Daktronics D Keen On Lean Manufacturing at Daktronics, Inc PDF

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Daktronics (D): Keen on Lean

Manufacturing at Daktronics, Inc.
Nancy M. Levenburg, Grand Valley State University
P
osted on a message board in the office of Matt Kurtenbach (Daktronics Vice
President of Manufacturing) was the quotation, “You can act your way into a new
way of thinking faster than you can think your way into a new way of acting.”
Indeed, meeting competitive challenges was nothing new to Daktronics, Inc.
(See Appendix A for company history.) Following a period of rapid sales growth (see
Exhibit 1), in February 2006 the forty-year-old firm made a formal decision to pursue
lean manufacturing. Up until 2006, Daktronics had increased its production capacity
by, in essence, replicating its existing operations, adding facilities, equipment, or peo-
ple—or some combination of the three. Reflecting on Daktronics’ lean manufacturing
journey in May 2010, Kurtenbach commented:
Four years ago we realized we had to fundamentally change how we were operating.
Given our rapid rate of growth, it was apparent to us that this replication method was
not easily scalable and the growth of the company could/would be limited by the abil-
ity to grow our manufacturing output. We simply couldn’t build buildings and hire
people fast enough. This realization led to the exploration of lean manufacturing as an
alternative way to increase our output . . . the driving goal was to eliminate manufac-
turing as a constraint on the growth of our organization. 1
Exhibit 1: Key Financial Measures
FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Sales $177,764 $209,907 $230,346 $309,370 $433,201 $499,677 $581,931
Gross Profit $59,131 $72,471 $73,209 $94,074 $126,597 $147,590 $155,358
Operating Expenses $39,306 $44,941 $53,773 $62,259 $89,682 $109,347 $112,741
Operating Income $19,825 $27,530 $19,436 $31,815 $36,915 $38,243 $42,617
Earnings per Share $0.32 $0.44 $0.39 $0.52 $0.59 $0.63 $0.64
Source: company records. Note: dollars in thousands, except per share data.

Copyright © 2012 by the Case Research Journal and the authors. The authors developed this case for class
discussion rather than to illustrate either effective or ineffective handling of the situation. The case was
presented at the North American Case Research Association Annual Meeting on October 29, 2010, in
Gatlinburg, Tennessee. This project was made possible with financial support via a NACRA case research
grant and South Dakota State University.

Daktronics (D): Keen on Lean Manufacturing at Daktronics, Inc. 97
Yet now, amidst a 2010 sagging U.S. economy, the year ahead looked rough. Atten-
tion was increasingly being placed on cost reduction. There was also talk about lean
accounting . . . and extending lean into the office environment. Was Daktronics ready
for new initiatives such as these? How well had he—and the manufacturing opera-
tion—accomplished its mission?
Daktronics’ Product Families

Daktronics, which had its corporate headquarters in Brookings, South Dakota, was a
leader in the digital signage industry and dominated the high end of the market. The
firm produced products in five major product categories (or “families”): (1) Sports
products, including scoreboards, sound systems and related computer-controlled
hardware and software; (2) Automated rigging and hoist products that were used in
sports facilities and theatres; (3) Video display systems; (4) Commercial products,
including message centers and time and temperature displays; and (5) Transportation
products that were used for road management, parking, mass transit, and aviation to
direct motorists and traffic (See Appendix B for the full product line.). According to
Daktronics’ 2009 Annual Report, approximately 57.7 percent of its net sales came
from the Schools and Theatres and Live Events business units, 26.8 percent came from
the Commercial business unit, 9.6 percent came from the International business unit,
and the remaining 5.9 percent was from the Transportation business unit.
Daktronics’ display systems ranged in price from small scoreboards priced at under
$1,000 to large, complex display systems installed in sporting arenas and priced in
excess of $40 million. Mitsubishi was a large and formidable competitor in the large
sports venues market (along with smaller firms, such as Lighthouse, ANC, and Barco).
(See Appendix C for major competitors.) In recent years, consultants were sometimes
used to assist big-ticket buyers, contributing to greater price sensitivity and difficulty
in differentiating.
Sales (and profitability) vacillated, largely due to the impact and timing of orders
for large display systems. These, in turn, varied depending on seasonality in sports
markets. Sales for football facilities tended to occur in the summer and early fall; those
for basketball and hockey occurred in the fall; and those for baseball occurred in the
early to late spring. Large product orders generally carried lower gross margins than
did smaller orders, particularly if the project required competitive bidding and sub-
contracting work.2
Two primary components formed the basis for many of Daktronics’ products: the
display and the controller. Over the years, display technology evolved from the use of
incandescent lamps to (at present) light emitting diodes (LEDs) and liquid crystal dis-
plays (LCDs). LEDs and LCDs permitted a wider range of colors, as well as increased
brightness and energy-related cost savings. LEDs tended to be used in large displays,
while LCDs were used in smaller displays. According to corporate sources, the vast
majority of displays sold utilized LED technology. Daktronics sourced some of its raw
materials, including LEDs, from a limited number of suppliers, primarily for quality
control reasons or the customized nature of the materials.
Using computer hardware and software, the controller collected and compiled
information, graphics, or animation furnished by the operator and other integrated
sources, and transferred this to the local or remote displays using wire or fiber optic

98 Case Research Journal • Volume 32 • Issue 4 • Fall 2012
cables, or infrared or radio links. The controller, therefore, managed each of the pixels
(literally, “picture elements”—the combination of tiny dots in rows and columns) that
formed the message or visual image.
In addition to the display module and the controller, other components in a digital
billboard as shown in Exhibit 2, were: (1) the power supplies (which converted the
AC voltage/current to DC voltage/current to power the electronics and the LEDs);
(2) the cable harness to connect the components; and (3) a cabinet to house the
aforementioned.
Exhibit 2: Example of Digital Billboard
Source: Daktronics.com
Manufacturing at Daktronics
In 2006, Daktronics engaged in component manufacturing (e.g., printed circuit
boards) and system manufacturing (i.e., metal fabrication, electronic assembly, sub-
assembly and final assembly), with the use of subcontractors primarily for metal fabri-
cation and loading printed circuit boards. It used a modular approach for manufactur-
ing displays, meaning that standard product modules were designed for use in a variety
of different products, thereby reducing parts inventories. While custom projects were
built according to the customer’s specifications, they might be designed to include a
significant percentage of standard components.
An enterprise resource planning (ERP) system coordinated order entry, produc-
tion, customer service, and other functions, and facilitated communications among
employee teams throughout the sales, design, production, and product delivery pro-
cesses. In April of 2006, Daktronics employed approximately 1,400 full-time employ-
ees and approximately 700 part-time and temporary employees, including students
enrolled at nearby South Dakota State University (SDSU). In fact, it was estimated
that about 18 percent of the labor force in Brookings were SDSU students. The break-
down of employees by type of role within the organization is shown in Exhibit 3.
None of its employees were represented by a collective bargaining agreement, and the
firm believed that its employee relations were good.

Exhibit 3: Number of Employees by Function
2006 2007 2008 2009

Manufacturing 900 1,200 1,300 1,200
Sales, Marketing, & Customer Service 700 1,300 1,300 1,500
Engineering 300 400 500 500
Administration 200 300 300 300
Source: company records.
Prior to 2006, Daktronics manufactured nearly all of its products at its main facil-
ity in Brookings (approximately 375,000 square feet on a 45-acre site). In 2007, Dak-
tronics opened a 120,000 square foot production facility to build larger digital bill-
boards in Sioux Falls, South Dakota. According to Daktronics’ 2006 Annual Report:
We are incorporating lean manufacturing concepts as we reconfigure our manufactur-
ing to take advantage of the new space available to us. We expect to gain efficiencies
in labor and space utilization, along with improved inventory turns, improved quality
control, and reduced lead times as a result.
In 2007, the company added an additional 80,000 square feet of manufacturing
space in Brookings and began manufacturing the Galaxy® line (smaller displays, used
primarily for on-site advertising) in Redwood Falls, Minnesota. The two primary rea-
sons for manufacturing the Galaxy® product line in Redwood Falls were: (1) it was a
highly standardized product; and (2) the lower ceiling height in the facility precluded
building larger video displays or billboards there. The Redwood Falls facility measured
approximately 100,000 square feet, which was primarily manufacturing space. At that
time, the company also expected that its investments in the Redwood Falls’ manufac-
turing facilities would increase, due to recent successes with the Galaxy® displays and
gas price digit displays.
Also during 2007, Daktronics’ total full-time employment grew by nearly 900
employees to 2,290, and its part-time and students to 935, with the employment
breakdown by function shown in Exhibit 3.
In 2008, Daktronics leased approximately 17,000 square feet in Shanghai, China,
for sales, service, and limited manufacturing to serve the Chinese market, and entered
into a lease agreement for a new building of approximately 90,000 square feet, primar-
ily to be used for manufacturing of architectural lighting products and final assembly
of video displays. Due to ramping up the facilities in Brookings, Sioux Falls, and Red-
wood Falls in 2006/2007, capacity constraints did not exist in 2008. The company
expected that the Commercial business unit would represent one of the fastest growth
segments of the business in 2009. Daktronics also anticipated growth in the U.S. and
overseas digital billboard markets, in on-premise advertising displays, and in higher
definition displays at sporting venues.3
Daktronics touted several accomplishments during 2009, including furnishing dis-
play systems for Yankee Stadium and Citifield, home of the New York Mets, and the
majority of displays for the New Meadowlands Stadium, home of the New York Jets
and New York Giants. Overall growth rates, however, were not as stellar as in prior
years (see Exhibit 1), with warranty costs contributing to a decline in gross profit mar-
gins. Daktronics attributed these costs to issues associated with new product designs
and quality in display systems.4 However, company officials believed that because of

investments in more sophisticated product reliability testing equipment (and person-
nel), future risks would be minimized.
At the close of fiscal year 2009, Daktronics employed approximately 2,500 full-
time employees and approximately 1,000 part-time and temporary employees. Econo-
mists predicted that the U.S. economy was only about halfway through a recession
that would be the longest and most severe since the Great Depression. Daktronics set
its goal to emerge from the downturn stronger than it had entered it. As was stated in
the 2009 Letter to Shareholders (from Aelred L. Kurtenbach, Chairman of the Board,
and James B. Morgan, President and Chief Executive Officer):
Going forward we will continue with our efforts in becoming a world class organiza-
tion utilizing “lean” concepts to systematically and continuously identify and eliminate
costs that do not add value for the customer. We have already achieved dramatic pro-
gress incorporating lean principles into our manufacturing processes since we initiated
our lean program in fiscal 2007. . . .5
Daktronics’ Lean Journey

Goals of the Lean Initiative
Prior to 2006, Morgan saw inefficiencies in manufacturing processes (“so many parts
and tools”) and relatively little standardization, which resulted in problems with plan-
ning inventory and tools. As he reflected in January of 2010, “We had to do something
fundamentally different. We want to be a billion dollar company. What we were doing
was not scalable.”
Furthermore, Daktronics used fixed-price contracts for nearly all of its product
sales.6 This meant that costs that exceeded their estimated amount reduced profits,
since the firm had a limited ability to recover cost overruns. Cost increases could result
from a number of factors; for example, increases in the cost or shortages of compo-
nents, materials or labor, or unanticipated technical problems that required project
modification. On the other hand, Daktronics benefited from cost savings.
So, lean manufacturing represented a way to generate cost savings, by reducing the
time between a customer’s order placement and receiving cash payment. To do this, a
goal was to eliminate all sources of waste, while delivering products to customers on
time. Seven sources of waste were identified in transportation, inventory, motion, and
so on, as shown in Exhibit 4.
Exhibit 4: Seven Sources of Waste
Transportation Moving material does not enhance the value of the product.
Inventory Material taking up space, costing money, and potentially being damaged.
Problems are not visible.
Motion Any motion that does not add value to the product is waste.
Waiting Material waiting is not material flowing through value-added operations.
Over Production Producing more material than is needed (inventory).
Over Processing Extra processing not essential to add value from the customer point of view is
waste.
Defects Causes lost production time and the cost of rework or scrap.

Gearing Up for Lean
To begin the journey, Daktronics partnered with three consulting firms. The Prag-
matek Consulting Group, headquartered in Bloomington, Minnesota, and known
primarily for its SAP and Business Process Technology Alignment services, was chosen
first. According to Matt Kurtenbach, this firm was selected based on its nearby loca-
tion and on the strength of one of the firm’s consultants who would be working with
Daktronics. In Kurtenbach’s words:
We had already decided what the first ‘lean project’ would be and that was converting
our production of the LED modules from batch-and-queue to flow [one-piece flow in
manufacturing cell production processes].7 We had a new production space designated
and we had new equipment on order . . . remember that building, buying, and hiring
was the way we had been growing prior to lean. So, we had the big things covered, but
we wanted/needed help with the details and methodology. We hired Pragmatek to help
us with those details.
Daktronics used the other two consulting firms for training and development pur-
poses, such as “Making Materials Flow” concepts and “A3 Thinking and Coaching.”8
According to Matt Kurtenbach, “They were chosen based on their credibility and past
Toyota experience . . . We had the opportunity to participate in some short workshops
in Minneapolis and decided to bring them into Daktronics to help further develop our
manufacturing leadership.”
The “lean team,” which reported to Matt Kurtenbach, consisted of a Lean Man-
ager, two Lean Manufacturing Engineers, and six Lean Coordinators for business
units, including one each for the Sioux Falls and Redwood Falls facilities, as shown
in Exhibit 5. Over the next four years (during the lean implementation), numerous
training opportunities were offered to employees, as shown in Exhibit 6.

Exhibit 5: Manufacturing Organizational Structure circa 2009
VP Manufacturing
Matt Kurtenbach
Lean Manager
Lean Manufacturing Lean Manufacturing

Engineer Engineer
Lean Coordinator
Commercial
(Sioux Falls)
Lean Coordinator
Commercial
(Redwood Falls)
Lean Coordinator
Transportation
(Brookings)
Lean Coordinator
Schools and
Theatres
(Brookings)
Lean Coordinator
Live Events
(Brookings)
Lean Coordinator
Corporate EA
(Brookings)

Exhibit 6: Lean Operations Training
Topic Participants
5S and Lean 101 Simulation All manufacturing employees (direct and support)
Lean Tools Employees on an as-needed basis as plans are kicked-off
(developed/given by Daktronics)
Lean Tools All Lean personnel (Lean Coordinators and Lean Engineers)
(5 days at Univ. of St. Thomas)
Lean Tools and Lean Leadership Plant Manager, Materials Manager, Manufacturing Engineer-
(2 ½ days at Univ. of St. Thomas) ing Supervisor, HR, Finance, Lean Coordinators, Division
Support Staff
Managing Value Stream Projects Lean Coordinators and Lean Engineers
(2 days with Lean Enterprise Institute)
Making Materials Flow Techniques Conducted by external consultant (former Toyota employee).
(1 day at Daktronics) Plant Manager, Materials Manager, Lean Coordinators, Divi-
sion Support Staff
Lean Problem Solving, A3 thinking 6 days conducted by external consultant (former Toyota
(8 days at Daktronics) employee). Plant Manager, Lean Coordinators, Division
Support Staff
For example, employees were trained on the 5S housekeeping system: . . . sort,

straighten, shine, standardize, sustain.9 According to Jeff Pekas, Electronics Assembly
(EA) Plant Manager, prior to lean implementation, the batch production floor plan
contained almost fifty shelving units that were positioned between every insertion
machine and along the length of one side of the walkway. Other shelving units, scat-
tered around the production floor, were used primarily to store tools, tooling,10 or mis-
cellaneous items. The shelves of these units were used to stage work that was waiting for
parts, waiting for queued processing, or, according to Pekas, “were literally waiting to be
rediscovered amidst all of the other work that populated the area.” Consequently, batch
production leaders often spent the better part of a workday searching for work orders,
which meant that they constantly needed to reprioritize queued jobs.
It also meant that product quality issues were sometimes not detected until they
were four days post-production, which delayed quality-related investigation and prob-
lem solving. This, according to Pekas, was not the fault of employees:
The assembly staff worked hard . . . very hard. The deep well of patience that each
employee started their day with was, by the end of the day, emptied by the many produc-
tion frustrations that they plowed through on a daily basis. Don’t get me wrong . . . many
good things happened in the batch area, but the good things required so much effort that
it was extraordinarily taxing to the people who carried out any successful effort. More
often than not, the effort always included an overtime shift or two.
Lean Implementation with LED Assembly

According to Pekas:
There was a great deal of team discussion about the [lean implementation] plan and
there were even discussions on how to plan for the plan. The team knew what had to be
done—the batch production area was a haven for inefficiencies and waste, but how to
even begin spurred very serious, passionate, and sometimes even loud discussions. The

team meeting schedule was set at three times a week for the duration of the project and
several meetings come to mind, especially early in the project when we would adjourn
in a stalemate or something was literally talked to death. Admittedly, there were times
when nothing from the meetings could be translated into anything actionable; we
struggled sometimes, but only sometimes.
As a first step, the LED assembly process was broken down into manageable parts,
and examined in detail vis-à-vis “proof of concept” exercises.11 When doing these exer-
cises, manufacturing engineers used stopwatches to document operations, taking notes
and recording employees’ feedback. At the conclusion, a product was selected for a
prototype experiment—one that had twenty-seven hand-inserted parts, including
eleven gravity drop-type parts, nine parts that required hand tools to attach, and eight
parts that required hand tools as well as hand-soldering.
The former means for transporting the product between assembly stations was to
use simple push carts; one cart, pushed by one person, was used to convey one printed
circuit board on to the next station. So, discussions ensued concerning how materials
could be more efficiently transferred and moved between stations along the produc-
tion line. According to Pekas, those discussions “directed us to rely on an energy source
that would always be available—gravity.” Consequently, gravity conveyors were pur-
chased; not for the entire length of the line, but for at least one key location, which was
equipped with an automated section to provide a timed release into the production
line. Finally, to maintain control of work in process, trays were used (two feet long x
eighteen inches wide) on which the printed circuit boards would be placed. Based on
100 feet of conveyor length, the conveyor held up to fifty trays.
While there was also a desire to test the product as it was being assembled, the
product test time exceeded each of the work station assembly times. Consequently, it
was decided to forego “live” testing initially in favor of collecting First Pass Yield data,12
though all agreed that in-line testing was imperative eventually.
Two nearly identical proof of concept exercises were conducted in order to demon-
strate the benefits of product assembly using a flow line to the two production shifts.
At post-build meetings, information was presented (e.g., assembly times) and employ-
ees were invited to share their thoughts. According to Pekas:
The feedback received from the employees was both positive and negative and both
extremes were expected; it was something new—a dramatic change for everyone. All
of the feedback was recorded, regardless of the positive or the negative tone and many
of the concerns the employees voiced became a part of the planning conversations as
the line developed. There were also some people in the audience who recognized and
understood the value that this flow approach to production would bring right away.
These same people would become flow line advocates and became a supportive voice
on the line for the people who had trouble coping with the velocity of change once
things started to roll.
Rolling Out Lean

Within the Electronics Assembly area, there were approximately 350 different parts
numbers, excluding those produced for Customer Service.13 The initial testing sought to
identify which products would work best on the high mix flow line. According to Pekas:
Once this sort began, it seemed like it would never end. Thankfully, a team member
who was suffering from boredom—just like the rest of us—experienced a revelation.

To paraphrase this person’s statement, he said we should simply accept the idea (for
now) that everything will flow, everything. This statement would capture at least 75
percent of the product mix and 85 percent of the volume. He went on to say that the
product mix is not the problem; the insurance policy to managing a high mix-driven
production schedule is machine redundancy, and at this time we are fortunate enough
to have duplication of every automated process needed to produce any product in our
mix! With these comments, the product sort discussions stopped because it made sense:
adopt an “everything will flow” philosophy and filter out the exceptions that have unac-
ceptable production parameters (such as an extended test cycle).
The “everything will flow” philosophy led to consideration of whether the equip-
ment should be laid out as a single line with side-by-side, duplicate resources, or as two
independent production lines. Pekas continued:
The benefit of a single production line with duplicate resources is that idle equipment
could be undergoing a setup for the next product while another product is running.
This configuration mitigates flow line downtime that would result from a high prod-
uct mix because it can drive the need for many different machine setup iterations. A
single line configuration would simplify production line leadership’s responsibilities
(only one line to manage), staffing level needs would be better understood, preventative
maintenance could be done while products are running (duplicate resources), and this
configuration would promote a balanced or ‘equal use’ approach to equipment utiliza-
tion. Ultimately, product velocity and production, in general, could be maintained
consistently down the flow line.
So, duplicated flow line resources (equipment) is simply a production insurance policy
comprising two things: changeovers have no production impact and as an equipment
backup strategy for unplanned outages. Being ‘duplicated’ can certainly translate to
mean underutilized, but the additional expense of carrying underutilized equipment
was the preferred option because of the assurance that the line would always be in a
condition to provide predictable and steady production.
We discussed two independently operated lines (since we had two of each piece of
equipment) as a possible configuration, but we really didn’t have the staff to position at
two lines and we were not in a position to hire additional people. Another concern was
with machine failures; if any one of the machines failed on a producing line, the result
would require relocating assembly parts, people, and tooling. In addition, this would
require equipment setup efforts for all machines on the line versus having to set up
only the single, back-up machine on the producing line. Certainly there would be idle
assembly staff during the setup time of the second machine on the down line, but this
production-vacant time could be planned for and filled with a teambuilding exercise,
training, safety reviews, or other policy reviews.
To prepare for high mix flow line production, work instructions were prepared,
identifying both preproduction (preparatory) tasks that were not value-added and
assembly work . . . and not simply paper-based (as in the past), but electronically. A
“kit prep” area was also established to ensure that all of the parts to be used for assem-
bly (primarily by hand) were properly organized, accounted for, and in good condi-
tion, prior to commencing production. If a kit was incomplete, it was quarantined
until the problem was resolved. Both cleared work orders that were ready to build and
uncleared work orders were posted on a scheduling board. The scheduling board was
used to determine the order of production, taking into account product similarities
and necessary changeovers. The goal was to always maintain a few orders (approxi-
mately four hours’ worth of production) in the kit prep area. According to Pekas:

If a work order doesn’t clear kit prep because it’s missing parts or contains inappropri-
ately formed parts, the result is downtime on the line. This means idled employees,
product rescheduling, equipment tear-downs and setups, and a whole host of other
issues that are detrimental to a flow line. The success of the entire value stream depends
greatly on detailed attention provided by very sharp people who understand the conse-
quences that a kitting error creates.
Manufacturing engineers observed that machine operators spent a good deal of
time searching for parts, resolving parts and programming problems, and that various
other issues took them away from their machines and their primary responsibility of
setting up and operating machines. However, by having resource [machine] duplica-
tion—rather than two independent lines—flow line downtime would be minimized.
Exhibit 7 shows before and after 5S photos. Check sheets were used to create
accountability of daily, weekly, monthly, and quarterly tasks. For example, at the end
of each shift (twice daily), employees logged accomplishments of such items as: sweep
floor, empty garbage, return tools and other items to proper places/retract cords, and
clean and organize tables with WIP.
Exhibit 7: Before and After 5S
Before After
Reflecting on the implementation of lean, Matt Kurtenbach commented:

Our efforts started in manufacturing where we were producing the highest volume
(and most expensive) assembly within our display, our LED modules. Historically,
these were done in a batch-and-queue fashion, so our first project was converting these
to flow. We also drove 5S in the early stages to help start a visual workplace and disci-
plined approach.

According to Morgan, the decision to move from batch processing to module
assembly was a big change. “When you walked into assembly, you’d see a bunch of
racks. The process was like trying to put your pants on, on the run—it’s tricky! We put
a pedometer on an employee, and in one day he had walked eight miles looking for
tools.” So, according to both Morgan and Matt Kurtenbach, employees—in general—
welcomed the change because it was so much more efficient.
According to Matt Kurtenbach:
One way to measure the success of our efforts has been to ‘see’ the difference in manu-
facturing. We no longer have stockpiles of finished goods and WIP [work in process],
which translates into increased cash flow. Products and projects move through manu-
facturing at a much faster pace, which has enabled us to lower our lead times without
adding capacity (buildings, equipment, or people). Lowering our lead times has ena-
bled us to grow by increasing revenues (manufacturing is no longer the constraint) and
serving our customers in a more predictable fashion (on-time delivery, for example). All
of this, of course, has lowered our production costs.
The buy-in by leadership and allocating the appropriate amount of resources have
played a major role with our transformation to date . . . resources being staffing dedi-
cated roles, significant amount of training for manufacturing leadership, and expecting
that we both run and improve the business—holding people accountable for driving
improvements. We took the approach that we would teach people these techniques
and hold the factory leadership accountable for successful implementation. The lean
group does not own our lean implementation—our factory leadership does. The lean
resources are there to provide expertise on how to apply the principles. I believe this
played a major role in our success to date.
After the success of this project, we put significant effort into converting other batch
processes. This was done across the manufacturing division, touching almost every
assembly that we produce. Once we began to explore lean, the wastes associated with
our batch-and-queue production methods became painfully obvious. The lure of lean
and the advantages that come with flow production techniques became irresistible. I
am amazed at how fast we have been able to implement most of our improvements.
Some things seem to take longer than it should, but we have made huge strides in a
relatively short (four years) period of time. This is a testament to our commitment and
dedication to this effort.
Pekas described the continuing evolution of lean manufacturing as follows:
With much of the lean foundational principles in place and close to stabilization, the
next step for electronic assembly was to begin departmental continuous improvement
activities. To kick this off, all eyes were on the batch production area of the factory,
which was a particularly difficult area to work in as either an employee or a leader.
In electronic assembly, batch production was the primary production method for sev-
eral hundred, if not thousands of different part numbers for over thirty-five years.
I cannot speak to the original business reason—or reasons—behind the decision to
produce products using batch production methods. But it obviously was quite suc-
cessful for many years, as is apparent by reviewing the company’s growth rate over the
past several years. It was not up until recently that the idea of exploring a different
production method outside that of a typical batch method really set in. This change
in thinking was partly spurred by optimism generated from the success experienced by
other manufacturing areas as they introduced flow lines.

Daktronics also sought to change its approach to quality management. As a tool to
help identify quality improvement activities, a “knowledge brief ” was used—Daktron-
ics’ version of the Toyota A3 problem solving form. According to Pekas, “if executed
properly, the document forces the owner to ask and answer ‘why?’ the problem exists
many times until ‘why?’ cannot be answered anymore, which finally reveals the root
cause of the problem.” After identifying the root cause, data is collected, the problem
is investigated, and decision making proceeds.
Quality problems, according to Pekas, during the batch production days:
. . . were not the result of uncaring people or people not trying hard enough; everybody
routinely went above and beyond expectations to do things right and to do the right
thing. Even with a dedicated assembly workforce there were still quality problems, but
it was not necessarily the fix to these quality problems that was the [real] problem. The
bigger issue behind the quality problems was the timing of when these problems were
discovered.
In the batch production system we lived in, it could take up to three days before a func-
tional test was performed on a fully-assembled order. This delay affected nearly every
order because, simply put, the batch test stations were usually congested with carts of
other product. This congestion contributed to racks of product waiting in a queue to
be tested and within these racks, there were quality flaws that, once discovered during
a functional test, would then need to be repaired . . . so the problems were fixed. Of
course, there were reasons for the quality problems, but the biggest problem was the
time delay from build completion to the time when the product receives the first test;
this particular situation required attention during the high mix project.
So, to be honest, the integration of real-time product testing that took place during
the real-time product build was absolutely the best thing that happened during this
project. Today, if a problem is found at a test station, the production line is signaled to
stop until the failure reason is understood and corrective action is taken . . . period. The
risk and cost to continue the build is too great not to stop production, and the bot-
tom line is that there is no person or process that will realize any improvement unless
deliberate and decisive action is taken to understand the root cause of the problem and
correct it on the spot.
The strategy behind Daktronics’ “live” product testing contained several features.
First, the number of test fixtures and additional test operators on the line was increased
to keep pace with the line flow. While this was moderately successful, both test fixtures
and additional staff were expensive, so products with test cycles longer than three min-
utes were redirected to a different station.14 Because Daktronics’ goal was to test 100
percent of the products on the line, those that were intentionally skipped were tested
at a test bench (detached from the flow line) before the order was released.
Finally, detailed instructions/checklists were developed for production leaders and
operators.15 (See Exhibit 8 for an example of a Work Instructions Sheet.) Those devel-
oped for leaders were used to assist them in monitoring the pulse of the line, provide
oversight to validate the current state of the production system, and assure that assem-
bly guidelines were being followed. Those developed for operators were posted at each
station along the high flow line, defining the activities to be performed, the order in
which they were to be performed, and the time required to complete the tasks.16

Exhibit 8: Work Instructions
The value stream maps—for both the batch-and-queue production and the high mix flow line—appear in
Exhibits 9 and 10. The purpose of the value stream maps was to depict the steps to improvement—using lean’s
symbols—in the effort to add customer value while reducing waste. By developing these maps, production lead-
ers and operators could visualize how the desired, high mix flow line should look . . . and develop action plans
to transition from the batch-and-queue system to the flow line.

Exhibit 9: High Mix Batch Production

112
Exhibit 10: High Mix Production Flow Value Stream Map
Case Research Journal • Volume 32 • Issue 4 • Fall 2012


Reflections on Results
In reflecting on Daktronics’ results, Pekas observed:
There have been many exemplary people who have worked in this factory for many
years and throughout all these years, each and every one of them endured at least some
degree of change; it is inevitable. However, what is different about the changes that
have transpired over these past few years is that these changes were much more accel-
erated (in my opinion) and carried out with a greater purpose—survival; and many
companies are in a similar situation. Certainly, the weakened economic times inspired
additional urgency in the grand scheme of things, but even in a robust economic envi-
ronment, the dynamic of change should consist of a well-developed plan that is tightly
coupled with a shared sense of urgency. This is the recipe for improvement.
The high mix, flow line is not in a perfect state. Admittedly, there are elements of the line
that do not reflect the desired stability that we believe we need, but to those issues we
will continue to strive for excellence. On the other hand there are elements of this line
which we recognize as substantial gains, and developing a trained staff is one of them.
As described by Matt Kurtenbach, other accomplishments are shown in Exhibit 11.
Exhibit 11: Lean Manufacturing Accomplishments
Measure Outcome
Production Space Recovery of 928 square feet of production space (50 shelving units and 25
carts removed from floor).
Work-in-Process WIP volume was reduced; WIP value was reduced by > 50 percent.
Work Instructions An electronic work instruction template was developed; work instructions for
several hundred Electronics Assembly products were developed. This elimi-
nated most of the paper-type work orders as well as work order processing for
this value stream.
Product Handling Product racking and un-racking iterations between machine operations were
reduced by over 70 percent.
As a result of the conveyor installation, product handling was reduced,
thereby reducing opportunities for handling-related quality defects.
Order Completion Average days to complete an in-house work order decreased from 20+ days to
Time three days (maximum), with some only a few hours.
Quality In-line testing strategy reduced defects and increased First Pass Yield (FPY),
which, in turn, reduced the need for full-time, degreed electronic technicians
from 17 to 10.
In-line testing repurposed electronic technicians to serve in primarily repair
roles; the more repetitive pass/fail-type testing is done by assembly staff.
FPY results for all of FY 10 (May 09 to May 10) was 95.9 percent (goal of
96.5 percent). From Sept 09 (the month that in-line testing began) to April
10, FPY was 96.7 percent. In five of these eight months, FPY was greater
than 97.5 percent.
Scrap The average monthly scrap cost for FY 2009 (May 08 to May 09) was
$9,615; FY 10 (May 09 to May 10) average monthly scrap cost was
$2,762—a reduction of just over 70 percent.
Source: Matt Kurtenbach
In view of the successes of the lean implementation in manufacturing areas, some

at Daktronics were beginning to wonder if lean techniques could be extended to non-
manufacturing areas, such as offices—if so, could manufacturing serve as a model?

Appendix A: Daktronics Company History
Daktronics, Inc. had come a long way from its start in Brookings, South Dakota in
1968 by two electrical engineering professors from South Dakota State University
(SDSU), Dr. Aelred (Al) Kurtenbach and Dr. Duane Sander.
Al Kurtenbach received his first training in electronics from the military. He
explained, “I served time in the Air Force before I went to college and worked as a
radar technician . . . I came to like electronics; learned a little bit about the engineer-
ing profession; and decided that that would be a good avenue for life.” Kurtenbach
went on to complete his undergraduate, master’s, and doctoral programs in electrical
engineering. He joined the electrical engineering faculty at SDSU in 1971 where he
became close friends with Dr. Duane Sander who was already on the faculty. The
two dreamed of a company;—however, there were obstacles. As Kurtenbach put it,
the two would-be entrepreneurs “ . . . were rich in children but poor in dollars,” and,
consequently, started “ . . . with very minimal startup capital and . . . bootstrapped
our way up.” The two friends set up their new company in a converted garage, funded
operations for the company’s first four years through a private placement of stock, and
took their salaries in stock for those first four years. The company name combined the
words “Dakota” and “electronics.”
Kurtenbach and Sander wanted a company that would employ SDSU students
and graduates and provide opportunities to retain the university’s talent in the area.
The two looked for a niche product. Kurtenbach said the original philosophy was, “If
GE (General Electric) is interested, we’re not.” Initial ideas focused on bio-medical
instrumentation, a reflection of Sander’s research interests in the field of electrical engi-
neering. However, the firm’s first product line was electronic voting systems, a line that
enjoyed some success.
Daktronics’ first electronic scoreboard came about because of Al Kurtenbach’s
friendship with SDSU’s wrestling coach who identified the need for scoreboards. Dr.
Kurtenbach called the portable scoreboard introduced in 1971 the “Matside®.” Dem-
onstration of the new product at regional and national wrestling meets developed
name recognition for the company and Daktronics’ leaders quickly realized the impor-
tance of working directly with sports customer groups to identify needs and design
products to meet those needs. The Matside® was the first of the company’s growing
standard or “catalog” scoreboards. The company subsequently developed a scoreboard
for swimming competitions and continued to develop its product line for a broader
array of sports applications.
Al Kurtenbach left SDSU in 1973 to devote full-time to Daktronics. Sander
remained on the faculty at SDSU, while continuing to serve on the board of direc-
tors for Daktronics. By the following year the company reached one million dollars in
sales and an employment body of 100. The company had a growing line of products
that included time and temperature displays, electronic message centers, custom and
standard athletic scoreboards, and electronic voting systems.
In 1983 the company constructed a new manufacturing plant in Brookings, bring-
ing its total manufacturing space to 64,000 square feet. Within three years, sales
exceeded $10 million dollars. The company continued to focus on small markets, but
planned to enter larger commercial markets. The following year Daktronics made its
first acquisition by purchasing circuit board manufacturer Star Circuits, and opened
the first company- owned scoreboard sales and service office in Seattle, Washington. In
addition, Daktronics began to build a nationwide dealer network.

As President, Al Kurtenbach led the company to striking achievements. CEO
James (“Jim”) Morgan pointed out, “We did the 1980 Winter Olympics and that
was our first opportunity to work on an international stage.” According to Morgan,
the 1980 Lake Placid event made him realize how big the company that Kurtenbach
and Sander had founded was really becoming. Daktronics went on to provide systems
for multiple Olympic games including Calgary (Winter 1988), Barcelona (1992),
Lillehammer (1994), Atlanta (1996), Salt Lake City (2002), Athens (2004), Beijing
(2008), and Vancouver (2010). In the 1980s, the company began installing displays
in major-league stadiums, leading to its being chosen for high profile sporting events
including the 2005 Super Bowl.
In 1994, Daktronics’ stock was first publicly traded on the NASDAQ with the
market symbol DAKT. By then, the company had over 500 employees. Daktronics’
most significant commercial applications included the 1997 conversion of the famous
Times Square “Zipper” sign to LED display technology. In the 1990s, Daktronics
acquired Keyframe®, Inc., and Sportslink®, Inc., and introduced LED technology for
use in scoreboards, which resulted in company sales exceeding $100 million in 2000.
Daktronics cited as one of the keys to its emergence as the dominant company
in large electronic displays its creative applications of light emitting diodes (LEDs),
which had become available in red, blue and green colors with outdoor brightness
in the mid-1990s. Daktronics pioneered the development of full-color LED video
displays capable of replicating trillions of colors. This enabled the company to pro-
duce long-lasting, energy-efficient large-format video systems with excellent color and
brightness.
In November 2001, Al Kurtenbach resigned as president of Daktronics but
remained on the board of directors. Jim Morgan took over as President and CEO.
Morgan had originally joined the company part-time as Daktronics’ first student
employee while he was still an SDSU graduate student. Morgan finished his MSEE in
1970 and went to work for Daktronics as the company’s first full-time employee. As he
put it, he had just “… happened to graduate from SDSU with my electrical engineer-
ing degree at about the time they founded Daktronics.” Morgan headed the company’s
engineering department from the time he joined the company full-time in 1971 until
he moved into the position as President and CEO.
The mid-2000s was a period of continued expansion and growth. Daktronics
expanded its manufacturing facilities and administrative facilities in Brookings; then
opened a manufacturing facility in Sioux Falls, South Dakota, and another in Red-
wood Falls, Minnesota. The additions brought total manufacturing space to 728,000
sq. ft. in the U.S. The geographic dispersion reflected Daktronics’ difficulties in find-
ing employees in Brookings, population about 20,000.
The company’s sales exceeded $300 million in 2006 when it began to implement
lean manufacturing to increase production efficiencies and reduce waste. By 2007 the
company was becoming too large to run as a single unit; thus it was split into five
different lines of business. Four of the units were domestic and included U.S. and
Canada—Commercial, Live Events, Schools and Theatres, and Transportation—with
a fifth business unit for International Operations.
In 2008, the company reached over $500 million in sales with over 3,000 employ-
ees. CEO Jim Morgan said, “If we hadn’t gone into lean manufacturing, we couldn’t
have had $581 million this last fiscal year without chaos.” That same year, the firm
leased 90,000 sq. ft. in a new building in Shanghai, China. That facility was used

primarily for assembly. Daktronics purchased some of the needed commodity parts in
China but flew sub-assemblies in from the U.S.
In 2009, after more than 41 years in business, Daktronics’ products were found in
nearly 100 countries on six continents around the world. However, the severe recession
that began in the United States in 2008 affected Daktronics as well. In fiscal 2009, the
company began to see the economy negatively impact its Commercial business unit
and, to a lesser degree, its International business unit. The stock price took a hit, fall-
ing from a high of $29.82 in October 2007 to a low of $6.55 in March 2009. As fiscal
2010 began, the adverse economic conditions also began to affect the sports business
in the company’s Live Events and Schools and Theatres business units. The company
began to see costs and selling prices of products being affected by the growth of com-
petition across all of its business units. In FY 2010 its challenge was how to weather
the recession and emerge well-positioned to resume pursuit of its stated goal to be a
billion dollar company.
President and CEO Jim Morgan remained optimistic. He believed that,
The interest of our customers in providing more entertainment value at sports venues
using our display technology is still there. We have a list of potential projects in our
sales pipeline for summer and fall delivery in calendar 2010, but there remains uncer-
tainty on how the economy will impact these projects. We will know more about this
as we move through the fourth quarter of fiscal 2010 and into the first quarter of 2011.

Appendix B: Daktronics Products
In 2010 Daktronics produced and sold the following major product lines.
Scoreboards and timing systems included scoreboards for baseball and basketball
(four- and single-sided) and scoreboards and timing displays for football as well as
stadium “enhancements” that could include video and message displays and sponsor
panels. In addition, Daktronics provided automated rigging and hoist products to
install and support its center-hung arena scoreboard/display systems for both small
and large sporting facilities.
Video displays used Daktronics-developed imaging and manufacturing technol-
ogy in permanent LED displays, mobile and modular LED displays for concert tours,
corporate functions and award and auto shows. Daktronics’ freeform LED technology
provided architects with flexible modules for designing and controlling displays on
buildings, and flat-panel displays for creating indoor display networks at businesses,
stadium concourses and event centers.
Audio systems coordinated high-quality sound systems for sports venues with the
scoring and video displays for indoor and outdoor venues. Daktronics’ audio system
offerings included both standard and custom options.
Digital billboards included a full line of LED architectural lighting and display
products for billboard displays as well as billboard management software and services.
Transportation products encompassed a wide range of LED-based displays for
road management, parking (including space availability displays to inform drivers
about parking- space status), mass transit and aviation applications including lane use,
travel time/toll rate, and variable speed signs.
Software and controllers allowed efficient and easy operation of Daktronics dis-
play technology. Some products were designed for simple display management (for
example changing information on the displays) and others were designed for creating
content for LED message signs. The sport software and controllers served to control
not just scores, but game and player stats, while the video software and controllers
helped process and control digital content for video displays.
Digital and price displays included product lines marketed primarily to com-
mercial customers. Products included outdoor time and temperature displays as well
as digital displays specifically designed for the petroleum industry. These offered high
visibility and quick fuel price updates using Daktronics’ Fuelink™ control software.
In addition, the company serviced the products it sold and, where necessary, pro-
vided training in programming and the use of the equipment.
Source: Daktronics Annual Report.

Appendix C: Profile of Major Digital Signage Industry
Competitors
The following brief profiles represent the breadth of firms that competed in the digital
signage industry in 2010.
Adaptive Micro Systems, LLC, was founded in 1978 and manufactured stand-
ard LED text and video displays primarily applicable to indoor/outdoor commercial
advertising and transportation markets. The company had manufacturing and sales
sites in the U.S., Malaysia, and Europe and used an authorized dealer network to sell
its products.
ANC Sports specialized in manufacturing and selling LED video displays directly
to large sports venues. It had worked with many collegiate and professional sports
teams on custom LED video display designs. It had also worked with other LED
display manufacturing companies, like Mitsubishi Electric, to complete projects using
ANC’s software and controllers that were used to power large, high-definition LED
video displays.
Barco was a leading global technology company that designed and sold visualiza-
tion solutions for a variety of markets including the digital-out-of-home (DOOH)
industry. Its manufacturing sites in Europe, North America, and Asia-Pacific built
standard and custom LED video displays as well as LCD and rear- or front-projection
displays. Barco had sales offices around the globe and also sold to customers through
resellers and system integrators.
Capturion was a privately owned multi-format LED video display company based
in Laurel, Mississippi with manufacturing facilities owned and operated in Asia. It was
striving to advance its indoor and outdoor products towards a better, “greener” LED
system.
Daktronics was considered by many to be the industry leader in manufacturing
LED displays. In business since 1968, the company had products installed in nearly
100 countries. Daktronics manufactured a wide variety of custom and standard LED
text and video displays as well as LCD screens. Daktronics used a vast dealer network
as well as selling its custom products directly and through system integrators.
Hibino Corp., in business since 1964, manufactured LED video displays primar-
ily for use in mobile and modular applications. The company reported it could custom
design and construct completely mobile audio visual systems for nearly any event.
Hibino sold directly to its customers.
Hi-Tech LED Displays had been manufacturing electronic displays since 1984.
It mostly manufactured standard LED text and video displays for a variety of applica-
tions, but also manufactured some custom displays. Hi-Tech sold primarily to U.S.
sign installation companies, but also sold directly to customers, and had completed
projects world-wide.
Imago (Odeco Electronica in Europe and ADDCO in U.S.) had offices and part-
ners around the world. Its assembly plants in Europe, North America, South America,
and India manufactured a variety of standard LED text and video displays. Imago was
best known for its intelligent transportation systems, but also did some low-end cus-
tom LED displays. The company sold through integrators and resellers to customers.

Ledstar, Inc., specialized in manufacturing LED text variable message signs (VMS)
for transportation applications since 1988. The VMS used on highways across North
America provided information to motorists. Ledstar’s products could be purchased
directly from the company.
LG Electronics, located in Korea, was established in 1958. Globally, it had 9.4
percent of the LCD TV market and 13.5 percent of the flat panel TV market in 2010.
It had leveraged its TV capabilities—including high definition (HD) TV—into com-
mercial products for the public venue market as well as many other market segments,
including healthcare, transportation, education, financial, retail, hospitality, quick ser-
vice restaurants (QSR), food services, government, and small business.
Lighthouse Technologies offered a line of LED text and video displays for almost
any application. The company had sales offices around the world and was recognized
for its custom mobile and modular units, as well as some of its displays in large sports
venues. Lighthouse was known as one of the industry’s leading companies for new
products and technologies. The company sold direct and through systems integrators
to customers.
LSI Industries entered the DOOH industry with its 2006 purchase of SACO
Technologies, Inc., of Montreal, which gave it the ability to produce large-format LED
displays. The company manufactured LED text and video displays and LCD displays
for nearly every application. LSI also had the ability to design and manufacture custom
displays and sold them direct and through integrators and resellers.
Mitsubishi Electric rated in 2009 as the world’s 215th largest company by Fortune
Global 500, manufactured standard and custom LED text and video displays, and a
variety of other products. It had sales locations around the globe and was capable of
manufacturing some of the largest custom LED video displays through its subsidiary
Mitsubishi Diamond Vision. The company sold its products through several distribu-
tion channels including direct and through partners, resellers, and system integrators.
Nevco, Inc., manufactured its first scoreboard in 1934, and had been considered
the largest private scoreboard manufacturer for some time until Daktronics displaced
it. Most recognized for its LED scoreboards. The first also manufactured LED text and
video displays. Nevco was capable of small custom scoreboard designs and sold directly
to end users and integrators mainly in North America, but also around the world.
Optec Display, Inc., in business since the late 1980s, primarily manufactured
standard outdoor LED text and video commercial advertising displays. It used manu-
facturing sites in the U.S., China, and Taiwan and had a 300+ dealer network that sold
its displays primarily in the U.S., with some global sales.
Optotech Corporation, established in 1983, manufactured both standard and
custom LED text and video displays for a variety of applications, its best known being
digital billboards. It also made LCD screens and other products. It had locations in
Taiwan and China, as well as sales locations throughout the world. To sell its products
Optotech used resellers and integrators, but also sold directly to the customer.
Panasonic Corporation, headquartered in Japan, was one of the largest electronic
product manufacturers in the world, comprised of over 634 companies. The com-
pany offered a wide range of digital signage solutions, from all-inclusive bundled solu-
tions, to custom-designed enterprise networks. Panasonic provided hardware, software
installation and support for its customers.

SignCoEDS manufactured signage for sports and commercial applications. It
manufactured LED text and video signs as well as LCD video walls and DLP (digital
light processing) displays. SignCoEDS primarily used a dealer network to sell to cus-
tomers, but also sold through integrators when doing custom projects.
Skyline Products, Inc., manufactured LED text displays primarily for the trans-
portation industry. Skyline’s VMS provided information to travelers on highways and
as a part of intelligent transportation systems. Skyline also manufactured renewable
energy sources and did aluminum fabrication. Skyline products could be purchased
directly from the company.
Sony was a Japanese multinational conglomerate corporation headquartered in
Tokyo, Japan. Convergent Media systems, a Sony company, developed Prodokol, a
fully managed, end-to-end, digital signage platform. Prodokol supported applications
such as interactive touchscreen, digital menu boards, and single display or multi-
display signage. Its leading managed solutions were banking, retail and quick service
restaurants (QSR).
Telegra was a leading manufacturer of advanced traffic management systems for
roadways, tunnels, and other transportation applications. It had manufacturing sites
in Croatia and the U.S., as well as sales sites around the world. The company reported
the ability to custom design transportation systems for nearly any application and sold
directly through integrators and resellers to customers.
Toshiba, rated in 2009 as the world’s 97th largest company by Fortune Global,
manufactured a variety of standard and custom LED text and video displays, LCD and
plasma screens, rear- and front-projection screens, as well as a number of other com-
munications and electronics products. Toshiba sales locations around the globe sold
products for use in a variety of applications. Toshiba sold direct, and through system
integrators and resellers around the world.
Trans-Lux Corporation manufactured standard and custom LED text and video
displays as well as LCD and plasma screens for a variety of applications. Trans-Lux had
locations across North America and the globe to sell its products. Trans-Lux worked
with resellers, partners, and integrators to sell its products to customers.
Watchfire manufactured standard LED text and video displays for the commer-
cial indoor/outdoor advertising market. The company’s products were manufactured
completely in the U.S. and were sold through a dealer network to customers across
North America.
Young Electric Sign Company (YESCO) started building custom signs and dis-
plays in 1920. The company manufactured LED text and video displays as well as
other different styles of signs, and was often featured on the Las Vegas strip. YESCO
had several manufacturing and sales locations in the U.S. capable of custom building
many styles of signs. It sold directly, and through resellers and integrators.

Notes
1. Lean Manufacturing at Daktronics. Presentation for South Dakota Engineering
Society, April 2, 2009.
2. Small orders generally had margins in excess of 40 percent and large orders had
margins of generally less than 30 percent.
3. It also felt that the sports business was generally “recession-resistant,” because buy-
ers could use video display products to generate revenue (through advertising).
4. Daktronics’ officials perceived that “excessive custom design” led to an increased
risk of warranty costs.
5. Daktronics 2009 Annual Report, p. 1. Available at: http://files.shareholder.
com/downloads/DAKT/669959025x0x302969/3d7827ec-d35d-415a-
9f34-bb0c397f65b3/Daktronics_%202009_%20Annual_%20Report_%20
Wrap_%20062509_%20shareholder.pdf
6. For long-term construction-type contracts, it recognized earnings using the
percentage-of-completion method.
7. Batch-and-queue refers to a system in which large lots—or batches—are pro-
duced. When a batch must wait for downstream processing, it sits idly in a
“queue.” A batch-and-queue system tends to require more production space,
and results in greater inventory and lead times than a one-piece flow. One-piece
flow means that parts move stepwise through processes with no work-in-process
(WIP) in between either one piece at a time or a small batch at a time.
8. The characters A and 3 together refer to the paper size, which is the metric equiv-
alent to 11-inch x 17-inch paper. The A3 technique is a part of Toyota’s Quality
Circle problem solving techniques, which were developed during the 1960s.
9. There are various versions of the five S acronym, but the basic idea is to main-
tain a workplace that is clean and free of unnecessary materials. For example,
Stevenson (2009) suggests Sort, Straighten, Sweep, Standardize, Self-Discipline.
10. Tooling (as opposed to “tools”) refers to machine accessories, which would be
mounted to the machine or used in setting up equipment.
11. A proof of concept refers to a rough prototype or working concept that provides
an indication of an idea’s feasibility.
12. First Pass Yield (FPY) is generally defined as the number of units of acceptable
quality (i.e., those not requiring rework) emerging from a process divided by
the number of units going into that process over a given period of time.
13. This would generally be considered a broad product mix.
14. This conclusion was reached based on a target test cycle of one minute per station,
with a maximum of three stations staffed. Products requiring more than three
minutes to test were viewed as “out of scope,” and were systematically sampled
(e.g., every second or third board), which would not slow the pace of the line.
15. This follows from Rule 1 of the Toyota Production System: “All work should
be highly specified as to content, sequence, timing, and outcome.” That is, all
operators should accomplish the same task(s) the same way.
16. For example, if the flow line required the line to operate at a 1.5 minute takt
time, then each of the work stations along the flow line would not contain work
content that exceeded 1.5 minutes.


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Daktronics (D): Keen on Lean

Exhibit 1: Key Financial Measures

FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Daktronics’ Product Families

Exhibit 2: Example of Digital Billboard

2006 2007 2008 2009

Source: company records.

Daktronics’ Lean Journey

Exhibit 4: Seven Sources of Waste

Source: company records.

Lean Manufacturing Lean Manufacturing

Source: company records.

Source: company records.

For example, employees were trained on the 5S housekeeping system: . . . sort,

Lean Implementation with LED Assembly

Rolling Out Lean

Exhibit 7: Before and After 5S

Source: company records.

Reflecting on the implementation of lean, Matt Kurtenbach commented:

Source: company records.

Source: company records.

Case Research Journal • Volume 32 • Issue 4 • Fall 2012

Exhibit 11: Lean Manufacturing Accomplishments

Source: Matt Kurtenbach

In view of the successes of the lean implementation in manufacturing areas, some

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