December 30, 2014 / agility, best practices, Cost Management, customer delivery, industry news, Output, productivity, quality, resource allocation, ROI, strategic planning, value-added services
As a critical part of the aerospace supply chain, industrial metal-cutting companies need to be sure they understand both the needs and challenges of their end users. As a supplier, this not only helps you provide better service to existing customers, it allows you to anticipate new growth opportunities.
Overall, the aerospace and defense industry had a decent 2014. According to the Year-End Review and Forecast from the Aerospace Industries Association (AIA), sales were expected to end up at $228.4 billion in 2014, up from $219.4 billion in 2013. The association also reports that aerospace exports maintained an upward trend throughout 2014, and sales of commercial aircraft paced the industry’s sales growth.
Early reports indicate that this year may show similar trends. According to mid-December article from Reuters, Boeing is expected to deliver a record 754 commercial aircraft in 2015, an increase of up to 5.5 percent. Honeywell also expects industry deliveries to be “up modestly again” in 2015 and forecasts a 4-percent average annual industry growth in jet deliveries over the next decade.
However, experts are also anticipating major challenges for aerospace industry, including the continued effects of sequestration and decreasing defense budgets. AIA believes that these obstacles are “adversely stifling innovation, resulting in significant layoffs of the industry’s highly-skilled workforce” and, ultimately, will hinder the aerospace industry’s global competitiveness. In fact, AIA uses the term “uncertainty” to describe its overall outlook for 2015.
So where is the opportunity for the industrial metal-cutting companies serving this industry? As AIA suggests, aerospace manufacturers will need to focus on efficiency and innovation to stay competitive, whether that includes developing new approaches to solving everyday challenges or exploring cutting-edge processes. In other words, they will have to look for additional avenues for saving money and time, which is where a trusted supply partner can help.
The key for metal-cutting companies will be finding ways to offer their aerospace customers value. This could include investing in advanced metal-cutting tools designed to meet the unique demands of the industry or equipping employees with certifications and specialized training.
Below are examples of two metals companies that have intentionally positioned themselves to better serve the aerospace industry:
- TW Metals, a specialty metal distributor and processer recently featured in Modern Metals, has focused its efforts on helping its aerospace customers shorten the supply chain and eliminate any waste. Using machinists approved by the OEMs, TW Metals partners with the entire supply chain to provide the end customer with just in time parts, including full “kits” like wings and tail assemblies, MM reports. The metals supplier also has its employees go through extensive training and certification specific to the aerospace industry’s needs. “The more you add value, the less total cost there is for the customer,” Bob Mraz, TW Metals Sales & Marketing VP, tells Modern Metals.
- Universal Machining Industries Inc. (UMII), a job shop based in Muenster, TX, has invested heavily in aerospace manufacturing technologies to address the unique needs of its customers. According to an article from Canadian Metalworking magazine, the company has transitioned from primarily stand-alone vertical machining centers to horizontal machining centers in automated cells. This helped the shop meet customer requirements for shorter lead-times and reduced part costs, as well as internal benefits such as improved workflow management and a more positive team atmosphere. “Through these investments, UMII has witnessed continual year-over-year growth and a 60 percent increase in total production over just four years,” Canadian Metalworking reports. You can read the details about the technology investments here.
In the end, successful suppliers know that winning customers has to be about both cost and value. Tailoring your company and processes to meet the unique demands of the industries that you serve will not only position you as a valued supply chain partner, but as an agile, industrial metal-cutting leader.
December 25, 2014 / best practices, continuous improvement, Employee Morale, human capital, industry news, lean manufacturing, LIT, maintaining talent, productivity, Safety, strategic planning, training
For many industrial metal-cutting organizations, “company culture” is nothing more than a management buzzword that brings up images of Google employees playing video games and drinking lattes. However, work culture is a critical component to any company’s success, whether you are a Fortune 100 tech firm or a family-owned forging operation.
Take GM Motors as an example. After dealing with a huge safety crisis earlier this year, the auto giant is in the midst of a corporate makeover based largely on culture change. According to an article that appeared in IndustryWeek, CEO Mary Barr is trying to create a new culture at GM based on ownership, candidness, and accountability—three traits she hopes will set a new tone for the manufacturing company. To put it another way, Barr believes that culture could indeed be the key to GM’s future success.
On a macro level, the goal for any organization is to create a positive work culture. The challenge is figuring out how to accomplish that within the confines of your operation. An archived article from Forbes gives a list of five tips for creating a successful office culture; however, they are applicable to any work environment:
- Seek out Employees with PHDs. This doesn’t mean look for highly educated employees. Instead, the goal is to hire and empower employees that have the Passion, Heart, and Desire (PHD) to do well and to see the company do well.
- Don’t Confuse Activity with Results. The work your employees perform should directly—and positively—impact the stated goals of your company.
- Appoint leaders with Focus, Consistency and Discipline. While employees may embody the company culture, management builds it. Choosing leadership with these qualities will build a team with similar qualities.
- Merit Counts. It’s not rocket science: Employees aware of merit-based promotions and responsibilities are more apt to possess a positive work ethic and opinion of your company.
- Attitude vs. Aptitude. While experience and knowledge is important, it can be taught. Attitude, however, cannot. Attitudes are huge contributors to company culture. If you want a positive culture, you need employees with positive attitudes.
Managers who think their operation doesn’t have a work culture—or that they don’t need to bother cultivating one—are quite mistaken. If there are employees, there is a culture. The real question is whether or not it is a positive culture and, even more so, if the culture reflects the long-term goals and ideals of the company. Defining an operation’s work culture requires managers to take a hard look at the DNA of their operation. Is safety a priority or a value? Do managers walk the floor and interact with operators? Do you involve plant-level staff in process improvement activities (a key element of lean manufacturing)? What are the attitudes of the staff? Are you just filling positions, or are you strategically choosing employees that reflect your company’s ideals?
What does this look like in a metal-cutting environment? Scot Forge, a metal forging operation based in Spring Grove, IL, states here that their company has a “unique culture” built on employee ownership, continuous improvement, safety, reward, camaraderie, and community.
Yarde Metals, a metal service center featured here in a series of case studies, also shows that a positive work culture doesn’t mean management can’t have high expectations. According to Greg Sioch, lead foreman, operators at Yarde know that if quality isn’t maintained, they will be held accountable. “If a piece of material is rejected by the customer, we know who cut it, so it goes back to that associate and they are held accountable,” Sioch says. “That’s our culture. The associate is expected to follow their procedures and hold that quality.”
With the new year upon us, perhaps it is time to take a closer look at your work culture and see how it lines up with your 2015 goals. By asking a few critical questions and instituting some of the strategies suggested in Forbes article, managers can objectively evaluate their facility’s current work culture and, more importantly, start to institute changes to make it better.
November 30, 2014 / best practices, Cost Management, industry news, LIT, productivity, resource allocation, strategic planning
As we wrap up 2014, most experts and manufacturers are optimistic about the year ahead. The Manufacturers Alliance for Productivity and Innovation (MAPI) predicts that industrial manufacturing production in the U.S. will grow by 3.5 percent in 2015, and U.S. GDP is forecast to show the same growth rate. Meanwhile, 90 percent of manufacturers participating in the most recent National Association of Manufacturers/IndustryWeek Survey of Manufacturers were either somewhat or very positive in their own company’s outlook.
Metals predictions are also positive. According to Modern Metals (MM), trends that will help spur growth in the New Year include strong warehouse and multi-family construction, higher North American auto sales and production, “lightweighting” of passenger vehicles and jet engine components for greater fuel efficiency and lower emissions, and stricter regulations for safe transportation of raw fuels. However, the magazine also cautions that companies need to be aware of cycles and the complex global market. “The outlook for 2015 is mostly positive, but competition, domestic and foreign, is always the overriding force that determines whether volume, price and demand forecasts are in balance,” MM warns.
On a higher level, there are several manufacturing trends that experts expect to shape the industry in 2015. In this IndustryWeek article, Michael Kotelec, a global practice leader for Verizon Enterprise Solutions, offers the following five big-picture predictions for the manufacturing industry:
- The adoption of social, mobile, analytics and cloud (SMAC) technologies will gain speed.
- Social media will further impact business model innovation.
- The Internet of Things (IoT) will increase automation and job opportunities.
- There will be greater capital investment.
- “Next-Shoring”(developing products closer to where they will be sold) will emerge.
While most of Kotelec’s predictions are way outside of the daily grind of a metal-cutting operation, these types of game-changing trends need to be considered as managers create their strategic plans for the New Year and beyond. Of course, no one can truly predict what the market will do—or what will drive it—but leaders need to be informed if they want to stay competitive. By keeping a pulse on “what’s next,” managers can create tactical solutions that balance internal efficiency with external demands.
June 20, 2014 / agility, best practices, industry news, LIT, operations metrics, performance metrics, ROI, strategic planning
According to research quoted in a recent article from MetalForming Magazine, 45% of manufacturers list “improving business execution” as a primary goal for 2014. In today’s uncertain marketplace, this isn’t much of a surprise. In short, agility is key.
However, manufacturers are finding that achieving this goal is a lot harder than it sounds. As the MetalForming article states, companies need to start by clearing “some common hurdles, most notably delays in decision-making due to a lack of timely information, and an inability to quickly react to change.”
This is why more and more companies are focused on data-driven manufacturing. As stated in the 2014 Industrial Metal-Cutting Outlook from the LENOX Institute of Technology (LIT), best-in-class machine shops are forming strategies, making decisions, and optimizing their operations using hard, quantifiable information. Anything else is just guessing.
The challenge is finding an efficient way to not only gather “timely data” but also store it, interpret it, manage it, and share it across your entire organization. Odds are you don’t have a fully staffed IT department waiting in the wings.
This is where business management software like Enterprise Resource Planning (ERP) can be helpful. ERP software is typically a suite of integrated applications that allows an organization to efficiently manage their business and automate back office functions. It combines all facets of an operation, including product planning, development, manufacturing, sales and marketing. It can be managed in-house, or as is the case with many machine shops, purchased as software as a service (SaaS).
Top-tier manufacturers and large enterprises have been touting the benefits of ERP systems for years. They can improve productivity, enhance cross-functional communication, and speed the “quote to cash” cycle. Even so, smaller shops often shy away from these systems because they can also be expensive, complex, and far too often, fail to provide bottom-line results.
That’s not to say you should write off ERP systems all together. It just means a little research is in order. Below are a few resources we gathered to help you dig a little deeper into the benefits ERP can offer your machine shop, along with a few pointers to ensure success.
- Key Considerations Before Implementation. A recent article that appeared in Project Times provides five key points to consider before you decide whether or not to implement an ERP system. Written by supply chain consultant Lisa Anderson, the editorial starts by warning manufacturers to refrain from getting all the bells and whistles. “Take a step back and focus 80% of your efforts on the 20% of functionality that drives your business,” Anderson suggests. You can read the rest of the article here.
- Purchasing Tips When Selecting a System. Once you have decided to move forward and invest in an ERP system, choosing the actual system can be overwhelming. This article from ThomasNet provides some important tips to follow when choosing an ERP system for a manufacturing business. The article goes through six critical points, such as taking a look at your company’s technology strategy and capabilities, as well as closer evaluation of the cost implications of the system.
- Lessons From Your Peers. Knowing what has worked and hasn’t worked for other machine shops can provide valuable information and reduce the trial-and-error phase for your shop. Check out this Modern Machine Shop article, which provides links to several case studies of shops that have implemented ERP systems. You should also consider speaking with your supply chain partners to see if they have had success with an ERP system. As LIT’s white paper on managing supplier relationships suggests, they may even be willing to assist you in determining key data points.
May 10, 2014 / best practices, continuous improvement, Employee Morale, human capital, industry news, LIT, maintaining talent, operator training, quality, root cause analysis, skills gap
There is no question that the skills gap is one of the most pressing issues for industrial metal-cutting companies and, of course, the manufacturing industry at large. According to a recent article from the U.S. News & World Report, it is estimated that more than half a million skilled manufacturing jobs remain unfilled due to the labor skills gap in the U.S., and that number will likely increase as more and more Americans age out of the workforce.
As we covered here, this has prompted industry leaders like GE and industry associations like the Society of Manufacturing Engineers (SME) to take action. Just last week, JPMorgan Chase & Company announced a $5-million commitment to the city of Dallas to help shrink the skills gap within several industries. The move is part of a five-year, $250-million national initiative Chase launched in December to provide job training and fund local research to identify the areas most in need. As this video explains, the banking giant is using real data to identify real needs and then investing in those needs to fill the actual gaps.
While these types of large-scale initiatives might be left to large-scale companies, Chase’s strategy is one that just about any fabricator can apply to their own operations. Like Chase, fabricators that want to make a real difference in their business need to identify the actual gaps within their own company walls. This is especially true if a large number of your workers are headed for retirement. Once you have identified the gaps within your organization, you can determine the skills that are needed and then adjust your training and hiring programs accordingly.
The following are two strategies that can help you determine if (and where) there are skills gaps in your operation:
- Map them out—literally. Marlin Steel, featured in a profile on thefabricator.com, is using a Skills Matrix to ensure that its shop always has someone available to perform the necessary skills. In a Q&A with the trade publication, Marlin Steel President Drew Greenblatt explains that the Skills Matrix is essentially a Microsoft Excel spreadsheet that identifies each worker’s skill set. Each skill is awarded a point value and, in essence, ranks workers by their skill level. This helps the shop identify strengths, gaps, and individual opportunities for improvement. It also encourages cross-training. To make it a win-win situation, Greenblatt provides financial compensation every time a worker adds a skill. (You can read the rest of the interview here.)
- Identify problem areas. Another method for identifying skills gaps in your fabrication shop is to evaluate your workers on the job to determine whether or not they are causing avoidable errors or inefficiencies. Here are a few tactics described in a white paper from LIT that can help managers identify problem areas:
- Conduct a time analysis to measure shop floor efficiency. You can read the specifics on how to conduct an analysis here. Once the analysis is performed, managers can review the results to identify inefficient workers, patterns when certain tasks are performed (i.e., cutting different grades of material), and baselines for improvement. Ideally, this is performed without worker knowledge in order to get a more accurate picture of performance.
- Take a close look at inventory levels. Even if an organization is meeting customer orders, high levels of inventory can indicate “hidden” inefficiency and quality issues. Waste and remnants are often the result of operator errors such as incorrect machine settings and improper blade usage—both of which point to a lack of training or knowledge.
- Implement some form of process control. Without a paper trail, it is difficult for managers to find the source of operational issues, including problem operators. By having processes in place to hold operators accountable such as daily checklists, maintenance reports, defect reports, and signatures to hold operators accountable, executives can quickly and easily pinpoint the cause of workflow bottlenecks, increased tooling costs, and other issues that can impact business performance.
As the skills gap is proving, investing in your human capital is just as critical as investing in your technology and equipment. Taking the time to identify strengths and weaknesses within your operations staff—and then encouraging and rewarding improvement—is one way industrial metal-cutting leaders can equip themselves for today, as well as the future.
April 30, 2014 / agility, benchmarking, best practices, continuous improvement, industry news, KPIs, LIT, operations metrics, Output, performance metrics, predictive management, preventative maintenance, productivity, strategic planning
A recent report from Gartner continues to build the case that metrics and smarter, more predictive management strategies are critical for industrial metal-cutting companies that want to succeed in today’s competitive landscape. In fact, according to the consulting firm, organizations that use predictive business performance metrics will increase their profitability by 20 percent by 2017.
“Using historical measures to gauge business and process performance is a thing of the past,” Samantha Searle, research analyst, said in a Gartner press release. “To prevail in challenging market conditions, businesses need predictive metrics—also known as ‘leading indicators’—rather than just historical metrics (aka ‘lagging indicators’).”
Gartner said that predictive risk metrics are particularly important for mitigating and even preventing the impact of disruptive events on profitability. The key is for companies to have predictive metrics that contribute to strategic key performance indicators (KPIs); however, Gartner discovered that many companies are failing to do just that.
Metrics vs. Strategic KPIs
After conducting a survey of 498 business and IT leaders in the fourth quarter of 2013, Gartner analysts found that while 71% of business and IT leaders understood which KPIs are critical to supporting the business strategy, only 48% said they can access metrics that help them understand how their work contributes to strategic KPIs. In addition, only 31% had a dashboard to provide visibility into KPIs.
However, according to Searle, even visible metrics won’t help drive strategic business outcomes if business leaders don’t have the right metrics in place. The problem, she says, is that managers often misinterpret the goal of a KPI.
The first thing companies need to realize is that KPIs are metrics, but not all metrics are KPIs. A KPI is a measure that should indicate what you need to do to significantly improve performance—or that indicates where performance is trending—which means it is predictive in nature. However, Gartner’s Searle says many companies don’t have predictive measures in place. “They persist in using historical measures and consequently miss the opportunity to either capture a business moment that would increase profit or intervene to prevent an unforeseen event, resulting in a decrease in profit,” she explains.
If you are still unsure of what qualifies as a KPI, check out this article, which lists five rules for selecting the best KPIs for your manufacturing organization. As the article states, “the key to success is selecting KPIs that will deliver long-term value to the organization.”
The larger lesson here is that in today’s fast-moving market, companies need to anticipate business events—not react to them. From a high level, Gartner is saying that this requires KPIs that are predictive. But what does this mean from a plant-floor level? What type of shop floor metrics can help businesses anticipate business events and provide input into strategic KPIs?
A benchmark study from the LENOX Institute of Technology (LIT) may provide a little insight. The following are two of the study’s key findings:
- 67% of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report that their job completion rate is trending upward year over year—a meaningful correlation. The implication is that less disruptive, unplanned downtime and more anticipated, planned downtime translates into more jobs being completed on time.
- 51% of organizations that “always” follow scheduled and preventative maintenance plans say that blade failure is predicted “always or “mostly.” This shows that preventative maintenance helps operations predict blade failure. And as any metal-cutting leader knows, predicting blade failure not only keeps production flowing, it also helps tooling and maintenance costs under control.
Both of the benchmark findings are, in fact, key metrics that can help industrial metal-cutting companies better understand strategic KPIs. In this case, we discovered that a proactive strategy like preventative maintenance can help managers plan for downtime and, in essence, allows them to create “predictive downtime,” which can actually improve cutting performance and extend equipment life. This is a much different from “interruptive downtime,” which can hurt performance, reduce on-time customer delivery, and increase material costs.
Based on this example, the KPI might be whether or not an organization is hitting its preventative maintenance schedule or whether or not the cadence of preventative maintenance is increasing or decreasing. For instance, if production was increasing but preventive maintenance measurements were static, it could predict massive failure issues.
Moving forward, here are a few questions to consider: What metrics are you using to measure business performance? Are they KPIs? Are your management strategies focused on being proactive or reactive? Are there ways you can predict business events such as blade failure and machine downtime?
Answering these key questions may help you determine whether or not your company is on track to increased profitability or at risk for being stagnant. Proactive strategies like the predictive metrics suggested by Gartner and the preventative measures suggested by the LIT study are critical for industrial metal-cutting companies that want improve their agility and, most importantly, their bottom line. Leaders are realizing that they need to act now—not later—if they want to be successful in the future. When it comes to today’s manufacturing landscape, good things will not come to those who wait.
April 28, 2014 / continuous improvement, Cost Management, human capital, industry news, lean manufacturing, LIT, predictive management, preventative maintenance, strategic planning
For most of the industrial metal-cutting industry, things are staring to look up. Earlier this month, the World Steel Association released its Short Range Outlook for 2014 and 2015. The forecast projects that global apparent steel use will increase by 3.1% in 2014 and by 3.3% in 2015. Regional projections are also positive. While the U.S. showed a decrease of -0.6% in apparent steel use in 2013, the global association forecasts that apparent steel use in the U.S. will grow by 4.0% in 2014 and by 3.7% in 2015.
However, even with its positive forecast, World Steel expects continued volatility and uncertainty to create a challenging environment for steel companies this year. And many metals executives are feeling that uncertainty. As stated in LIT’s 2014 Outlook for Industrial Metal-Cutting Companies, most industrial metal-cutting companies are only cautiously optimistic about today’s market.
This is especially true of many forging industry executives, who were encouraged by sales increases in 2012, only to be disappointed with no growth and some decreases in 2013. Specifically, the Forging Industry Association (FIA) reports that total industry shipments for the custom impression die forging industry were at $7.313 billion in 2013, down slightly from $7.337 billion in 2012. Meanwhile, 2012 total industry shipments by the custom open die forging industry were 15% below 2012, and shipments for the custom seamless rolled ring forging industry were basically flat. (You can view FIA’s final sales data here.)
As forging executives move into the second quarter, there are some trends unfolding in 2014 that they should be watching closely. A recent column from IndustryWeek does a good job of describing five higher level trends that are affecting most of the manufacturing industry. These include the following:
- Increased reliance on automation and robots
- Rapid prototyping
- Smaller orders
- Leaner factories
On an operations level, there is perhaps one prevailing trend—the relentless push for continuous improvement. In an uncertain market, operations managers are realizing they have no choice but to optimize and become more agile. In some cases, this requires capital investment, but many industry leaders are discovering alternative ways to improve operations. LIT’s benchmark study of industrial metal-cutting companies, for example, identifies three key areas where managers can make improvements without adding new capital expense:
- Invest in Smarter, More Predictive Operations Management
- Embrace Proactive Care and Maintenance of Tools & Equipment
- Invest in Human Capital
Of course, there is no crystal ball for what 2014 will bring, and as the last few years have taught manufacturing executives, nothing is ever certain. In the end, the key will be for forging companies to strategically consider industry trends (i.e., smaller orders), while also proactively improving what is happening inside their doors.
April 20, 2014 / continuous improvement, human capital, industry news, LIT, maintaining talent, operations metrics, operator training, performance metrics, skills gap, strategic planning
Here’s the good news: Data continues to show that 2014 will likely be a year of growth. Gardner’s most recent metalworking business index (MBI), for example, showed that conditions in the metalworking industry expanded in March for the third straight month and the fourth time in five months. According to Modern Machine Shop, this was the fastest rate of growth since March 2012. Additional MBI findings revealed positive trends in several key business areas, including new orders and production, capacity utilization and spending, employment, and supplier deliveries. You can read the full report here.
All of this good news, however, comes with some uncertainty. As reported in LENOX Institute of Technology’s (LIT) 2014 outlook, most metals executives are only cautiously optimistic about the near-term future. Political issues, pricing pressures, and talent shortages are issues weighing heavily on industrial metal-cutting companies, leaving executives with no choice but to focus on continuous improvement as they attempt to strategically approach a shaky marketplace.
For machine shops, taking the time to make improvements is a challenge in itself, especially if business is starting to pick up. However, leading-edge shops know that in today’s demanding market, optimization is the only way to stay competitive. In other words, they are making time.
While you may not have the resources to undergo a major improvement initiative in 2014, the following are two key trends today’s machine shops need to consider:
- Data-Driven Manufacturing. Yes, “big data,” the Internet of Things, and digital manufacturing have all become industry buzzwords. But as this article from Modern Machine Shop Editor Mark Albert suggests, behind all of this terminology is a trend that can’t be ignored: Today’s machine shops need to make decisions based on information. In fact, Albert says this is the only way that production can move forward. “Facts and figures determine the path a manufacturing process should take, and they propel it ahead,” he states. “To drive manufacturing, factual information has to be available so that people, as well as computers, can use it.” Whether you are manually measuring cut times or implementing cutting-edge monitoring software, the point is that today’s manufacturing decisions need to be based on real, quantitative data.
- Closing the Gap. For years, experts have been warning manufacturers about the skills gap, but it is just now starting to have an impact. Case in point: Prime Advantage Corporation, a buying consortium for midsized manufacturers, recently conducted a survey of CFOs from its member companies. According to the results, 65% of those surveyed said they have open positions that they are seeking to fill, but are having difficulty filling the jobs because of a lack of qualified labor. Other reports are revealing similar trends. To close this gap, companies are discovering that they need to start investing in their human capital. This is a change from the last few years, when metals executives invested more in technology and equipment. In addition to addressing the skills gap, LIT’s benchmark survey of industrial metal-cutting companies provides evidence that investing in areas like training can provide additional benefits, including better quality, faster on-time customer delivery, higher revenue per operator, and lower rework costs.
To read more about trends we expect to see in 2014, check out LIT’s 2014 Industrial Metal-Cutting Outlook.
April 10, 2014 / continuous improvement, Cost Management, industry news, LIT, strategic planning
Late last month, the LENOX Institute of Technology (LIT) published its 2014 Industrial Metal-Cutting Outlook. Echoing the sentiments of many industry analysts, the report expects 2014 to be another year full of uncertainty. Metal fabricators, as well as every other manufacturing segment, are finding it difficult to anticipate what this year might hold, which makes planning extremely challenging.
There are, however, several trends that fabricators should keep in mind as they attempt to strategically navigate this unpredictable market. Here are a few we gathered from the industry’s top resources:
- Government Setbacks Continue. As pointed out by Dan Davis in a recent blog from thefabricator.com, a lot of today’s market uncertainty stems from political dysfunction. As Davis states, “the government can’t get out of its own way,” which is why many business leaders are “increasingly calling on Congressional leaders to work together to chart some sort of course for the future.” In all reality, political games are likely to continue this year, which means manufacturers shouldn’t expect the government to help the economy grow in 2014.
- Wages and Costs Will Rise. Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA), predicts that costs will rise across the board by mid-year. “The producers of metal and other raw materials have been reducing production to bring supply in line with demand,” Kuehl states in an FMA forecast report [LINK] published in late December. “Wages will rise for the people needed as they will be in short supply, and any pickup in business will make them that much more valuable.”
- Some Growth is Expected. There is some good news. Most reports expect at least some growth in production over the next two years. According to the latest outlook from MAPI, fabricated metals production is forecast to post moderate gains of 4% in both 2014 and 2015. The manufacturing organization also reports that nearly all major types of fabricated metal products have shown production increases in the three months ending January 2014 relative to the same period one year ago. Forging and stamping was up 4%, architectural and structural metals rose 4%, machine shop turned products and fasteners grew 6%, and coating, engraving, and heat treating grew 1%.
- Improvement Continues to be Critical. While the MAPI numbers may not be indicative of a full rebound, they give some indication that there is opportunity for growth, especially for companies focused on improving the one thing they can control—their operations. Lean techniques and technology investments will continue to be important strategies for managers to consider, but as this white paper from LIT states, optimization starts with your operators. Ongoing training is key for existing employees and becomes even more critical for new employees as fabricators attempt to bridge the current skills gap. There is no question: continuous improvement is the new normal for metal fabricators that want to thrive in today’s competitive market. And if you think you have no time for improvement, check out this article from thefabricator.com. As the article shows, you can—and need to—make time.
April 5, 2014 / best practices, continuous improvement, human capital, industry news, KPIs, LIT, maintaining talent, operator training, performance metrics, skills gap, value-added services
As the industry heads into the second quarter, uncertainty remains. In fact, as we state in our 2014 Industrial Metal-Cutting Outlook, uncertainty may be the only thing that is certain right now.
Like most sectors of the metal-cutting industry, metal service centers have experienced little if any growth in 2014. January started off with a much-needed improvement over December, with small increases in shipments and reduced inventory levels. However, February wasn’t as strong as many had hoped. According to the latest figures from the Metal Service Center Institute, U.S. service center steel shipments in February 2014 increased by 0.4% from February 2013, and 2014 year-to-date steel shipments increased by 0.2% from the same period in 2013. When looking at total volume from January to February, service centers’ shipments of steel and aluminum actually declined, reports IndustryWeek.
In other words, we aren’t quite there yet. Experts like the Manufacturers Alliance for Productivity and Innovation (MAPI) are hopeful that the rebound is coming, but until then, there are several industry trends that we feel will be key for metal service centers in 2014. Here are a few to keep in mind:
- Diversification. Shrinking profits and political issues like budget sequestration are making diversification a key strategy for service centers. In a recent column appearing in the March/April issue of Forward magazine, business journalist William P. Barrett stresses that this is especially important for companies that service the military. He states, “But it also seems prudent, in these times of daffy congressional budget strategies, to diversify as much as possible to dilute the risk that haunts the business of military contracting.” In some cases, this may mean forming new customer relationships, or it could mean offering existing customers a few value-added services (e.g., sawing, laser cutting, and parts fabrication) for a more predictable stream of revenue. You can read a great case study of one metal-cutting company’s successful “reinvention” here.
- The Skills Gap. We’ve all heard about the skills gap, and at this point, we may even be sick of hearing of hearing about it. But the issue is real, and like every manufacturer, service centers need to address it. For example, the latest U.S. Total Manufacturing Index revealed that manufacturing job openings for the latest three months is 16.1% above the year-ago quarter, and the rates-of-change are improving. According to analysis from IndustryWeek, this means that manufacturers should “expect upward pressure on wages as skilled labor becomes even harder to find.” While finding and training new employees is a large part of addressing the gap, as this white paper from LIT points out, it is just as important for today’s industrial leaders to focus on maintaining and improving their existing workforce.
- Metrics, Metrics, Metrics. Continuous improvement is the mantra of most manufacturing leaders these days, and as any lean consultant will confirm, this requires measurement. There is no question that industry buzz words like “metrics” and “KPIs” will continue to be important tools for industrial metal-cutting leaders; however, knowing where to start and what to measure can be a daunting task. Although the “right” KPI will vary by organization, as this blog discusses, there are a few simple guidelines managers should follow to determine the most effective performance measurements for their metal-cutting operation. For those who want a more in-depth look at metrics, MESA International is offering a webinar, “Manufacturing Metrics that Really Matter” on April 16. Based on a 5-month research study by MESA and LNS Research, the webcast is targeted at manufacturing executives, continuous improvement team members, and plant managers/supervisors that want to use metrics to optimize their business performance.