2014 Industrial Metal Cutting Outlook
March 30, 2014 / continuous improvement, Cost Management, forecast, human capital, productivity, supplier relationships, value-added services
Steel has a rich history in America and around the globe. It has often been called both the backbone of manufacturing and the building block of society—and rightly so. We rely on steel in many industry sectors, including automotive, aerospace, infrastructure, and consumer durables. The health of our sector is critical to the economy, as well as the quality of life that many of us enjoy.
As a global company that services the industrial metal-cutting industry, we at LENOX Tools have a unique vantage point of what is happening within the larger metals market. We have watched some companies barely survive these last few years, and we have also seen leaders rise to the occasion. And while there is still a lot of uncertainty within the marketplace, we are confident that with the right tools, 2014 can be a year of opportunity for many of our customers.
According to the Steel Manufacturers Association, the short-term prospects for the steel industry are no more certain in 2014 than they were in 2011, 2012, or 2013. While 2012 was a good year for the industry, with significant increases in both crude steel production and consumption, 2013 wasn’t as good as everyone had hoped. According to the World Steel Association, U.S. steel production was down 2% in 2013 compared to 2012, and forecasts estimate that apparent consumption only grew a mere 0.7% in 2013 over 2012. (Final data has not been released.)
But there are some promising signs. The World Steel Association’s October outlook stated that steel demand is expected to increase by 3.0% in 2014, aided by the improving global economy and activities in the automotive, energy, and residential construction sectors. In addition, as reported by Modern Metals, both automotive sales and construction housing starts are expected to increase in 2014.
Even with these positive indicators, most metals companies remain cautiously optimistic about the near-term future. According to an annual survey of metal executives by American Metal Market, the majority of respondents expected business to improve, with only 8% stating they were less optimistic about business as they headed into 2014. However, three in four respondents said political events have heightened uncertainty, and only 30% of executives expected the economy to turn around this year.
As the industry continues to wait for a true economic comeback, we are seeing some major strategic shifts in the businesses that we service. Unfortunately, a few businesses just could not find a way to survive, but many others were able to adapt and found smarter ways to work. They became leaner, more productive, and made investments where they mattered. We have also seen the emergence of several industry trends, such as consolidation and an influx of new services and products, as companies attempt to remain profitable.
One trend that we hear a lot about is “on-shoring” or “near-shoring”—the process of moving a business operation from overseas back to the local country. China, of course, has been the common landing spot for outsourced manufacturing in recent history. However, with rising labor and energy costs, China’s cost advantage is disappearing. That, along with the difficulties in managing a business across the globe in countries with vastly different work and social cultures, is helping drive the “on-shoring” trend. This is great news for the U.S. metal-cutting industry, as we will help rebuild America one business at a time.
When the market does finally rebound, companies need to be ready. Based on our experience, we at LENOX Tools see the following best practices as critical action items for companies that want to be prepared for quick growth:
- Equip Employees. To succeed in today’s competitive market, industrial metal-cutting companies need to optimize all aspects of their operations, including their human capital. This is especially important as the industry deals with a major skills gap. As highlighted in the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, operator training needs to be ongoing. This is especially important for companies that have multiple shifts and a diverse mix of talent. By instituting regular operator training, managers can level the shop floor talent and add consistency to production procedures. This also encourages a spirit of continuous improvement among experienced operators who often resist change.
- Build Partnerships. Perhaps one of the greatest benefits of an increasingly competitive market is that many suppliers are offering value-added services to differentiate themselves—a trend that is especially beneficial for smaller industrial metal-cutting companies. Support in areas such as preventative maintenance, troubleshooting, and even software tools can help improve productivity and, ultimately, save costs. By leveraging the knowledge and services of trusted suppliers, companies can turn vendor relationships into strategic partnerships that have a real impact on the bottom line.
- Invest in the Right Tools. Forward-thinking managers know that long-term success usually requires some investment, whether in time or capital. Now more than ever, companies need to weigh their cost expenditures against the benefits or detriments of dollar-allocating decisions. However, managers need to be sure they are not shortsighted by upfront costs and, instead, consider the long-term benefits of improved productivity. For example, many of our customers that deal with hard, difficult-to-cut metals have found that investing in carbide-tipped band saw blade is worth the up-front investment because it improves cost per cut. Shop-floor decisions and investments need to be strategic and should help achieve larger company goals.
Another Year of Improvement
The reality is that no one knows what 2014 will bring, which makes agility and strategy critical. In fact, uncertainty is perhaps the only thing that is certain in this market. However, there are two things the last few years have taught us: you can never be too prepared, and there is always room for improvement.
Industrial metal-cutting leaders know they cannot afford to rest on their laurels—not in 2014 or in the future. Continuous improvement is the only way to succeed in today’s market, and best-in-class managers are proactively encouraging change at all levels of their organization. We at LENOX Tools are ready for another year of improvement, and we look forward to helping equip our customers and their employees with the tools they need to make this year one of their best.