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KPIs

Five Ways to Optimize Your Machine Shop

March 20, 2015 / , , , , , , , , , , , , , , ,


In an age of information overload, most managers know how their shops should run. They’ve read case studies about successful lean initiatives, benchmarking studies confirming the benefits of preventative maintenance, and forward-thinking editorials endorsing the “smart” factory. Yet, in the midst of in the day-to-day grind, it is often difficult to find the time and resources to make any real improvements, let alone put a plan in place to make them happen. As a recent article from Canadian Metalworking quips, many shops are too busy working on their business to work on their business.

However, taking the time to make strategic decisions for your shop is critical to its success. Maintaining status quo is no longer enough in today’s market. Modern machine shops need to have both short- and long-term plans, and they need to make the time to see them through.

But where do you start? At this year’s The MFG Meeting, Laurie Harbour, president of manufacturing consulting firm Harbour Results, Inc. (HRI), shared five best practices for leaders who want to start making real changes in their operations:

  1. Strategic Planning. Do you have a strategic plan? It’s not a mission or a value   Your company needs a strategy that outlines what its focus is and why that focus is important. Additionally you need a plan with actionable one-year objectives that are communicated at all levels of your organization. And, of course, metrics need to be in place to drive each employee’s role and responsibility in meeting the plan.
  2. Market Intelligence. To be successful you must be informed. Companies can no longer afford to guess or rely on “luck.” It is critical that you gather and review both internal and external data. Triangulation of customer information, industry knowledge/historical performance/experience and external market intelligence are critical to a successful demand plan.
  3. Demand Planning. Although difficult, demand planning can lead to driving significant efficiency gains within your business. Utilize market intelligence; talk with your customer and implement demand planning in your facility. Those that are doing so improve throughput by 20 to 30 percent, making profitability soar.
  4. Manufacturing Efficiency. Rather than just improving the efficiency of one or more machines, you need to look at the entire system for optimization. Rather than scheduling each and every piece of equipment that supports making the product separately, it is critical to schedule the system and how all the pieces interact. Analyzing the entire manufacturing operation as a whole helps identify opportunities for efficiency gain and process improvements.
  5. Labor. The manufacturing industry is facing a skilled-labor shortage and it is only predicted to get worse. To be competitive and maintain a productive workforce, you need to have a plan and be prepared to attract, train and retain a younger generation.

To help leaders take a deeper look at their operation, HRI also offers a Strategic Planning Worksheet, which lists some questions leaders can use to identify opportunities for improvement in each of these five areas. You can download the worksheet here.
Are you addressing these five major areas in your machine shop? In what areas could you use some improvement? Taking the time to ask critical questions like these—and those listed in the HRI worksheet—is the first step in optimization and, even more so, putting you on the right path to becoming one of those shops you always read about.

KPIs

Benchmarking Resources for Your Forging Operation

February 25, 2015 / , , , , , , , , , , , ,


In today’s market, knowing what your peers are doing is critical to staying competitive. One way to do this is by benchmarking. According to management consultancy McGladery, the use of benchmarking is on the rise as companies look to offset the effects of the uncertain economy by reducing costs and improving effectiveness. “Benchmarking provides an objective analysis of existing business processes and insight into improving those practices, identifying gaps or inefficiencies,” the consultant firm says in a white paper. “It presents a measurement to make informed business decisions against, as well as develop strategies and create initiatives to provide a road map for growth, if not survival.”

However, as this article from iSixSigma explains, benchmarking is not a quick or simple process tool. In fact, the article  lists 18 “vital steps” companies should follow when benchmarking. Unfortunately, many forging operations don’t have the resources to take on their own benchmarking initiatives. The good news is that there are several industry sources that offer companies the opportunity to participate in benchmarking surveys. While it may be tempting to keep your company’s information close, leaders know that no amount of competitor research can replace the value that true comparison can provide.

For forges, there are several external benchmarking resources out there that offer both competitive and strategic data, as well as the opportunity for participation. Whether your goal is to find out how you stack up among your forging peers or if you simply want to gain best practice insight from some manufacturing leaders, here are a few resources that may be useful:

KPIs

Choosing Metrics that Matter for Your Fabrication Shop

January 10, 2015 / , , , , , , , , , , ,


As most manufacturing experts will attest, measurement is the only way fabricators can truly optimize their operations. By choosing the right metrics, today’s managers are able to quantify their successes, identify areas for improvement, and anticipate possible failures.

Unfortunately, knowing what to measure is the hardest part. When it comes to metrics, more is not always better. In fact, the goal should always be quality, not quantity. As this blog post from MESA International says, if you find your shop measuring things like parking space vacancy and food trucks, it’s probably time to re-evaluate.

Choosing the right metrics for your shop needs to be a strategic decision, which means there isn’t a sure-fire formula. However, there are some basic guidelines that can help you gauge if you are at least headed in the right direction. Below are a few tips that may help:

KPIs

How Midsize Metals Companies Can Sustain Operational Excellence

November 15, 2014 / , , , , , , , , , ,


Industrial metalworking companies, like other segments of the manufacturing industry, are constantly looking for ways to achieve operational excellence. Case studies, market research, and benchmarking surveys are critical tools for today’s managers as they search for new ideas to improve efficiency, lower costs, and increase profitability. This type of research is especially important for midsize metals companies, which may not have the resources to hire a consultant or take on a large-scale improvement initiative.

However, good ideas won’t actually do any good if they aren’t executed correctly and maintained. The key to truly achieving operational excellence is to sustain it. Otherwise, continuous improvement will start to feel like nothing more than a continuous hamster wheel.

According to a recent report from the National Center for the Middle Market at Ohio State University, sustaining operational improvement is a challenge for most midsize businesses. “In observing dozens of companies over the years, we had been struck by the regularity with which gains are made, then fade,” the authors write in the report, The Operations Playbook: A Systematic Approach for Achieving and Maintaining Operations Excellence. “Even when improvements are significant, it isn’t unusual for a company to end up closer to where it started than at the stepped-up level it enjoyed at the conclusion of a change program.”

To help demystify the issue, the organization conducted a survey of 400 C-suite executives—250 of them from middle-market firms, 150 from larger firms. The authors focused their research efforts on the middle market (i.e., companies with annual revenues between $10 million and $1 billion) because they feel this segment drives U.S. growth and competitiveness.

“When it comes to operations, middle-market companies are the perfect size because they are large enough to institute formal processes but small enough that their leadership is still closely involved in the day-to-day functions,” Dr. Peter T. Ward, Director for the Center for Operational Excellence at The Ohio State University Fisher College of Business, said in a press release. “Leaders can be closer to the work of the business, which helps them to communicate strategic goals, be more involved in developing the skills of employees, and recognize and solve problems as they arise.”

Based on the study findings, the authors concluded that operational improvements tend to last longer when they are comprehensive and systematic. Specifically, the authors suggest that operations should be managed as a four-part system. Each system, along with a set of the report’s suggested strategies, is summarized below.

Problem Solving Subsystem. This system includes the actions taken by the operations team when addressing a problem. Recommended best practices include:

Daily Management Subsystem. This includes the practices leaders use every day to identify possible issues and manage critical activities. Recommended best practices include:

Strategic Subsystem. The focus of this system is to ensure that workers understand the higher level strategy and how it should guide their actions and their priorities. Recommended best practices include:

People Development Subsystem. This system is devoted to equipping staff with the necessary skills and capabilities to fill critical gaps in operations. Recommended best practices include:

By following these operational strategies, the authors state that mid-market companies are on the right path to both achieve and maintain higher levels of effectiveness in their operations. You can read more about the study findings and download the entire report here.

KPIs

Understanding Six Sigma and Lean Manufacturing in Your Industrial Metal Cutting Organization

September 28, 2014 / , , , , , , , , , , , ,


At this point, most metals executives have heard the message of continuous improvement loud and clear. As a benchmark study from the LENOX Institute of Technology (LIT) confirms, a large number of industrial metal-cutting organizations are embracing smarter, more proactive operations management to stay competitive in today’s uncertain market.

However, knowing where to start can often be both intimidating and frustrating. Active change takes time and costs money, so managers need to be sure they are strategically choosing the right methods to achieve their operational goals.

Two improvement methodologies that are widely used in industrial metal cutting are lean manufacturing and Six Sigma. While both are used to improve productivity and profitability, their approaches are not the same. Understanding the difference between both methods is important not only for managers trying to choose the right organizational improvement program, but also for managers who may want to consider using them together.

Lean Manufacturing
According to leanproduction.com, lean manufacturing is “a collection of tips, tools, and techniques that have been proven effective for driving waste out of the manufacturing process.” Toyota is credited for developing it the 1980s, and over the years it has been used by manufacturers worldwide to improve all facets of the manufacturing business, from quality assurance to human resources.

Below are some key attributes of lean manufacturing, as defined by The Process Excellence Network:

Six Sigma
iSixSigma defines Six Sigma as “a disciplined, data-driven approach and methodology for eliminating defects in any process, from manufacturing to transactional and from product to service.” It was developed in the mid-1980s by Motorola engineers who were unhappy with traditional quality metrics. In response, they developed a new standard, as well as the methodology and needed cultural change associated with it. Six Sigma gained popularity in the 1990s after General Electric adopted it as part of its business strategy.

Below are some key attributes of Six Sigma, as defined by The Process Excellence Network:

The above is just a brief overview of two of the industry’s improvement methodologies and only touches on some of the main characteristics. For a more in depth, side-by-side comparison of lean manufacturing and Six Sigma, check out this article from Chron.

In an upcoming blog, LIT will explore how managers can strategically utilize both methodologies to achieve what some experts believe are longer lasting business results.

KPIs

What Connectivity Could Mean for Industrial Metal Cutting Companies

August 15, 2014 / , , , , , , , , , , , , ,


If the words the “Internet of Things” and “real-time data” mean nothing to you or your metal-cutting operation, you may want to lean in. A growing number of industry experts believe these buzzwords may just transform the manufacturing industry.

“Today’s more powerful sensors and devices, connected to back-end systems, analytics software, and the cloud, are transforming industries, right now,” says Sanjay Ravi, Worldwide Managing Director, Discrete Manufacturing Industry at Microsoft in this blog post. “With the rise of these connected operations, manufacturing executives are not only finding new ways to automate and create efficiency, they are also focusing on a big new opportunity for revenue growth—services.”

In other words, forward-thinking manufacturers are finding that connecting their production equipment to the Internet and/or to other devices is providing insight into their internal operations they may not have been able to get otherwise. By gathering production data and then using software to make it understandable, they are improving efficiency and uncovering new service opportunities.

And according to Ravi, this is no passing trend. Quoting research from IDC (commissioned by Microsoft), Ravi says “manufacturers stand to gain $371 billion in value from data over the next four years.”

A recent article from Forbes echoes this sentiment, stating that factories that are connected to the Internet are more efficient, productive, and smarter than their non-connected counterparts. However, the article also says that only 10 percent of industrial operations are currently using the connected enterprise, which means 90 percent are missing out.

The way in which manufacturers can use connectivity will vary by industry and application, but as this article from O’Reilly Radar describes, the Internet of Things (IoT) and connectivity are revolutionizing manufacturing policies and procedures in two key ways:

  1. For the first time, managers can actually know what’s happening on the assembly line to both products and machinery in real time.
  2. That information can be shared, also in real time, with anyone inside or outside the enterprise who could improve their operating efficiency and decision-making with that real-time data.

As the Forbes article describes, companies like manufacturing giant GE, bread maker King’s Hawaiian, and Sine-Wave, a provider of technology solutions, are already taking full advantage of what many are calling the “information revolution.” At GE’s Durathon battery factory in Schenectady, NY,  for example, 10,000 sensors on the assembly line, along with sensors located in every single battery it produces, allow managers to instantly find out the status of production.

This is happening in the metal-cutting world as well. According to this white paper from the LENOX Institute of Technology (LIT), one metal service center developed an internal software system to automatically track the number of square inches processed by each band saw and each blade. At any point, the operations manager can go to a computer screen, click on a saw, and see how many square inches that saw is currently processing and has processed in the past. This has allowed the service center to easily track trends and quickly detect problem areas.

Tim Heston, senior editor at The Fabricator, also sees the opportunities sensors, data, and connectivity offer the metal fabrication industry and its supply chain. “Imagine a future in which you have trillions of sensors able to predict customer demand throughout the supply chain, monitor machine conditions to prevent unplanned downtime; and a future with machine tool technology and manufacturing methodologies allowing shops to change over between jobs within seconds (some of this technology is already here), all synced with customer demands,”  he says in a recent editorial. “In short, imagine a future in which the majority of activities in the supply chain add value.”

Does connectivity have a place in your metal-cutting operation? Could it? At the very least, these are the questions leading companies should be asking. Unless, of course, they are part of the 10 percent that is already connected.

KPIs

How Fabricators Can Use Overall Equipment Effectiveness for Continuous Improvement

August 10, 2014 / , , , , , , , , ,


Over the last several years, a growing number of fabricators and other industrial metal-cutting companies have started measuring overall equipment effectiveness (OEE). This is definitely a good trend, as measurement is a critical part of continuous improvement. However, many companies are jumping on the OEE bandwagon without being fully informed, which is causing a lot of misunderstanding and misuse of this important metric.

Knowing what OEE is—and what it isn’t—is the only way to make sure you are using it effectively. Here’s a quick primer.

What OEE Is
According to leanproduction.com, OEE is a best practices metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time.

In simple terms, OEE can be described as the ratio of fully productive time to planned production time. According to leanproduction.com, it can be measured in one of two ways:

(Good Pieces x Ideal Cycle Time) / Planned Production Time

or

Availability x Performance x Quality

(You can  find a more detailed description of the calculation here, as well as a sample calculation.)

A plant with an OEE score of 100 percent has achieved perfect production—high quality parts as fast as possible, with zero down time. While that’s ideal, it’s not quite possible in the real world. According to oee.com, studies show that the average OEE rate among manufacturing plants is 60 percent, which leaves substantial room for improvement. Most experts agree that an OEE rate of 85 percent or better is considered “world class” and is a good long-term goal for most operations. The good news it that 85 percent is achievable. As this case study from Metalforming magazine describes, Magellan Aerospace in Kitchener, Ontario, Canada  was able to improve its OEE from a mere 36 percent to a world-class 85-percent-plus.

Managers can use OEE as both a benchmark and baseline. Specifically, leanproduction.com says it can be used to “compare the performance of a given production asset to industry standards, to similar in-house assets, or to results for different shifts working on the same asset.” It can also be used as a baseline “to track progress over time in eliminating waste from a given production asset.”

What OEE Isn’t
Even with a basic understanding of OEE, many operations are still misinterpreting it and, therefore, aren’t using it effectively. This blog post, for example, argues that OEE is not a key performance indicator (KPI), and it shouldn’t be measured at a company or plant level. The author goes on to state five reasons why OEE is not a good KPI, including the fact that it is not comparable between different pieces of equipment and/or different locations. Instead, he suggests OEE should be used as a way to help identify and eliminate waste in front of a process, line, or equipment.

Another misconception is that OEE is the same thing as Total Productive Maintenance (TPM). An article from IndustryWeek (IW) says this is definitely not the case. “OEE is the measure most closely associated with TPM, but OEE is not equivalent to TPM,” the IW article states. “At its heart, TPM is not about complex metrics; it’s about developing the capabilities of people.” So while a good understanding of OEE can help with TPM, the two terms shouldn’t be used interchangeably.

How to Use OEE Effectively
So how do you use OEE correctly? Below are a few pointers we called out from the IW article:

Also, if you are short-run, high-mix fabricator, don’t assume OEE isn’t for you. Check out this article from thefabricator.com, which describes how automated data collection can help you to better measure OEE in more custom manufacturing applications.

As the IW article states, OEE is often misused, but it is not a “bad metric.” In fact, it can be very useful in helping companies quantify improvement opportunities. Just be sure you know the facts before you start using OEE measurements to make strategic decisions.

KPIs

Reducing Scrap in Forges that Cut and Process Metal

July 25, 2014 / , , , , , , , , , , , , ,


In industrial metal-cutting, a small amount of scrap is inevitable. However, reducing material waste should still be a top goal for forges that cut and process metal. Like all other forms of waste, scrap negatively affects profitability, especially if it is generated out of error.

The truth is that any amount of scrap or rework you’re experiencing in your operations provides an opportunity for improvement. Taking the time to reduce scrap often leads to better productivity and higher quality cuts. According to this article from CONNSTEP, a Connecticut-based continuous improvement organization, reducing scrap and rework rates can also improve cash flow. “The number one reason small businesses go out of business is lack of cash flow,” the article states. “If the scrap rate is 8 percent of your production now and it is reduced to 6 percent, that newly created 2% may now be used to produce new/additional product and your savings should account for the cost avoidance of using new/additional material to complete the existing order.” In other words, by reducing rework and scrap from occurring, industrial metal-cutting organizations can actually generate money that goes right to their bottom line.

If you are a forge that cuts and processes metal, here are a few strategies we gathered to help you reduce your scrap rates:’

 

In the end, scrap is just one of the many areas of waste that today’s leading forges are trying to attack. However, with the cost of inventory being so high, no industrial metal-cutting organization can really afford to ignore a pile of wasted material that could have been used for profit. When it comes down to it, every piece of scrap counts in today’s lean manufacturing world. However, by implementing some of the above strategies, not every piece of scrap has to count against you.

KPIs

Safety as a Strategy in Forges

June 25, 2014 / , , , , , , , , ,


While most managers would list safety as a top concern and maybe even a priority, only a select few would list it as a strategy. A growing number of industrial metal-cutting companies are finding, however, that building their operations around this critical business area offer benefits that can improve the bottom line.

As we stated in an earlier blog post, safety has a direct impact on operations. Put simply, injured operators can’t be productive. The concept seems basic, but even leading manufacturers often fail to realize this. In a recent IndustryWeek (IW) article, Craig Long, a vice president at Milliken & Company, admits that this was something Milliken failed to do in its early years. While the manufacturer had always worked hard on safety, it was doing so in a silo. “We saw no connection between safety and operations. We were in survival mode,” Long writes in the IW article.

Long goes on to describe the safety journey of another leading manufacturer, Alcoa, and how its intentional safety efforts improved profitability to record-setting levels. Following the lead of Alcoa and other leading manufacturers, Long states in IW that Milliken spent several years repositioning its operations around safety and, as a result, has seen tremendous financial benefits, including doubling the S&P 500’s rate of earnings growth.

An increasing number of leading-edge forges are also using plant safety as a strategic lever. Every year, the Forging Industry Association (FIA) recognizes three forges for their exceptional safety efforts, and this year’s winners all stressed that safety is at the core of their company’s success. However, as one winner emphasized, the top goal should be ensuring that every employee goes home without an injury. “To us, the impact of an employee being injured, regardless of where it happens, has a negative impact on the injured individual, his/her family, and to our company, in that order of importance,” John P. McGillivray, Safety & Environmental manager at Scot Forge Co., told Forging Magazine.

So how do you build your forge around safety so that both your employees and business benefit? Below are a few tips we gathered to help you begin a safety-first journey:

Best-in-class forges know that a tactical approach to plant safety provides benefits beyond meeting OSHA requirements or winning awards. Today’s managers need to value safety because it actually holds value that can positively—or negatively—impact their workforce and, in the end, the bottom line.

KPIs

The Importance of Predictive Strategies in Industrial Metal Cutting

April 30, 2014 / , , , , , , , , , , , , ,


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.”

Bottom-Line Predictions

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:

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.

Agile Actions

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.

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