September 10, 2016 / agility, best practices, blade life, blade selection, continuous improvement, industry news, material costs, strategic planning
For the last several years, the U.S. auto industry has been a growth driver for many industries, including industrial metal cutting. As we reported in our “Metal Service Center Outlook for 2016,” the automotive sector is one of two industries expected to help metal fabricators “ride out the storm” of today’s uncertain market.
While recent reports have shown that U.S. auto industry sales have started to cool, most experts still believe auto sales will remain strong over the next few years, even if they aren’t breaking any new records. In theory, this is good news for metal fabricators and other companies serving the auto segment. However, sales aren’t the only trend suppliers should be tracking.
According to an article from PricewaterhouseCoopers (PwC), the auto industry is in the midst of change, and the supply chain needs to be ready to respond. “It’s not clear how cars will change in the coming years, but automakers and suppliers no longer have the luxury of sitting out the transformation,” the PwC article states. “If you are an executive at an OEM or an auto equipment supplier, your strategic acumen — your ability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules — will surely be tested.”
Put simply: if automotive is one of your key customer segments, it’s time to pay attention.
One of the biggest shifts happening within automotive manufacturing has been the growing use of lightweight materials. To meet federal emission standards, a growing number of U.S. automakers like Ford are using lightweight metals to decrease the weight of their vehicles and, therefore, increase the fuel economy. Many in the industry refer to this trend as “lightweighting.”
Of course, with new materials come new equipment and tooling needs, as well as new cutting parameters and techniques. To ensure that fabricators are prepared, below is a short summary of two materials trends worth following:
- Aluminum. As this American Metals Market (AMM) article states, aluminum is now second to steel as the most used material in automotive design. According to AMM, the use of aluminum is growing because it is a fast, safe, environmentally friendly, and cost-effective way to improve performance, boost fuel economy, and reduce emissions. Key aluminum suppliers like Alcoa have been reaping the rewards of this trend and expect growth to continue on a global scale.
As any metal-cutting expert can attest, every material has its own distinct properties that affect how it is cut. Aluminum is a softer material, but it is also abrasive, which can present some machining challenges. According to an article published by Canadian Industrial Machinery (CIM) magazine, aluminum’s abrasive property can wreak havoc on a saw blade, accelerating tooth wear and diminishing blade life. To combat aluminum’s abrasive quality, most manufacturers recommend carbide-tipped band saw blades over bi-metal blades. This is because carbides are harder, tougher, and more durable, Matt Lacroix of LENOX explains in the CIM article. “Carbide tips are slower to wear and better suited to handle the high machining speeds,” Lacroix writes. Other blade factors, such as backing steel and tooth geometry, can also help improve the efficiency of sawing aluminum, he adds. (To read more about cutting aluminum, check out the entire CIM article here.)
- Magnesium Alloys. Although it hasn’t received nearly as much attention as aluminum, metals experts quoted here in an article from Canadian Fabricating & Welding believe that magnesium alloys will have a place in lightweight auto design in the future. “The weight reduction we experience using aluminum in place of steel is 40 percent,” Adrian Gerlich, associate professor in the Department of Mechanical and Mechatronics Engineering at Waterloo, tells the magazine. “Using magnesium alloys in place of aluminum sees a further comparative weight reduction of between 30 and 40 percent.”
Gerlich adds that despite its lightweight properties, magnesium alloys do present a host of manufacturing challenges. Because it is less stiff than aluminum, magnesium alloys require the addition of stringers and stiffeners, he explains. In addition, the material is difficult to weld, has to be formed at a higher temperature if it is to be used for stamped parts, and is more susceptible to corrosion. “The oxide of magnesium isn’t inherently protective; it continues to corrode, so careful protection of the material is required,” Gerlich states. Even with these challenges, however, Gerlich and others believe that with more research, magnesium alloys could have huge potential in automotive applications.
Steel Still Reigns—For Now
Even with these new materials hitting the automotive scene, steel will likely continue to be the dominant metal used in automotive manufacturing. According to Automotive World, the average vehicle is still made using between 800kg and 900kg of steel.
As Tim Triplett, editor of Metal Center News, said in an archived editorial, the steel industry won’t likely lose any ground in auto design but, instead, will simply adjust to the trends. “Just as many headlines heralded new developments in lightweight, advanced high-strength steels,” Triplett wrote. “Steelmakers claim the auto industry can meet the government mileage standards by using the new steel alloys, in combination with power train innovations, and at a lower cost than switching parts to aluminum.”
Indeed, reports show that auto manufacturers are already testing the use of lightweight steel alloys, and innovators like GM are even trying mixed-metal manufacturing in which steel and aluminum parts are welded together.
Regardless of which automotive material trends take hold, the point is that fabricators and other suppliers serving this market need to be ready: Do the research, ask the questions, and be ready to adapt accordingly.
August 30, 2016 / agility, best practices, Cost Management, industry news, LIT, Output, productivity, strategic planning, supplier relationships, value-added services
There is no question that the supply chain is evolving. As reported in a previously published blog, instead of treating supplier relationships as a series of business transactions, more and more manufacturers are treating their supply chain as a valuable part of their business strategy. In fact, this trend is listed as a best practice in the eBook, 5 Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization.
With an increased focus on building closer partnerships with suppliers, it’s not too surprising that many companies are starting to move back to sourcing suppliers closer to home. As one article from Automotive World quips, “local sourcing—it’s the new global sourcing.”
According to the AW article, local sourcing can bring cost savings across the entire supply chain, especially in light of rising costs in traditionally low-cost regions. “This phenomenon of local sourcing is being witnessed across the globe, with leading OEMs sourcing locally from developed as well as emerging countries,” the article states.
A report released by MFG.com, an online manufacturing marketplace, shows similar trends. Based on the data gathered from buyers of custom manufactured parts from the MFG Watch 2016 marketplace survey, 80% of U.S. sourcing professionals chose to source their parts predominantly in the U.S. The report also found that since 2012, buyers have seemingly moved away from sourcing from Chinese suppliers, as sourcing in China has fallen by about 14% in 3 years.
It is worth noting that the MFG.com report found that U.S. sourcing professionals nearly doubled their sourcing activities in regions like Eastern & Central Europe, as well as South America and North Africa. In other words, not everyone has jumped on the bandwagon.
However, there are definitely some benefits for ball and roller bearing manufacturers that choose local sourcing. Local suppliers, for example, can quickly and easily respond to any troubleshooting or maintenance problems with your tooling and equipment, often in-person. They can also assist with other key business areas, such as preventative maintenance and operator training.
Of course, those are just a few examples. An article from Thomasnet gives a more comprehensive list in its article, “Top 6 Benefits of Local Sourcing:”
- More Reactive. Local suppliers are typically more reactive than suppliers who are farther away. They are able to deliver products quicker, and it is much easier for a supplier to coordinate a shipment across the neighborhood than around the world.
- Greater Control. The further away you are from elements of your supply chain, the less control you have over them. There’s also less chance of things being “lost in translation,” which often occurs when working with far-flung teams of people, many of whom aren’t actually on the floor and touching your products.
- Reduced Supply Chain Costs. North American businesses send and receive parts and products all over the continent, and the expenses can add up as quickly as the miles. Localizing your supply chain can reduce many of these costs. And, with less money being sunk into logistics, there will be less weighing down your bottom line.
- Better for Business. Local sourcing doesn’t just help save money; it can also help you generate more of it. That’s because companies in your region may be impressed by your efforts to keep a tight and fast-paced supply chain, which can help you attract new customers.
- Good for the Community. It stands to reason that if sourcing locally increases your bottom line, it would do the same for other suppliers and manufacturers in your area, which can be a big boon to your local economy and the people who live there.
- Helps the Environment. Localizing your supply chain represents a tremendous opportunity to help the environment. When you reduce shipping and storage, you also reduce emissions and energy usage.
Whether building cars or manufacturing ball bearings, more and more operations managers are finding that their success is directly tied to collaborative vendor relationships—relationships that go far beyond the sale of a product. While not everyone believes in local sourcing, it is one of the many ways you can build closer, more valuable relationships with your supply chain.
To read more about building valuable supplier relationships, including some key areas where suppliers can help, check out the white paper, Managing Your Blade Manufacturer Relationship.
June 20, 2016 / agility, human capital, industry news, KPIs, lean manufacturing, maintaining talent, operations metrics, performance metrics, skills gap, strategic planning
In today’s lean manufacturing world, managers and executives are encouraged to “stay grounded” and find out first-hand what is happening in their operations. As we stated in a previously published blog, improvement decisions can’t be made in an ivory tower. Instead, lean experts advise manufacturing executives to make the time to visit the shop floor—also known as taking a “gemba walk”—so they can see their operation from the front lines.
At the same time, however, today’s competitive market requires leaders to keep a pulse on “megatrends” so they can create innovative, strategic solutions that balance internal efficiency with external demands. In other words, even small shop managers need to be tracking larger scale trends so they can stay competitive and respond to changing customer expectations and an evolving manufacturing industry.
According to Modern Machine Shop, the recent MFG Meeting in Palm Springs, CA highlighted some bigger picture trends that are shaping manufacturing. Below is a summary of three key trends, as reported by Editor Mark Albert:
- Navigating a sea of information. Albert notes that in three to five years, more than a trillion objects will be networked. “Products and user communities will merge,” he states. “The structure of the factory will evolve into a social network. Designers and manufacturers must be ready to create products that behave like living organisms.”
- Cyber security. “The pervasive interconnection of things (which exists today) exposes every company to a massive threat from cyber criminals and malicious hackers,” Albert states. “Companies must adopt defensive strategies that build in, not bolt on, protection at every level.”
- Stay optimistic. Albert says that despite what seems to be persistently negative influences and nagging uncertainties, the economic outlook for U.S. manufacturing is positive. As one leading economist asserted at the MFG meeting, a calm and rational analysis sees better times ahead—as indicated by the numbers, not the emotions.
A contributed article appearing in IndustryWeek echoed similar trends, but zeroed in on the effect “Big Data” will have on manufacturing. “The ability to collect and analyze large volumes of data in economic transactions has revolutionized customer care in the retail and finance sectors,” the article states. “In manufacturing, Big Data will accelerate the integration of IT, manufacturing, and operational systems on the shop floor and lead to better forecasting and understanding of plant performance.”
The IW article also noted the changing demographics of the workforce—a trend of which most machine shops and industrial metal-cutting companies are well aware. According to the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal Cutting Organization, by the year 2020, most companies will have five generations in the workplace. This may certainly create some challenges, but as the eBook explains, managers can also use this demographic mix to their benefit by leveraging the different strengths found within their multigenerational workforce.
“While younger, less experienced workers may lack industry knowledge, they are typically more technology savvy and more willing to embrace new techniques,” the eBook explains. “Seasoned workers, on the other hand, may be resistant to both change and technological improvements; however, they typically have a vast amount of experience and loyalty, and may be able to mentor new employees.”
Of course, these are just some of the big-picture trends affecting machine shops, and many are already responding. As reported in our “Machine Shop Outlook for 2016,” a benchmarking study from Modern Machine Shop revealed that leading U.S. machine shops this year are focusing on workforce training and talent to close the skills gap, improving shop floor practices to optimize processes, and investing in future technology to stay competitive.
How is your shop responding to these megatrends?
June 15, 2016 / agility, best practices, blade selection, industry news, material costs, strategic planning
As we reported in our 2016 Industrial Metal-Cutting Outlook, this year has started off much slower than experts had hoped or anticipated. However, there are still a few industry segments that are sparking demand for industrial metal-cutting companies. One of these segments is solar power.
Over the last few years, the solar power industry has experienced exponential growth. In 2010, solar only totaled 4 percent of all forms of electric generation but has since grown to 30 percent in 2015, according to the latest U.S. Solar Market Insight report from the Solar Energy Industries Association (SEIA).
The sector shows no signs of slowing down either. In the first quarter of 2016 alone, solar accounted for 64 percent of all new electric capacity in the U.S., adding more capacity than natural gas, coal, nuclear, and wind industries combined. SEIA forecasts that the solar industry will nearly quadruple by 2021. In addition, Congress recently extended the Solar Investment Tax Credit (ITC) until the end of 2021, which provides a substantial federal tax credit for both residential and commercial projects until a permanent 10-percent credit takes effect in 2022. The Solar ITC also allows owners who start construction before the end of 2021 to claim a larger credit as long as it’s complete and in service by the end of 2023.
According to an article from IndustryWeek, one of the reasons solar is booming is due to large-scale installations, which will account for approximately 75 percent of all installations this year. The utility and large-scale solar installations require many metal products for towers, including structural tubing, racking, and torque tubes for fixed and tracking systems—all of which have to be cut and shipped.
Industrial metal-cutting companies that want to grow with the solar power market need to be aware of customer needs and how the market is evolving. Based on our research, there are two trends worth noting.
1. Metal Wars
Following suit with other industries, price is driving metal material preferences for solar power installations. According to this article from American Metals Market (AMM), Aaron Faust, vice president of business development and co-founder of Applied Energy Technologies (AET) explained: “During our first four years, we sold predominately stainless products. In the last three years, galvanized steel has taken the lion’s share of our products. For a long time, it was the perfect storm—stainless could complete with aluminum and galvanized. But margin has been squeezed so tight across the board. Prices are driving everything now.”
In addition to price, solar requires high quality and durability to withstand the weight of the installation itself and weather conditions. While aluminum and stainless steel have long been used in solar applications, many aluminum rack suppliers are now offering galvanized steel products, as they not only meet strict specifications for custom utility and large-scale installations but also are highly resistant to corrosion. “Two things that will define next year are the availability of steel and the capacity of companies to process it,” Faust tells AMM. “There’s not much concern over availability, but the market could face some limitations with the market concentrated on certain forms.”
Given a shift in material preference, it is important for metal-cutting companies to have the right tool for the job. For example, carbide band saw blades are designed to cut faster and last longer for a variety of applications, including aluminum and hardened materials like galvanized steel. However, high-performance bi-metal blades may provide a cost-effective solution for carbon steel and structural steel tubing. (For more information on choosing the right blade, check out the Blade Selector tool from the LENOX Institute of Technology.)
2. Fixed vs. Tracking Systems
Besides the preferred metal type for utility grade solar installations, the type of installation itself will have an impact on what industrial metal-cutting companies will be cutting. GameChange Solar, a New York-based manufacturer of commercial and utility scale solar racking and tracker systems, recently switched to pre-galvanized steel for its production after aluminum prices increased, according to an article from Modern Metals. In addition to the material switch, the company recently increased its use of metal tubing and sourced 40 million pounds of sheet and tubing due in part to the growing use of solar trackers. Unlike fixed systems that simply collect sunrays as they pass over the panel, tracking systems follow the sun throughout the day with the use of structural tubing. Panels are then installed on the tube so they can pivot back and forth to increase a panel’s efficiency. GameChange Solar’s President Andrew Worden estimates that the tracker market will total $1 billion this year in the U.S. alone, with the world market growing to an estimated $3 billion.
With nothing but growth in the forecast for the solar power industry, the metal industry is poised to grow alongside it. Industrial metal-cutting companies that stock the right material and cutting tools will be prepared to take full advantage of this market opportunity and gain a competitive edge.
April 5, 2016 / agility, continuous improvement, Cost Management, industry news, LIT, material costs, strategic planning
Last year was a rough one for the metal-cutting industry. While many metal service centers were glad to put a close on 2015, most are bracing themselves for more of the same challenges in the year ahead.
For metal service centers, most of 2015 was spent playing catch-up with high inventory levels from the year before. Continued low demand and prices didn’t do much to free-up working capital, so the cycle continued: Metal service centers actively worked to reduce inventory in an effort to maintain, or at least even out, prices.
While the automotive and construction categories did boost demand in 2015, as forecasted in our Metal Service Center Outlook for 2015, the energy sector dealt a blow with historically low oil and gas prices, essentially negating any uptick the metal industry experienced to date.
At the end of 2015, shipments of steel and aluminum were not only down month-over-month but year-over-year as well. According to data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments declined in December by 11.4% from the prior-year, while shipments of aluminum decreased by 3.5%. As metal service centers focused on offloading high-priced materials, steel and aluminum inventories decreased by 16.2% and 3.3%, respectively, from the prior-year.
The decline seen in 2015, unfortunately, continued to impact metal service centers during the first two months of 2016—even with drastically reduced inventory levels—albeit slower than before. The latest figures from MSCI report U.S. service center steel shipments in February decreased 4.6% from February 2015, and shipments of aluminum products decreased by 0.4% compared to the same time last year. Inventories in February also decreased 20.6% and 7.7%, respectively, from the prior-year period.
Gloomy Forecast Ahead
With growth falling short of expectations to date, the manufacturing industry is expecting to see more of the same challenges throughout 2016. In fact, the Manufacturers Alliance for Productivity and Innovation (MAPI) recently lowered its manufacturing forecast for 2016 and 2017 due to high inventory levels and plummeting oil prices. In addition, slightly more than half of manufacturing respondents believe 2016 will be the same or worse than 2015, according to the December 2015 Semiannual Economic Forecast from the Institute for Supply Management.
Staying the Course
While 2016 clearly isn’t going to be one for the record books, there are still opportunities for growth. According to an executive roundtable report by Metal Center News, the following two industries are expected to help metal service centers ride out the storm:
- Automotive. Like last year, the automotive sector is expected to see continued growth. According to a report from the National Automobile Dealers Association, new light-vehicles are set to rise to 17.7 million units—the seventh straight year of increasing U.S. new-vehicle sales. General Motors started off 2016 with 0.5 percent more vehicles than in January 2015, and Ford’s CEO Mark Field has said he expects 2016 to be “another strong year,” American Metals Market reports. Continued low fuel prices and interest rates should also help drive sales.
- Residential and non-residential construction. Construction, as a whole, has been showing signs of life for years, and now all segments are expected to grow, including commercial, residential and non-residential sectors. According to Dodge Data & Analytics, total construction starts in 2016 will grow 6%. Low long-term interest rates by the Federal Reserve and moderate job growth will help the segments expand throughout the year.
Yes, the rest of 2016 is set to be a challenging year for metal service centers thanks to inventory levels and low oil prices. Despite the obstacles, however, there are a few bright spots. As described above, increasing demand from the automotive and construction industries provide some opportunities for growth. Some reports are even forecasting increased steel demand from the solar energy sector.
Service centers that take advantage of market opportunities while continuing their strategic planning and continuous improvement activities should be able stay the course in 2016, and, hopefully, position themselves for a strong performance in 2017.
What sectors is your metal service center focusing on in 2016? What strategies are you following to see out the rest of the year?
April 1, 2016 / agility, continuous improvement, human capital, industry news, lean manufacturing, LIT, maintaining talent, operator training, preventative maintenance, quality, strategic planning, supplier relationships, supply chain
Although many hoped that 2016 was going to be a year of full recovery and growth, expansion in the industrial manufacturing sector has been slow moving. High inventory levels, a strong dollar, falling commodity prices, and a slowdown in China have left many industrial metal-cutting companies disappointed and more than a little cautious.
Evidence of slow growth started at the end of 2015. According to estimates from the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production was unchanged from the third to the fourth quarter of 2015. Monthly data has shown erratic patterns of growth and decline that have pretty much cancelled out any movement forward—a trend that is expected to continue.
“We expect the volatility to continue through the first half of 2016, a situation that will result in essentially no manufacturing production growth,” MAPI stated in a recent report. “Manufacturing production should be flat in the first and second quarters of 2016 before accelerating to a 3-percent annual rate in the second half of 2016.”
For the entire year, MAPI expects manufacturing production to decelerate rather than accelerate compared to 2015. “Production increased 2 percent last year, and we forecast only 1.1-percent growth in 2016,” MAPI states. The good news is that MAPI predicts growth in industrial manufacturing of more than 2 percent for both 2017 and 2018.
Unfortunately, the forecast for steel demand also shows little to no growth, although 2016 is expected to be an improvement over 2015. According to the Short Range Outlook 2015-2016 from the World Steel Association (worldsteel), global steel demand decreased 1.7 percent in 2015 but is expected to grow by 0.7 percent in 2016.
“It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China,” Hans Jürgen Kerkhoff, chairman of the worldsteel Economics Committee, said. “Combined with China’s slowdown, we also face low investment, financial market turbulence, and geopolitical conflicts in many developing regions.”
The only bright spot is that steel demand in developed countries is expected to show positive growth of 1.8 percent this year. The U.S. in particular should see demand increase by 2 percent in 2016, worldsteel predicts.
While no one wanted the year to start off slow, most manufacturers aren’t too surprised. In a roundtable discussion with Metal Center News (MCN), Michael Bush, a vice president at Esmark, Inc., was quoted as saying that he didn’t expect the market to pick up until at least May. “Even though it will pick up in the second half, we expect 2016 to be down 1 percent for the year,” Bush told MCN. “That’s our general feeling going into the market.”
Bush isn’t alone. The American Metals Market annual survey of metals executives showed that 30 percent of respondents in the steel, aluminum, and other metals sectors expected business to be worse in 2016, and 70 percent predicted that the domestic economy would not fully turnout until 2017 or later. (You can read the full report here.)
The reality is that the U.S. is still in the middle of an economic recovery, which means that metal-cutting companies and other manufacturers won’t likely see any major growth this year. According to MAPI, manufacturing industrial production must grow another 3 percent in order to reach the pre-recession production level achieved in the fourth quarter of 2007, which means a full recovery is expected in the third quarter of 2017. Non-high-tech manufacturing production is 5 percent below the prerecession level and will not be fully recovered until the third quarter of 2018.
On a positive note, the latest numbers from the Institute for Supply Management (ISM) show some improvement. As reported by Plant Engineering, ISM’s monthly Purchasing Manufacturers’ Index (PMI) jumped 2.3 percentage points in March to 51.8 percent, putting the index solidly above the 50-percent growth threshold for the first time in 2016.
Out of 18 manufacturing industries, ISM says that 12 reported growth in March, including Fabricated Metal Products and Primary Metals. One survey respondent from the Primary Metals segment stated, “Our business is still going strong.” Another respondent from the Fabricated Metals Products segment said, “Capital equipment sales are steady.”
The big question, of course, is will this momentum continue? Analysts believe that continued growth will depend largely on continued strong employment because it creates new income growth and a solid base of consumer spending. MAPI says that another impetus is easy credit availability, which propels big-ticket spending for motor vehicles, residential housing, and nonresidential construction.
While the overall data is certainly sobering, there are a few signs that suggest the metals sector can still snap out of the lull. As Modern Metals recently reported, “The average age of a vehicle on the road still exceeds 10 years; construction season is coming and Congress passed a long-term highway bill in December.”
Metal executives participating in MCN’s roundtable believe that automotive—which is predicted to top 17 million vehicles this year—will be the big market driver, as well as residential and nonresidential construction, white goods, and anything associated with “green energy.”
A report from Fabricating & Metalworking says that surviving 2016 will require manufacturers to use the current market conditions to their advantage. “U. S. manufacturers should be aggressive to take advantage of falling costs while at the same time finding new opportunities created by these economic forces,” the report says. Specifically, the article states that companies should consider employing two key strategies:
- Target those markets that benefit from lower energy and commodity prices such as transportation.
- Modify supply chains to reflect the new realities.
From an operations standpoint, continuous improvement activities will continue to be critical for industrial metal-cutting companies as they push through this slow period. Finding ways to optimize what is happening inside your shop doors is perhaps one of the most effective ways to balance the uncertainty of what is happening outside your doors. What does that look like? An eBook from the LENOX Institute of Technology’s lists five performance-boosting best practices that can help metal-cutting companies improve internal operations:
- Get lean. Although lean manufacturing is not a new movement, it is evolving. Companies that “got lean” years ago are focusing on continuous improvement, and a growing number of high-mix, low-volume operations are tweaking traditional lean methodologies to fit their specific situation. Regardless of your organization’s size, lean manufacturing should be at least part of your operational strategy.
- Invest in human capital. Industry data indicates that metal executives tend to invest in technology over people, but the tide is changing as the manufacturing industry deals with a serious shortage of skilled production workers. Managing this skills gap will require changing the way companies train and maintain talent, whether by beefing up training programs or rethinking their hiring tactics.
- Focus on quality as a process. There is no question that speed and agility are critical in today’s fast-paced market, but managers need to make sure that meeting demand doesn’t come at the expense of accuracy. To meet this challenge a growing number of market leaders are putting practices in place to ensure that their quality goals are met and maintained.
- Embrace preventative maintenance. In almost every manufacturing operation, machine breakdowns are one of the top causes of lost productivity. While some downtime is inevitable, proper maintenance and proactive care of equipment and tooling can reduce its occurrence. One benchmark survey revealed that 67 percent of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report an upward trending job completion rate.
- Form strategic supplier relationships. In today’s competitive marketplace, it is easy to base supplier relationships on price. However, a growing number of manufacturing leaders are placing more value on their supply chain. By leveraging the knowledge and services of trusted suppliers, companies can turn vendor relationships into strategic partnerships that have a real impact on the bottom line.
Ready and Waiting
All things considered, 2016 won’t likely be a banner year for industrial metal-cutting organizations. However, not all hope is lost. Recent upticks in manufacturing may indicate some positive (albeit slow) momentum, and many experts believe growth is in the long-term future, even if we have to wait another year. Until then, metal-cutting companies can continue to apply strategies that address external trends while also improving internal operations, putting them in the best position possible when the market finally turns around.
March 15, 2016 / agility, best practices, continuous improvement, industry news, LIT, productivity, resource allocation, strategic planning
In today’s competitive marketplace, a successful business is an agile business—one that can adapt to changing factors and provide a product deemed valuable by the buyer. An unsuccessful business, on the other hand, is one that refuses to evolve and innovate.
Take, for example, the Blockbuster video rental chain, which met its demise after it refused to partner with Netflix, or Blackberry, the smart phone pioneer that ended up failing miserably once Apple released iPhone. Both are prime examples of companies that failed to adapt to the times, but they are definitely not the only ones. In fact, only 57 companies have made the Fortune 500 list every year since the list’s inception in 1955.
The industrial metal-cutting industry is no exception and has certainly seen its fair share of fallen companies in recent years. Fluctuating demand and volatile market conditions have proved that success requires adaptation, innovation, and continuous improvement. Market survival has required metal-cutting companies to find new ways to gain productivity and run more efficiently with fewer resources. It’s also required them to focus on product and manufacturing innovation by streamlining production, maximizing efficiencies, and adopting new manufacturing equipment and technologies.
As explained by an article from IndustryWeek, this type of “manufacturing innovation” is fairly common in today’s market as manufacturers seek to gain a competitive edge through reduced costs and speed to market. However, one form of innovation that many companies fail to embrace is what IndustryWeek defines as “business model innovation.”
“Probably the most difficult type of innovation for manufacturing CEOs, however, will be in catalyzing business model innovation,” the article states. “The fact is that traditional business models are coming under increasing pressure as new, more nimble competitors take advantage of their agility to create and dominate new market segments and sales channels.”
The article goes on to explain that today’s demanding business environment requires manufacturing executives and their management teams to think more holistically about innovation, their operating models, and even how their products and services meet their end customers’ needs. Put simply: Innovation needs to touch every aspect of your industrial metal-cutting operation.
What does that look like? IndustryWeek lists five fundamental ways manufacturers can be innovative and successful:
- Run at multiple speeds. The rate at which typically you invest and at which you may need to invest in the future can be dramatically different. Allow yourself to invest, and take advantage of new technologies, when you need to by integrating flexibility into your business plan.
- Recognize the inflection point. Stay on top of industry developments to ensure you don’t miss the point where an emerging trend becomes the next big thing. Missing out could mean the difference between expanding and shutting down.
- Create an innovative culture. Encourage employees to try new things. Motivate and reward breakthrough innovation while keeping in mind the risks and outcomes. Balance that culture with day-to-day operations.
- Adapt the business model. Change is imperative for survival. Whether you need to defend the company against a new competitor, respond to customer demands or seize an opportunity, be ready to adapt your existing business model and create new ones. The Internet of Things (IoT), data and analytics can dramatically evolve operations.
- Have a long-term vision. Develop a clear vision of how your innovation investments align to your long-term business goals. Share that vision with employees, suppliers, customers and shareholders.
This concept is certainly applicable to the metals industry. Aluminum producer Alcoa, for example, recently revamped its product portfolio to meet changing market conditions. As reported by Modern Metals, Alcoa has announced plans to close or curtail its refinery and smelting operations to focus on its rolled sheet products for the aerospace and automotive industries, for which products have more than doubled compared to the prior year.
Another example is Jett Cutting Service, Inc., a 30-year old shop featured here in a case study from the LENOX Institute of Technology. Starting out with just band saws, the industrial metal-cutting company has grown over the years to better serve its customers, acquiring new companies and expanding its capabilities to become a multi-faceted cutting service. From precision circular saw cutting to a lathe cut-off on round tubing, Jett Cutting has evolved into a whole processor that serves steel service centers, machine shops, and some producing mills.
As both examples illustrate, innovation within the metal and metal-cutting industries has more to do with adaptation and strategic planning than with ground-breaking “disruptive” innovation. In other words, no one expects your industrial metal-cutting organization to be the next Google, but the fact remains: Success requires innovation and evolution. Today’s industrial metal-cutting companies need to remain innovative in both their manufacturing operations and business models to meet changing demands and, more importantly, to achieve long-term success.
Is innovation part of your company’s strategic plan? What strategies can you implement to ensure long-term success?
January 20, 2016 / agility, best practices, continuous improvement, customer delivery, Employee Morale, industry news, Output, productivity, quality, ROI, Safety, workflow process
As smart phones and other mobile devices become ubiquitous among consumers, it’s not surprising that mobile technologies are also finding their way onto the shop floor. In fact, according to PwC’s 18th Annual Global CEO Survey, mobility is the top technology priority among industrial manufacturing CEOs.
For many companies, the choice to make their manufacturing operation “mobile” is strategic. As a recent article from Forbes explains, companies are designing mobility into new production strategies, processes, and procedures to gain greater accuracy and speed. “Augmenting existing processes with mobility is delivering solid efficiency gains,” the Forbes article states. “The net result is greater communication, collaboration and responsiveness to customer-driven deadlines and delivery dates than has been possible before.”
Of course, how you choose to use mobility in your operation will truly dictate its impact—both positive and negative. There are still a lot of managers who are hesitant to allow mobile devices on the shop floor, fearing that workers will be distracted and less productive. In some cases, those fears are warranted. One machine shop, featured here in Modern Machine Shop magazine, found that it was beneficial to completely ban cell phone use on the shop floor. While some employees resisted the change at first, the ban allowed the shop to avoid a hike in their insurance premiums, increased productivity, and eventually helped improve employee morale.
There are plenty of other ways, however, that manufacturers are using mobility for their benefit. Kawasaki Motors Manufacturing Corp., featured here in a case study, recently replaced its card-based Kanban system with a more efficient electronic method that could better manage its just-in-time parts system. Using tablets and a custom mobile software application, Kawasaki eliminated the waste of 4,500 Kanban cards per day, which ultimately led to $3,500 in operational savings per day and a quick ROI, the article states.
How can your shop incorporate mobility into your operation? LNS Research, a consultancy based in Cambridge, MA, lists nine key ways companies are using mobile devices in manufacturing environments. Below are the top-five uses (you can read the full list of nine here):
- Dashboards. Solutions providers have been offering performance dashboarding apps for a few years now, and many are taking it a step further by delivering role-based information that has been analyzed and contextualized for the specific personnel based on their information needs (for example, a plant manager versus an operator or quality manager).
- Quality Auditing. In the past, quality auditing in remote locations typically involved some form of paper. Today, on-site and off-site auditing is typically done within a smartphone or tablet application, offering better integrity of information and allowing audits to be standardized across multiple locations.
- Corrective Actions. Today, most solutions providers offer some form of mobile app to support interactions with the corrective action process. These apps typically leverage the native capabilities of mobile phones and tablets, such as GPS/location services, voice/visual recording, and more.
- Real-time Alerts. With nearly any type of mobile device, real-time alerts can be set up to streamline notifications based on some type of predetermined parameter.
- Electronic Work Instructions (EWI). Work instructions in general have greatly benefited from the digitization of manufacturing records. Now, thanks to mobile technology, it’s common for shop floor workers to reference EWIs on a tablet or smartphone as they follow a particular process or assemble something.
If mobility is something you want to bring into your shop, but you aren’t sure where to start, check out the feature, “7 Tips for Taking Your Operation Mobile,” published by American Machinist.
If mobility isn’t on your radar, you may want to reconsider. Slowly but surely, industrial manufacturers are finding that there is indeed “an app for that,” which means your shop may be missing out on some prime opportunities for cost savings or efficiency gains. In fact, according to Mike Roberts of LNS Research: “If you’re not on the path to using mobile apps to better manage your production operations, you’re seriously at risk of being stuck in the past.”
How could mobility help your machine shop function better?
December 1, 2015 / agility, circular sawing, continuous improvement, Cost Management, industry news, LIT, optimization, productivity, quality, ROI, strategic planning
Last month, executives from the metal forming, fabricating, and welding industries visited Chicago to walk the aisles of McCormick Place for Fabtech 2015. As to be expected, the trade show featured hundreds of new products and technologies. However, many are saying this year’s show was about more than just the latest gadget.
“A certain excitement permeated this year’s show, and it wasn’t just about this incredibly fast laser, that press brake that eliminates setup time, or that welding power source that connects to the cloud and simplifies welding parameter selection,” writes Tim Heston, senior editor, in a column appearing on thefabricator.com. “It was about how all these technologies and more can work together to make a shop better.”
Indeed, it seems the attitude of Fabtech attendees mirrors what several industrial metal-cutting leaders have found: Investing in new technology isn’t about simply cutting a little faster or reducing set-up time. It is about optimizing processes so that every area of the company can benefit—from shop floor operations and maintenance to quality and finance. As Heston writes: “…a fast laser alone won’t ship a product out the door any faster. Even the smallest shops now are tackling front-office planning, scheduling, and often investing in software to streamline information flow throughout an organization.”
In other words, managers should look at the big picture before adopting any new “groundbreaking” technologies. How will this new technology affect your entire operation? What other processes down the line will be impacted by the benefits of the new technology? Do these other processes need updating as well?
That’s not to say, however, that companies should shy away from investing in new technology. In fact, a recent article from manufacturing.net stresses that cutting-edge technology is critical in today’s marketplace.
“The manufacturing sector is a fast-changing, cut-throat industry,” Martin Hurworth, states in the manufacturing.net article. “Firms who make their living there should be constantly looking to invest in new technologies to make their operations smoother, smarter and swifter, not to mention more cost-effective. In a globalized world, staying at the sharp end has never been more important.”
According to Hurworth, strategic technology investment allows companies to improve in three key business activities:
- Sustain Growth and Meet Demand
- Ensure Quality
- Innovate Effectively
Jet Cutting Service has found this to be the case. Last year, the industrial metal-cutting company reached a record-setting 1.1. million cut parts in just one month—310,000 more cut parts than it typically produces on a monthly basis. “I would like to believe that our increase in sales is due to investing in the latest cutting technology, which increases our capacity and production capabilities,” Vice President Mike Baron says in a case study from the LENOX Institute of Technology. “The newer technology also allows us to offer competitive pricing, which has led to many new customers.”
Although Baron admits the financial commitment can be risky, he finds that many technologies are worth the investment. “We need to constantly keep on top of the latest technology out there,” Baron states. “We don’t want to spend extra money, but if it’s going to cut 20 percent quicker than I do now…then we’ll go after it.”
For example, a few years ago, Baron had eight different circular saw blade manufacturers come into his factory to see which blades performed the best. While the process was time-consuming, Baron said it was a huge learning experience for his team and ended up giving him a 20-percent cost savings in the long run.
Will the latest metal-cutting tool or gadget be the answer to all of your operational challenges? Of course not. However, when carefully considered from a strategic, long-term perspective, it could set your company on a growth trajectory you may not have achieved any other way.
What metal-cutting technology investments could positively impact your bottom line?
November 10, 2015 / agility, continuous improvement, Cost Management, customer delivery, customer service, LIT, ROI, value-added services
As the market gets more and more competitive, a growing number of fabricators and other industrial metal-cutting companies are diversifying their services to gain an edge over the competition. For some, this might mean adding a value-added service to benefit existing customers, while for others, it might mean investing in equipment and training to serve new customers.
One specialty that could open up new opportunities is large-part fabrication. For shops that have been focused on smaller segments like home appliances and automotive, large-part fabrication could expand the customer base into areas such as agriculture, commercial construction, and aerospace.
Greiner Industries, for example, has spent the last few years investing in new technology to differentiate itself and has now earned a reputation for taking on extremely large and complex fabrication projects. According to an article from The Fabricator, the Mount Joy, Pa.-based Greiner now has the cutting, drilling, and welding capabilities to take on large railroad girder jobs.
“You have to keep looking for opportunities or areas to explore,” Frank Greiner, founder, told The Fabricator back in 2014. “That will never stop. That’s just part of growing.”
Quality Iron Fabricators, another fabrication shop based in Memphis, TN, is currently working on providing structural steel sections that will be used to build a 161-ft rocket test stand that will be used by NASA, reports Modern Metals. Like Greiner, Quality Iron Fabricators has made investments to better serve large-part customers. Specifically, the fabricator has invested in an integrated fabrication system that includes an automated material handling system and software to connect machines to each other. President Brian Eason tells MM that his company is also looking to revamp its production line to make it even more efficient.
“We always strive to get better at everything we do, and this has been a key part to improving our process,” Eason says in MM.
As both examples demonstrate, moving into large-part fabrication offers great opportunity, but it also requires careful consideration and, usually, some investment. If your fabrication shop is considering large-part fabrication, we have gathered the following considerations based on an article from Canadian Metalworking:
- Choose equipment carefully. Machines designed to handle oversized material can take up a lot of floor space. “When looking for equipment to cut large parts it’s important to make sure that the machine is built rugged enough to support all tools over a large working span,” Brad Williams, national sales manager for Koike, tells Canadian Metalworking. In addition, make sure you choose equipment manufacturers that have a strong track record for building and supplying large format cutting systems.
- Consider automation and material handling solutions. Transporting large parts often requires two or more operators, which can pose safety issues and slow productivity. Automation and material handling systems can save on labor costs, reduce safety incidents, and increase efficiency. For extremely large and heavy parts, overhead crane systems are typically a better option than forklifts.
- Maximize productivity wherever possible. Operators often fatigue when fabricating large parts, especially in processes like bending. Brian Welz, product group manager for TRUMP, tells Canadian Metalworking that production accessories like bending aides can help minimize operator fatigue and maximize productivity.
- Base processes on application. For optimal results, large-part fabricating demands that equipment and cutting processes be defined based on the application requirements, Douglas Shuda at ESAB Welding & Cutting Product, tells Canadian Metalworking. Plate size and material thickness are also important considerations when exploring large-part fabricating.
Even if large-part fabrication isn’t a good fit for your shop logistically or economically, perhaps it is time to consider taking on some new capabilities to better serve your customers. According to a white paper from the LENOX Institute of Technology, in addition to higher quality and tighter tolerances, a growing number of customers are asking fabricators to provide value-added services. This provides shops with a prime opportunity to differentiate from the competition.
What new services or capabilities could add value to your existing customer relationships and, more importantly, open the door to new relationships?