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?
March 1, 2017 / agility, blade failure, blade life, blade selection, customer service, industry news, LIT, strategic planning
As we reported in last month’s blog, experts consider aerospace to be one of the strongest industries. In one report from the Metal Service Center Institute, Richard Aboulafia, vice president of analysis at the Teal Group Corporation, said that aerospace was the only industry that saw growth acceleration through the recession and that the civil aviation sector in particular offers “major opportunities for long-term growth.”
This, of course, is good news for industrial metal-cutting companies serving this sector, and prospects continue to look good for the near future.
Set to Soar
According to a report from Defense News, the aerospace and defense industry set a new record for international sales in 2016, delivering $146 billion in exports. The article went on to say that 2017 could be “another banner year” for the defense and aerospace industries thanks to some anticipated government orders.
As reported by Defense News in December, the U.S. State Department approved in the first quarter of this fiscal year foreign military sales worth an estimated $45.2 billion dollars, which is said to be more than the total foreign military sales for all of fiscal 2016. “If approved by Congress and manufactured this year, some of those purchases could help rack up the export total for 2017,” the article states.
Deloitte’s 2017 Global Aerospace and Defense Sector Outlook is also optimistic. According to the Executive Summary, Deloitte expects industry revenues for the global aerospace and defense sector to resume growth, driven by higher defense spending. Following multiple years of positive but subdued rate of growth, Deloitte forecasts that sector revenues will likely grow by about 2.0 percent in 2017.
Forecasts from industry leader Boeing show similar trends. According to a January report from Reuters, Boeing expects to deliver between 760 and 765 commercial aircraft in 2017, topping 748 deliveries in 2016. Honeywell, on the other hand, forecasts a slight decline in 2017; however, the company expects deliveries will begin picking up in 2018 due to the strength of several new aircrafts entering service, AINonline reports.
This could spell opportunity for many industrial metal-cutting companies. As an article from IndustryWeek states, the aerospace industry is a good business in which to be competitive because the underlying drivers of demand are very strong. “Since the end of the Great Recession, new commercial aircraft orders have typically been double, and in some years, triple the number of annual deliveries,” the article states. “This reflects explosive growth of air traffic in the emerging world as rising incomes and declines in ticket fares make air travel affordable for increasing numbers of households.”
Equipped for Growth
As a critical part of the supply chain, there is no question that metal-cutting companies could reap the rewards of aerospace’s success. However, companies serving this sector need to be sure they are doing what it takes to win the business of both existing and potential aerospace customers, even if that means investing in advanced metal-cutting tools designed to meet the unique demands and shifting trends within the industry.
For example, as reported here by The Fabricator, Superior Machining & Fabrication has upgraded its 110,000-sq.-ft. machine shop to better serve the aerospace sector. “Changes include the addition of CAD/CAM software, a larger 5-axis bridge mill for hard metals, and a 5-axis SNK bridge mill,” the article states. “The company also has tripled the size of the quality room, added an assembly room, created a staffed tool/fixture room, introduced lean manufacturing/5S throughout the shop, and segmented the shop into cells with their own leaders/supervisors to help improve product flow.”
Shops should also be sure they are equipped to handle the material demands of customers, including the growing use of titanium in aerospace components. In a recent interview with American Metals Market, Rich Harshman of metals supplier Allegheny Technologies, Inc., says he sees a significant mix shift happening within the aerospace industry. Specifically, he says there is a “growing demand for our differentiated next-generation alloys as well as growing demand for our isothermal and hot-die forging and titanium investment castings.”
For metal-cutting operations, this means having a carbide-tipped band saw blade. Since titanium and other high-performance alloys are stronger and harder, they need more than the average bi-metal blade. Using a carbide-tipped band saw blade not only allows for the successful cutting of hard metals like titanium, it simultaneously offers longer blade life and faster cutting as well, according to the white paper, Characteristics of a Carbide-Friendly Bandsaw Machine.
In today’s unpredictable market, the truth is that no one really knows what the future holds for aerospace. However, industry leaders know that it pays to be prepared. Tailoring your operations and processes to meet the unique demands of the industries you serve will not only position you as a valued supply chain partner, but as an agile, industrial metal-cutting leader that is ready to fly when demand takes off.
February 1, 2017 / agility, customer delivery, customer service, industry news, LIT, strategic planning, supplier relationships, value-added services
Although there is still a lot of uncertainty surrounding the economy, many metals companies and experts are fairly optimistic about the short term. According to the January 2017 Precision Metalforming Association (PMA) Business Conditions Report, metalforming companies expect strong business conditions throughout the next three months.
Much of this optimism is based on positive forecasts for end-use markets. At the Metal Service Center Institute’s Forecast 2017 Conference, for example, economists and industry experts shared positive outlooks for several customer segments, giving the metals supply chain an idea of where to place their focus this year.
Below is a summary of segments that show some growth potential for industrial metal-cutting companies this year, as reported by MSCI. (You can access the full report here.)
- Aerospace. According to Richard Aboulafia, vice president of analysis at the Teal Group Corporation, aerospace continues to be the strongest industry and “the only one that saw growth accelerate through the recession.” Aboulafia said that commercial deliveries to China are setting a new record, but now, in part due to a lot of backorders on jets, it is the civil aviation sector that is offering “major opportunities for long-term growth.”
- Military. Aboulafia expects military aircraft to be stable and profitable, but says he is only cautiously optimistic about any growth over the next five years or so. The good news for steel and aluminum producers and processors, however, is he doesn’t expect a lot of competition. He believes that both civil and military aviation will “continue to favor legacy products” in their manufacture.
- Energy. Experts are the most optimistic about the renewable energy sector. “Federal tax credits are the heart of what is driving this industry,” said Andy Lubershane sector specialist at IHS Energy. “And those credits have now been renewed, so we are looking at a lot of strength for both wind and solar perhaps into 2021.” Costs are dropping in both segments, Lubershane said, and efficiencies are increasing, both good signs for industry strength.
- Construction. A continued demand for new housing is adding muscle to residential construction, according to Ken Simonson, chief economist at AGC of America. He judged the outlook for this sector as “very positive” for the foreseeable future.
While these are broad-based outlooks, they should provide metal-cutting companies with some confidence as they invest in existing customer segments or consider branching out into new markets. Knowing where the growth is located is a critical part of strategic planning.
Of course, the other key element is knowing how to best serve those customers—both new and existing. As reported in the news brief, “Strategies for Improving Customer Service and On-Time Delivery in Industrial Metal Cutting,“ on-time deliveries are no longer enough. Today’s customers are looking for trusted suppliers that go the extra mile. “Whether offering a new, value-added service or investing in certification, metal-cutting companies have several opportunities to cultivate a strategic customer relationship built upon premium service,” the brief states. (For some specific strategies for improving customer service, you can download the full news brief here.)
It is far too early to tell how this year’s market will shake out, but as the above forecasts show, there are several segments that offer growth potential for industrial metal-cutting organizations. With a little strategic planning and a strong focus on customer service, companies may find they can make this year one of their best.
January 10, 2017 / best practices, continuous improvement, customer delivery, customer service, industry news, LIT, quality
Like many industrial metal-cutting companies, fabricators face the constant challenge of balancing speed with quality. Although most managers understand that both are critical, tight schedules and rising customer expectations are making it more and more difficult for companies to keep up.
According to the brief, “Strategies for Improving Customer Service and On-Time Delivery in Industrial Metal Cutting,” managers need to be sure that when push comes to shove, quality comes first. “While speed and agility are certainly key attributes of any leading metal-cutting operation, they cannot come at the expense of accuracy,” the brief states. “In sawing, for example, if an operator increases the speed of the saw to get more cuts per minute without considering the feed setting or the material, the end result will be decreased blade life, possible maintenance issues, and lower quality cuts. In the same way, companies focused solely on speed and delivery without considering the quality aspect of customer service will likely see other areas of their business suffer, including customer retention and costs.”
Leading fabricators understand the benefits of keeping quality high, and many continue to invest in this part of their operations. Madden Bolt, a fabricator based in Houston, TX, recently announced that it has earned its AISC certification from the American Institute of Steel Construction (AISC). The goal of the certification, the company states, is to further demonstrate to customers its commitment to delivering quality steel products—a step Madden says only half of the steel fabricators in its category have taken.
According to a company press release, the six-month AISC certification process was worth the effort and directly benefits customers. Specifically, the certification requires Madden Bolt to implement effective procedures that safeguard the specifications and agreements within customer contracts, including a system that would resolve discrepancies or deviations from contract requirements. Madden is also required to ensure that material ordered complies with design and drafting specifications and that the materials are inspected to meet ASTM standards.
Many fabricators are also in the process of undergoing ISO 9001:2015 certification. The quality standard, which was recently updated, is a best practice for many industrial metal-cutting organizations, including Metal Cutting Service, Inc. in City of Industry, CA. David Viel, president of the specialty metal-cutting shop, admits that while it is hard to pinpoint the dollar benefit ISO 9001 certification has brought to his bottom line, it has definitely offered a return on investment. “Our quality, if I had to make an estimate, would be in the range of a 20% to 30% improvement,” he says here in a case study.
Of course, certification is just one way fabricators can invest in quality. There are several technologies available that help industrial metal-cutting companies enforce quality control, such as the inspection tools used by companies featured here and here in Modern Metals.
Regardless of how you decide to ensure quality within your shop, the point is that you put in the time and resources necessary to make it a top priority. In today’s fast-paced market, slow and steady does not win the race, but fast and sloppy doesn’t stand a chance.
In what ways has your fabrication shop invested in maintaining high quality standards?
November 25, 2016 / agility, best practices, blade life, continuous improvement, customer delivery, customer service, LIT, quality, strategic planning, workflow process
There is no question that customer expectations are changing. Companies like Amazon have raised the bar on what customers should expect from a service provider, whether that means Sunday deliveries or using the latest technology to improve the purchasing experience.
Not surprisingly, the so-called “Amazon effect” has found its way into industrial manufacturing. Supply chain consultant Lisa Anderson says she has seen this first hand with all of her manufacturing and distribution clients. On-time deliveries, she says, are no longer enough. Today’s customers are looking for suppliers that can offer faster lead times and value-added services that will benefit their bottom line.
While same-day delivery may not yet be feasible, industry leaders are finding several ways to enhance customer service. According to the brief, “Strategies for Improving Customer Service and On-Time Delivery in Industrial Metal Cutting,” the following are just a few of the strategies industrial metal-cutting organizations are using to better meet the demands of their customers:
- Put Quality First. Balancing speed with quality has always been a pain point for manufacturers, but as any metal-cutting company can attest, customers are now asking for tighter tolerances in half the time. Growing demand has made this an even greater challenge. While speed and agility are certainly key attributes of any leading metal-cutting operation, they cannot come at the expense of accuracy. In sawing, for example, if an operator increases the speed of the saw to get more cuts per minute without considering the feed setting or the material, the end result will be decreased blade life, possible maintenance issues, and lower quality cuts. In the same way, companies focused solely on speed and delivery without considering the quality aspect of customer service will likely see other areas of their business suffer, including customer retention and costs.
- Standardize Processes. Standardization is one of the key aspects of lean manufacturing. However, experts believe it is often the missing link within many so-called lean factories. By taking the time to standardize manufacturing processes, metal-cutting operations can keep production moving smoothly while also maintaining consistency. This is especially true for shops that run multiple shifts. For example, managers can create standardized cut charts so operators know the right blade to use for every process and type of job. Procedure checklists, sign-off sheets, and training reference documents are additional tools managers can use to maintain quality throughout the production process.
- Consider ISO Certification. Many industry leaders are finding that becoming ISO 9001 certified helps them maintain quality standards during times of high volume. The ISO standard is based on a number of quality management principles, including a strong customer focus, the motivation and implication of top management, and continuous improvement. The basic goal of the ISO standard is to help companies provide customers with consistent, good quality products and services, which, in turn, often brings business benefits like improved financial performance. In most cases, it is used to strengthen existing quality programs by making it a formal, documented procedure.
- Engage Customers. As many leading companies are discovering, the voice of the customer can be a valuable tool. According to research from consulting firm Aberdeen Group: “The customer has become much more than a product delivery channel and instead has morphed into an integral stakeholder with the clout to determine the viability of the organization, and their voice can no longer be taken for granted.” Of course, customer feedback requires some form of measurement, which can mean anything from tracking every call to your service center to having your sales team proactively reach out to customers for input. The goal is to both gather and leverage customer feedback to identify problem areas and reveal new service opportunities.
Many forges and other industrial metal-cutting companies are also diversifying their services to better serve new and existing customers. In fact, Ampco-Pittsburgh Corporation has built diversification into its corporate strategy. Earlier this month, the Carnegie, PA-based forging operation announced the acquisition of ASW Steel, Inc., a steel producer based in Welland, Ontario, Canada.Commenting on the acquisition, John Stanik, Ampco-Pittsburgh’s CEO, said:
“This acquisition is a very important element in Ampco-Pittsburgh’s strategic diversification plan. ASW’s proven broad expertise in flexible steel refining methods will provide us with the capabilities to manufacture the additional chemistries needed to expand our reach in the open-die forging market. The transaction also enhances our ability to grow in markets in which we currently participate and to add new markets for customers in the oil and gas, power generation, aerospace, transportation, and construction industries.”
What does it take to keep your customers satisfied and, more importantly, gain their loyalty? In today’s demanding market, most industrial metal-cutting companies would say high quality, competitive costs, and on-time delivery. However, those have always been the hallmarks of any good manufacturer, and some might argue that the last few years weeded out any companies that even remotely lagged in these key areas. How you “amp up” your customer service game will largely depend on what you already have in place, but the above strategies are just a few ideas to get you started.
What is one thing you could do to improve customer service in your forging operation?
November 20, 2016 / best practices, continuous improvement, customer delivery, customer service, lean manufacturing, LIT, productivity, ROI, strategic planning, workflow process
Research continues to show that leading industrial metal-cutting companies are focused on continuous improvement. For example, according to the latest Top Shop benchmarking survey from Modern Machine Shop magazine, “top shops” (defined as the top 20 percent of the 350 shops that were surveyed) are more likely to apply lean-manufacturing methodologies than other shops. They are also more likely to have cultures of continuous improvement. Specifically, the survey revealed that 62 percent of top shops have adopted formal continuous improvement programs compared to only 46 percent of other shops.
The survey also found that shops are implementing a variety of improvement tools to stay competitive. One tool in particular that is widely used is value-stream mapping (VSM). In fact, the survey found that almost 40 percent of top shops are using this lean methodology compared to only 20 percent of other shops.
As explained in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, VSM is a “paper and pencil” tool that helps managers visualize and understand the flow of material and information as a product makes its way through the value stream. The map is a representation of the flow of materials from supplier to customer through your organization, as well as the flow of information that support processes as well. According to iSixSigma, this can be especially helpful when working to reduce cycle time because managers gain insight into both the decision-making and the process flows.
Although it is easy to become overwhelmed by the terminology, an archived article from Ryder outlines VSM in five simple steps:
- Identify product. Determine what product or product groups you will follow. Focus on one product at a time and start with the highest volumes.
- Identify Current Flow. Once you’ve defined the scope, the next step is to create a “current state map,” or a visual representation of how the process (or processes) in the warehouse is operating at the present moment. Key data points such as units per month, shipping frequency/schedules, hours of operations (available time), number of shifts worked, or any pertinent information around customer demand should be gathered before beginning the current state.
- Observe. Get on the floor and walk the entire process through step-by-step. Take notes and compile data such as inventory, cycle times, and number of operators.
- Make the map. Literally map out the process you just witnessed by drawing it out on a board. Include the data you collected and place inventory numbers under each step in the process. This will identify your bottlenecks.
- Create (and implement) a plan. Now that you know what and where your process improvements are, choose one or two to focus and improve on in a set amount of time. Once those are complete, you can prioritize the other bottlenecks to improve lead times.
One of the biggest misconceptions about VSM is that it is only applicable to high-volume shops. Like many other lean tools, VSM can usually be adapted to fit high-mix, low-volume machine shops. In an interview with Fabtech, Mike Osterling, a senior consultant with Osterling Consulting, Inc., explains:
“Let’s begin by pointing out that the front office processes (order taking and management) for low-volume, high-mix production processes are much more complex than the front office processes for high-volume low-mix environments – thereby meaning those value streams are in much greater need of VSM alignment! So we need to start those VSMs at the receipt of order (or at receipt of a request for quote), and we need to include leaders from those areas in the actual VSM activity. In some cases we can identify VS product families if there are products that are different, but they go through common production processes. In those situations, there may be opportunities to create areas of flow (or mini-flow).” (You can read the rest of the interview here.)
In an industry driven on speed and schedules, taking a few days to complete VSM or other improvement exercises may seem like wasted time. However, managers need to consider the price of not taking the time to focus on continuous improvement. Investing in tools like VSM can help your shop operate more efficiently, reduce lead time, improve customer service, and as research suggests, help you keep up with your competitors.
October 20, 2016 / best practices, blade life, blade selection, continuous improvement, customer service, industry news, LIT, Output, productivity, quality
As end markets like aerospace and medical look for ways to improve the strength and reliability of their products, many machine shops are seeing increased use of harder materials like titanium alloys.
However, there are a few characteristics that make titanium alloys more challenging to work with than many other metal materials. To help machine shops tackle this often tough-to-cut metal, the following is a brief overview on titanium alloys and the most effective cutting tools and methods for working with this material.
Taking on Titanium
Titanium alloys are praised for their strong, yet lightweight properties. The material also has outstanding corrosion resistance. As explained here by Modern Machine Shop, these properties make the material an ideal choice for aircraft designs,medical devices, and implants.
However, titanium can be tricky to work with due to its reactivity at higher temperatures and its tough composition. “Since titanium’s heat conductivity is low, it will flex and return to its original shape a lot more easily than steel or high-nickel alloys,” explains an article from American Machinist. “The downside of this is experienced during machining: the heat from the operation does not transfer into the part itself or dissipate from the tool edge, which can shorten tool life.”
The article goes on to say that this issue is compounded by the tight tolerances demanded by most customers. “For aerospace, the tolerances are to within a thousandth of an inch, and if violated, the part must be scrapped,” the article states. “Achieving such tolerances while using such a malleable material is difficult, and wear on the cutters increases significantly compared to similar efforts with nickel and chromium alloys.”
The technical article, “Machining Titanium and Its Alloys,” published by jobshop.com provides key insights into the chemistry behind titanium alloys and lends the following tips for its successful manufacturing (You can read the full article here):
- Use low cutting speeds
- Maintain high feed rates
- Use generous amounts of cutting fluid
- Use sharp tools and replace them at the first sign of wear, or as determined by production/cost considerations
- Never stop feeding while a tool and a work piece are in moving contact
Choosing the Right Blade
Like any material, one crucial aspect of cutting titanium alloys is choosing the right tool. As industry experts, The LENOX Institute of Technology (LIT) offers critical advice concerning blade selection in its white paper, Characteristics of a Carbide-Friendly Bandsaw Machine. Since titanium alloys are a stronger and harder material, they pose a unique cutting challenge best solved by carbide blades. Using a carbide-tipped band saw blade not only allows for the successful cutting of titanium alloys, but it simultaneously offers longer blade life and faster cutting as well.
LIT’s white paper further elaborates on the benefits of the carbide technology by providing a real-life comparison between a bi-metal and a carbide blade. The test produced the following results:
- The bi-metal band saw blade (Contestor GT) ran 120 feet per minute with a feed rate of 0.53 inches per minute.
- The carbide blade (Armor CT Black) ran at 320 feet per minute with a feed rate of 3.11 inches per minute.
Ultimately, the higher speed and feed rate of the carbide blade enabled it to make the cut 13 minutes faster, translating into 160 more parts produced during an 8-hour shift than its bi-metal counterpart.
Meeting Material Demands
Material trends will come and go, but metal-cutting companies that want to successfully serve existing and potential customers need to be prepared to adapt to the industry’s changing material needs. As the use of titanium grows, today’s machine shops need to understand the material’s unique characteristics and machining requirements so they are fully equipped to tackle every one of their customers’ demands.
July 10, 2016 / best practices, customer service, LIT, strategic planning, value-added services
In today’s uncertain economy, diversification continues to be a key strategy for fabricators and other industrial metal-cutting companies. Forming new customer relationships, expanding into new OEM segments, and offering existing customers value-added services can all help dilute the impact of external influences and provide an additional stream of revenue.
Companies also use diversification to reduce business risk. According to an article from Forbes, most small and mid-sized manufacturers fall under the 80/20 rule—they make 80% of their profit from 20% of their customers. In some cases, that 20 percent may mean only one or two customers. While no one denies the value of landing a big customer (or two), relying on a select few to solely sustain your business can be extremely risky.
Diversification in Action
As described here, diversification saved many fabricators in 2015. In fact, companies like Merrill Technologies Group (MTG) are hoping the strategy will help double its business in the next five years, according to another article from the The Fabricator. Starting out as a small machine shop in 1968, MTG has now turned into a $72-million metal manufacturer offering light and heavy metal fabrication, machining, nondestructive testing, machine building, and engineering services.
This type of business evolution, the article states, is a sign that times are changing and that more and more fabricators are moving away from defined customer niches. “The modern metal manufacturing landscape is different,” the article states. “Large OEMs are consolidating their supply chains. Rather than source a large project to umpteen suppliers, they may well be looking for one source—a one-stop shop like MTG—to handle it all.”
Other industrial metal-cutting companies have found the same to be true. Jett Cutting Service, Inc., a 30-year old shop featured in the case study, “Best Practices of High Production Metal-Cutting Companies,” started out with just a few band saws. However, the industrial metal-cutting company has grown over the years to better serve its customers, acquiring new companies and expanding its capabilities to become a multi-faceted cutting service. From precision circular saw cutting to a lathe cut-off on round tubing, Jett Cutting has evolved into what it calls “a whole processor” that serves steel service centers, machine shops, and some mills.
Making the Move
Both the MTG and Jett Cutting examples demonstrate that diversification can be just as advantageous to customers as it can be to your business. If you are considering diversifying your business, an article from Inc. lists several ways to accomplish that. The following are a few of the strategies listed:
- Adapt. Tweak your product or service so it appeals to a new group of consumers or users.
- Find related services. Are there additional services that go along with what you sell or do?
- Open another location. If you only have one physical location, consider opening a second.
- Go overseas. Not every small business has the wherewithal to launch an overseas operation. Right now the big players are eyeing Africa the way they eyed Asia 10 years ago. Network in your community, and see if any businesses are exploring overseas ventures. You might find a project where your company fits in.
- Follow the growth. If you’re in an area with disheartening demographics or punishing tax rates, see if you should expand to a lower tax growth area. Look at the South, Texas, and North Dakota. Would one of these areas be a good candidate for a branch office?
As the Inc. article points out, smart investors place a high value on diversification, and smart business owners should consider doing the same. Could diversification be an option for your fabrication shop?
To read more about other manufacturers that have successfully diversified their business, check out the Forbes article, “The Argument For Market Diversification In Manufacturing.”
July 5, 2016 / best practices, continuous improvement, customer delivery, customer service, LIT, productivity, quality, ROI
Mobile technology is impacting every industry, including the manufacturing and the industrial metal-cutting segments. In fact, VDC Research estimates that the number of mobile connections in global factories is expected to double by 2017, reports Business Solutions magazine.
Manufacturing leaders are integrating mobile technology into their production processes and procedures to gain better communication, collaboration, and responsiveness. In addition, manufacturing environments with hazardous conditions are forecast to use mobile apps more to improve worker safety and productivity. As metal service centers hold safety as a top priority, mobile technology can help reduce incidents while optimizing overall productivity.
To realize the benefits of mobile technology, it is important for manufacturers to consider how, when and where it will be used throughout the operation. An article from Fabricating & Metalworking magazine suggests that manufacturers answer the following questions before they implement any mobile technology on the shop floor:
- What do I use the device for? Data entry, looking at diagrams, work instructions, etc.?
- Can I do my job when I have my device in hand, pocket or wherever?
- Who uses the device?
The answers to these questions will help guide managers toward the technology set-up that will work best for their shops’ specific needs and requirements. For example, an operator in your service center will likely need to move around easily and would benefit from a smaller, hand-held device, whereas, an assembler may be better suited with a full-sized tablet to read detailed drawings and schematics. According to the Fabricating & Metalworking article, tablets or large phones offer both portability and convenience for many tasks and can still be easily placed in a holster or pocket.
There is more than just choosing the right mobile device when it comes to mobile technology, however. To truly optimize production, metal service centers need to also choose and implement the technology so that it truly meets the needs of the operations.
According to Merit Solutions, an IT consulting and development firm, there are four best practices manufacturers should consider when selecting and implementing mobile technology to ensure it benefits the business:
- Put problem-solving first. Before deploying mobile technologies within your manufacturing organization, ask what problems you’re trying to solve. Be sure to get feedback from employees on the needs the challenges they face. Their input is valuable and will likely guide you toward the right solution.
- Evaluate current infrastructure investments. When considering mobile technology for manufacturing, it’s important to assess what infrastructure already exists. Your current infrastructure will determine whether certain technologies are supported or if they are compatible and will function properly. Knowing your current set-up will also prevent wasting dollars on a duplicate investment or one that is similar to what you already have.
- Don’t neglect security. Security is a vital component of any mobile technology solution that prevents hackers from accessing confidential data. Make sure your mobile technology solution has a built-in security feature to help protect your business.
- Educate your employees. Mobile technologies will only make a business more efficient and productive if the end users accept and adopt the technology. If employees feel forced to use something they don’t understand, the technology will go unused. Be sure to explain why the service center is implementing the technology and, more importantly, how to use it before it is implemented. Employees should also know the proper security guidelines and adhere to them.
Like any investment, it’s also important to ask how the use of mobile technology could benefit your customers. As advised in the white paper, The Top Five Operating Challenges for Metal Service Centers, a rule of thumb before investing in any technology upgrade is to consider whether or not it enhances customer service. For example, how could it be used to help improve quality or increase delivery time?
While mobile technology can provide benefits such as improved portability and efficiency on the shop floor, implementing the technology so that it truly optimizes your shop’s set-up and production can be challenging. By understanding what your operation needs, how your employees will use mobile technology, and how it can improve customer service, metal service centers can better position themselves to get a full return on their investment.
To read more about using mobile technology on the shop floor, check out the blog post, “Adopting Mobile Technology within Your Industrial Metal-Cutting Operation.”
May 20, 2016 / best practices, continuous improvement, customer satisfaction metrics, customer service, strategic planning
For most machine shops, marketing and branding are not top priorities. However, in today’s competitive market, industrial manufacturers are starting to see that creating a company brand or message can be an important part of the business strategy.
According to a report from Lippincott, more and more industrial companies are seeing strong brand management as a key for standing out from competitors and expanding into adjacent markets. “Leading industrials are starting to practice many of the elements of B2B branding, from identifying the key audiences for their messages to ensuring that their approaches to branding align with their business strategies,” the consultant firm states.
Of course, hiring a firm to develop a cutting-edge marketing campaign is likely not in your shop’s budget; however, you may want to consider developing a unique selling proposition (USP). As this article from Thomasnet.com explains, a strong USP, also known as a value statement, clearly articulates why a customer should buy from you instead of a competitor. The goal of this type of messaging is to attract customers on an emotional level that goes beyond cost.
“Without a compelling message, nothing about a shop stands out,” the article explains. “And when nothing about a job shop stands out as better than the others, it’s basically a commodity that can only compete on price.”
Ask yourself: What is unique about your company and its values? How do your services translate those values? Most importantly, how are you communicating this message to your customers? The answers to these questions can provide a good starting point for developing your company’s USP.
As stated in the Thomasnet article, an effective USP should meet the following criteria:
- Clear and concise: You shouldn’t make customers guess what you mean. Don’t be too clever; be direct and straightforward.
- Adaptable: A selling proposition will need to take many forms, depending upon whether it is being used in digital advertising, inbound marketing, videos, or traditional print, radio, and television advertisements. Therefore, make sure it is flexible and malleable enough to be used across mediums.
- Distinctive: Your statement should be specific to your organization, so don’t borrow language from other companies—especially your competitors. If it sounds rehashed, it won’t resonate with your customers.
- True: You want to set attainable and realistic expectations with your prospects, so never promise them more than you can deliver and don’t stretch the truth. If you can’t make good on your proposition, or if you can’t validate your claims, then don’t put it in writing. Find another message instead.
|A unique selling proposition (USP) can also be a good ruler to which you can measure your supply chain relationships. If a supply partner doesn’t help you fulfill your USP—or share similar principles—perhaps it’s time to re-evaluate the relationship. As explained in the eBook, Five Performance Boosting Best Practices for Your Industrial Metal-Cutting Organization, your supply chain should an enabler of your business strategy.|
What does this look like in practice? D&J Technologies, a machine shop featured here in a LENOX white paper, lists the following USP on its website:
“Combining unparalleled quality, on-time shipping, and excellent communication, D & J Tech exists to make the manufacturing process effortless.”
Below are two more examples, as listed in the Thomasnet article:
- “Zero defects, guaranteed, thanks to our proprietary monitoring equipment.”
- “The only ISO 9001:2008 certified supplier in the tri-county area able to vapor polish parts over 24” in diameter.”
These are just a few examples. At the end of the day, all managers should periodically ask the question: Why do customers choose to do business with us? Taking the time to turn the answer into a clear, concise, and marketable message could be a lot more valuable than you realize.
For more information on developing a USP, you can download a free worksheet here, or check out this article from Fabricating & Metalworking, which provides more than 20 tools to help you build your organization’s brand story.