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.
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 25, 2017 / continuous improvement, Cost Management, human capital, industry news, lean manufacturing, LIT, skills gap, strategic planning, supply chain
Broad spectrum forecasts continue to look positive for manufacturers. As reported in our 2017 Industrial Metal-Cutting Outlook, experts believe that 2017 will be a year of growth for industrial manufacturing. Specifically, the latest outlook from MAPI says that industrial manufacturing growth should be 1.2% in 2017 and then accelerate to 2.6% in 2018.
Manufacturers are also optimistic. According to a May survey from the Institute for Supply Management, U.S. manufacturing and services executives expect to see increased revenue, hiring, and capital spending in 2017, reflecting confidence in the economy, reports IndustryWeek. Even after a short decrease in manufacturing orders in April, ISM’s gauge remains well above the average for all of 2016 and “indicates healthy optimism among factory managers,” according to Bloomberg.
A Focused Forecast
What does this mean for metal forges? From a big-picture standpoint, this is all good news. Economic health directly impacts automotive and other customer segments that carefully choose how they spend money with forges and other supply chain partners.
However, as stated in the article from Forging magazine, “Forgers are manufacturers, of course, but drawing their circumstances out of the mass of data represented by surveys like PMI or similar sources is futile.” In other words, it is more beneficial to look at segment forecasts than it is to look at broad manufacturing outlooks.
To give a more accurate outlook picture, Forging conducts its own annual survey with forging executives. Below are some results from its 2017 Forging Business Outlook:
- Shipments: About 62% of all respondents expect their operations’ tons/shipped to rise in 2017, compared to 2016. Only 6.6% of the total expect the coming year to deliver an overall decline in shipments, and 31.1% are forecasting 2017 results will be “about the same” as the 2016 total.
- Spending: Over 65% of all respondents said they have capital spending plans for 2017. For 50.8% of these respondents, the investments will take the form of new manufacturing equipment; 11.1% plan to expand their existing operations, and 3.2% plan to invest in new production plants.
- Challenges: When survey respondents were asked to identify the problems they anticipate lying ahead in 2017, topping the list is “lack of orders” (43.6%), followed by “foreign competition” (38.2%), “general labor shortage” (27.3%), “energy costs” (25.5%), and “higher labor costs” (25.5%).
- Opportunities: For 2017, 25.0% of respondents see commercial opportunity in automotive components, while 20.0% see that opportunity in fuel-efficient engine designs. Only aircraft/aerospace components (16.7%) and alternative-energy systems (10.0%) drew respondents in double digits.
Trends to Watch
Like most industrial manufacturers, forges remain committed to continuous improvement, regardless of market conditions. Because lean manufacturing is nothing new, today’s forges need to think outside the box—or beyond the shop floor—to find new improvement opportunities. As stated in 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, Weber Metals of Paramount, CA and Ulven Forging of Hubbard, OR have taken their lean manufacturing and other continuous improvement activities “above the shop floor” and into the front office. According to Forge magazine, this has resulted in numerous benefits for the companies, including improvements in traceability, quoting, product flow, and scheduling.
Another big trend within the forging industry is a commitment to technological advancement. Last year, the Forging Foundation (FIERF) and Forging Industry Association revised the industry’s Forging Technology Roadmap to develop, support and fund technology and research to benefit the North American forging industry. In early 2017, The FIERF Board approved funding for five new technology projects. Below are three of those projects, as reported by Forging magazine: 1. Forging of Magnesium Alloys for Automotive Applications. Professor May Wells, University of Waterloo, Dept. of Mechanical and Mechatronics Engineering, and two graduate students, are engaged in the project that seeks “to design, build and validate an automotive, fatigue-critical component made of forged magnesium.” Ford Motor Co. is the industry partner to their research. 2. High-Strength, High-Toughness Microalloyed Steel Forgings Produced with Relaxed Forging Conditions and No Heat Treatment. Professor Anthony DeArdo, University of Pittsburgh, Dept. of Mechanical Engineering & Materials Science, and a graduate student, are seeking a “new composition and process route for making high-strength, high-toughness forging with minimum die wear, limited distortion and no heat treatment.”
1. Forging of Magnesium Alloys for Automotive Applications. Professor May Wells, University of Waterloo, Dept. of Mechanical and Mechatronics Engineering, and two graduate students, are engaged in the project that seeks “to design, build and validate an automotive, fatigue-critical component made of forged magnesium.” Ford Motor Co. is the industry partner to their research.
2. High-Strength, High-Toughness Microalloyed Steel Forgings Produced with Relaxed Forging Conditions and No Heat Treatment. Professor Anthony DeArdo, University of Pittsburgh, Dept. of Mechanical Engineering & Materials Science, and a graduate student, are seeking a “new composition and process route for making high-strength, high-toughness forging with minimum die wear, limited distortion and no heat treatment.”
3. Development of a Manufacturing Process for High-Power-Density Hollow Shafts. Professor Gracious Ngaile, North Carolina State University Dept. of Mechanical and Aerospace Engineering, with two student researchers will work to develop a cost-effective manufacturing process for high-power-density hollow shafts. The project’s industry partner is Mid-West Forge.
For a complete explanation of all five projects, you can read the entire article here.
Market forecasts aside, one thing is clear—today’s metal forging operations need to stay relevant and focused on the future. Improvement should continue to be the goal in 2017 and beyond, both in terms of process and technology. Forging may be a mature industry, but as the editors at Forge have stated over and over, with the efforts of industry leaders, it can still be advanced manufacturing.
In what areas can your forging operation advance in 2017?
May 5, 2017 / agility, best practices, continuous improvement, Cost Management, industry news, optimization, strategic planning
Although 2016 didn’t end on a high note for metal service centers, many industry leaders and experts are confident about 2017.
Overall, 2016 wasn’t a stellar year for service centers. According to the Metals Service Center Institute (MSCI), service center shipments in the U.S. and Canada finished 2016 with year-over-year declines in both steel and aluminum. Inventories mostly remained below prior-year levels, though stocks crept up at year’s end.
Coming into 2017, forecasts were hopeful but guarded. As reported here by Metal Center News, analysts like Chris Kuehl of Armada Corporate Intelligence warned that factors such as the interest rates, inflation, the strong dollar, government grid lock, and tax reform would all play a role in determining the health and strength of the U.S. economy in 2017. In late January, M. Robert Weidner III, president and CEO of MSCI, voiced his concerns and urged the new Trump administration to take serious and immediate action to restore growth and to help the industrial metals supply chain fully recover from the lingering effects of the Great Recession and government policy.
Confidence, however, is growing in recent months. As stated in LIT’s 2017 Industrial Metal-Cutting Outlook, metal service centers and other industrial metal-cutting organizations are getting more and more optimistic about the near future, and the latest market data looks promising.
After a flat February, U.S. service center steel shipments grew substantially across the board in March. Specifically, steel shipments increased by 9.7% from March 2016, and shipments of aluminum products increased by 13.0% from the same month in 2016. Inventory levels also showed improvement.
Meanwhile, industry leaders like Reliance Steel & Aluminum Co reported strong first-quarter results. According to the company, sales were up 11.9% from the first quarter of 2016 and up 17.4% from the fourth quarter of 2016. Gregg Mollins, president and CEO, said that improved demand, higher metal pricing, and continued strong execution resulted in record quarterly gross profit dollars and Reliance’s highest earnings per share and net income since the first quarter of 2012.
“2017 is off to a great start,” Mollins said in a news release. “Both pricing and demand levels are better than they were a year ago, and we are optimistic with regard to increased infrastructure and equipment spending on the horizon. We will continue to focus on maximizing our gross profit margin while diligently managing operating expenses and inventory levels as well as maximizing market opportunities to drive our earnings higher.”
In an April press release, Ryerson said it is “cautiously optimistic on demand for metal products in the first half of 2017.” The company anticipates higher revenue for the first quarter of 2017 compared to the fourth quarter of 2016 and the first quarter of 2016, with higher average selling prices and higher tons sold for the current quarter as compared to both periods. The key, the company states, will be to see “how positive sentiment ultimately converts to real demand for industrial metals.”
According to a report from MetalMiner, positive sentiment was also evident among attendees and speakers at this year’s S&P Global Platts Steel Markets North America conference, held in Chicago in late-March. Presentations and forecasts were mostly optimistic, MetalMiner writes here, although there were differences in opinions of what attendees should focus on in the coming months.
One of the conference presentations, given by Roy Berlin, president of Berlin Metals; Donald McNeeley, president of Chicago Tube & Iron; and Michael Lerman, president of Steel Warehouse, offered attendees three ways service centers can offer more value to the market. As reported by MetalMiner, these included the following:
- Embrace change but find an identity. Berlin noted that finding an identity in the industry is key. “Decide what it is you’re going to do and do it well. No, do it great, actually,” he said.
- Do more with less. According to McNeeley, service centers have to interject more automation. He said they need to do more with less and they cannot drive input costs down any more. On output costs, McNeely said companies cannot get customers to pay a premium for the market, so the only thing left in that channel is “operational excellence.”
- Tackle your internal costs. Lerman concluded by sharing that his company stays competitive by attacking its main internal costs: logistics, scrap, safety and healthcare. He also said that in today’s volatile market, service centers should seriously consider learning how to use and apply financial hedges where appropriate. “I know we have been taking advantage of it, and I think it is going to be more and more important as we move forward,” he noted.
Another key strategy will be for service centers to think outside the box when it comes to spending—and saving costs. According to the news brief, Resource Allocation Strategies for Leading Industrial Metal-Cutting Organizations, managers focused on continuous improvement should explore all of the ways they can save their operation time and money. For example, if new equipment isn’t in the budget, perhaps second-hand equipment is an option. Although there is some risk in buying used equipment, when done correctly, this can be a cost-saving alternative for companies looking to expand their capacity or capabilities.
Onward and Upward
Most companies know by now that there are never any guarantees when it comes to the industrial metals sector. As stated in a recent article from Modern Metals, projections “still err on the side of caution, but much less so than their forecasts of previous years.” With renewed confidence and a few strategies in their back pockets, service centers can position themselves for both new opportunities and growth in 2017.
April 1, 2017 / benchmarking, best practices, continuous improvement, Cost Management, industry news, LIT, maintaining talent, operations metrics, optimization, performance metrics, productivity, skills gap, supplier relationships
While no one would likely call it a “boom,” recent months have provided good news for industrial manufacturing. Reports have been positive, and business confidence among metal-cutting companies and other industrial manufacturers is up. Experts admit that some challenges and risks remain, but most believe that growth will continue in 2017 and well into 2018.
There is no question that uncertainty has plagued the manufacturing sector for the last several years. Hints of recovery followed by sluggish growth have made it hard for many companies to trust that business was fully rebounding. Last year, terms like “cautiously optimistic” were being thrown around, but many were still wondering — “Are we there yet?’”
Reports and forecasts indicate that we are at least heading in the right direction—both globally and within the U.S. The JP Morgan Global Purchasing Managers’ Index (PMI) has remained above the neutral 50.0 mark throughout the past 13 months and registered 53.0 in February and March—its highest level in 69 months. According to the bank, the expansion in March “remained broad-based by product type, with PMI readings for the consumer, intermediate, and investment goods sectors all signaling further solid growth.”
Forecasts from Manufacturers Alliance for Productivity and Innovation (MAPI) also point to growth, although slower than some would like. According to the latest outlook, manufacturing growth is expected to be 1.2% in 2017 but then accelerate to 2.6% in 2018. Average annual manufacturing output growth is expected to be 1.5% between 2017 and 2020.
Recent data show U.S. manufacturing expanded in March, following a very strong February. The Institute for Supply Management Purchasing Managers’ Index (PMI) hit 57.2% in March, a 0.5 percentage point reduction from a record-setting 57.8% in February 2017. Of the 18 manufacturing industries, 17 reported growth in March, including Fabricated Metal Products and the Primary Metals industries. According to one survey respondent from the Fabricated Metals segment: “Regional business is strong. Hiring qualified team members has improved.”
Cliff Waldman of MAPI says that March data adds to mounting evidence that U.S. manufacturing output performance is on track for moderate improvement, relieving the factory sector from the sluggish growth that has plagued it since 2013. “Data on actual manufacturing output from the Federal Reserve are basically in sync with the recent ISM data as they show an acceleration of growth in U.S. manufacturing since the beginning of 2017,” Waldman said in a blog post. “However, the year-over-year improvement thus far is moderate. Nonetheless, the reasonably broad-based nature of factory sector growth in both January and February suggests growth stability.”
Business confidence among industrial metal-cutting companies and other manufacturers is also up. The first-quarter Manufacturers’ Outlook Survey from The National Association of Manufacturers (NAM) revealed that manufacturers’ optimism rose to a new all-time high in the survey’s nearly 20-year history.
According to NAM, the rising confidence stems from the hope that the new administration in Washington, D.C. will bring much-needed regulatory relief, as well as tax code reforms and a significant infrastructure package. “Indeed, business leaders are cautiously hopeful that pro-growth policies from Washington will allow the country to emerge from the sluggish expansion seen in the years since the Great Recession,” the association said in the report.
Metal companies are confident as well. According to industry leader ArcelorMittal, global apparent steel consumption is estimated to have expanded by 1% in 2016. Based on the current economic outlook, ArcelorMittal expects global apparent steel consumption to grow further in 2017 by between 0.5% and 1.5%.
In the U.S., Mittal says that apparent steel consumption (ASC) declined in 2016 by approximately 1.0% to 1.5%, driven in large part by a significant destock in the second half of 2016. “However, underlying demand continues to expand and the expected absence of a further destock in 2017 should support ASC growth in the U.S. of approximately 3.0% to 4.0% in 2017,” the company said in its 2016 Annual Report.
Sentiment about customer markets is also positive. Mark Millett, president and CEO of Steel Dynamics Inc., told Modern Metals that he expects growth in the energy sector and continued growth in construction spending, “especially for larger public sector infrastructure projects.”
And although there have been reports that automotive manufacturing peaked in 2016 and will decline in 2017, metals companies don’t seem too worried. AK Steel told MM that a richer product mix, including the premium pricing that can be obtained on newer, more specialized or custom grades, should help offset declines. “Our volumes are going to be fairly stable, and fairly steady compared to what they were last year,” Kirk Reich, AK Steel president and COO, said in the MM article.
Trends to Watch
That’s not to say that companies don’t still have some concerns. In late January, M. Robert Weidner III, president and CEO of the Metals Service Center Institute (MSCI), urged the new Trump administration to take serious and immediate action to restore growth and to help the industrial metals supply chain fully recover from the lingering effects of the Great Recession and government policy.
“The industrial metals sector needs action now,” Weidner said, noting that service center aluminum shipments are registering 20 percent below their pre-Great Recession peak, and carbon steel shipments from service centers are still down 30 percent. “The erosion in the U.S. industrial metals supply chain hurts our communities; erodes local, state, and federal tax revenue; and reduces the pool of well-paying U.S. jobs,” Weidner continued.
The strong dollar and reduced capital spending are also concerns. “Signs of wide, yet modest, improvement in global growth are the key drivers of better performance in U.S. manufacturing,” Waldman of MAPI says. “Unfortunately, the problems of a high dollar, a long-term capital spending malaise, and significant policy uncertainty remain to challenge the magnitude of the U.S. manufacturing improvement, even as the world finally provides much-needed support for U.S factories.”
Many industrial manufacturers also remain risk averse. In a recent PwC survey, only 30 percent of U.S.-based industrial manufacturing senior executives said that their companies were planning to increase spending on information technology in the subsequent 12 months. “There is a remarkable opportunity here,” PwC says in a blog post. “Yet the industrial manufacturing sector remains risk averse, unwilling to spend on new machinery, software, and talent during a period of protracted slow growth and limited proven solution.”
According to PwC, there are six actions industrial manufacturers can take to be more profitable in 2017. You can read the full list here, but the following four strategies are the most applicable to industrial metal-cutting companies:
- Leverage data and analytics in a new business model. By upgrading their technical capabilities, industrial manufacturers can bundle a variety of services enabled by connectivity and data, replacing the increasingly outmoded model of selling one big complex machine under warranty and a service agreement for maintenance and repair.
- Develop strategic partnerships. Industrial manufacturers must become more active players in the technology ecosystem, seeking expertise outside the industry in order to develop equipment connectivity, data analysis, and software that are beyond their current abilities.
- Mine operational data. If connected machines—the primary components of the Internet of Things (IoT)—are to be the backbone of industry in the near future, industrial manufacturers will have to figure out how to manage the data coming from an avalanche of sensors, integrated equipment and platforms, and faster information processing systems. There is a critical need to hire people who can mine these bits and bytes of information and work more closely with customers to use the data to improve equipment performance and open new revenue streams.
- Create strategies for talent development and retention. industrial manufacturers must purposefully map out an exciting technology strategy with specific benchmarks and achievements anticipated for the next 18 to 36 months—and then communicate this story clearly to job candidates. Even companies that have not yet felt the shortage of technology-savvy staffers need to take steps to prepare for it as the number of job openings in this field will continue to outpace the number of available hires for the foreseeable future.
Of course, a major technology overhaul may not be possible for every shop, but there are always improvements that can be made. As stated in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, thriving in today’s market requires companies to embrace change and focus on continuous improvement in all areas of their business.
“Whether implementing a lean manufacturing tool to improve processes or investing in training to develop people, proactive leaders are focused on making positive changes in their operations so they can quickly respond to today’s changing customer demands,” the eBook states.
Yes, the sentiment among industry players and experts is positive, but that doesn’t mean companies should put improvement activities on the backburner. Industrial metal-cutting organizations that keep a close eye on mega trends while continuing to optimize their internal operations may not only do well in 2017, but exceed expectations.
March 20, 2017 / best practices, continuous improvement, Cost Management, human capital, industry news, LIT, operations metrics, operator training, optimization, performance metrics, preventative maintenance, productivity, resource allocation, ROI, strategic planning
As we reported in a previous blog, capital spending among machine shops and other metalworking companies has been down for the last several years. This has been largely due to an unstable marketplace and low business confidence among shop owners. The good news is that industry reports suggest a rebound in the near future.
However, this dip in spending has caused many shops to take a closer look at the value of their existing equipment. When new equipment isn’t in the cards—and even if it is—it is important for today’s managers to understand the total cost of running their metal-cutting equipment and, even more so, what their total worth is from an operations standpoint.
Below are just a few ways shops can be sure they are looking at the value—not just the cost—of their existing equipment:
- Look at profitability, not just productivity. As explained here, overall equipment efficiency (OEE) is a critical metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time. According to a recent article from Modern Machine Shop, OEE is helpful, but it may not be enough on its own. “Managers have to balance decisions about maximizing the part-making capability of their equipment with decisions about the money-making potential of this equipment,” the article states. “OEE ratings alone provide an incomplete picture.” The article goes on to describe a measurement called Financial OEE (FOEE), a trademarked name for a new feature of a communications platform from Memex, which accounts for profitability. As stated in the article, “FOEE helps a shop understand how machine performance is helping (or hurting) profitability. This insight provides guidance—and incentive-to focus on the most appropriate productivity improvement efforts.” More specifically, FOEE is the current-state hourly profit divided by a value representing a world-class level of profit. This ratio compares what profit a company made with what profit could have been made at world-class levels. This information can help shops see the financial value of improving the machine’s performance. To read more about this metric, check out the full article here in Modern Machine Shop.
- See existing equipment as an asset. A common struggle among many shops is finding enough working capital to invest in new equipment. To help fight this battle, a recent article from Canadian Metalworking discusses how shops can use the value of existing equipment on the floor. “An asset-based lender, one who has experience in the manufacturing industry, will recognize that a good, brand-named machine tool that has been paid for in full, is an asset that can be leveraged,” the article states. “The equipment is used to provide collateral for financing new machinery, or as a resource to raise working capital to cover the additional costs of product development using existing equipment.” This does require the shop to have a full understanding of how existing equipment is evaluated and how it can be leveraged. To read some tips on properly evaluating and grading your machinery, click here for the complete article.
- Consider the value of maintenance. It’s a pretty simple fact: Equipment that isn’t running is pretty much worthless. This seems obvious, but many shops still put preventative maintenance (PM) and other housekeeping tasks on the back burner in an effort to stay productive. The irony is that this usually ends up hurting productivity in the long run. As stated in the brief, Cost Management Strategies for Industrial Metal-cutting Organizations, there are several aspects of equipment maintenance that contribute to overall costs. “From an operations standpoint, managers can keep costs under control by making sure metal-cutting equipment is operating as optimally as possible,” the brief states. This includes ensuring that equipment is running at the proper settings and that fluids are adequate. Closely monitoring blade life and maintenance reports are also critical. Perhaps the most important consideration is a strong preventative maintenance program. Programs can be as detailed as a shop feels is necessary, but a few checkpoints are outlined here in a white paper from the LENOX Institute of Technology. If limited personnel is the issue, check out this blog about getting equipment operators involved in daily PM tasks.
What other factors contribute to the value of your metal-cutting equipment?
February 28, 2017 / best practices, Cost Management, Employee Morale, human capital, industry news, LIT, maintaining talent, operator training, ROI, skills gap
The idea of investing in your employees sounds good in theory. In fact, many would say that this is a trend among manufacturers as they try to find ways to address the widening skills gap.
But as any metals executive knows, theories don’t pay the bills. Resources designated to employees may offer some “soft” benefits like improved morale, but is there any financial benefit to investing in employees?
Research shows that the answer is yes: Investing in employees does offer a good return on investment (ROI). In an article published by Harvard Business Review, Alex Edmans, professor of Finance at London Business School, says that research of stock market data clearly reveals that the benefits of investing in employees outweigh the costs and that employee satisfaction improves firm value.
“I studied 28 years of data and found that firms with high employee satisfaction outperform their peers by 2.3% to 3.8% per year in long-run stock returns—89% to 184% cumulative—even after controlling for other factors that drive returns,” Edmans writes in HBR. “Moreover, the results suggest that it’s employee satisfaction that causes good performance, rather than good performance allowing a firm to invest in employee satisfaction.”
According to Edmans, the findings have major implications. “For managers, they imply that companies that treat their workers better, do better,” he writes. “While seemingly simple, this result contradicts conventional wisdom, which uses cost control as a measure of efficiency.” (You can see all the details of Edmans’ findings here.)
Research conducted among forges and other industrial metal-cutting organizations show similar results. A benchmark study conducted by the LENOX Institute of Technology provides evidence that investing in human capital is critical for improving on-time customer delivery and driving higher revenue. Specifically, the survey of 100 industrial metal-cutting operations found the following:
- 64% of organizations that cite their operator turnover is decreasing year over year also report that on-time job completion is trending upwards—a critical correlation.
- 51% of organizations that reported reduced levels of operator turnover also said their revenue per operator had increased.
With data like this, it is hard to argue against the value of investing in employees. And while most executives think of pay raises when they think of employee investment, the good news is there are several ways forges can invest in employees. The following are just four possible approaches that go beyond pay:
- Listen. Operators that work with equipment every day are a valuable source of information. Be intentional about collecting feedback and implement some of their ideas.
- Equip. Invest in an employee’s future with incentives like continued education or management training. This shows employees that you value their personal success and provides them with new skills that can benefit your operation in the long run.
- Communicate results. Regularly share performance reports with employees by either posting them or discussing them in staff meetings. According to the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, sharing report results encourages accountability, provides motivation, and reminds operators that they are a critical aspect of the company’s success.
- Reward. Studies continue to show that goal setting and incentives are effective motivational strategies. Empower your operators by letting them set their own goals. This also holds them accountable for their work and promotes long-term “buy-in” and loyalty.
Investments of any kind usually present some risk, but in the case of human capital, it seems unlikely that there are any real threats or disadvantages. As research confirms, pouring resources into the very people that keep your company running is just good business—in theory and in practice.
How is your forging operation investing in employees?
February 20, 2017 / agility, best practices, blade failure, blade life, blade selection, Cost Management, customer delivery, industry news, LIT, maintaining talent, operator training, productivity, quality, resource allocation, skills gap, strategic planning
Thanks to an unstable marketplace, capital spending among machine shops and other metalworking companies has been down for the last several years. However, new reports suggest a rebound in the near future.
According to data from Gardner Business Intelligence (GBI), machine tool consumption peaked at $7.5 billion in 2014, and then contracted 3 percent in 2015 and 7 percent in 2016. Based on GBI’s Capital Spending Survey, projected total machine tool consumption in 2017 will be down an additional 1 percent. However, as reported here by Modern Machine Shop, the survey also shows that demand for core machine tools will increase in 2017 by 9 percent. In addition, GBI’s new econometric model for machine tool unit orders indicates that the rate of contraction in overall machine tool demand bottomed in July 2016 and will improve through the end of 2017.
Steven Cline, Jr., director of Market Intelligence at GBI, says the driving force behind the projected rebound is the need for increased productivity. “Shops need to increase productivity in order to remain competitive in a global manufacturing marketplace and to counteract the much-talked-about skills gap,” Cline writes in Modern Machine Shop. “More and more shops are turning to lights-out and/or unattended machining to achieve this increase in productivity, but new equipment, including machine tools, workholding and automation, is needed to run lights-out.”
As reported in the news brief, “Strategies for Training and Maintaining Talent in Industrial Metal-Cutting Organizations,” industrial metal-cutting companies have spent the last few years investing a lot of time and resources into their workforce. This has helped boost productivity and address some of the skills gaps, but the GBI survey suggests that shops are seeking a balance that requires investments in both human capital and equipment.
For example, Speedy Metals, an online industrial metal supply company and processor, recently upgraded its band saws to improve efficiency. “We had been searching for a reasonably priced, high-production band saw to add to our saw department and boost our production,” Bob Bensen, operations manager, tells Modern Metals. “We needed a reliable band saw that was going to stand up to the rigors of our fast-paced environment.”
Bensen went on to say that the new band saw, which has nesting capabilities and allows his operators to cut a variety of metals, has improved productivity. This, he adds, has given Speedy Metals a competitive edge and allows his company to continuously offer same-day shipping on quality parts and customized saw cuts that meet the closest tolerances.
Similarly, metal-cutting companies like Aerodyne Alloys are investing in new metal-cutting tools to further improve efficiency. Working with hard-to-cut metals like Inconel 718 and Hastelloy X, the metal service center decided to upgrade from bi-metal blades to carbide-tipped blades to get higher performance out of its band saws. After upgrading to a carbide blade, Aerodyne was able to tackle hard, nickel-based alloys, while also improving cutting time on easier to cut materials like stainless steel. According to a case study, this helped improve operational efficiencies at Aerodyne by up to 20 percent.
Of course, not all capital investments offer a good return. If your shop is considering investing in new equipment or tools this year, be sure to measure cost against productivity. According to the white paper, Selecting the Right Cutting Tools for the Job, managers need to weigh the following:
- upfront costs against overall operating and maintenance costs
- long-term productivity of a machine and its intended use
- equipment and blade life, as well as cost per cut
There is no question: Staying competitive in today’s market is tough. Demands for high quality and quick turnaround continue to increase, while cost pressures and issues like the skills gap remain. How will your shop respond? As the GBI survey suggests, it may be time to consider making some capital investments to ensure that your team is fully equipped to meet demands.
February 5, 2017 / best practices, continuous improvement, Cost Management, LIT, operator training, quality, ROI, strategic planning, supplier relationships
Keeping costs low and quality high are the top goals of just about every industrial metal-cutting operation. What’s interesting, however, is that many companies treat these two areas as independent variables. A recent series of articles from IndustryWeek (IW) shows why it is important for managers to look at quality and cost together. More specifically, it recommends that companies quantitatively measure the cost and benefits of quality.
“Tracking the financial impact of any support function is necessary in order to illustrate its value and garner continued support and resources from senior management,” the IW article explains. “This struggle is vitally important for quality management departments that continue to struggle with competing for resources. Once organizations get clarity on the financial impact of quality, the next step is to understand what practices and applications help improve the financial value.”
Unfortunately, this seems to be easier said than done. Based on the results of a 2016 survey conducted by the American Society for Quality (ASQ) and the American Productivity & Quality Center (APQC), approximately 60 percent of organizations say they don’t know or don’t measure the financial impact of quality. According to a report on the survey’s findings, “this lack of measurement may be attributed to not having a common method for capturing the financial impact.”
Many companies also do not understand the benefits of measuring quality and, instead, simply use it as a means of “compliance” or to keep customers happy. This is especially true in today’s market. As stated in the white paper, The Top 5 Operating Challenges for Metal Service Centers, customers continue to expect higher quality and tighter tolerances from their metal-cutting suppliers.
However, the IW article states that quality should be about more than “checking a compliance box” or basic due diligence. “Developing a solid foundation of quality assurance for continuous improvement, risk mitigation, and compliance provide immeasurable value,” the article states. “However, once that solid foundation is established, organizations can then leverage quality for the benefit of the customer and enhance brand image, thus serving as a competitive differentiator.”
In fact, based on ASQ and ASQC’s survey findings, “organizations that leverage quality as a strategic asset were more likely to report higher levels of financial gains from their quality program.” In other words, companies are using quality to drive profitability.
For more information on how to start measuring the cost of quality, click here to access IW’s four-part series. The articles look at the relationship between financial benefits and the following areas:
- the role and uses of quality,
- governance and standardization of quality,
- quality training for suppliers, and
- quality incentives and training for staff.
How are you measuring the financial impact quality has in your service center?