Grainnet

Lean Manufacturing, Grain Storage Growth, and International Marketing Priorities for New GSI Chief

by Ed Zdrojewski, Grain Journal editor

The introduction of "lean manufacturing" practices and an increase in international marketing are two of the priorities for the new president and chief operating officer of GSI Group, Assumption, IL.

Scott Clawson, who joined GSI in August, outlined his vision for the grain industry supplier Oct. 25 at a meeting of the AgCafe in Decatur, IL.

GSI is a manufacturer of grain storage, handling, and drying systems, as well as poultry and swine feeding and conditioning equipment.

Annual sales for the company, which employs about 3,000 worldwide and 2,000 in the United States, have increased from $272 million to $485 million over the last five years.

Major Priorities

Clawson, who comes from a manufacturing background, strongly espoused a production management approach called "lean manufacturing," which has been introduced into GSI's seven global manufacturing plants.

Under this approach, which also is known as "Total Production System," he said, rank-and-file employees are called on to participate as teams to solve problems, improve efficiency, improve delivery performance, and eliminate waste.

This work is done in a monthly workshop involving eight to 15 employees that focuses on a specific project.

Clawson reported that each workshop has improved productivity in its focus area by about 25%. Future focus will be improving deliveries in a growing market.

Over 925 employees or 46% of GSI's U.S. workforce has participated in workshops so far, he said.

Another priority, he said, is to boost international sales, particularly to Asia and Eastern Europe. GSI currently ships equipment to Latin America, Eastern Europe, and Asia.

Clawson said that while there are no plans to relocate any manufacturing operations overseas, this is a product that primarily is sold in the Midwest and needs to stay in the Midwest.

One major challenge for GSI is managing volatile steel prices, which is the number one input cost for its products.

Grain Industry Trends

Clawson noted that GSI is a highly diversified company, which makes for a more stable business than for companies dominated by a single product or single large customer.

However, certain trends are particularly favorable for expansion of the grain side of GSI's business, he said:

* Corn production is booming, with record production of more than 13 billion bushels forecasted for the United States in 2007. Corn yields more per acre than any other grain or oilseed crop grown in the United States, so any expansion of corn acreage greatly increases demand for GSI's grain storage and handling systems.

* As farms continue to consolidate, more are investing in on-farm storage, another aspect of GSI's grain business.

* The introduction of genetically modified crops, corn hybrids in particular, generally boosts yields and specifically requires more separations at commercial grain elevators, which translates into a need for additional storage bins.

* The recent boom in ethanol production, which currently consumes about 25% of the U.S. corn crop, adds to increased demand for GSI products.

Background

A native of Batesville, IN and graduate of Brigham Young University and Harvard Business School, Clawson, prior to joining GSI, was CEO of Iowa-based RYKO Enterprises, the largest vehicle wash system manufacturer in North America and second largest worldwide.

While at RYKO, Clawson transformed the company into a growth-oriented, market-focused organization by strengthening its distribution, sales, and marketing team and by implementing lean manufacturing practices.

Prior to that, he held various roles at Danaher Corp., a diversified industrial company, and served as president of Gilbarco Veeder-Root, a global leader in petroleum equipment and services such as gasoline pumps and dispensers.

In 1972, Craig Sloan helped establish Grain Systems, Inc. and began manufacturing a wide variety of corrugated steel, bulk grain storage bins.

GSI grew from being the smallest of the nation's 23 storage bin manufacturers to the largest in the world by 1988.

The company later acquired lines of grain handling accessories and swine and poultry feeding systems.

As of August 2007, GSI is majority-owned by Centerbridge Partners, L.P. equity fund based in New York, NY dedicated to acquiring promising companies and improving their profitability, as well as significant ownership by employees in these companies.