General Metals Industry
March 15, 2014 / benchmarking, Cost Management, human capital, KPIs, lean manufacturing, overall equipment effectiveness, productivity
Most companies that have adopted lean manufacturing strategies know the importance of measurement. When a metal-cutting operation can quantitatively assess their performance, it can start to make significant improvements and set realistic goals to stay competitive. It also allows them to benchmark themselves against other industrial metal-cutting organizations. However, metrics are only meaningful if they are tied to strategy. That’s where key performance indicators (KPIs) come into play.
KPIs are the measurements selected by a company to give an overall indication of the health of the business. KPIs are typically dominated by historical, financial measurements, but most experts agree that they are more valuable if they also include operational measurements. Unfortunately, this isn’t as easy as it sounds and takes careful consideration.
Case in point: Over the last several years, it has been popular for manufacturers to us overall equipment effectiveness (OEE) as a KPI. However, this blog post argues that OEE is not a KPI that should be measured at a company or plant level. In the blog, the author states five reasons why OEE is not a good KPI, including the fact that it is not comparable between different pieces of equipment and/or different locations. Instead, he suggests OEE should be used as a way to help identify and eliminate waste in front of a process, line, or equipment.
Although the “right” KPI will vary by organization, there are a few simple guidelines managers should follow to determine the most effective performance measurements for their metal-cutting operation. Below are a few strategies to consider:
- Plant-level KPIs should align with business objectives. According to this article from Control magazine, managers should begin by making sure plant-level KPIs line up with corporate goals. Is your company focused on growth, or is the goal to maintain existing customers? How does your KPI tie into those goals? As the manager quoted in the Control article states, a good KPI should consider the manufacturing side and business side of an operation.
- Keep the list short. If every KPI should help drive strategic intent, the list should be intentional and concise. As stated in this column from IndustryWeek, managers that measure too many things aren’t really measuring anything. While it is okay to add to your list of KPIs, as the IW author states, be sure to go back and edit the list to make sure each KPI works toward the overall company strategy. This helps maintain focus.
- Make it a team effort. KPIs must mean something to everyone in order to be effective. This means communication is critical. Key personnel and supervisors should understand what the KPIs are, why they are important, and how they are measured. Without explanation, team members can get frustrated, especially if goals aren’t being met. Managers can also take it one step further by defining employee goals in terms of organizational KPIs. According to this article from Mind Tools, this is the critical link between employee performance and organizational success. For more information on how to link KPIs with employee goals, you can read the full Mind Tools article here.
General Metals Industry
March 4, 2014 / employee incentives, human capital, optimization, training
For the last several years, most metals companies have been investing in technology to improve productivity. And as the industry tries to deal with the skills gap, that trend will likely continue. In fact, a report from Fabricating & Metalworking expects 2014 to be the year of “unprecedented automation.”
However, industry leaders also realize that automation isn’t going to be the panacea for their workforce challenges, nor is it the only way they can optimize their operations. A growing number of manufacturers are finding that plant floor workers can play just as much of a role in improving efficiency and, if leveraged correctly, can be more of an asset than a cost.
According to this article in The New York Times, a few years ago, motorcycle manufacturer Harley completely redesigned its production system around this concept. The company built a brand new plant, but instead of relying on robots to ramp up productivity, the well-known brand put its value in its workers and the problem-solving skills they brought to the table.
Of course, Harley is a custom, unionized shop. Can the same hold true in a high-production metal-cutting environment? A recent column from IndustryWeek says yes. As evidenced in the winners of its Best Plants Award, IW says that leading manufacturers—both union and non-union—are investing in their plant floor production staffs and are seeing positive bottom-line results.
Here are a few metals companies that also finding that to be the case:
- Yarde Metals, a metal service center based in Southington, CT, has found that employee incentives can pay off. According to a case study from the LENOX Institute of Technology, Yarde has instituted a bonus system that provides operators with financial compensation when the company does well. To keep operators up to date on performance, managers post daily scorecards next to the time clock that lists productivity stats and other key operation metrics. Greg Sioch, lead foreman of the facility’s plate department, says the system has been very successful and that operators are used to getting bonuses. “Everybody knows that if you don’t send out a good product, you are going to be held accountable for it and it is going to ultimately affect the bottom line for everybody,” Sioch said.
- According to the Modern Metals 12th Annual Consuming Industries Survey, several fabricators, service centers, and metals OEMs are investing in internal training and education programs to combat the growing void of qualified workers. Safety, forklift, first aid, lean manufacturing, and operational training are just some of the programs being offered. In the article, “A Mixed Bag,” the magazine quotes one fabricator as saying that it plans to hire unskilled labor at lower rates and increase their pay as they learn skills. Another fabricator tells MM that it pays for any education relating to the metal industry and that it also offers apprenticeship programs.
To succeed in today’s competitive market, metalworking executives need to optimize all aspects of their operations—and that includes their human capital. Whether it’s incentivizing employees to keep quality high, leveraging their problem-solving skills to improve productivity, or providing them with the training to acquire the skills required in today’s automated plant, it pays to value your operators. Like Harley, metals companies have a choice: They can either treat their plant floor operators as costs, or they can turn them into valuable assets.
General Metals Industry
February 15, 2014 / productivity, skills gap, training
At this point, most industrial metal-cutting executives are aware that the manufacturing industry is facing a tremendous workforce challenge. A widening skills gap is threatening U.S. businesses at large, and, according to Forbes, even the best firms are feeling the effects.
For manufacturers, the issue is two-fold. First, skilled production workers are one of the largest workforce segments facing retirement in the near future, which will have an impact on the number of experienced workers on the shop floor. In fact, recent reports say the mass “boomer exodus” has already begun.
Meanwhile, the current talent pool isn’t what is should be. Streamlined production lines and more process automation have changed the nature of manufacturing work, and the incoming generation of workers lacks the skills and technical knowledge required. What’s worse is that most young workers aren’t interested in working anywhere near a production line.
All of this is especially disheartening at a time when many companies are trying to bring manufacturing back to the United States. Industry associations like the Society of Manufacturing Engineers and major players like GE are attempting to get ahead of the problem by working closely with universities and government bodies to provide the necessary training and education to encourage students to pursue careers in manufacturing. And while these types of initiatives are certainly encouraging—and necessary—what can manufacturers do right now to help close the skills gap within their own operations?
For many companies, managing the skills gap will require changing the way they train and maintain talent, whether that means beefing up training programs or rethinking their employment strategies. This will mean different things for different companies, but here are a few of the talent strategies being used by some forward-thinking manufacturers:
- Develop existing employees. A recent article from Modern Machine Shop argues that your current employees are likely your best means of developing new skills. Just like existing customers are often the greatest source of new business, the underdeveloped potential of existing employees could be your greatest source of new talent. Huntington Ingalls Industries, a shipbuilder featured here in IndustryWeek, has found that investing in leadership training has made a huge impact within their operations. Specifically, the manufacturer has focused on leadership training of foremen in particular, which has made it easier to get the rest of the line workers on board. As a result, the company has been able to maintain its quality goals, even with a fairly inexperienced staff.
- Consider new employment options. In the war for new talent, a lot major corporations have started to offer flexible work arrangements—an option that doesn’t quite fit with most manufacturing jobs. Or does it? This report from McKinsey & Company suggests that one way for manufacturers to deal with the loss of skills and institutionalized knowledge of retired workers is to offer them part-time employment options. According to the report, this is a common strategy used by Toyota Motor in Japan, which “aggressively recruits” its retired employees for half-time roles at the company and its affiliates.
- Leverage multigenerational strengths. According to Modern Metals, by 2020, companies will be challenged with balancing five generations in the workplace—a task that, at face value, appears to be a human resources nightmare. However, MM suggests that when managed correctly, a multigenerational workforce can actually be an asset. For example, as this white paper from the LENOX Institute of Technology explains, while younger, less experienced workers may lack industry knowledge, they are typically more technology savvy and more willing to embrace new techniques. Seasoned workers, on the other hand, may be resistant to both change and technological improvements; however, they typically have a vast amount of experience and loyalty and may be able to mentor new employees. When leveraged appropriately, companies can use this diversity as an opportunity to improve operations and create new and innovative solutions to traditional problems.
The skills gap is a daunting issue for sure, and there is no “silver bullet” solution. However, manufacturers that fail to tackle this challenge now will find themselves facing bigger problems in the future. The next generation of manufacturing may offer a new set of talent challenges, but as proactive companies are finding, it also presents a new set of opportunities.
General Metals Industry
January 30, 2014 / continuous improvement, training
Like every other U.S. manufacturer, industrial metal-cutting companies have spent the last few years focusing on mere survival. Most companies have been forced to run “lean” and, in turn, have had to make some changes. However, a few organizations have risen above the fold and emerged as industry leaders. The question is how? While your goal may not be to make it onto IndustryWeek’s Manufacturing Hall of Fame, the fact is that today’s competitive market will continue to weed out companies that remain stagnant. In other words, “getting by” just isn’t going to be enough.
So what does it take to be an industrial metal-cutting leader? Below are a few of the common traits found among best-in-class companies:
Industry leaders understand the importance of continuous improvement. Experts like consultancy McGladrey continue to find that thriving manufacturers have a “relentless focus” on continuous improvement. According to McGladrey’s latest Manufacturing & Distribution Monitor Report, this is especially true as the economy emerges from the recession. As stated in the report, industry leaders are starting to realize that continuous improvement is vital because “increased profitability will likely need to come as much from productivity improvements as it will from revenue growth.”
Industry leaders invest in training. Investing in the right machinery is an important aspect of every metal-cutting operation; however, leading manufacturers know that productivity starts with the operator. All three of the industrial metal-companies featured in this series of case studies from LENOX Institute of Technology (LIT) have thorough training programs for both new and seasoned operators. Metal Cutting Service, Inc. (MCS), for example, offers an intense 40 hours of training when operators are first hired, as well as ongoing training at least once or twice a year. According to MCS president David Viel, “You are no better than your employees.”
Industry leaders work closely with key suppliers. Perhaps one of the greatest benefits of an increasingly competitive market is that many suppliers are offering value-added services to differentiate themselves—a trend that is especially beneficial for smaller manufacturers. Support in areas such as preventative maintenance, troubleshooting, and even software tools can help improve productivity and, ultimately, save costs. As stated in this article from ThomasNet, suppliers possess deep knowledge about the products they produce, and manufacturers should tap into this expertise and use it to their advantage. Global manufacturing giants like Unilever have even established long-term supplier partnership programs to help achieve specific company goals. To read how this can work in an industrial metal-cutting environment, check out this white paper from LIT or this case study on Aerodyne Alloys, a leading metal service center.
General Metals Industry
January 15, 2014 / costs, root cause analysis
Let’s paint a possible scenario in an industrial metal-cutting environment: After reviewing monthly costs, a manager notices that tooling costs are up. Upon further investigation, the manager discovers that operators have been replacing blades more frequently than usual. In other words, a blade the company has been using for years is now failing. What does the manager do?
A. Contact the supplier to complain about a bad shipment
B. Research new blade options
C. Check equipment settings
D. Evaluate operator performance
In most cases, the answer is likely going to be A or B. When a problem happens on the cutting room floor, most managers want to fix it and move on. And if the problem appears to be mechanical, the natural instinct is to blame the machine. However, these issues can also be symptoms of larger, operator-based problems such as improper blade usage, lack of training, and poor maintenance.
When a performance issue arises on the cutting room floor, managers should have procedures in place that help determine the underlying causes of the failure. This will not only solve the problem at hand, but can also weed out any “hidden inefficiencies” that could be negatively impacting the bottom line. In the aforementioned scenario, for example, premature blade failure not only increases tooling costs, it also creates bottlenecks and decreases quality. If the real source of problem is a poorly trained operator, a new blade isn’t going to solve any one of these issues.
Forward-thinking managers know the key to optimal performance is identifying the root cause of failure so that it never happens again. Below are a few strategies managers can use to uncover the source of operational issues:
- Ask why. While this strategy may seem a bit simplistic, it is actually a lean manufacturing concept. According to online resource Lean Production, a common problem-solving approach within lean manufacturing is to ask “why” five times. The idea is that every time you ask “why,” you are moving a step closer to discovering the true underlying problem.
- Work with suppliers. No one knows your tools and equipment better than your suppliers, and many offer value-added preventative maintenance (PM) and troubleshooting services that can help you determine whether or not the issue is truly mechanical. They may also offer documents and online tools that can help aid in troubleshooting. Reference guides like this one from the LENOX Institute of Technology (LIT), for example, can help managers identify whether or not the source of premature blade failure is due to user error or machine error.
- Evaluate your operation. This includes everything from inventory levels and safety scores to cut times. As pointed out in the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, high scrap rates, excess inventory, and low safety scores are often key indicators of operator-based inefficiencies. Cuts times are also critical to identifying the source of error. This, however, requires a baseline for comparison. If your facility hasn’t already undergone a time analysis to measure operational efficiency, this article from thefabricator.com gives a great overview of the process and how you can get started.
- Be proactive. Don’t wait for failures to occur to start looking for inefficiencies. Implementing proactive management strategies such as PM programs, formal training procedures, and lean techniques within your industrial metal-cutting operation can ensure that your equipment, operators, and processes are running at optimal levels. In essence, the more undesirable effects you can take out of the equation, the faster you can identify and respond to problems when they occur.
General Metals Industry
December 19, 2013 / agility, predictive management
With increased competition and uncertain economic conditions, today’s operations managers have to be more than just good problem solvers. Yes, they still need to be able to handle unforeseeable crisis on the fly; however, now, more then ever, managers also need to have strategies in place that predict risks. By using a more proactive approach to management, industrial metal-cutting companies are finding they can actually reduce the adverse effects that can happen in a manufacturing environment.
In a recent market research report, Aberdeen Group details a predictive, more agile management strategy called Operational Risk Management (ORM). According to the firm’s research, best-in-class manufacturers are taking a risk-focused approach for three main reasons:
- the need to reduce the impact operational risks have on the bottom line and brand image
- the unpredictable global economic environment/market instability
- the need to grow the business without increasing risk
Put simply, these leading companies are using ORM to improve operating performance. Aberdeen says the goal of this type of management is to create “a framework that helps executives, employees on the plant floor, and maintenance personnel understand and manage the risks impacting their organization, establish processes to effectively address these risks, and implement procedures for corrective and preventative actions.”
Several leaders in the industrial metal-cutting segment are finding ways to use proactive operations management. In fact, data from the LENOX Institute of Technology’s Benchmark Survey revealed that companies with high machine uptime are benefitting from investing in smarter, more predictive and agile management operations approaches. For example, 76 percent of industrial metal-cutting operations that followed scheduled and planned maintenance on their machines also reported that their job completion rate is trending upward year over year. In addition, more than half of organizations that “always” follow preventative maintenance (PM) plans reported that they can “always” or “mostly” predict blade failure.
By having this “predictive downtime” information, managers can plan for downtime and actually use it to their benefit. This is quite different than “interruptive downtime,” which can negatively impact performance, customer delivery, and equipment and material costs. Steel of Carolina LLC, a fabricator, featured in this case study from LIT, has said that weekly PM checks have become critical to keeping its saws operating as much as possible. To keep production running smoothly, the company schedules PM checks for the weekends (when equipment isn’t running) and also keeps specific wear parts in stock for quick replacement.
Of course, PM and parts inventory is only a small part of predictive management. Aberdeen outlines an entire roadmap for manufacturers that want to establish a formal ORM framework. You can download a copy of the report here and read information on technology enablers and a great case study on Coca-Cola.
In the end, there is no crystal ball. However, by implementing predictive strategies that go beyond simply reacting to crisis, operations managers can minimize risk, increase agility, and perform smarter in today’s volatile market.
General Metals Industry
December 15, 2013 / Employee Morale, Output, Safety
In an industrial metal-cutting environment, safety is critical. Everyone knows that. In fact, most managers would probably list it as a top priority. However, in practice, most of those same managers treat safety more like a necessary evil than a business strategy. In other words, their safety initiatives are built around simply meeting OSHA requirements, not as a means of maintaining—or better yet, improving—the bottom line.
The truth is that most managers need to shift their mindset when it comes to safety. Randy DeVaul, author of Performance Safety: A Practical Approach and Performance Safety: Lessons For Life, argues that safety should be viewed as a value, not a priority. What’s the difference? According to DeVaul, priorities change depending on the circumstances; however, a value is maintained, regardless of the circumstances. In other words, safety should be a constant, and it should be integrated into every aspect of your industrial metal-cutting processes.
The concept is actually fairly simple: Injured operators can’t be productive.
If your best operator is constantly calling off because of a bad back, someone else needs to be trained to take his place. This not only takes time away from production, it could also affect quality. And, of course, there is the cost element.
There are several ways safety can have an impact on overall business operations, but here are three key points today’s managers should consider:
- An unsafe environment is expensive. According to the U.S. Department of Labor, “businesses spend $170 billion a year on costs associated with occupational injuries and illnesses—expenditures that come straight out of company profits.” In fact, a 2012 workplace safety study by Liberty Mutual says that overexertion, which is defined as “injuries related to lifting, pushing, pulling, holding, carrying, or throwing,” cost businesses $13.61 billion in direct costs. However, by establishing safety and health management systems, the Department of Labor says that workplaces can reduce their injury and illness costs by 20 to 40 percent. That’s pretty significant in today’s challenging marketplace.
- Low safety scores can indicate poor workflow on the shop floor. Constant injuries can be the symptom of larger operational problems. If an operator has to transport a piece of steel halfway across the facility to perform the next process, both safety and productivity are at risk. The less an operator touches a piece of material, the less likely he is going to get injured and the more efficient he can perform. According to LENOX Institute of Technology’s recent paper, Tackling the Top 5 Operating Challenges in Industrial Metal Cutting, simple changes like strategic equipment placement, adjustable “scissor” tables, and elimination of trip hazards can make your shop safer and, in the meantime, eliminate bottlenecks and improve productivity.
- A workplace built around safety can improve employee morale, especially if operators are included in safety initiatives. No one knows the production process better than an operator, which makes his or her input extremely valuable. Managers should be consistently asking production employees how they can make the metal-cutting process faster and safer, whether that means repositioning the saw at a certain angle or adding a table on the backside of the saw to save a trip after each cut. The key is to not only ask for suggestions, but to also follow through and make adjustments. This increases safety and also empowers employees to be a part of the company’s overall success. It’s a win-win for everyone.
While an operator’s wellbeing should always be the top concern, the value of safety goes beyond employee health. A safer environment is more productive; a more productive environment provides more output; and more output provides more money. Really, it’s that simple.