September 10, 2015 / best practices, Cost Management, LIT, operator training, productivity, resource allocation, ROI, Safety, strategic planning
If there is one operational pain point that every manufacturing executive faces, it’s resource allocation. From a strategic standpoint, it would be ideal for managers to make continuous changes within their operations, both in terms of equipment assets and human capital. However, budget and time constraints, an unstable market, and labor shortages are making it more difficult than ever for managers to gauge if and when resources should be reallocated.
In fact, according to research from McKinsley Quarterly, most companies rarely shift resources at all, even during times of financial crisis. Instead of making adjustments, many executives tend to “play it safe,” resist change, and, as a result, often limit their company’s growth potential.
If this sounds familiar, perhaps it is time to take a closer look at how you are distributing resources within your fabrication shop. Do you find yourself using the same strategies you have used for years, or are your tailoring your strategy to today’s market trends? For example, are you allocating more resources to your human capital to prepare (or respond) to the widening skills gap? What about technology? Are you considering new investments in software, automation, or other metal-cutting advancements to increase productivity or expand your market reach? Today’s leaders need to be sure they are making strategic choices that benefit both the company and employees, while avoiding the trap of making allocation decisions because “that’s the way they’ve always been done.”
Of course, the challenge is figuring out which investments will generate the best return. While there is always an element of risk to any strategic decision, the following are a few best practices today’s managers should consider when reallocating resources in their fabrication shops:
- Have a plan or method. As a recent column from Modern Machine Shop explains, a strategic plan “is the means by which a company will allocate its resources to achieve its goals.” In other words, it’s the “how.” In today’s market, companies can’t afford to simply be reactive; they need to have a plan. Ideally, this plan would be based on input from various stakeholders throughout the company, and it would map out “the resources, tasks, and timing required to meet the company’s goal,” according to the Modern Machine Shop article. This goes for smaller shops as well. As one consultant explains here, every business owner should have a method and means to predict what resources are needed to sustain growth in their business venture, even if that method is based on intuition and experience.
- Closely evaluate possible outcomes. Before making any major investment decisions, it is important that managers carefully consider the unique elements of their operation. Take automation as an example. While an automated saw may have the capability to offer a good return, fabricators also need to consider whether an automated saw will actually yield better results. As this white paper explains, automated equipment doesn’t always provide enough accuracy for jobs that require ultra-tight tolerances. “The problem you run into with automation is how your indexing system works. The more you move a piece of material, the more likely it is going to be out of tolerance,” Jim Davis, corporate operations services manager at O’Neal Steel, tells the LENOX Institute of Technology. “For instance, say you’ve got a saw with a 36-inch indexing vice. You ask any saw manufacturer and they’ll tell you every time you’re going to lose a 32nd to a 16th of an inch of tolerance on the length of your cut, so it sort of defeats the purpose.”
- Research alternatives. Like any strategic decision, resource allocation requires an open mind. In the spirit of continuous improvement, best-in-class managers need to explore all of the ways they can save their operation time and money. Perhaps used machinery is an option. Forge magazine provides some great reasons to contemplate second-hand machinery, as well as ten critical factors to consider before making a purchasing decision. Another article from Industry Week discusses some best practices for financing heavy equipment. Managers also shouldn’t underestimate the benefits of investing in human capital. Upgrades in areas such as training and safety can provide huge gains in efficiency and quality.