May 10, 2017 / best practices, continuous improvement, customer service, human capital, industry news, maintaining talent, productivity, skills gap
Based on expert forecasts and industry sentiment, the outlook for 2017 continues to be hopeful. As stated in LIT’s 2017 Industrial Metal-Cutting Outlook, metal fabricators and other industrial metal-cutting organizations are getting more and more optimistic about the near future, and recent market data looks promising.
While the latest outlook from the Manufacturers Alliance for Productivity and Innovation (MAPI) expects “relatively sluggish” output growth for the manufacturing industry as a whole, the near-term forecast for Fabricated Metal Parts is positive. Specifically, MAPI forecasts that output growth for the Fabricated Metal Parts sector will register 1.8 percent in 2017 and 3.4 percent in 2018. In addition, March data from the U.S. Census Bureau shows that both new orders and shipments of Fabricated Metal Parts were up 5.5 percent compared to 2016.
Recent data from the Institute for Supply Management (ISM) is also encouraging. As stated here in a press release, economic activity in the manufacturing sector expanded in April. According to the Manufacturing ISM Report on Business, 16 out of 18 manufacturing industries reported growth in April 2017, with the Fabricated Metal Products sector nearing the top of the list. In fact, one survey respondent from the Fabricated Metal Products sector stated, “Business is definitely improving. Profit margins are increasing.”
This type of optimism seems to be prevalent throughout the industry. The first quarter Fabricating & Forming Job Shop Consumption Report from Fabricators & Manufacturers Association International (FMA) revealed that 61.9 percent of metal fabricating managers and shop owners see improving conditions for the coming quarter and another 34.3 percent expect things to stay the same. A mere 3.7 percent expect things to get worse. “This is the most confident the sector has been in a while,” says Chris Kuehl, FMA’s economic analyst.
That’s not to say that fabricators don’t have some concerns. After attending FMA’s Annual Meeting in March, Kuehl reports here that he noticed three key trends among attendees, including:
1. Cautious optimism. According to Kuehl, most fabricators appear to be optimistic but many remain cautious. “The years of an administration that was at best ambivalent toward business and at worse downright hostile are over,” he writes. “There are definitely mixed opinions about what happens under Trump, but thus far the promises are looked upon as encouraging. That said, there is doubt that many of the promises will be kept because of fierce opposition from many quarters and lack of faith in Trump’s diplomatic skills. Still, there is hope that some of the big issues will get the attention deserved—trade patterns, regulation, and taxes at the top of the list.”
2. People will stay at the top of the list of worries. The manufacturing skills gap continues to be an issue for most fabricators, according to Kuehl’s analysis. “It is harder than ever to find the employees needed,” he says. “Manufacturers aren’t finding qualified and eager job seekers no matter what they offer to pay. The powers that be have not yet addressed this problem, and that is immensely frustrating.”
3. Concerns about the future. Even with some renewed confidence, Kuehl says that fabricators and manufacturers are still concerned about the future and whether the industry is ready for developments it hasn’t seen in over 10 years. “Interest rates will be higher for the first time in over a decade, and inflation will be rearing its ugly head sooner rather than later,” he writes. “Add in the ramifications of a trade war or two, and the concern many have expressed [is] that the progress seen thus far could come to a screeching halt.”
Even with some potential challenges ahead, most fabricators remain focused on growth. Over the last few years, automotive has been a huge growth market for fabricators, but some experts believe that sales are slowing and the market is stabilizing. However, as stated in a blog post from Branam Fastening, there is still plenty of opportunity for growth in the following customer segments:
- Construction. The non-residential construction market is expected to grow an additional 6% in 2017. Metal roofing, HVAC, steel supports, and other complementary building products will also see an increase in demand.
- Oil. The price for a barrel of oil is expected to exceed $60 in 2017. Many experts believe that once it surpasses this threshold, it becomes advantageous for domestic oil producers to reignite exploration and production operations. New pipelines, rigs, storage containers and other metal fabricated products are expected to be in greater demand throughout the industry in 2017.
- Electronics: The electronics industry is expecting a 3.1% positive bump in domestic production in 2017 and 5.3% growth in 2018. This paves the way for an increase in metal fabricated products like custom encasements.
- Infrastructure: Estimates predict infrastructure budgets to grow between $275-$500 billion over the next 5 years. A big part of this spending will comprise airport repairs and construction, road repairs, bridges, railways, new stations, and waiting platforms. Opportunities for metal fabricators can be found throughout.
A Bright Future
Does the future look bright for metal fabricators? According to MAPI, there are certainly “glimmers of light,” and recent data certainly reflects that assessment. However, preparation and continuous improvement should still be a top priority for fabricators. As stated in the white paper, Best Practices of High Production Metal-Cutting Companies, industry leaders need to remain focused on optimizing every aspect of their internal operations—regardless of market conditions—so they can be ready for whatever the future holds.
In what ways can you position your operation for growth in 2017?
May 5, 2017 / agility, best practices, continuous improvement, Cost Management, industry news, optimization, strategic planning
Although 2016 didn’t end on a high note for metal service centers, many industry leaders and experts are confident about 2017.
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.”
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:
- Embrace change but find an identity. Berlin noted that finding an identity in the industry is key. “Decide what it is you’re going to do and do it well. No, do it great, actually,” he said.
- Do more with less. According to McNeeley, service centers have to interject more automation. He said they need to do more with less and they cannot drive input costs down any more. On output costs, McNeely said companies cannot get customers to pay a premium for the market, so the only thing left in that channel is “operational excellence.”
- Tackle your internal costs. Lerman concluded by sharing that his company stays competitive by attacking its main internal costs: logistics, scrap, safety and healthcare. He also said that in today’s volatile market, service centers should seriously consider learning how to use and apply financial hedges where appropriate. “I know we have been taking advantage of it, and I think it is going to be more and more important as we move forward,” he noted.
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.
April 1, 2017 / benchmarking, best practices, continuous improvement, Cost Management, industry news, LIT, maintaining talent, operations metrics, optimization, performance metrics, productivity, skills gap, supplier relationships
While no one would likely call it a “boom,” recent months have provided good news for industrial manufacturing. Reports have been positive, and business confidence among metal-cutting companies and other industrial manufacturers is up. Experts admit that some challenges and risks remain, but most believe that growth will continue in 2017 and well into 2018.
There is no question that uncertainty has plagued the manufacturing sector for the last several years. Hints of recovery followed by sluggish growth have made it hard for many companies to trust that business was fully rebounding. Last year, terms like “cautiously optimistic” were being thrown around, but many were still wondering — “Are we there yet?’”
Reports and forecasts indicate that we are at least heading in the right direction—both globally and within the U.S. The JP Morgan Global Purchasing Managers’ Index (PMI) has remained above the neutral 50.0 mark throughout the past 13 months and registered 53.0 in February and March—its highest level in 69 months. According to the bank, the expansion in March “remained broad-based by product type, with PMI readings for the consumer, intermediate, and investment goods sectors all signaling further solid growth.”
Forecasts from Manufacturers Alliance for Productivity and Innovation (MAPI) also point to growth, although slower than some would like. According to the latest outlook, manufacturing growth is expected to be 1.2% in 2017 but then accelerate to 2.6% in 2018. Average annual manufacturing output growth is expected to be 1.5% between 2017 and 2020.
Recent data show U.S. manufacturing expanded in March, following a very strong February. The Institute for Supply Management Purchasing Managers’ Index (PMI) hit 57.2% in March, a 0.5 percentage point reduction from a record-setting 57.8% in February 2017. Of the 18 manufacturing industries, 17 reported growth in March, including Fabricated Metal Products and the Primary Metals industries. According to one survey respondent from the Fabricated Metals segment: “Regional business is strong. Hiring qualified team members has improved.”
Cliff Waldman of MAPI says that March data adds to mounting evidence that U.S. manufacturing output performance is on track for moderate improvement, relieving the factory sector from the sluggish growth that has plagued it since 2013. “Data on actual manufacturing output from the Federal Reserve are basically in sync with the recent ISM data as they show an acceleration of growth in U.S. manufacturing since the beginning of 2017,” Waldman said in a blog post. “However, the year-over-year improvement thus far is moderate. Nonetheless, the reasonably broad-based nature of factory sector growth in both January and February suggests growth stability.”
Business confidence among industrial metal-cutting companies and other manufacturers is also up. The first-quarter Manufacturers’ Outlook Survey from The National Association of Manufacturers (NAM) revealed that manufacturers’ optimism rose to a new all-time high in the survey’s nearly 20-year history.
According to NAM, the rising confidence stems from the hope that the new administration in Washington, D.C. will bring much-needed regulatory relief, as well as tax code reforms and a significant infrastructure package. “Indeed, business leaders are cautiously hopeful that pro-growth policies from Washington will allow the country to emerge from the sluggish expansion seen in the years since the Great Recession,” the association said in the report.
Metal companies are confident as well. According to industry leader ArcelorMittal, global apparent steel consumption is estimated to have expanded by 1% in 2016. Based on the current economic outlook, ArcelorMittal expects global apparent steel consumption to grow further in 2017 by between 0.5% and 1.5%.
In the U.S., Mittal says that apparent steel consumption (ASC) declined in 2016 by approximately 1.0% to 1.5%, driven in large part by a significant destock in the second half of 2016. “However, underlying demand continues to expand and the expected absence of a further destock in 2017 should support ASC growth in the U.S. of approximately 3.0% to 4.0% in 2017,” the company said in its 2016 Annual Report.
Sentiment about customer markets is also positive. Mark Millett, president and CEO of Steel Dynamics Inc., told Modern Metals that he expects growth in the energy sector and continued growth in construction spending, “especially for larger public sector infrastructure projects.”
And although there have been reports that automotive manufacturing peaked in 2016 and will decline in 2017, metals companies don’t seem too worried. AK Steel told MM that a richer product mix, including the premium pricing that can be obtained on newer, more specialized or custom grades, should help offset declines. “Our volumes are going to be fairly stable, and fairly steady compared to what they were last year,” Kirk Reich, AK Steel president and COO, said in the MM article.
Trends to Watch
That’s not to say that companies don’t still have some concerns. In late January, M. Robert Weidner III, president and CEO of the Metals Service Center Institute (MSCI), 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.
“The industrial metals sector needs action now,” Weidner said, noting that service center aluminum shipments are registering 20 percent below their pre-Great Recession peak, and carbon steel shipments from service centers are still down 30 percent. “The erosion in the U.S. industrial metals supply chain hurts our communities; erodes local, state, and federal tax revenue; and reduces the pool of well-paying U.S. jobs,” Weidner continued.
The strong dollar and reduced capital spending are also concerns. “Signs of wide, yet modest, improvement in global growth are the key drivers of better performance in U.S. manufacturing,” Waldman of MAPI says. “Unfortunately, the problems of a high dollar, a long-term capital spending malaise, and significant policy uncertainty remain to challenge the magnitude of the U.S. manufacturing improvement, even as the world finally provides much-needed support for U.S factories.”
Many industrial manufacturers also remain risk averse. In a recent PwC survey, only 30 percent of U.S.-based industrial manufacturing senior executives said that their companies were planning to increase spending on information technology in the subsequent 12 months. “There is a remarkable opportunity here,” PwC says in a blog post. “Yet the industrial manufacturing sector remains risk averse, unwilling to spend on new machinery, software, and talent during a period of protracted slow growth and limited proven solution.”
According to PwC, there are six actions industrial manufacturers can take to be more profitable in 2017. You can read the full list here, but the following four strategies are the most applicable to industrial metal-cutting companies:
- Leverage data and analytics in a new business model. By upgrading their technical capabilities, industrial manufacturers can bundle a variety of services enabled by connectivity and data, replacing the increasingly outmoded model of selling one big complex machine under warranty and a service agreement for maintenance and repair.
- Develop strategic partnerships. Industrial manufacturers must become more active players in the technology ecosystem, seeking expertise outside the industry in order to develop equipment connectivity, data analysis, and software that are beyond their current abilities.
- Mine operational data. If connected machines—the primary components of the Internet of Things (IoT)—are to be the backbone of industry in the near future, industrial manufacturers will have to figure out how to manage the data coming from an avalanche of sensors, integrated equipment and platforms, and faster information processing systems. There is a critical need to hire people who can mine these bits and bytes of information and work more closely with customers to use the data to improve equipment performance and open new revenue streams.
- Create strategies for talent development and retention. industrial manufacturers must purposefully map out an exciting technology strategy with specific benchmarks and achievements anticipated for the next 18 to 36 months—and then communicate this story clearly to job candidates. Even companies that have not yet felt the shortage of technology-savvy staffers need to take steps to prepare for it as the number of job openings in this field will continue to outpace the number of available hires for the foreseeable future.
Of course, a major technology overhaul may not be possible for every shop, but there are always improvements that can be made. As stated in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, thriving in today’s market requires companies to embrace change and focus on continuous improvement in all areas of their business.
“Whether implementing a lean manufacturing tool to improve processes or investing in training to develop people, proactive leaders are focused on making positive changes in their operations so they can quickly respond to today’s changing customer demands,” the eBook states.
Yes, the sentiment among industry players and experts is positive, but that doesn’t mean companies should put improvement activities on the backburner. Industrial metal-cutting organizations that keep a close eye on mega trends while continuing to optimize their internal operations may not only do well in 2017, but exceed expectations.
March 25, 2017 / best practices, continuous improvement, human capital, industry news, lean manufacturing, LIT, maintaining talent, operator training, optimization, productivity, Safety, strategic planning
For years, manufacturers have relied on lean processes to improve productivity and to reduce waste. This is certainly a good thing from an operations standpoint. However, from a safety and health perspective, lean manufacturing can have a few drawbacks.
For example, lean practices make jobs highly repetitive. As pointed out in this article from Industrial Engineer, repetitive jobs often eliminate critical rest time for employees. “The repetitive jobs take their toll on employees as stressful postures and high forces are repeated over and over throughout the day,” the article says. “In the long run, the financial savings from the productivity gains and quality improvements are used to pay for the higher cost of workers’ compensation claims.”
This is why many forges and other industrial metal-cutting organizations have incorporated ergonomics into their production processes. According to the U.S. Occupational Safety and Health Association (OSHA), ergonomics is defined as fitting a person to a job to help lessen muscle fatigue, increase productivity, and reduce the number and severity of work-related injuries. Strategic equipment placement and improved ergonomics not only keep employees safe and healthy, but they are key aspects of high productivity and optimized workflow. The fewer times an operator touches a material, the fewer chances for injury and human error, both of which contribute to productivity.
Not sure where to start? An article from IAC Industries describes possible workplace risk factors and suggested solutions. For example, there are at least six different types of musculoskeletal risk factors operators may face:
- Forceful exertions and motions.
- Extreme or repetitive exertions, postures and motions.
- Duration of exertions, postures, motions, vibration and cold.
- Insufficient rest or pauses.
- Work factors (for instance, close performance monitoring, wage incentives, machine-paced work).
- Environmental factors.
The article then goes on to describe an example of an ergonomic workstation design. According to IAC, incorrect working height is often responsible for extreme postures and motions at the workstation. Recommendations for the appropriate working height are as follows:
- Six inches above elbow height for fine work such as proofing documents or inspecting small parts.
- Four inches above elbow height for precision work such as mechanical assembly.
- Same height as elbow for writing or light assembly,
- Four inches below elbow for coarse or medium work such as packaging.
Of course, this is just one of the many ways a manufacturer can improve ergonomics within their operation. Another article from Ergonomics Plus, an Indianapolis, IN-based company, offers a 10-point checklist to help managers create a framework for building a successful ergonomics process. According to the company, a solid ergonomics process doesn’t have to be complicated to be successful, but it can be challenging to get all the right pieces in place and achieve sustainable results. You can review the entire checklist here.
If these suggestions feel overwhelming or you don’t quite know where to start, you may want to consider bringing in some professional help. Earle M. Jorgensen Company (EMJ), a metal service center featured here in a white paper from the LENOX Institute of Technology, decided to perform an in-depth ergonomic study at one of its metalworking facilities. With the help of a third-party resource and input from its shop floor employees, the company made several changes to the shop floor to eliminate unnecessary handling and transportation of material. Ergonomic improvements ranged from repositioning band irons to adjusting the height of staging tables. By optimizing the workflow, EMJ has seen a reduction in employee injuries, improvements in operator efficiency, and increased output. The service center has also seen an increase in shop floor morale, as operators feel they are playing a critical role in helping the facility succeed.
In what ways could you incorporate ergonomics into your forging operations?
March 20, 2017 / best practices, continuous improvement, Cost Management, human capital, industry news, LIT, operations metrics, operator training, optimization, performance metrics, preventative maintenance, productivity, resource allocation, ROI, strategic planning
As we reported in a previous blog, capital spending among machine shops and other metalworking companies has been down for the last several years. This has been largely due to an unstable marketplace and low business confidence among shop owners. The good news is that industry reports suggest a rebound in the near future.
However, this dip in spending has caused many shops to take a closer look at the value of their existing equipment. When new equipment isn’t in the cards—and even if it is—it is important for today’s managers to understand the total cost of running their metal-cutting equipment and, even more so, what their total worth is from an operations standpoint.
Below are just a few ways shops can be sure they are looking at the value—not just the cost—of their existing equipment:
- Look at profitability, not just productivity. As explained here, overall equipment efficiency (OEE) is a critical metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time. According to a recent article from Modern Machine Shop, OEE is helpful, but it may not be enough on its own. “Managers have to balance decisions about maximizing the part-making capability of their equipment with decisions about the money-making potential of this equipment,” the article states. “OEE ratings alone provide an incomplete picture.” The article goes on to describe a measurement called Financial OEE (FOEE), a trademarked name for a new feature of a communications platform from Memex, which accounts for profitability. As stated in the article, “FOEE helps a shop understand how machine performance is helping (or hurting) profitability. This insight provides guidance—and incentive-to focus on the most appropriate productivity improvement efforts.” More specifically, FOEE is the current-state hourly profit divided by a value representing a world-class level of profit. This ratio compares what profit a company made with what profit could have been made at world-class levels. This information can help shops see the financial value of improving the machine’s performance. To read more about this metric, check out the full article here in Modern Machine Shop.
- See existing equipment as an asset. A common struggle among many shops is finding enough working capital to invest in new equipment. To help fight this battle, a recent article from Canadian Metalworking discusses how shops can use the value of existing equipment on the floor. “An asset-based lender, one who has experience in the manufacturing industry, will recognize that a good, brand-named machine tool that has been paid for in full, is an asset that can be leveraged,” the article states. “The equipment is used to provide collateral for financing new machinery, or as a resource to raise working capital to cover the additional costs of product development using existing equipment.” This does require the shop to have a full understanding of how existing equipment is evaluated and how it can be leveraged. To read some tips on properly evaluating and grading your machinery, click here for the complete article.
- Consider the value of maintenance. It’s a pretty simple fact: Equipment that isn’t running is pretty much worthless. This seems obvious, but many shops still put preventative maintenance (PM) and other housekeeping tasks on the back burner in an effort to stay productive. The irony is that this usually ends up hurting productivity in the long run. As stated in the brief, Cost Management Strategies for Industrial Metal-cutting Organizations, there are several aspects of equipment maintenance that contribute to overall costs. “From an operations standpoint, managers can keep costs under control by making sure metal-cutting equipment is operating as optimally as possible,” the brief states. This includes ensuring that equipment is running at the proper settings and that fluids are adequate. Closely monitoring blade life and maintenance reports are also critical. Perhaps the most important consideration is a strong preventative maintenance program. Programs can be as detailed as a shop feels is necessary, but a few checkpoints are outlined here in a white paper from the LENOX Institute of Technology. If limited personnel is the issue, check out this blog about getting equipment operators involved in daily PM tasks.
What other factors contribute to the value of your metal-cutting equipment?
March 10, 2017 /
The idea of moving your fabrication shop over from traditional manufacturing to lean manufacturing can seem a bit daunting, but in today’s competitive market, it’s almost necessary. Even high-mix shops are finding ways to get lean and, in turn, are reaping the rewards of efficiency and reduced waste.
Knowing where to start is often a stumbling block for many fabricators, especially since smaller shops don’t always have all the resources required for a complete transformation. Which tools are the most effective? Which ones are the fastest to implement? How do I go about “mapping” out my company’s lean journey?
To help address some of these questions and more, the LENOX Institute of Technology has compiled the following useful tools and best practices to help educate shops that want to “get lean.”
Adopt Some Lean Practices
There are a host of lean practices manufacturers can use to reduce waste and improve productivity. According to the eBook, Five Performance Boosting Best Practices for Your Industrial Metal-Cutting Organization, the following tools are just a few to consider:
- 5S. Known by many as the “housekeeping tool,” 5S is used to reduce waste and optimize productivity through maintaining an orderly workplace and using visual cues to achieve more consistent operational results. The five pillars of 5S include Sort, Set in order, Shine, Standardize, and Sustain the cycle. The potential benefits of 5S can go far beyond having a cleaner workspace. For example, regular cleaning, as part of the Shine pillar, decreases the accumulation of cuttings, shavings, dirt, and other substances that can contaminate production processes and result in defects.
- Root Cause Analysis. This is a problem-solving exercise that focuses on finding and solving the underlying cause of a manufacturing issue instead of applying “quick fixes” to?the symptoms. There are several techniques used when conducting a root cause analysis, including “The Five Whys.” This strategy suggests that you ask the question “why” five times with the notion that each time you ask the question, you move a step closer to discovering the root of the problem.
- Value stream mapping. This is a paper and pencil tool that helps managers visualize and understand the flow of material and information as a product makes its way through the value stream. The “map” takes into account not only the activity of the product, but the management and information systems that support the basic process as well. This can be especially helpful when working to reduce cycle time because managers gain insight into both the decision-making and the process flows.
Buy Some Practical Tools
Just like a line needs the right equipment to perform an operation, your shop needs the right tools to implement and communicate any lean manufacturing efforts. American Machinist offers five practical tools that companies should invest in as they begin incorporating lean principles into their operations. Below are three of the tools suggested: (Click here to read all five tools.)
- Whiteboard. The first step in transforming your existing processes to Lean Manufacturing processes is to map them out. You’ll want to imagine that your existing processes are the starting point, and a finely tuned, smooth-running, lean facility is your destination; then, draw it all out—literally. There’s no better tool for this kind of process mapping than a nice, big whiteboard. Not only will you use your whiteboard in the initial mapping, but you’ll continue to use it to map out various other processes for problem solving, analysis, and training along the way.
- Laminator. Once you’ve mapped out the ideal Lean processes for your shop floor, you’ll want to make the processes visually available to everyone who’ll engage in them. Signs are by far the best tools to accomplish this. As you move further in your Lean journey, you’ll begin to see the constantly changing nature of your processes as you re-evaluate and fine-tune them. Because the processes change in response to these re-evaluations, so do the signs. That’s why investing in a top-notch laminator is a great idea. The laminator will save a surprisingly large amount of time and money in the long run.
- Colored Tape. Like signs, tape allows you to create a visual manifestation of your facility’s lean processes. For example, by using colored tape, you can create lined paths with arrows and other symbols, or you might number stations based on where each one falls in a specific workflow. Assigning meaning to the various colors can also be an effective way to communicate steps and stages in your lean systems.
Focus on Building a Culture
Most experts agree the key to a successful lean transformation is cultural acceptance. In other words, everyone in the organization needs to be on board if it’s going to work. An article from Plant Services provides four building blocks to creating a lean culture:
- Visibility and transparency. Employing a lean system that allows for high visibility and complete transparency—where everyone can see what everyone else is doing at any given second of the day—is the first step toward creating that new culture.
- Provide value to the end user. Lean manufacturing systems should be a tool, not a task. These systems must provide value to the end user. In tandem with transparency, a lean system should be designed with that value in mind.
- Easy to use. For any new system rollout to be adopted quickly by hundreds of employees, it must be easy to use. If a new lean manufacturing system requires a PhD in computer science to use and understand, it’s far too difficult. Ease of use must be a priority for functions throughout the entire system, from data entry and report analysis to accessibility and responding to alerts or alarms.
- Provide instant feedback. For a lean system to be completely effective, employees will need to see the immediate effects of their work. Is the company or the production team winning or losing? The best way to capture that sense of immediacy is through real-time analytics.
What lean tools and practices have you implemented in your fabrication shop?
March 5, 2017 / best practices, industry news, LIT, maintaining talent, operator training, productivity, quality, skills gap, strategic planning
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:
- One initiative, called Incumbent Worker Training, is funded by the Workforce Innovation and Opportunity Act. The program is helping Kentucky companies like metal stamper Tower International cover training and apprenticeship program costs. The program reimburses 50 to 90 percent of training costs, depending on the size of the company, for in-demand sectors and occupations, including manufacturing, technology, healthcare, food and beverage production and transportation, distribution, and logistics. Employers can qualify for as much as $10,000 per year to cover costs such as non-company instructors, tuition, curriculum development, textbooks, supplies and more. Tower has used the money to help cover training costs for three employees in the company’s registered apprenticeship programs. You can read more about the program here.
- Another proposal, called “Toward a New Capitalism” from the Aspen Institute’s Future of Work Initiative, is based on the idea of “pay for performance.” According to an article from The Atlantic, the government-backed corporate retraining program is set up to help companies pay for training, but only for curricula that raise a worker’s wage. For example, if a company spends thousands of dollars to train an employee on a specific skill that results in a pay raise, the company gets reimbursed by the government for the training costs, even if the employee decides to leave. “By training workers, businesses are essentially buying a small equity stake in their future wages,” the article explains. “If their wages rise, the company gets money, while the worker gives up nothing, purely benefiting from the training program.” You can read more about the program here and here.
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?
March 1, 2017 / agility, blade failure, blade life, blade selection, customer service, industry news, LIT, strategic planning
As we reported in last month’s blog, experts consider aerospace to be one of the strongest industries. In one report from the Metal Service Center Institute, Richard Aboulafia, vice president of analysis at the Teal Group Corporation, said that aerospace was the only industry that saw growth acceleration through the recession and that the civil aviation sector in particular offers “major opportunities for long-term growth.”
This, of course, is good news for industrial metal-cutting companies serving this sector, and prospects continue to look good for the near future.
Set to Soar
According to a report from Defense News, the aerospace and defense industry set a new record for international sales in 2016, delivering $146 billion in exports. The article went on to say that 2017 could be “another banner year” for the defense and aerospace industries thanks to some anticipated government orders.
As reported by Defense News in December, the U.S. State Department approved in the first quarter of this fiscal year foreign military sales worth an estimated $45.2 billion dollars, which is said to be more than the total foreign military sales for all of fiscal 2016. “If approved by Congress and manufactured this year, some of those purchases could help rack up the export total for 2017,” the article states.
Deloitte’s 2017 Global Aerospace and Defense Sector Outlook is also optimistic. According to the Executive Summary, Deloitte expects industry revenues for the global aerospace and defense sector to resume growth, driven by higher defense spending. Following multiple years of positive but subdued rate of growth, Deloitte forecasts that sector revenues will likely grow by about 2.0 percent in 2017.
Forecasts from industry leader Boeing show similar trends. According to a January report from Reuters, Boeing expects to deliver between 760 and 765 commercial aircraft in 2017, topping 748 deliveries in 2016. Honeywell, on the other hand, forecasts a slight decline in 2017; however, the company expects deliveries will begin picking up in 2018 due to the strength of several new aircrafts entering service, AINonline reports.
This could spell opportunity for many industrial metal-cutting companies. As an article from IndustryWeek states, the aerospace industry is a good business in which to be competitive because the underlying drivers of demand are very strong. “Since the end of the Great Recession, new commercial aircraft orders have typically been double, and in some years, triple the number of annual deliveries,” the article states. “This reflects explosive growth of air traffic in the emerging world as rising incomes and declines in ticket fares make air travel affordable for increasing numbers of households.”
Equipped for Growth
As a critical part of the supply chain, there is no question that metal-cutting companies could reap the rewards of aerospace’s success. However, companies serving this sector need to be sure they are doing what it takes to win the business of both existing and potential aerospace customers, even if that means investing in advanced metal-cutting tools designed to meet the unique demands and shifting trends within the industry.
For example, as reported here by The Fabricator, Superior Machining & Fabrication has upgraded its 110,000-sq.-ft. machine shop to better serve the aerospace sector. “Changes include the addition of CAD/CAM software, a larger 5-axis bridge mill for hard metals, and a 5-axis SNK bridge mill,” the article states. “The company also has tripled the size of the quality room, added an assembly room, created a staffed tool/fixture room, introduced lean manufacturing/5S throughout the shop, and segmented the shop into cells with their own leaders/supervisors to help improve product flow.”
Shops should also be sure they are equipped to handle the material demands of customers, including the growing use of titanium in aerospace components. In a recent interview with American Metals Market, Rich Harshman of metals supplier Allegheny Technologies, Inc., says he sees a significant mix shift happening within the aerospace industry. Specifically, he says there is a “growing demand for our differentiated next-generation alloys as well as growing demand for our isothermal and hot-die forging and titanium investment castings.”
For metal-cutting operations, this means having a carbide-tipped band saw blade. Since titanium and other high-performance alloys are stronger and harder, they need more than the average bi-metal blade. Using a carbide-tipped band saw blade not only allows for the successful cutting of hard metals like titanium, it simultaneously offers longer blade life and faster cutting as well, according to the white paper, Characteristics of a Carbide-Friendly Bandsaw Machine.
In today’s unpredictable market, the truth is that no one really knows what the future holds for aerospace. However, industry leaders know that it pays to be prepared. Tailoring your operations and processes to meet the unique demands of the industries you serve will not only position you as a valued supply chain partner, but as an agile, industrial metal-cutting leader that is ready to fly when demand takes off.
February 28, 2017 / best practices, Cost Management, Employee Morale, human capital, industry news, LIT, maintaining talent, operator training, ROI, skills gap
The idea of investing in your employees sounds good in theory. In fact, many would say that this is a trend among manufacturers as they try to find ways to address the widening skills gap.
But as any metals executive knows, theories don’t pay the bills. Resources designated to employees may offer some “soft” benefits like improved morale, but is there any financial benefit to investing in employees?
Research shows that the answer is yes: Investing in employees does offer a good return on investment (ROI). In an article published by Harvard Business Review, Alex Edmans, professor of Finance at London Business School, says that research of stock market data clearly reveals that the benefits of investing in employees outweigh the costs and that employee satisfaction improves firm value.
“I studied 28 years of data and found that firms with high employee satisfaction outperform their peers by 2.3% to 3.8% per year in long-run stock returns—89% to 184% cumulative—even after controlling for other factors that drive returns,” Edmans writes in HBR. “Moreover, the results suggest that it’s employee satisfaction that causes good performance, rather than good performance allowing a firm to invest in employee satisfaction.”
According to Edmans, the findings have major implications. “For managers, they imply that companies that treat their workers better, do better,” he writes. “While seemingly simple, this result contradicts conventional wisdom, which uses cost control as a measure of efficiency.” (You can see all the details of Edmans’ findings here.)
Research conducted among forges and other industrial metal-cutting organizations show similar results. A benchmark study conducted by the LENOX Institute of Technology provides evidence that investing in human capital is critical for improving on-time customer delivery and driving higher revenue. Specifically, the survey of 100 industrial metal-cutting operations found the following:
- 64% of organizations that cite their operator turnover is decreasing year over year also report that on-time job completion is trending upwards—a critical correlation.
- 51% of organizations that reported reduced levels of operator turnover also said their revenue per operator had increased.
With data like this, it is hard to argue against the value of investing in employees. And while most executives think of pay raises when they think of employee investment, the good news is there are several ways forges can invest in employees. The following are just four possible approaches that go beyond pay:
- Listen. Operators that work with equipment every day are a valuable source of information. Be intentional about collecting feedback and implement some of their ideas.
- Equip. Invest in an employee’s future with incentives like continued education or management training. This shows employees that you value their personal success and provides them with new skills that can benefit your operation in the long run.
- Communicate results. Regularly share performance reports with employees by either posting them or discussing them in staff meetings. According to 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.
- Reward. Studies continue to show that goal setting and incentives are effective motivational strategies. Empower your operators by letting them set their own goals. This also holds them accountable for their work and promotes long-term “buy-in” and loyalty.
Investments of any kind usually present some risk, but in the case of human capital, it seems unlikely that there are any real threats or disadvantages. As research confirms, pouring resources into the very people that keep your company running is just good business—in theory and in practice.
How is your forging operation investing in employees?
February 20, 2017 / agility, best practices, blade failure, blade life, blade selection, Cost Management, customer delivery, industry news, LIT, maintaining talent, operator training, productivity, quality, resource allocation, skills gap, strategic planning
Thanks to an unstable marketplace, capital spending among machine shops and other metalworking companies has been down for the last several years. However, new reports suggest a rebound in the near future.
According to data from Gardner Business Intelligence (GBI), machine tool consumption peaked at $7.5 billion in 2014, and then contracted 3 percent in 2015 and 7 percent in 2016. Based on GBI’s Capital Spending Survey, projected total machine tool consumption in 2017 will be down an additional 1 percent. However, as reported here by Modern Machine Shop, the survey also shows that demand for core machine tools will increase in 2017 by 9 percent. In addition, GBI’s new econometric model for machine tool unit orders indicates that the rate of contraction in overall machine tool demand bottomed in July 2016 and will improve through the end of 2017.
Steven Cline, Jr., director of Market Intelligence at GBI, says the driving force behind the projected rebound is the need for increased productivity. “Shops need to increase productivity in order to remain competitive in a global manufacturing marketplace and to counteract the much-talked-about skills gap,” Cline writes in Modern Machine Shop. “More and more shops are turning to lights-out and/or unattended machining to achieve this increase in productivity, but new equipment, including machine tools, workholding and automation, is needed to run lights-out.”
As reported in the news brief, “Strategies for Training and Maintaining Talent in Industrial Metal-Cutting Organizations,” industrial metal-cutting companies have spent the last few years investing a lot of time and resources into their workforce. This has helped boost productivity and address some of the skills gaps, but the GBI survey suggests that shops are seeking a balance that requires investments in both human capital and equipment.
For example, Speedy Metals, an online industrial metal supply company and processor, recently upgraded its band saws to improve efficiency. “We had been searching for a reasonably priced, high-production band saw to add to our saw department and boost our production,” Bob Bensen, operations manager, tells Modern Metals. “We needed a reliable band saw that was going to stand up to the rigors of our fast-paced environment.”
Bensen went on to say that the new band saw, which has nesting capabilities and allows his operators to cut a variety of metals, has improved productivity. This, he adds, has given Speedy Metals a competitive edge and allows his company to continuously offer same-day shipping on quality parts and customized saw cuts that meet the closest tolerances.
Similarly, metal-cutting companies like Aerodyne Alloys are investing in new metal-cutting tools to further improve efficiency. Working with hard-to-cut metals like Inconel 718 and Hastelloy X, the metal service center decided to upgrade from bi-metal blades to carbide-tipped blades to get higher performance out of its band saws. After upgrading to a carbide blade, Aerodyne was able to tackle hard, nickel-based alloys, while also improving cutting time on easier to cut materials like stainless steel. According to a case study, this helped improve operational efficiencies at Aerodyne by up to 20 percent.
Of course, not all capital investments offer a good return. If your shop is considering investing in new equipment or tools this year, be sure to measure cost against productivity. According to the white paper, Selecting the Right Cutting Tools for the Job, managers need to weigh the following:
- upfront costs against overall operating and maintenance costs
- long-term productivity of a machine and its intended use
- equipment and blade life, as well as cost per cut
There is no question: Staying competitive in today’s market is tough. Demands for high quality and quick turnaround continue to increase, while cost pressures and issues like the skills gap remain. How will your shop respond? As the GBI survey suggests, it may be time to consider making some capital investments to ensure that your team is fully equipped to meet demands.