EARNING MORE BY MOVING FASTER Coleman, the venerable maker of camping stoves and lanterns, was going nowhere. Now it's flexible, fast growing, and formidable. What made the difference? Speed.
By Brian Dumaine REPORTER ASSOCIATE Laurie Kretchmar

(FORTUNE Magazine) – IN A WORLD where managers sweat bullets to grind out improvements of a percentage point or two, some numbers just don't look real. Coleman Co. of Wichita, Kansas, used to need two months of inventory to provide giant retailers like Wal-Mart and Kmart with a shipment of camping stoves or lanterns. Today it can make and ship a new order in a week. Just two years ago the company offered 20 models of ice coolers in three color combinations; now it sells 140 models in 12 color combinations. Coleman has cut inventory costs by $10 million, reduced scrap 60%, and raised productivity 35%. What on earth happened? In a word: speed, the management concept that helps companies cut the time it takes to make an old product, develop a new one, and get both into the hands of customers. The change dates to the company's 1989 takeover by MacAndrews & Forbes, the holding company of New York financier Ronald Perelman, which also owns Revlon and other companies. Says Jerry Levin, executive VP of MacAndrews & Forbes: ''Speed has been wonderful for us. We've only owned the company two years, and the results already have been quite startling.'' Although Coleman is private and doesn't release figures, FORTUNE has learned that it made an operating profit of $32 million last year on revenues of $435 million. More important, speed has helped boost cash flow to a level that, according to Coleman CFO George Mileusnic, is more than enough to service the debt Perelman incurred when he bought the company for $545 million. About speed, Mileusnic says: ''It met our expectations, and they were aggressive expectations.'' Todd Slotkin, a senior managing director at Citibank, one of Perelman's major lenders, estimates that Coleman's move toward nimbleness has increased the company's value by roughly $100 million since Perelman bought it. Don't think that Coleman boosted profits simply by making everyone work faster. That's a big mistake, and a common one in approaching speed as a management technique. Most companies guilty of it end up alienating their already overworked employees. The correct approach is to change the way work is done by eliminating wasteful steps in the work process, organizing machinery more efficiently, and catching mistakes earlier. Even companies that do it right, like Coleman, can expect challenges. This spring Coleman fended off a move to unionize its plants, led by workers who felt there was too much change too fast. Founded in 1900 by W. C. Coleman, a former schoolteacher who peddled lanterns to frontier storekeepers, the company built a reputation over the years for reasonably priced, high-quality products. In 1940, Sheldon Coleman, son of the founder, took over and drove the company to unprecedented success. During World War II, GIs voted the Coleman pocket stove, along with the Jeep, the two most useful pieces of noncombat equipment. The company dominated most of its markets for decades. Then Sheldon's son, Sheldon, known around the plant as Sheldon Junior, took the helm in 1988. While the company's profits had grown during the Eighties, the family essentially ran the main business as a cash cow, pulling out profits and reinvesting little. Seeing an opportunity for even greater profit -- the company's pension plan was overfunded by some $30 million -- in the spring of 1989 Junior made a bid to take the company private. The move put the company into play, attracting Perelman's attention. Soon after buying Coleman, Perelman took a closer look at the business. He didn't like what he saw. While the company still controlled some 90% of the market for camping stoves and lanterns, it faced stiff competition in the cooler and jug business from Rubbermaid and Igloo. In the words of a Coleman factory hand, Perelman ''started to kick butt.'' First the obligatory steps: He sold off some unrelated operations, such as a heating and air-conditioning business, closed down an obsolete factory, and gutted the corporate staff. But that was just the beginning. To change significantly, Coleman would have to transform the very heart of the way it worked. IF ANYTHING CRIED OUT for reform it was Northeast, Coleman's cavernous factory for making stoves, lanterns, and coolers, a facility that today accounts for most of the company's revenues. This Wichita plant was slow and inefficient, comprising many small, feuding departments. Not quite sure where to start, in the spring of 1990 management called in the Thomas Group, a Dallas consulting firm specializing in speed. As a first step, the Thomas Group recommended that Coleman adopt just-in-time systems, the way of managing inventory perfected by the Japanese and increasingly popular among U.S. companies. Inventory costs were hurting Coleman's margins. The company had so much work in process -- parts of stoves, lanterns, and coolers waiting to be assembled -- that it had to build massive cagelike ceiling racks stretching from one end of the 350,000-square-foot factory to the other just to store it all. Just-in-time, by contrast, enables a company to pare down inventory by using materials and parts as soon as they arrive at the factory. Coleman had come to depend on all that inventory to cover up problems and inefficiencies in the assembly line. If a machine broke, workers could draw from the huge inventory of parts until someone got around to fixing the problem, which often took days. The Thomas Group explained that if Coleman could work without this cushion of inventory, it would be forced to improve its performance. There was a lot of skepticism at first. Says Joe Nold, Coleman's soft-spoken senior vice president of operations, who is almost never without his pipe: ''The Thomas Group started talking numbers we couldn't believe, quantum leaps. We said, 'You've got to be kidding.' '' The consultants were dead serious. They understood, though, that to get quantum leaps the company first had to sell speed to the rank and file. The consultants explained to Coleman's people that inventory is like a sea: As you lower the level of the sea, or inventory, you can see dangerous rocks, or manufacturing problems, that had been covered up for years. Once the program had been explained and employees trained, Coleman set the assembly workers the goal of cutting in half the time it took to get an order and ship it out the door -- and then to do it again, and again: from eight days to four, from four to two, and so on. As soon as the line started to speed up, Coleman uncovered some of those rocks, and its work kept crashing to a halt on them. But that was okay, the experts said, for every time the line stopped, the workers would learn what was wrong and eliminate the inefficiency, and from then on the process would be quicker. Says Iris Baker, an energetic team leader who, with her Dutch-boy haircut, can usually be seen bobbing from one assembly line to the next: ''Before, when you saw a problem, you'd tell someone and he'd say, 'Yeah, I'll get to it.' Now the line stops and the impact is immediate. You've got to act.'' As plant manager Dave Mattingly kept speeding up the line, more rocks kept surfacing. Sometimes a machine part would simply break, so he started a preventive maintenance program, which saved downtime. Once when a machine broke and stopped the line, workers had to get a new part made at the company's tool and die shop, located in a downtown building 12 miles away. This took days. To speed up the process, Coleman realized it had to move the shop to the factory, where repairmen are at most a two-minute walk from the farthest machine. The move saves the company hours, if not days, on every breakdown. Today Mattingly can produce 35% more ice coolers a year with the same number of people. All those huge, overhead storage bins are nearly empty. And that's just the beginning, says Coleman President Bob Ring: ''We haven't even scratched the surface yet.'' NOT THAT ALL PROBLEMS have been solved. One trouble with speed is that it often doesn't leave workers much time to reflect on what they're doing. That bothers Paul Grimes, a thoughtful shop worker whose tattooed arm -- it reads GRIZZLY with a bear paw underneath -- and Bart Simpson tank top with EAT MY SHORTS, MAN across the front indicate a certain sense of humor. Says he: ''Sometimes it gets a little hectic, and there's not enough time to think about improving your job.'' It would certainly pay to give people like Grimes a little time to think. A few months ago he and his team suggested a way to improve the design of the valve on a propane lamp that now saves the company $50,000 a year. Another challenge in any program to increase speed is making sure the compensation system doesn't penalize people who slow down operations to ensure quality. Coleman's old system paid employees by the number of pieces they produced, which meant, incredibly, that workers were rewarded even if they made defective parts. Coleman switched to an old-fashioned hourly wage in the fall of 1990, allowing workers to stop the line and fix problems without cutting their pay. Soon after, a number of employees moved to unionize the plant, inviting in the International Association of Machinists and Aerospace Workers, and an election was scheduled for May. These workers realized that some of the best producers would make less on an hourly wage. Says Jack Nugent, a grand lodge representative for the Machinists: ''Coleman used to be a paternalistic company. When the new management came in, it was too much too fast. It was traumatic for a lot of people.'' ACCORDING to Nugent, Coleman used a time-tested strategy for foiling the union: fear. Management reminded workers of a disastrous strike in 1971, the last time Coleman had a union in Kansas. When the vote was taken this year, the union lost nearly 2 to 1. Says Paul Grimes, who voted against the union: ''I felt a middleman would have clouded the issue. It would have slowed us down.'' Joe Nold denies using fear tactics and says he simply argued that workers would be better off under the new system. ''We didn't threaten,'' he says. ''We told people we'd grow market share, and that translates to job security.'' Even so, Nold wishes management had explained the changes more thoroughly to workers: ''If you're going to get people this deeply involved, you have to make sure they understand the business.'' As Coleman was speeding up its assembly line and fighting off the union, it was also applying the idea of speed to sales and product development. The company linked computers with major retailers like Wal-Mart and Kmart so orders could be sent electronically from cash register to factory. This cut by at least a day the interval between a customer's ordering and receiving products. Coleman got even better results with development, halving the time it takes to move from an idea to a new product. The key, according to Thomas Group CEO Philip Thomas, is simply to take out steps that don't add value. Thomas recommends focusing on what he calls the three R's: Does the step improve responsiveness to the customer, does it improve results like profit and quality, or does it improve the effectiveness of resources like people and inventory? If not, out it goes. When Coleman looked to cut out inefficient steps, one of the first things it discovered was that each new product required as many as 16 signatures. Says Coleman development chief Mike Farmer: ''Before, we didn't allow mistakes. We went through so many channels that no one failed. We didn't get much done, though.'' Now Coleman's product-development teams can make most decisions without waiting for nods from above. To further speed development, the company set clear boundaries for new products. Explains Farmer: ''A problem we always had in the past was, we could never pound the stake in the ground and say, 'This is what I want.' We were always changing our minds and not getting anywhere.'' When the company set out last year to develop a new outdoor lamp for home use called the Leisure Lantern, it set clear boundaries. For example, the lantern would produce 80 candlepower, use propane fuel, and be less rugged than the camping lanterns. Coleman cut development time from two years to one, and early sales are strong. ''What speed is about,'' says John Rukavina, Coleman's head of national sales, ''is profits. A racehorse that can run a mile a few seconds faster is worth immeasurably more.'' No one knows that better than Ronald Perelman, who's now hooked on the concept of speed. Will Revlon be next?