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Metal Service Centers

Strategies to Help Metal Service Centers Keep Safety First

August 5, 2017 / , , , , , , , , , ,


Safety is one of those issues that every manufacturer knows is important, yet as evidenced by the unending list of OSHA fines, it is pretty clear that it often slips through the cracks. Even big name companies like Exxon can fall short.

Put simply, your manufacturing operation can never be too safe. Like any other process or initiative, safety should be approached with continuous improvement in mind. This means that service centers, as well as any other manufacturing operation, need to continually reevaluate their safety procedures and processes to look for areas for improvement.

The manufacturing industry as a whole is promoting this type of mentality, knowing that “safety first” needs to be more than just an underlying principle. It needs to be an ongoing, active practice. The Metals Service Center Institute (MSCI), for example, recently teamed up with the National Safety Council to offer ongoing, relevant safety tools and resources to its members. “Advocating for an industry-wide safety culture is a critical part of all that we do at MSCI,” said M. Robert Weidner, III, MSCI president & CEO. (You can access MSCI’s resources here.)

To help service centers keep safety at the forefront, the LENOX Institute of Technology (LIT) has researched some best practices being used by industry leaders. Read below to discover some safety strategies and the additional benefits they can bring to your service center:

Metal Service Centers

Metal Service Centers Take Action in 2017

May 5, 2017 / , , , , , ,


Although 2016 didn’t end on a high note for metal service centers, many industry leaders and experts are confident about 2017.

 

Growing Confidence

Overall, 2016 wasn’t a stellar year for service centers. According to the Metals Service Center Institute (MSCI), service center shipments in the U.S. and Canada finished 2016 with year-over-year declines in both steel and aluminum. Inventories mostly remained below prior-year levels, though stocks crept up at year’s end.

Coming into 2017, forecasts were hopeful but guarded. As reported here by Metal Center News, analysts like Chris Kuehl of Armada Corporate Intelligence warned that factors such as the interest rates, inflation, the strong dollar, government grid lock, and tax reform would all play a role in determining the health and strength of the U.S. economy in 2017. In late January, M. Robert Weidner III, president and CEO of MSCI, voiced his concerns and urged the new Trump administration to take serious and immediate action to restore growth and to help the industrial metals supply chain fully recover from the lingering effects of the Great Recession and government policy.

Confidence, however, is growing in recent months. As stated in LIT’s 2017 Industrial Metal-Cutting Outlook, metal service centers and other industrial metal-cutting organizations are getting more and more optimistic about the near future, and the latest market data looks promising.

After a flat February, U.S. service center steel shipments grew substantially across the board in March. Specifically, steel shipments increased by 9.7% from March 2016, and shipments of aluminum products increased by 13.0% from the same month in 2016. Inventory levels also showed improvement.

Meanwhile, industry leaders like Reliance Steel & Aluminum Co reported strong first-quarter results. According to the company, sales were up 11.9% from the first quarter of 2016 and up 17.4% from the fourth quarter of 2016. Gregg Mollins, president and CEO, said that improved demand, higher metal pricing, and continued strong execution resulted in record quarterly gross profit dollars and Reliance’s highest earnings per share and net income since the first quarter of 2012.

“2017 is off to a great start,” Mollins said in a news release. “Both pricing and demand levels are better than they were a year ago, and we are optimistic with regard to increased infrastructure and equipment spending on the horizon. We will continue to focus on maximizing our gross profit margin while diligently managing operating expenses and inventory levels as well as maximizing market opportunities to drive our earnings higher.”

In an April press release, Ryerson said it is “cautiously optimistic on demand for metal products in the first half of 2017.” The company anticipates higher revenue for the first quarter of 2017 compared to the fourth quarter of 2016 and the first quarter of 2016, with higher average selling prices and higher tons sold for the current quarter as compared to both periods. The key, the company states, will be to see “how positive sentiment ultimately converts to real demand for industrial metals.”

Action Items

According to a report from MetalMiner, positive sentiment was also evident among attendees and speakers at this year’s S&P Global Platts Steel Markets North America conference, held in Chicago in late-March. Presentations and forecasts were mostly optimistic, MetalMiner writes here, although there were differences in opinions of what attendees should focus on in the coming months.

One of the conference presentations, given by Roy Berlin, president of Berlin Metals; Donald McNeeley, president of Chicago Tube & Iron; and Michael Lerman, president of Steel Warehouse, offered attendees three ways service centers can offer more value to the market. As reported by MetalMiner, these included the following:

Another key strategy will be for service centers to think outside the box when it comes to spending—and saving costs. According to the news brief, Resource Allocation Strategies for Leading Industrial Metal-Cutting Organizations, managers focused on continuous improvement should explore all of the ways they can save their operation time and money. For example, if new equipment isn’t in the budget, perhaps second-hand equipment is an option. Although there is some risk in buying used equipment, when done correctly, this can be a cost-saving alternative for companies looking to expand their capacity or capabilities.

Onward and Upward

Most companies know by now that there are never any guarantees when it comes to the industrial metals sector. As stated in a recent article from Modern Metals, projections “still err on the side of caution, but much less so than their forecasts of previous years.” With renewed confidence and a few strategies in their back pockets, service centers can position themselves for both new opportunities and growth in 2017.

Metal Service Centers

Apprenticeships May Help Your Service Center Fill Skills Gaps

March 5, 2017 / , , , , , , , ,


Data from the U.S. Labor Department continues to show that the skills gap is real. As reported here by the Wall Street Journal, the number of open manufacturing jobs has been rising since 2009, and 2016 registered the highest number in the past 15 years.

Why does this continue to be an issue? According to the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, there are several layers to the current workforce challenge. First, skilled production workers are one of the largest workforce segments facing retirement in the near term, which will have an impact on the number of experienced workers on the shop floor.

Meanwhile, the current talent pool isn’t what it should be. Streamlined production lines and more process automation have changed the nature of manufacturing work, and the incoming generation of workers either isn’t interested in working anywhere near a production line or lacks the necessary skills and technical knowledge.

The question continues to be, then, how can companies fill the gap? While the issue is too complex for one “sure-fire” solution, many believe that training and, more specifically, apprenticeship programs are an effective way for companies to fill their employee pipeline and build their team’s skill set.

An article from IndustryWeek argues that while colleges may turn out students that may know things, manufacturing companies need students that can do things. This is why apprenticeships are key. “Perfectly positioned at the intersection between knowledge and training, apprenticeship programs are ideal talent incubators,” the article states. “The positive outcomes of skills training are many: stronger communities, a skilled and confident workforce and an increase in the number of career opportunities for our young people.”

The U.S. Department of Labor defines apprenticeships as “an employer-driven, ‘learn while you earn’ model that combines on-the-job training, provided by the employer that hires the apprentice, with job-related instruction in curricula tied to the attainment of national skills standards,” according to its web site.

With hands-on jobs like metal-cutting, it’s hard to argue against the benefits of on-the-job training. However, the problem is that many companies don’t want to pay for it. The apprenticeship model typically involves progressive increases in an apprentice’s skills and wages, which can be viewed as costly to organizations, especially if they are afraid employees will take their skills elsewhere.

The good news is that there are several new initiatives out there that are trying to alleviate that cost by joining the industry and government together. Below are two examples:

While apprenticeship programs aren’t by any means a new idea, they could be exactly what manufacturing needs—again. For an industry that has spent a lot of the last few decades focusing on process and efficiency, it’s time to place the focus back on people. By investing time and resources into building a highly skilled workforce, you are ultimately investing in your company’s long-term success.

How is your company building a skilled workforce? Could an apprenticeship program help close the skills gaps in your operation? 

Metal Service Centers

Measuring the Cost of Quality in Your Metal Service Center

February 5, 2017 / , , , , , , , ,


Keeping costs low and quality high are the top goals of just about every industrial metal-cutting operation. What’s interesting, however, is that many companies treat these two areas as independent variables. A recent series of articles from IndustryWeek (IW) shows why it is important for managers to look at quality and cost together. More specifically, it recommends that companies quantitatively measure the cost and benefits of quality.

“Tracking the financial impact of any support function is necessary in order to illustrate its value and garner continued support and resources from senior management,” the IW article explains. “This struggle is vitally important for quality management departments that continue to struggle with competing for resources. Once organizations get clarity on the financial impact of quality, the next step is to understand what practices and applications help improve the financial value.”

Unfortunately, this seems to be easier said than done. Based on the results of a 2016 survey conducted by the American Society for Quality (ASQ) and the American Productivity & Quality Center (APQC), approximately 60 percent of organizations say they don’t know or don’t measure the financial impact of quality. According to a report on the survey’s findings, “this lack of measurement may be attributed to not having a common method for capturing the financial impact.”

Many companies also do not understand the benefits of measuring quality and, instead, simply use it as a means of “compliance” or to keep customers happy. This is especially true in today’s market. As stated in the white paper, The Top 5 Operating Challenges for Metal Service Centers, customers continue to expect higher quality and tighter tolerances from their metal-cutting suppliers.

However, the IW article states that quality should be about more than “checking a compliance box” or basic due diligence. “Developing a solid foundation of quality assurance for continuous improvement, risk mitigation, and compliance provide immeasurable value,” the article states. “However, once that solid foundation is established, organizations can then leverage quality for the benefit of the customer and enhance brand image, thus serving as a competitive differentiator.”

In fact, based on ASQ and ASQC’s survey findings, “organizations that leverage quality as a strategic asset were more likely to report higher levels of financial gains from their quality program.” In other words, companies are using quality to drive profitability.

For more information on how to start measuring the cost of quality, click here to access IW’s four-part series. The articles look at the relationship between financial benefits and the following areas:

How are you measuring the financial impact quality has in your service center?

Metal Service Centers

Supply Chain Trends Impacting Metal Service Centers in 2017

January 5, 2017 / , , , , , ,


As metal service centers and other industrial manufacturers find new ways to stay competitive, the role suppliers play is becoming more and more critical. Now more than ever, manufacturers need to be in tune with what is happening within their supply chain.

One major trend companies need to be aware of is the shifting dynamic within the supply chain, much of which has been caused by cost pressures. “Competitive pressure to reduce costs is forcing changes in supply chain operating models, creating more complexity and dependence in the value chain,” notes PricewaterhouseCoopers (PwC) on its website. “The number of entities and interdependence between parties is increasing and expectations regarding reporting are also becoming more burdensome.”

Another trend is increased collaboration with suppliers. Many service centers are looking to form strategic relationships with suppliers that can provide value, not just low-cost services or products. A white paper from the Lenox Institute of Technology discusses how this is happening within industrial metal-cutting:

“Operations managers increasingly find that to be successful, they must establish a collaborative vendor relationship that moves far beyond the sale of a product. By leveraging all of the assets their vendors can bring to the table, companies can form strategic partnerships that not only help fulfill their customer demands, but that also help optimize other aspects of the business such as cost management and employee training.”

A recent article from ThomasNet confirms this trend, stating that supplier collaboration will be crucial in 2017. The article, which you can access here, lists three more trends worth noting:

  1. Increased Emphasis on Ethics and Transparency. In 2016, many companies came under fire due to a lack of ethical practices within their supply chain. As consumers become more environmentally and sustainability conscious, supply chain professionals will be under enormous pressure to ensure that their products are safe, ethical, and environmentally friendly. As a result, procurement teams will invest in technologies that provide greater visibility into their suppliers.
  2. Digital Will Become Standard. For years, the supply chain has been shifting away from the paper-and-technology model of information management to an all-digital approach. In 2017, that shift will go from optional to essential.
  3. The Supply Chain Will Get Agile. Today’s intricate, global supply chains are inherently risky, so supply chain managers need to be able to plan ahead and react quickly when a disruption does occur. Thanks to the advent of real-time data, it’s now possible. Leveraging data, supply chain professionals can make quick decisions that can resolve potential crises.

Of course, only time will tell how much of an impact these trends will have on your service center this year. Some of them may have no impact at all. However, for those companies that want to have an edge up on the competition, it is critical to keep a pulse on every aspect of your business, including your supply chain.

Metal Service Centers

Create a Culture of Safety to Improve Your Metal Service Center

December 5, 2016 / , , , , , , , ,


Workplace safety is a priority for nearly every manufacturer. However, when industrial metal-cutting organizations need to do more with less to stay competitive, safety priorities can sometimes fall to the wayside—creating severe and costly consequences for workers and businesses alike.

Here’s the good news: According to OSHA’s “Survey of Occupational Injuries and Illnesses,” private industry employers reported 48,000 fewer nonfatal injury and illness cases in 2015 compared to the prior year. Unfortunately, the bad news is that the manufacturing industry had the highest proportion of accidents. As reported by OSHA’s Severe Injury Reporting Program, manufacturing accounted for 57% of all amputations and 26% of all hospitalizations, closely followed by construction, transportation, and warehousing. In addition, of the Top 25 industry groups reporting severe injuries, architectural and structural metal and fabricated metal product manufacturing came in at 17 and 20, respectively.

Of course, workplace injuries come with a cost—not only to  employees’ health but to businesses as well. According to the 2016 Liberty Mutual Workplace Safety Index, the most disabling, nonfatal workplace injuries amounted to nearly $62 billion in direct U.S. workers compensation costs. That’s more than a billion dollars a week.

Workplace injuries also create production inefficiencies. As reported in the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, a cleaner, safer work environment is a more productive, profitable environment. Often times, safety incidents may be rooted in issues such as lack of training, an unorganized shop floor, or poor workflow layout and ergonomics. Neglecting safety issues can lead to reduced output and, ultimately, a lower profit.

One way manufacturers can reduce workplace injuries is to not only make safety a priority, but to create a culture of safety throughout the organization. Tire manufacturer Goodyear, for example, reduced worldwide incident rates by 94% by creating an engaged safety culture in 49 facilities across 22 countries for its 66,000 workers.

In an interview with New Equipment Digest, Michael Porter, Global Environmental Health & Safety Director at Goodyear, said the key to building this type of culture is integration from the top down. “Starting from the highest levels of the company, we tie our EHS strategy down into our company’s overall strategy roadmap,” Porter explained. “Then that cascades down into how we operate on a manufacturing level.” This, he adds, includes everything from workforce organization and equipment care to continuous skills development.

To help create a culture of safety, there are a few strategies metal service centers can consider. Dave Stauffer, director of SBM Management, recently told attendees at the 2016 Safety Leadership Conference the eight building blocks his company has used to create a culture of safety in its 500 operating locations. The following are SBM’s top four strategies (You can read all eight here, as reported by EHS Today.):

  1. Employee observations. Coach and mentor employees to validate that they are doing their jobs safely. Ensure employees are wearing their personal protective equipment (PPE). Observe employees to make sure they are working effectively.
  2. Safety engagement. Establish rapport with employees to help reduce unsafe conditions and at-risk behavior in the workplace. Actively involve all employees in the health and safety of the workplace. Verify employees are engaging in the correct safety behavior.
  3. Employee recognition programs. Reward employees for safe job performance. Reinforce and recognize positive work culture. Celebrate employee successes.
  4. Interactive audits. Supervisors and managers should complete the observations daily and document them. Engage in conversation about safety and assure each employee has the skills, knowledge and training to perform their job safely.

The Metal Service Center Institute also recognizes the importance of safety and recently partnered with the National Safety Council (NSC) to release new safety resources optimized for the metal industry. The new tools include:

While there is no magic formula for creating a “zero-incident” service center, industry leaders are taking steps to ensure their operations are safe. Creating a culture of safety can help identify and eliminate process bottlenecks, improve production, avoid costly injury implications, and most importantly, keep operators and workers safe.

What safety programs do you have in place at your metal service center? Do you consider your center to have a culture of safety?

Metal Service Centers

Improve Your Metal Service Center Operations with Standardized Processes

November 5, 2016 / , , , , , , , , ,


Process improvement strategies are nothing new to manufacturing. As an industrial metal-cutting company in today’s challenging market, chances are you’ve spent time finding ways to reduce costs while increasing output to keep up with rising material costs and customer demands.

However, with a slew of improvement strategies, tools, and technologies available, many managers have lost sight of one of the simplest ways they can optimize the performance of their operations—process control.

Process control can help metal service centers ensure consistent quality, and minimize blade and machinery failures that can cause a workflow bottleneck. While there are many ways to implement process control, standardization is perhaps the easiest and most successful way to keep employees moving in the same direction.

Standardized practices, as defined by leanmanufacture.net, dissect larger, overall processes into simple, easy-to-follow steps that any operator can easily perform. This standardized approach allows operators to perform tasks the same exact way every time, which results in using resources, such as time and raw materials, more efficiently.

According to the Lean Enterprise Institute, standardized work “is one of the most powerful, but least used lean tools. By documenting the current best practice, standardized work forms the baseline for kaizen or continuous improvement. As the standard is improved, the new standard becomes the baseline for further improvements and so on. Improving standardized work is a never-ending process.” The approach consists of three elements:

  1. Takt time, or the rate at which products must be made in a process to meet customer demand.
  2. The work sequence in which an operator performs tasks within takt time.
  3. The standard inventory, including units in machines, required to keep the process operating smoothly.

Benefits of standardized practices include:

Not convinced such a simple approach can make a big impact? Case in point—McDonald’s, the world’s largest restaurant chain. As cited in this article by consulting firm WIPRO, McDonald’s has standardized it “manufacturing” process for hamburgers so well that most of the organization is focused on growing the business, product development and marketing.

As described here, metal manufacturer ThyssenKrupp reduced work-in-process by 40%, reduced operator movement by nearly 5,000 feet per day and improved productivity by 9% by implementing standardized work at two working stations at its Sao Paulo, Brazil plant.

In today’s fast-paced market, process control is essential for metal service centers that want to grow against competition. According to the industry brief, Strategies for Improving Workflow and Eliminating Bottlenecks in Industrial Metal-Cutting, as the pace on the shop floor increases, metal service centers can’t afford a blade failure or costly mistakes that can slow down and stop production. Today’s metal service centers must focus on the process to identify and correct any mistakes on the shop floor immediately. By implementing standardized work, metal service centers not only gain insight into potential workflow bottlenecks, but also have a solid foundation for a continuous improvement plan going forward.

Even if your metal service center has a cutting-edge improvement plan in place, take a step back and look at your processes. Are they standardized? Have they gotten too complex? By going back to the basics and standardizing work practices, managers can optimize operations and ensure that every employee—and every process—is successful, every time.

What process controls and improvements have you implemented at your metal service center? Is standardized work one of them?

Metal Service Centers

How to Optimize Metal Service Center Operations with Operator Accountability

October 5, 2016 / , , , , , , , , , , , ,


Industrial metal-cutting companies know running an efficient and productive operation is imperative to keeping up with and, more importantly, staying ahead of the changing industry and customer demands. However, in industrial metal cutting—as well as any manufacturing process—an operation is only as good as its operators.

This is why operator accountability is so important. As reported in the white paper, The Top Five Operating Challenges for Metal Service Centers, as more metal service centers rely on automated technology, managers need to work closely with machine operators to ensure their knowledge and skill sets align with the company’s technology assets and productivity goals. The objective is to encourage employees to take ownership of their impact on the operation so they not only care about the quality of their work, but also understand the role they play in the company’s overall success. Working closely with employees to create a culture of accountability can help metal service centers achieve the operational excellence they desire.

According to an article from IndustryWeek, accountability can be a powerful manufacturing tool because it is a broad-based effort to define and track an organization’s standards. “Accountability systems serve to prompt and encourage people to keep their promises to each other,” Jon Thorne, senior consultant, Daniel Penn Associations, says in the IW article. “Accountability monitors whether promises are being kept and reminds us to hold up our end of the bargain. When we all keep our promises to each other the result is human reliability. And with human reliability, your organization can accomplish anything.”

While using accountability to improve your metal service center operations is not an exact science, it is systematic. In fact, accountability is a set of systems that overlap and reinforce each other, according to the IW article. The following three systems are just a few ways manufacturers can boost accountability (You can read the full list here):

  1. Customer satisfaction. Measuring your service to internal customers puts interdepartmental cooperation on an objective basis: You confront issues rather than people. The plant manager’s role is to insist that the organization seek out and satisfy its customer’s needs, but it is the customers and suppliers who decide how to do it.
  2. Weekly staff meetings. The idea sounds simple, but having a regular and consistent forum where information can flow both ways enables employees to hold management accountable by asking questions and discussing any issues. Two meetings per week are recommended.
  3. Action item lists. Many times, regular staff meetings result in new policies and processes, or changes to those that are existing. Keeping an action list or planner helps prioritize activities, highlights important information, and enables employees to hold each other accountable for keeping the agreements they’ve made.

Another simple strategy is to regularly share performance reports with employees by either posting them or discussing them in staff meetings. As stated in the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, sharing report results encourages accountability, provides motivation, and reminds operators that they are a critical aspect of the company’s success. This approach falls in line with the culture of lean production environments, and research has shown it positively affects employee morale.

How does this help optimize operations? Although employee investments are often hard to quantify, the following two manufacturers have seen measurable results after implementing accountability practices:

Running an efficient operation is essential to every metal service center, but far too many managers fail to understand the role their operators play in their optimization efforts. By implementing a few processes that hold operators accountable for their actions, managers can create a culture in which employees care about their jobs and, even more so, the long-term success of the company.

What accountability practices have you implemented at your metal service center?

Metal Service Centers

Three Simple Strategies for Metal Service Center Business Focused on Growth

September 5, 2016 / , , , , , , ,


The manufacturing industry is experiencing a roller coaster market, making it difficult for metal service centers to know when to grow or scale production. As reported in here in IndustryWeek, the Institute for Supply Management’s index recently registered the steepest manufacturing drop since January 2014. The August index dropped to 49.4, marking the first contraction for U.S. manufacturing in six months. New orders in August also declined 7.8% compared to July—the first drop since December 2015—according to the August 2016 Manufacturing ISM Report on Business.

In addition, data from the Metal Service Center Institute (MSCI) shows that U.S. service center steel shipments in July declined by 15.2% compared to July 2015, while shipments of aluminum decreased by 14.8%. In response to lagging shipments, steel and aluminum inventories also decreased in July by 14.5% and 1.3%, respectively, from July a year ago.

The uncertain outlook is causing industrial manufacturers to adjust and carefully manage costs. According to a recent survey by PricewaterhouseCoopers (PwC), only 35% of industrial manufacturers were optimistic about the U.S. economy in the year ahead, down from 69% last year. Despite the slowdown, however, manufacturers continue to invest in growth opportunities, with 80% of respondents planning to increase operational spending and 52% planning on new product or service introductions this year.

Despite current market challenges, many companies are finding that a moderate market can be an ideal time to revisit their growth strategy. In fact, as reported here, research from McKinsey & Company found that transitions between growth phases often predict a company’s success or failure. “Companies that are growing at a slow or normal clip have more time to consider their options and make wise decisions,” the article states. “Rapid growth may be desirable, but slow and steady does indeed seem to win the race.”

The fact is that while business growth may seem impossible right now, there are still simple ways to keep your company headed in the right direction. An article from ThomasNet provides three simple steps manufacturers can take to help them grow their business:

  1. Choose a goal. You can’t grow your business without knowing what you want and need to grow. Will you grow by gaining new customers or doing more business with current customers? Do you want to expand into new product segments? Decide what the best opportunity is for your business and focus there.
  2. Build your credit. Deciding to partner with a company—either on the supplier or customer side—requires due diligence. If a potential customer ran a business credit report for your business, what would it show? Tracking and regularly checking your credit file will help ensure your company’s image is attractive to future business partners and creates credibility. This will also enable you to easily pay increased or unexpected expenses as you grow such as additional payroll for new employees, or loans for new equipment or warehouse space.
  3. Spread the word. Once you’ve decided to grow, let people know and get the word out. Add a listing to online business directories and build your online presence to drum up new orders.

This is also a good time to lean on your supply chain. As cited in the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, a report from Tompkins Supply Chain Consortium found that 80% of supply chain professionals report the supply chain is an enabler of business strategy. In addition, a majority of companies felt the supply chain is a source of business value and a competitive advantage, leading the Consortium to conclude that “the importance of an integrated supply chain and overall business strategy cannot be ignored.” Identify your strategic suppliers, position them to add value, and see where they can help you grow your business.

While there is a lot to consider when deciding whether or not to expand your business, employing a few basic strategies can help put you on a path to steady growth, even if it is slow moving. As many service centers are finding, today’s market conditions offer a unique opportunity for companies to re-evaluate and improve, not only to survive current market conditions but also to position themselves for growth when the demand rebounds.

Are you thinking about growing your metal service center? What strategies are you employing?

Metal Service Centers

How Metal Service Centers Can Build Cost Management into their Improvement Initiatives

August 5, 2016 / , , , , , ,


With yet another recent decline in metal shipments, industrial metal-cutting companies are paying close attention to cost management as a part of their business strategy.

 

According to recent data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments declined in June by 5.1% from the prior-year, while shipments of aluminum decreased by 6.5%. Inventories also declined, with steel down 16.5% and aluminum down 1.5% from the prior-year. The story is equally bleak in Canada, where shipments of steel are down 14.4% and aluminum declined 16.5% from a year ago.

As stated in the white paper, The Top Five Operating Challenges for Metal Service Centers, managing costs is one of the top five operating challenges for metal service centers. However, at a time when uncertain market conditions remain, manufacturers are laser-focused on the bottom line to ensure they stay competitive.

Traditionally, there are a few manufacturing cost areas that companies typically zero in on as they try to boost their profit margins. According to an article from Chron, these include:

Another way metal service centers keep costs under control is ensuring equipment is operating as efficiently as possible. This includes running at the proper settings and using the right blades. For example, as explained in this blog post, although a coated saw blade adds a premium cost upfront, the blade’s life is nearly double and can slice cutting time in half, ultimately leading to savings and increased productivity.

While all of these tactics can certainly be effective, an article from IndustryWeek (IW) notes that companies can do more than simply focus on the “traditional” costs to help manage the bottom line. Specifically, the article says that companies can indirectly manage costs for the long-term by incorporating specific goals into their overall improvement plans. In fact, the article suggests that focusing simply on costs can be detrimental to a company’s success.

According to the IW article, costs should not be the main goal or focus of any improvement program, regardless of how tempting it can be to make changes solely for the impact on the bottom line. Disguising cost-cutting as an improvement can lead to low morale, resistance to support other improvements, and lack of engagement. Instead, the article states that companies should consider the following four action steps to realize cost improvements as part of a larger improvement plan:

  1. Employee training. Make sure everyone from the CEO to every worker in every function receives training in the improvement tools and philosophies. Make sure top management backs the changes and keep the session impactful and memorable.
  2. Spend time with and discuss finances upfront. Spend time with the financial community and hold discussions on costs and savings before the improvement project starts. Work with the financial team to develop a tracking system for possible problems to prove cost savings in the future.
  3. Include financial colleagues. Be sure to include a person from the financial community in each improvement team. This person will be able to validate cost savings and ensure all costs are tracked accurately.
  4. Include costs as part of a larger plan. Improvement initiatives need to be part of a long-term plan in order to really change operations, including realized cost savings. Otherwise, the improvement will only be temporary with the risk of the organization returning to its old habits or making them worse.

By including employees and financial community members in an overall improvement plan from the start, metal service centers can experience both operational and financial efficiencies. The goal is to think about costs strategically. Balancing cost savings as part of a larger plan will benefit the organization in the long run by offering continued returns.

What cost management strategies have worked for your metal service center?

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