KENNAMETAL INC.  / AR 2002 11 LEAN Our process for perpetual value creation  Kennametal’s transformation to lean has been particularly accelerated at our Orwell, Ohio, insert plant. Orwell has accepted the notable challenge of becoming a model lean location to provide a template for Kennametal’s other global locations. The transformation at Orwell includes dealing with the demanding pace of lean projects completed in just five days – projects that often completely disrupt and change the workflow, people and machines utilized in the targeted process. The projects are required to deliver aggressive improvements, meeting targets that include: a 25 percent increase in productivity,  a 50 percent decrease in floor space, and a 50 percent decrease in work-in-process (WIP). Overcoming a fear of change can be painful, but the impressive results that are being produced are winning daily converts of employees who have seen their production rates soar, and scrap/rework rates plummet. In the production process pictured here, lean projects resulted in a 151 percent productivity improvement, lead-time reduction of 67 percent, a 43 percent decline in WIP, decreased part travel distance of 28 percent, and significant quality improvements due to a 35 percent reduction in material handling. We are translating the lean principles of value creation and customer responsiveness into a total business strategy. At an individual level it represents the emergence of a knowledgeable, multi- functional, entrepreneurial and empowered work force. At the process level it is a methodology to lower inventories, streamline cost structures, free up floor space to expand the business without increased fixed costs, increase return on invested capital and shorten customer lead times. For our customers  it enhances quality, delivery and responsiveness. Our Lean Enterprise goal is to eliminate all forms of waste throughout Kennametal, as defined by unnecessary complexity, activities and transactions that do not add value to internal or external customers. Over the next year we will continue to increase the velocity of our Lean Enterprise initiative.  We anticipate exceeding 500 focused improvement events that will continue to enhance customer value and continually reduce cost. Through the ongoing improvement efforts of our employees we  are targeting an additional $10 million to $15 million in cost savings and $20 million to $25 million in inventory reductions.