August 20, 2017 / best practices, blade failure, blade life, blade selection, bottlenecks, continuous improvement, LIT, operator training, predictive management, preventative maintenance, productivity, quality, workflow process
While some downtime is inevitable, more and more forges and other industrial metal-cutting companies are discovering that proper maintenance and proactive care of equipment can significantly reduce its occurrence.
The problem is that maintenance departments are typically busy putting out fires, which pushes anything “preventative” to the side. Why take the time to stop a potential problem when there are enough real problems happening right now?
However, as stated in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, proactively addressing maintenance issues allows managers to reduce costs, increase blade and tooling life, and, most importantly, avoid costly mistakes. “With a simple check-list, operators can enhance their knowledge base and positively affect performance on the shop floor,” the eBook states.
What does this look like in practice? According to the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, operators can conduct daily preventative maintenance (PM) checks in less than 10 minutes. Programs can be as detailed as a manager feels is necessary, but in a band saw environment, the following are a few key checkpoints to include:
- checking coolant levels
- cleaning saw blades of debris
- visual tests of critical tooling elements such as the feed system and lasers
- double-checking parameter settings (i.e., speed and feed rate)
Although many shops conduct PM checks at the start of each shift, there are several ways managers can schedule their PM procedures. In a recent blog, maintenance software provider SM Global offers four possible PM schedules:
- Date based: Schedule PM checks every X amount of days, weeks or months. So, for example, you can have a maintenance task scheduled every 5 business days, on every Friday, the second Monday of every third month, every January on the first Wednesday and so on.
- Meter based: There are two different meter types. In one, you schedule maintenance every time a meter reading increases or decreases by a certain amount. For example, an oil change when a meter reading increases by 3000 miles. The second type is a batch meter. You schedule maintenance after an equipment processes X number of units. For example, replace a bearing every time the equipment produces 500 widgets.
- Alarm based: You schedule a maintenance task every time an alarm condition happens. For example, an alarm could be excessive vibration on a machine. You can schedule a PM check on the machine when this alarm occurs.
- Relative to another task: Start a new maintenance task when another task completes. For example, order more coolant every time you clean your fluid/lubricant reservoir and screen (typically every 3 months).
If your metal forging operation doesn’t have a current PM program in place, you may want to consider working closely with your equipment and tooling supply partners to set up daily, monthly, quarterly, and annual PM schedules. In addition to helping you create checklists, many provide complimentary annual or bi-annual PM check-ups, which can provide more in-depth equipment diagnostics.
August 15, 2017 / best practices, blade failure, bottlenecks, continuous improvement, human capital, LIT, operator training, productivity, quality, Safety, workflow process
A top goal of every operations manager is to reduce error on the shop floor, whether it be mechanical error or human error. While 0% error rates are pretty hard to achieve, the reality is that even a small percentage of error can quickly add up.
An article from Competitive Production puts this into perspective:
“If things are done correctly 99 percent of the time, that equates to two unsafe landings at Chicago’s O’Hare International Airport each day; 16,000 pieces of lost mail each hour; 20,000 incorrect drug prescriptions each year; or 500 incorrect surgical procedures completed each week. In manufacturing, the slightest of errors, for example one-tenth of a percent, can have a significant impact on a company’s financial performance and profitability.”
When it comes to band sawing, error remains a top concern for managers. As Matthew Lacroix of LENOX explains here, fabricators and other metal-cutting shops have three main areas of concern regarding their band saw processes. “The top frustrations that we repeatedly hear from fabricators are machine downtime, blade failure, and operator error,” he tells Canadian Metalworking. “In each case, there are steps they can take within their own organizations to manage the problems.”
The white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, provides a few steps managers can take to reduce error in their band saw department:
- Optimize workflow. Reducing error and increasing productivity often go hand-in-hand, and taking steps to optimize workflow often accomplishes both. This typically includes analyzing equipment placement, material flow, and ergonomics. Even something as simple as adjusting the height of staging tables can make a difference. By reducing the amount of times an operator handles the material, managers can improve operator efficiency, reduce the chance for error, and improve safety.
- Implement accountability procedures. Without a paper trail, there is no way to account for errors when they happen. One-over-one verification procedures can be used to ensure that operators are following the correct procedures and running saws at the proper settings. Band saw operators, for example, could be required to sign-off on paperwork once they have set up equipment and performed the initial cuts. Another operator or supervisor can then sign off to verify that proper procedures have been followed.
- Make operator training an ongoing procedure. Most shops have multiple shifts, which means that inexperienced night-shift operators may be running the same machinery as seasoned day-shift operators. This often causes inconsistencies in quality and productivity. By instituting regular operator training, managers can level the shop floor talent and add consistency to production procedures. Managers can discuss topics such as proper blade selection and use, scrap rates, and material requirements. What other strategies has your machine shop implemented to reduce error?
August 10, 2017 / best practices, continuous improvement, employee incentives, Employee Morale, human capital, lean manufacturing, LIT, operator training, productivity, resource allocation
Continuous improvement and lean manufacturing are certainly not new concepts to today’s fabricators. The numerous benefits of “getting lean” have been widely accepted, which means that most shops have already undergone some type of improvement initiative. In many cases, understanding the benefits of lean manufacturing is not the challenge. The real challenge is making the initiative stick long enough to produce results.
Unfortunately, that is often not the case. Using a hypothetical example, an article from The Fabricator explains that it is not uncommon for a fabrication company to go through four or five different improvement initiatives, none of which end up successful. The problem, the article states, is that engineers and managers may make changes to the way employees do their work, but they really don’t spend enough time helping operators and other employees understand why or how to do it. Even if everyone is often willing to take on the lean transformation, managers need to teach everyone the “what, why, and how” behind the lean principles.
In addition, there are often employees that are hesitant to embrace improvement initiatives like lean manufacturing. Some may even actively fight against it, even while performing their assigned lean tasks.
The goal for any manager should be to not only get workers to adopt lean principles, but to fully embrace them. Getting everyone—from the top down—is the only way a shop will start seeing results. As explained in the eBook, Five Performance-Boost Best Practices for Your Industrial Metal-Cutting Organizations, for lean to be successful, “it must permeate the business silos and receive universal backing amongst senior management and employees.”
How can managers accomplish this? A recent article from IndustryWeek offers four ways fabricators can get even the toughest employees on board with lean initiatives:
- Don’t Gloss Over the Fact that Challenging Times Lie Ahead. Instead of minimizing potentially negative consequences of the looming change, state flat out that some individuals will face more adversity than others. Much of this has to start from the top. The unknown intimidates, frustrates, and creates emotional insecurity. If leadership communicates and exhibits its vision, then change becomes the catalyst for improvement.
- Evaluate Current Staffing. Lean management is not synonymous with layoffs. However, some team members are not open to working in a lean culture. They may not agree with lean philosophies, nor do they want to better understand these principles. If you retain these individuals as company culture evolves around them, you are not benefiting them by allowing them to continue working for a lean company. Consider respectfully transitioning recalcitrant team members out of their positions.
- Pre-plan Team Communications. Use rich communication mediums to announce change. Face-to-face communication cannot be overvalued as a means to convey positivity, commitment, and optimism. An “all hands” meeting is an appropriate venue for the initial announcement. Do not make a habit of distracting teams from their primary responsibilities with frequent updates.
- Highlight Empowerment Versus the Increase in Responsibilities. Team members accustomed to traditional workplace cultures will not readily evaluate their own actions and suggest process improvements. This type of self-evaluation may be completely foreign to them. Initially, many team members will find the concept of increased responsibility daunting rather than empowering. To teach lean thinking, strive to make lean ambassadors out of the organization’s influence drivers. Focus on those who can deliver change and who will become not only the informal leader on the floor, but also the industrial athlete of the cell.
While changing processes is certainly a huge part of any lean manufacturing journey, getting people to accept, embrace, and understand the changes is the first and most important step a shop can take. As many fabricators have discovered, missing this critical step could mean the difference between seeing results and hitting another dead end.
August 5, 2017 / best practices, continuous improvement, Cost Management, industry news, LIT, operations metrics, operator training, productivity, quality, Safety, strategic planning
Safety is one of those issues that every manufacturer knows is important, yet as evidenced by the unending list of OSHA fines, it is pretty clear that it often slips through the cracks. Even big name companies like Exxon can fall short.
Put simply, your manufacturing operation can never be too safe. Like any other process or initiative, safety should be approached with continuous improvement in mind. This means that service centers, as well as any other manufacturing operation, need to continually reevaluate their safety procedures and processes to look for areas for improvement.
The manufacturing industry as a whole is promoting this type of mentality, knowing that “safety first” needs to be more than just an underlying principle. It needs to be an ongoing, active practice. The Metals Service Center Institute (MSCI), for example, recently teamed up with the National Safety Council to offer ongoing, relevant safety tools and resources to its members. “Advocating for an industry-wide safety culture is a critical part of all that we do at MSCI,” said M. Robert Weidner, III, MSCI president & CEO. (You can access MSCI’s resources here.)
To help service centers keep safety at the forefront, the LENOX Institute of Technology (LIT) has researched some best practices being used by industry leaders. Read below to discover some safety strategies and the additional benefits they can bring to your service center:
- Implement Ongoing Safety Training. Almost every manufacturer requires new hires to undergo initial safety training; however, it doesn’t take long for an operator to take safety for granted and minimize its importance. That’s why many companies are starting to expand their safety training requirements. McInnes Rolled Rings, a forging operation featured here in Forging magazine, says that instead of just requiring new employees to have basic safety training session on day 1, it now requires additional safety training on Day 8, Day 30, Day 60 and Day 90. In addition, the company tells Forging that it conducts annual safety training for all associates (including office personnel) and has team leaders conduct “Toolbox Talks” throughout the year.
- Use Visual Devices. Don’t underestimate the power of visual safety reminders. LENOX Tools, for example, has implemented a Safety Sticker program, which visually displays whether or not its operation has had any safety incidents. Sticker dispensing stations and a safety calendar are located at every entrance to the facility, and every employee is required to put on a green sticker with the number of days “accident free” written on it. When a recordable accident occurs, everyone in the facility changes from a green sticker to a red sticker for a seven-day period. After seven days, everyone reverts back to the green sticker. According to LENOX, the program has been “a good rallying point for the facility and builds energy around safety.”
- Leverage Mobile Technology. Another way to encourage and enforce safety procedures is to utilize mobile technology. As discussed in this article from LNS Research, a growing number of manufacturers are using mobile devices and apps that require operators to log-in before using a particular machine, either as part of training or everyday tasks. Once logged in, the system can validate if that operator has completed a required training, read an update to a quality specification, and so on. If that person has not done so, the system will not let him or her proceed. Many companies are also utilizing digital checklists. Shops can use this digital approach to keep a record of what items an operator has checked off, as well as anything that has to be overridden on the checklist for a process to move forward (for auditing purposes).
- Undergo an Ergonomic Study. 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. By making ergonomic improvements, your operation will almost automatically be safer. That was the case for California-based Earle M. Jorgensen Company (EMJ), featured here in a white paper from LIT. After performing an in-depth ergonomic study at one of its metalworking facilities, EMJ made several changes on the shop floor, including repositioning band irons and adjusting the height of staging tables. As a result, the service center was able to reduce employee injuries, improve operator efficiency, and increase output.
- Track Near Misses. As Modern Machine Shop reported in a column by Wayne Chaneski, one way to increase safety in a manufacturing environment is to report what he calls “near misses.” A near miss is an incident that didn’t result in medical attention or time away from work, but could have. Tracking near misses can predict potential workplace accidents and provide an opportunity to prevent them from occurring in the first place. Some common causes of near misses include electrical cords, hoses, or tubing on the floor; sharp objects inside a drawer; low-hanging objects; unsecured ladders; a hot tool or piece of equipment left out without a warning tag; and improperly secured items in cabinets. According to Chaneski, the best way to track near misses is to encourage employees to report them and to add them as a category during internal safety audits.
- Talk About It—Often. Perhaps the best way to reinforce the safety message is to talk about it—a lot. Structural Steel of California, a leading industrial metal-cutting company featured here, is intentional about making sure that employees know that safety is a critical aspect of the metal products it fabricates, and that mindset has evolved into an overall culture of safety within the company’s two North Carolina facilities. The manager holds a safety meeting every morning with the operators and a safety committee meeting every month. In addition to enforcing the safety message, this constant communication provides ample opportunities for the manager to discuss any other production issues that need to be addressed.
August 3, 2017 / best practices, continuous improvement, lean manufacturing, LIT, production planning, productivity, strategic planning, workflow process
Over the last 20 years, lean manufacturing, Six Sigma, and other improvement techniques have changed the face of manufacturing. Kaizen programs, 5S, value-stream mapping, and other lean strategies have rendered impressive results in high-volume manufacturing plants around the world. However, not every lean principle is an off-the-shelf solution for operational efficiency. This is especially true for high-mix, low-volume manufacturing environments.
Industrial metal-cutting shops are often juggling multiple jobs—many of them custom and almost none of them the same. Production requirements, lead times, and due dates can vary, which makes forecasting and traditional lean concepts difficult to apply. In fact, according to the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, many small, high-mix operations don’t even attempt to implement traditional lean techniques because they are typically more successful in higher production environments.
The good news, however, is that lean manufacturing is evolving. “A growing number of high-mix, low-volume operations are tweaking traditional lean methodologies to their specific situation,” the eBook notes. “Lean manufacturing techniques can be modified to increase efficiency in even the most customized metal-cutting operations.”
For example, according to an article from Canadian Metalworking, one way to achieve operational excellence in a high-mix manufacturing environment is to create a mixed-model value stream. This begins by creating “product families” or groups of products that have similar process flow and work content. “The next step is to create one current-state map per product family and then a future-state design for that family that can achieve operational excellence,” the article states.
There is no question that this task can be complicated when dealing with a variable product mix. To help managers successfully achieve operational excellence in mixed model production, Canadian Metalworking offers the following 10 guidelines: (You can read the full article here.)
- Do you have the right product families? Create product families based on similar processing steps and work content, not brainstorming.
- What is the takt time at the pacemaker? Determine how often the pacemaker must produce a part to keep up with customer demand for the product family.
- Can the equipment support takt time? Determine if existing machine capacity can support the product family within the established takt time.
- What is the interval? Calculate how often the pacemaker will cycle through and produce all the parts in the product family.
- What are the balance charts for the products? Balance the work content, per operator, to takt time to create continuous flow through the pacemaker process. There will be different balance profiles for each product within the family.
- How will we balance flow for the mix? Determine how variation within customer demand and the product family will be handled, either by adjusting labor, sequencing, or work balancing.
- How will we create standard work for the mix? Standard work means establishing one standard way to build the products in the family, and then having everyone follow that method.
- How will we create pitch at the pacemaker? Pitch is a visual time frame that tells everyone in the value stream if they are on time to customer demand. The pitch created is tied to how often work is released to and taken away from the pacemaker.
- How will we schedule the mix at the pacemaker? Determine the mix that can be supported at the pacemaker, and schedule the pacemaker to handle variation within the product family.
- How do we deal with changes in customer demand? Customer demand can vary, and we need to pre-establish a Plan B to use when it does. Plan B might involve pulling a product or rebalancing the pacemaker.
Of course, this is just one example of how lean can be applied to smaller, variable manufacturing environments. For more strategies, check out the book Made to Order Lean by Greg Lane or these links of archived case studies published by Modern Machine Shop and The Fabricator.
While high-mix, low-volume operations certainly present a unique set of production challenges, there are several custom methods managers can put in place to reduce waste, optimize flow, and improve productivity. It may take a little research and some creativity, but leading-edge shops are finding that in today’s competitive market, the benefits are well worth the investment.
July 15, 2017 / best practices, continuous improvement, Cost Management, industry news, LIT, resource allocation, strategic planning
As we reported in last month’s blog, “Machine Outlook for 2017 and Beyond,” market conditions continue to look good for machine shops and other industrial metal-cutting operations. Even in a good market, however, industry leaders know it is important to continue to watch costs. Any edge you can carve out against the competition is beneficial.
According to the brief, “Resource Allocation Strategies for Leading Industrial Metal-Cutting Organizations,” this may require companies to think a little outside the box. “In the spirit of continuous improvement, best-in-class managers need to explore all of the ways they can save their operation time and money,” the brief states.
One way shops are reducing costs is adopting more sustainable manufacturing practices. Whether implementing strategic energy plans or adopting a few environmentally friendly practices, today’s industrial manufacturers are finding that “going green” can provide bottom-line savings.
As reported here by Modern Machine Shop, manufacturing consumes the equivalent of 3.6 billion barrels of crude oil every year—1/5 of all energy consumed in the U.S. Additionally, depending on the manufacturing process, energy can encompass as much as 50 percent of the cost of production. Based on these numbers, it seems reasonable to argue that not only do manufacturers have a social responsibility to reduce their energy usage, but they could save some money by doing so.
London-based sheet metal company Harlow Group, for example, was able to reduce electrical costs by approximately $38,000 per year after installing a new heating system, low-energy lighting, and implementing a formal shut-down policy for heavy equipment.
To help your machine shop begin the move toward sustainability, an article from ThomasNet.com describes three key steps:
- Analyze Your Current Organization’s Environmental Impact. Start by analyzing your energy usage. Determine how energy sources are used in your production processes and how they might influence the environment. It is also important to look at your operation’s water usage and the types of materials you are using on the shop floor. Are they recyclable or hazardous? How necessary are they to the production process?
- Reduce Waste Where You Can. Once you understand where your organization stands, you can take steps towards a more environmentally friendly facility. Fortunately, these steps don’t have to be giant strides; you can start small and make incremental, strategic improvements.
- Find Ways To Leverage Renewable Energy. Leveraging renewable energy is one of the best ways to create a more sustainable facility. Renewable energy options are plentiful, and they include sunlight, wind, rain, tides, waves and geothermal heat. In addition to saving on raw energy costs, you may also be able to take advantage of tax incentives, depending on the state you live in.
For some more specific actions your shop can take, check out this list of energy-saving tips from Michigan Manufacturing Technology Center, which includes ideas such as avoiding peak energy rate periods and checking for compressed air system leaks. You may also want to read this article from Canadian Metalworking that discusses eco-friendly coolants and coolant recycling.
Does your shop consider sustainability as a bottom-line operating principle? If so, what new practices can you adopt to keep your industrial metal-cutting company at the leading edge?
July 10, 2017 / best practices, continuous improvement, Cost Management, industry news, LIT, maintaining talent, operator training, productivity, quality, skills gap, strategic planning
Historically, the trend has been for metal companies to put process over people. The manufacturing industry’s shortage of workers with the necessary skills (also known as the “skills gap”), however, is forcing companies to allocate resources back to their workforce.
For many companies, this means changing the way they train and maintain talent, whether that means beefing up training programs or rethinking their hiring tactics. Rockwell Automation, for example, is working to recruit military veterans and leverage their unique skill sets. “We’ve been able to develop a truly groundbreaking program that will help solve a challenge critical to fueling the future growth of the manufacturing sector,” Blake Moret CEO of Rockwell Automation, states here in a press release. “Military veterans possess a unique combination of technical savvy and core work skills that makes them well-positioned for careers in today’s advanced manufacturing environments.”
Companies are also reevaluating how they are maintaining their talent. As lean manufacturing expert Jamie Flinchbaugh says here in IndustryWeek, you can’t “just hire talent and then leave it alone.” Continuous improvement applies to all areas of an operation, including training and maintaining talent.
According to Flinchbaugh, when it comes to building a strong team, manufacturers should consider the following:
- Put the right talent in the right place. Hiring is part of this, but so is organizational design. Too often Flinchbaugh says he sees organizations reward talent by taking them out of the place they perform the best. That’s like taking your best hitter on the team and making them a team coach before their retirement as a reward. So top salespeople become sales managers, and top engineers become engineering managers. Is that the best use of their talent?
- Talent is responsible for its own improvement. Your talent should hold the primary responsibility for their own development. A lean thinker should be encouraged to improve their talent in any skill that matters, whether personal or professional.
- Coach and train. Making the development of talent a core part of your business means integrating it into your management systems. This is not something to delegate to human resources. The hardest part of this is how you leverage your top talent. While not everyone is suited to coaching and training, leveraging your top talent to build more talent is the long-term play.
In a metal-working environment, it is also critical that operators and other employees feel valued. While the idea of empowering employees sounds a bit cliché, a growing number of managers are finding that operators who take ownership of their process or work area are invaluable. According to the brief, “Strategies for Training and Maintaining Talent in Industrial Metal-Cutting Organizations,” operator “buy-in” can positively affect all aspects of an industrial metal-cutting operation, including quality, productivity, and in the end, the bottom line. Similarly, when employees feel disconnected, those same business areas can be negatively affected. Strategies such as collecting feedback, goal setting, and incentives are good ways to encourage employee ownership from the start.
As the skills gap has proven, investing in talent is just as important as investing in technology and process. Metal-cutting companies—not to mention the manufacturing industry at large—can’t afford to neglect one of its greatest assets. In the end, building and cultivating high-quality talent is necessary for building and cultivating high-quality services and products.
May 20, 2017 / agility, best practices, continuous improvement, industry news, LIT, operator training, predictive management, resource allocation, strategic planning
The year started out on a high note for machine shops, and current reports suggest the upward trend will continue throughout 2017. How should machine shops respond?
A Bright Picture
The new year meant good things for machine shops and other industrial metalworking companies. According to the Gardner Business Index, the metalworking industry grew in January for the first time since March 2015, reaching its highest point since May 2014.
That momentum has continued throughout the year. Both February and March registered growth, with the Index hitting its highest points since March 2012. Growth continued in April as well, although at a slightly slower rate. However, as Steven Kline, director of market Intelligence at Gardner Business Media, states here, “Expansion is still the greatest it has been in three years.”
Customer segments are also experiencing growth. According to Kline’s report, power generation was the fastest growing industry in April, growing for the second time in three months. Twelve other industries recorded strong growth as well. Industrial motors/hydraulics/mechanical components grew at an accelerated rate for the fourth month in a row; aerospace continued its streak of growth at six months; and job shops and oil/gas-field/mining machinery also grew in April.
Other economic indicators point to good news. As reported here by Cliff Waldman, chief economist at the MAPI Foundation, manufacturing employment has now increased for five consecutive months, with an average of 14,200 new jobs gained per month. “Overall, this is the most convincing evidence that the broad manufacturing picture is starting to show some real improvement from years of weakness,” Waldman states.
Getting Smart for the Future
Yes, the near-term picture looks bright for machine shops. However, industry leaders can’t rest on their laurels and need to be sure they are prepared for where the market is heading. Perhaps the biggest trend happening within manufacturing is what many call the “fourth industrial revolution.” As explained in a previously published blog, the fourth industrial revolution (also called “Industry 4.0”) is the advent of the long-awaited “smart factory,” in which connectivity and advanced technologies are being used to streamline decisions, optimize processes, eliminate waste, and reduce errors.
Companies like EVS Metal, a precision metal fabricator headquartered in Riverdale, NJ, have already started thinking about what this means for their operation and how they can adapt. From a practical standpoint, shops can start by equipping components and machines with necessary Industry 4.0 features, such as sensors, actuators, machine-level software, and network access to measure productivity of metal-cutting equipment.
However, according to an article from Production Machining, companies need to more than just invest in technology. Matthew Kirchner, managing Director, Profit 360, explains here that manufacturers that wish to capitalize on the coming revolution will require a new level of knowledge, aptitude, and disciplines in the following four areas:
- Understanding throughput: The ability to understand a basic throughput equation, and how throughput is affected by machine speed, setup time, white time between operations, first pass yield and the like is fundamental to succeeding in a cyber-physical plant.
- Jacks of all trades: The lines between departments become increasingly grey as information and manufacturing technology connect and integrate them. The manufacturing operation of the future requires team members that can work fluidly across myriad industrial equipment and technology.
- Networking and control systems: Manufacturing technology will evolve relatively quickly to where every device has its own IP address. This will create what has been called a “hyper-connected Smart System of Systems” where endless streams of data are collected. A working understanding of this interconnectivity will be necessary.
- Inform-Actionable Data: The challenge of the manufacturer will not be a lack of data, but too much of it. Collecting, scrubbing, discerning, and analyzing this information will be fundamental to our ability to improve performance and process. Thus, industrial maintenance, factory automation, IT, and accounting will no longer be individual members of different departments or teams. Instead, they will become members of the same team whose charter is to drive enterprise-wide performance improvements using the tools now afforded them by the advent of cyber-physical systems.
Equipped for Success
As machine shops move into the second half of the year, the key will be to not only make the most of current market conditions, but to also strategically prepare for the future. Like any trend, it will take a while for the fourth industrial revolution to fully materialize. However, many experts are saying that industry leaders are embracing this next generation of manufacturing and, more importantly, are starting to make investments. Is your shop in a position to do the same?
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.