tool can. This way, it doesn't have to.

Still, making the system work wasn't quite so straightforward. Lemco-Miller had to change its tooling strategy in more ways than just moving the tools to one place.

And Todd Tool had to change its service to Lemco-Miller in more ways than just minding the company store.

New Rules

There were kinks in the relationship at first. These were inevitable. The agreement—that a vendor would take up residence in a customer's facility—was unlike any that either company had entered before. But Todd Tool proved adaptable and open-minded, says Mr. Miller. Not every company could have made the system work so quickly. The supplier soon came to realize that some of its traditional rules of business no longer applied.

"The customer is always right," for one. The customer is still right … but now the customer has many faces, and the obligation to fill the customer's orders goes hand in hand with the agreement to help this customer lower its costs.

Once, for example, Todd Tool would have filled any order that came in from Lemco-Miller, no matter which employee happened to have his name on the document. But now, operators routinely step up to the tool store window with requests for replacement or supplemental tools, in addition to what the job number requires. Todd Tool fills these orders, too—but only to a point. Before filling the order, the tool store attendant keys it into a tool-control software program written by Lemco-Miller. If the quantity or dollar value of the order exceeds pre-defined limits, then the software flags this fact, requiring the operator to get his supervisor's permission before the order can be filled.

This puts Todd Tool in the awkward position of refusing some business in the short term, by turning away orders from operators. However, in the long term, the supplier knows it can expect more and more business from a healthy Lemco-Miller, and both companies recognize that disciplined use of tooling is one key to this health.

And refusing the business isn't the only way Todd Tool had to depart from its customary role. For Lemco-Miller, the supplier also now breaks the seal on its merchandise, opening packages to sell in units of one. The only other choice would be to give operators a package of four or six tools where only one tool is needed, thereby placing too many tools into Lemco-Miller's possession too soon. This is exactly the sort of inefficiency Todd Tool was brought in to eliminate.

Todd Tool's Mr. Wood therefore opens packages of four or six as necessary, and tracks any remaining tools the operators don't take. In addition, he fills small manila envelopes with one tool apiece, for stocking the vending machine used to keep the night shift supplied while the store is closed (see sidebar).

Worth An Extra Pass

When any repeat job requires specialty tools apart from Lemco-Miller's standard stock, Mr. Wood keeps a set ready. These tool kits are stored in individual bins, each labeled according to the job number. Since this system went into effect, no machine tool in the shop has been idled because it waited for a needed tool. Even when a short-lead order comes in unexpectedly, Mr. Wood can fill the tooling needs just by pulling the appropriate bin.

Lemco-Miller doesn't require the tool store to special-order every tool that appears on a new job's tool list. Far from it. Instead, it has the store maintain a stock of general-purpose tools. Programmers are now encouraged to avoid any specialty tool whenever one of these common tools can do the same job almost as quickly. For example, a programmer doesn't specify a special, oversize milling cutter to take a wide cut, but instead calls for multiple passes with a common tool. Programmers thus have fewer choices, and cycle times are a little longer. Yet the entire process works more efficiently. There are several reasons why.

For one, tools get used. With fewer specialty tools ordered, there are fewer chances for a tool chosen for just one job to linger in the shop after that particular job is done.

And there is also a benefit in the form of a more consistent process, says Mr. Miller. Operators grow accustomed to seeing the same tools over and over again, and seeing similar features machined in the same way. As a result, they ascend whatever learning curve each tool or operation requires, and stay up on that curve through subsequent jobs. Adding more familiar tools to the mix reduces the chance that rework will be needed because a tool was used incorrectly.

However, this suggests the most important benefit of tool standardization for Lemco-Miller—a faster process overall. Run time may well be longer with standard tools, but Lemco-Miller discovered that time savings in other areas more than compensated for this.

For example, fewer specialty tools almost always mean fewer tools per job. This translates to less time for manually loading the tools into holders and less time for measuring tool offsets.

In addition, when a job comes to the shop for the first time, standard tools offer a savings in "catalog time." Programmers at Lemco-Miller are no longer expected to search through tooling catalogs to find precisely the right tools to minimize cycle time for every feature. Instead, they find ways to cut the part using the same tools they've grown used to specifying over and over.

"Finding the right tool for every operation is the right approach for a dedicated process, but not the typical job shop," Mr. Miller says. "Our shop has to get every job up and running as fast as possible. Where start-up and setup time are key, it's worth taking two passes instead of one to favor standard tools."

Short-Order Tooling

Even so, no job shop can rely entirely on an abbreviated tool list. Some jobs just demand special tooling. An odd-size hole may call for a non-standard reamer. And when a dovetail slot is needed, it's hard to make any common endmill do the work of a dovetail cutter.

To introduce tools like these into the process without the delay that specialty tools used to bring, Lemco-Miller relies on the tool store.

Todd Tool's employee now learns what tools a new job will require before any of Lemco-Miller's operators do. Mr. Wood checks advance tooling lists from programmers against the tools he has on-hand. When a job demands a specialty tool not to be found in his stock, he orders it promptly from Todd Tool's main warehouse, so he will have the tool available a day or two later when the job is run. And if Todd Tool doesn't carry the specialty tool, then the company at least knows which of its competitors it should contact to obtain it. Lemco-Miller established the relationship precisely so it could rely on this kind of expertise.

Now, even though Lemco-Miller favors the standard tools, what special tools it does need are just as accessible. For each job with non-standard tooling needs, Mr. Wood maintains a bin labeled by job number, with a full complement of that job's special tools inside. Without warning, an operator can come to the window with a repeat job—any repeat job—and Mr. Wood will give him the right tools at once. He checks that job number's tool list in his database to see what tools he should pull from the standard stock. And if there are specialty tools as well, he just reaches for the appropriate bin.

In this way, Todd Tool truly gives Lemco-Miller just-in-time service.

Better To Shop Around?

All of this fails to mention one obvious drawback of the tool store system. With all of its tooling business going to one supplier, Lemco-Miller no longer shops for the lowest cost for each tool ordered. The foremost duty of the former purchasing agent has been eliminated. How can the shop guarantee that it's getting the best price?

It can't, says Mr. Miller, but that's beside the point. The shop has learned that it can trust Todd Tool to charge competitive prices. Shopping for prices that are even lower might not generate enough savings to pay back the expenses of the shopping itself—for example, the purchasing agent's time. By contrast, the savings that flow from the tool store partnership are easily enough to make the relationship profitable.

How much money does the tool store save Lemco-Miller? David Miller Jr. is at a loss to name a figure, simply because calculating it would mean accounting for so many sources of savings. There is the increased productivity from faster setups. There are the tools no longer wasted because they were misplaced somewhere in the shop. There is the machine capacity freed up because machines no longer wait for necessary tooling to arrive. And there is all of the paperwork and record-keeping necessary to place and track tool orders from a variety of suppliers—now performed entirely by the single-source supplier itself.

But Lemco-Miller also believes there are side benefits from the more streamlined system, the values of which are elusive because no one had thought to expect them. Director of engineering Glenn Currie has noted one example. Since the tool store system was put in place, he observed, tool life has gone up dramatically. Better utilization of non-standard tools is one reason, but the life has gone up for common tools, too.

Mr. Currie thinks he knows why. "We have Woody behind the tool store counter now, to decide when a tool is worn," he says. "Before, when the operators gathered their own tools, they would reject used tools more often. They always preferred to start with new, sharp tools each time." MMS

The Tool Machine Think of it as a refreshment center for the process. To keep its second shift running while the tool store is closed, Lemco-Miller converted a candy machine into an automatic tool management system. In place of candy, the machine dispenses replacements for worn or broken tools. Manila envelopes in the machine contain one unit apiece of the most commonly used drills, mills and tool inserts. The machine requires no cash or identification. In essence, it's an open box of tooling. But the virtue of using a vending machine instead of an open box is the orderly way the tools go out. They fall one at a time, according to the order in which they were queued in the indexing screw. This makes all the difference. It makes restocking an automatic process. Near the end of each row of product is a card that says it's time to resupply. The operator who makes this card drop simply leaves it for the tool store attendant to find in the morning. When the attendant sees one of these cards waiting for him, he knows it's time to fill more manila envelopes. The system thus ensures that the second shift is never left short of the tools it needs.