With oil prices higher than the ozone layer, it’s easy to forget they were scraping the bottom of the barrel as recently as five years ago.

Robert Mills, president of Kudu Industries, hasn’t forgotten. Nor is he likely to.

Just before the price of crude bottomed out near $8 in 1999, his once-profitable company hit the wall, lurching into insolvency.

Yet with a little help from outside friends, this Calgary-based manufacturer of progressing cavity pump systems (a new-age, super-efficient improvement on the pumpjack) survived the crisis, emerging from financial purgatory with a new lease on life.

Larry MacDougal photo, Business Edge
Robert Mills has brought Kudu Industries back from the brink.

Today, Mills confidently predicts a $50-million year for his rejuvenated and debt-free private corporation – a turnaround of staggering proportions.

Mills, his executive team and 130 employees turned the trick as if by magic. By applying the principles of a dynamic corporate creed known as lean manufacturing, they eliminated inefficiency and waste within their 38,000-sq.-ft. manufacturing plant, now about to double in size following renovations planned for this year.

And they saved millions by placing their inflated inventory, considered a serious profit-killer by the gurus of “lean,” on a crash starvation diet.

“We were great at sales and at servicing our customers, but we weren’t great at managing inventory,” Mills reflected on the company’s flirtation with disaster.

When oil prices sagged in the late 1990s, Kudu Industries had a maxed-out line of credit and $11 million in inventory. But the company remained well within budget until mid-February 1998, when its customers (today they include Petro-Kazakhstan, EnCana, CNRL and Talisman) suddenly and simultaneously ceased to order product.

“We had a 60-per-cent slump in sales from 1997 through ’98 and another 40 per cent in 1999,” Mills murmured, reliving the angst.

By that time, Mills and his backers had already decided to sell the company. Desperate, the president had been in touch with Chuck Harrison, a former Canadian Football League lineman who now spreads the lean gospel on behalf of the National Research Council’s Industrial Research Assistance Program (IRAP).

Fortunately for Mills, the sale fell through. And the lean principles subsequently embraced by the Kudu team eventually began to bear fruit in conjunction with improved performance by the oilpatch at large.

“Inventory ties up so much capital,” Mills said, explaining the bugaboo which almost sank the company. “You finance inventory. You rent space for it. You heat it, you light it, you air-condition it, you clean it and you move it.”

With Harrison acting as tutor, Mills came to understand that streamlining inventory frees up funds which can be used elsewhere to greater effect. Ultimately, Kudu Industries adopted the inventory control system advocated by Toyota, leanest of the lean manufacturers.

The Toyota “Kanban” system is a simple but effective method of time management that fits Kudu like a glove.

After embracing the new strategy, the company was able to reduce inventory costs from $11 million to about $5 million within six years. By doing so, the Kudu team eliminated the need for purchasing agents and transferred responsibility for inventory control directly to the tradespeople working on the shop floor.

“The people doing the assembly now have the parts they need at their fingertips. They know what they need. When the (parts) bin is empty, our trained staff go to their computer station and punch up a number on our manufacturing software, which tells them who the supplier is,” said Mills.

Then the employee prints off a purchase order and faxes it directly to the parts supplier.

For the lean model to work, however, employees need to be fully on side and well-trained. That’s why Kudu Industries routinely spends $2,500 a year on training upgrades for each staffer.

Since the good times returned, Mills has insisted on sharing the wealth. Last year, each staff member received about $8,000 under terms of a democratic employee profit-sharing scheme which equally distributes 10 per cent of the company’s pre-tax profits.

Naturally enough, such radical departures from standard practice raised an occasional eyebrow during the early going.

“There were some doubts,” Mills admitted with a wry smile. “People would ask me why we were copying Toyota. I kept telling them, ‘Simply because Toyota is the most efficient and highest-quality car manufacturer in the world,’ ” he said, leading up to the punch line.

“Then I proved it by buying a (European model) – the most unreliable car I’ve ever owned,” Mills laughed out loud. “My next car will be a Toyota.”