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Section B
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An Introduction to the Case Study—Remmele Engineering Incorporated

They know what their competitors do, they know what their customers think, they know what technology has to offer, and they know what their capabilities are.

They know. The reasons they know are because they listen and because they continuously probe for the latest developments in all of these areas—and because they are genuinely curious and committed learners.

The company goal is to "Be the Best," the company T-shirt says "Pride in Quality," and the company people know how they stand in the industry. And yes, there is what appears to be some elitism here; but it stems from a shared ideology, the totally involved pursuit of objectives, and the active and open discourse that takes place among tightly aligned and highly competent teams, not from a sense of superiority. There is no arrogance here.

The biggest fear expressed by management during our analytical phase was that our report would hold them up as an untouchable paragon and create the seeds of hubris where none exist.

Management need not fear an onslaught of hubris from this portrait of the company. William Faulkner could have been explaining what drives Remmele when he wrote: "Don’t bother just to be better than your contemporaries or predecessors. Try to be better than yourself." At most, this portrait will set a new mark to beat; but more than likely it will quickly become an aging snapshot in the history photo album.

History

The story and success of Remmele Engineering, Inc. (REI) are based on the vision of its founder Fred Remmele. In 1926, he immigrated to the United States from Heilbron, Germany. A skilled tool and die maker by trade, Mr. Remmele quickly found work in the Midwest, eventually settling in St. Paul.

Over the next 20 years, he became a well-known and respected tool and die craftsman. During this period, however, he became increasingly disturbed by the disorganization of most machine shops. He also noticed that many employers displayed a lack of consideration toward their employees. When good ideas surfaced from the shop floor, they were often ignored by management.

In 1949, Fred Remmele decided to put his ideas about managing a company to work. Along with Thomas S. Zastrow, he started a tool and die business—the Fred L. Remmele Co. The firm was based on certain principles, including a respect for employees, a flexible and progressive management philosophy, a commitment to community service, and a desire to set the highest standards in both machining and in the design of custom machines.

In the beginning, the Fred L. Remmele Co. made custom equipment for producing curved printing plates, produced tools and dies, and did contract machining. Mr. Remmele's management style and the quality of his work gained him a steady stream of customers. Within a year, it was incorporated as Remmele Engineering, Inc. Within two years, it had moved to a new location and had 15 employees.

Over the next ten years, REI continued manufacturing custom-designed machines, including photo register equipment used in the printing industry and tape applying machines for 3M. REI also continued providing contract precision machining services.

As the company grew, Fred Remmele didn't forget those who helped make it a success. In 1956, he instituted the company's first profit-sharing plan. In 1962, Remmele Engineering moved again; this time to a 27,000 sq. ft. facility. To take advantage of the space, Mr. Remmele added $100,000 worth of new equipment. At this point, employment had grown to 55. By the end of the year, it had jumped to 75 and company sales exceeded $1 million.

The years between 1960 and 1980 marked a period of rapid expansion. In 1963, the company developed the fixtures that support the appliance during injection of foam insulation in refrigerators and freezers. It also developed machines to assemble typewriter ribbon cassettes, place magnetic tape on ledger cards, package carbon paper, and plate chain. In response to the growth, the company continued expanding—first to 44,000 sq. ft, then to 73,000 sq. ft. In 1970, the company purchased 67 acres near Big Lake, Minnesota. Eventually, it built two plants on the property.

Early on, Fred Remmele decided against borrowing to finance capital equipment. Instead, he used internal funding resources to acquire new machines and additional capabilities. The philosophy remains. Even today, the company finances virtually all its capital equipment using "inside" sources. Outside financing is occasionally used to purchase property and erect buildings.

In June of 1971, Fred Remmele retired as president of REI. He remained on the board until his death in 1981. Before he left the company, Fred Remmele made sure that it remained true to his vision of dedication to customers and employees alike. To that end, the company developed its own training center in 1974 and continued the machinist apprenticeship program that had been started in 1965. In 1975, it elected the first two members of an outside board of directors.

By 1976, REI reached $8 million in annual sales. To boost revenues, it set up a national sales rep organization. Within six years, revenues exceeded $26 million. Once again, the company added equipment and plant space, this time by purchasing a plant for its automation systems activities. In the late ‘80s, the company continued investing in equipment and people, often committing to a promising technology, then later finding the business to support it. By 1989 sales exceeded $60 million.

Today, Remmele Engineering has more than 475 employees and annual revenues of approximately $90 million. Its customers include computer companies, automotive manufacturers, the aerospace/aircraft/defense/space industry, and others. Even though the company is one of the largest job shops in the United States, it maintains the same philosophy that Fred Remmele began.

Operating Philosophy: Remmele's overall corporate goal is to be the "best in its field." The company also emphasizes customer satisfaction, employee satisfaction, profitability, and growth. To achieve these goals, Remmele has adopted several operating principles. These include:

Maintaining a small plant atmosphere: Remmele feels that good communication is important for profitable growth. To that end, the company guidelines state that the optimum desired employment at any one plant is 200 people and, to avoid excessive dependence and to limit risk, has guidelines that also limit the percentage of resources it will dedicate to one customer and the amount of business it will take in any one industry.

According to Remmele's management, this philosophy has a number of advantages. It helps management maintain close working relationships with their customers as well as their employees. It encourages diversification of jobs and customers. It allows Remmele to maintain a nurturing environment. It gives employees the opportunity for recognition based on their contributions, and that leads to high morale. It also allows Remmele to avoid dramatic declines that come from having "all their eggs in one basket."

In addition, keeping the plant small enables customers to know everyone involved in their job. For their part, the employees feel a sense of "ownership." Recently, a prospective customer visited one of Remmele's plants unannounced and met with the group supervisor and machine operator, as management was otherwise engaged. The operator showed the customer how he was going to approach the project and showed his thought preparation with a software package that displayed the tool path he had worked out. The prospect became a customer, impressed that Remmele's operators knew exactly what they were going to do from a technical perspective during the estimation and proposal stage.

When a plant grows too large, Remmele will spin off one of its capabilities into an independent operating unit. This helps maintain an entrepreneurial atmosphere, sense of excitement, and team spirit within the company. Employees want to know "When are we going to split off and become our own plant or division?"

Encouraging Employee Loyalty: The company's overriding philosophy is "We all succeed or fail together."

Remmele tries to empower everyone. For example, when the company was deciding whether to establish high velocity machining capability, it formed a committee of a half-dozen people, four of whom were machinists, to make the recommendation. The committee searched the world for the best equipment available, eventually visiting

machine manufacturers in France and Germany, and talking to their customers. The committee returned with a recommendation that was presented to all divisional employees by the machinists on the committee.

To insure availability of the highest skilled machinists, and encourage the learning environment, Remmele invests as much as $100,000 in apprenticeship and training programs for new employees. The company also provides 100% tuition reimbursement for every employee, in any field as long as it is related to some function at the company.

Remmele is a non-union shop that believes in paying its employees a competitive wage. Remmele competes for highly skilled people where journeyperson machinists can earn $50,000 per year or more. In addition, the company maintains a profit-sharing program based on corporate profitability.

The company values its employees as family and will reduce hours to avoid layoffs. It conducts a yearly attitude survey. It will give employees as much responsibility as possible. For example, machine operators in one division are also responsible for purchasing, quality control, and machine maintenance. In essence, they are in charge of their own performance and their own success. To that end, Remmele employees are often involved in the hiring process. Typically, those who will work with a potential employee will interview and help make the hiring decision.

For their part, employees are encouraged to suggest improvements and develop solutions to customer problems or demands, instead of waiting for solutions to come from management. They are also expected to return the company's loyalty through their performance on the job, in keeping with the corporate goal to "Be the Best" in its field.

Practicing the Art of Informed Risk: Remmele encourages its employees to make decisions based on knowledge. Mistakes and even losses are accepted as part of the learning curve.

The company invests heavily and constantly in new technologies and is recognized by both competitors and customers for its leadership here. Typically the company will commit millions of dollars to a new technology or piece of equipment, and to the learning curve, before taking the capability to market.

Recently a five-axis machine was purchased without any exhibited interest from customers to influence the decision. It had been using three-axis capability for some jobs that could use a five-axis machine effectively, and they perceived a potential market for five-axis machine application. After learning and experience with the new equipment developed knowledge and skills, the company promoted the capability to current and potential customers. This led to the new tooling "design and build" segment of its business.

In another example, a particular part needed more cost-effective production. Both the customer and Remmele looked for ways to reduce or eliminate assembly time and the need for assembly equipment. Remmele spent a year and half exploring process technology alternatives. The knowledge the company gained not only helped them address the customer's needs but served to increase machining speeds in applications throughout the company.

Their eye is always on the long term. When learning is combined with perceived potential they will subsidize a loss. Its Automation Division was carried through several years of money-losing operation when conditions changed that removed a traditional market. Belief in the people and the perception of long-term value, coupled with hard-working attempts at different approaches, now pays off as the plant has returned to profitability.

Organization and Lines of Business: In 1996 Remmele Engineering consists of five plants grouped in four divisions. They are a privately held company with shareholders among the descendent family of Fred Remmele, who turned over the presidency in 1971 to Ron Pfleider, a long-time customer at Franklin Manufacturing. Mr. Pfleider was succeeded in 1976 by Mr. Remmele's son-in-law, Bill Saul. Mr. Saul is now semi-retired and chairman of the board. In 1984 Mr. Saul turned over management of the company to the current president Tom Moore and others notably not of the founding family. Management is clearly responsible for the operation and strategic direction of the company at this point and enjoys a relationship with its board similar to that of a public company.

The General Machining Division has two plants. Plant 10 produces low quantity or small lot runs in a 111,000 sq. ft. facility that incorporates design/build of tooling, fixturing, and fabrication and utilizes five-axis machining and other advanced equipment to produce parts up to 10 tons and 10 feet. Plant 40 is a 153,000 sq. ft. facility that produces low volumes and large parts (up to 75 tons and 100 feet) and features a 100 ft. CNC 7-inch milling and boring machine and a five-axis mill with 63 feet of travel.

The Repetitive Batch Machining Division is housed in Plant 20, a 49,000 sq. ft. facility dedicated to repetitive batch manufacturing of medium-sized parts and assemblies in medium volumes. It specializes in parts that can fit within a two-foot cube and features machining centers and flexible manufacturing systems with operating speeds up to 40,000 RPM.

The Production Machining Division is housed in the 60,000 sq. ft. Plant 30 facility. It features a focused-factory cell concept that does a lot of dedicated outsourcing and can produce high volumes of precision machined parts. It is particularly suited to work in the two-foot-cube-and-under category, with special capabilities for miniature precision machined parts typically under one cubic inch in size. The plant also features a class 100 clean room.

The Automation Division is in the 87,000 sq. ft. Plant 50 and houses engineering and design services for developing one-of-a-kind factory automation equipment and systems. The facility contains design, fabrication, parts machining, assembly and testing capabilities.

In Conclusion

Remmele showed some initial concern that we would paint them as too accomplished, taking the edge off their continued quest. Later, when reviewing our maturity assessments, the opposite reaction occurred: Some of the management team felt that they were not showing as good as their striving-to-be-the-best should produce. We suggested that they were so far ahead of anyone else that this didn't matter and that this whole area of change proficiency is not an area that has a history of focus as yet. We also observed that things were moving so fast that our snapshot of Remmele's status was already fading. In the eight-month project effort we witnessed information technology strategy come a long way in the direction of greater change proficiency maturity, we witnessed a high velocity machining experiment turn in to a new line of business, and we witnessed one division that had lost important sustaining business come back with a vengeance.

Principles play the key role in Remmele's achievements, and we refer to collections of these principles as frameworks for many of the individual critical business practices. No attempt has been made at this point to reduce the principles to a minimal but sufficient set in each of these cases, as that exercise is beyond the scope of this work—but nevertheless a very promising avenue of exploration.

Yes, they are mainly a family-owned business, but don't make the mistake of dismissing them as a role model because you are a massive publicly-traded corporation. Here is a laboratory you can observe.

No numbers can capture and compare an agile enterprise any more than a single figure of merit can compare two living organisms for viability in untested circumstances; such a thing is organic by nature. We go through this numeric exercise to discipline our thoughts and broaden our exploration—much like many view the exercise of Baldrige application rather than actual implementation as the value. It is a mistake to think that there is anything absolute about the figures of merit we will show. Developing them and showing them, however, is thought-provoking and leaves behind a richer understanding in the wake.

Please pardon the multiple use of specific stories in the case study. Many are so rich in detail and implementation breadth that they provide good example material across many different business practices. The points being made, however, are different in each use.

So read on, and see an agile enterprise in action. It is not always on top of everything—but it has practices in place to recognize and attend to those areas that fall from grace—and the constant pressure of unrelenting change requires constant vigilance, as no area is brought to the top once and for all.

Features: Home | Library | Corp Info
Major Concepts: Realsearch ||| Enterprise Model ||| Maturity Model
                        Knowledge & Agility ||| Agile System Principles
Book: Response Ability - The Language, Structure and Culture of the Agile Enterprise
Book: Value Propositioning - Perception and Misperception in Decision Making

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Last modified: May 30, 2019