April 20, 2016 / best practices, continuous improvement, Cost Management, customer service, Employee Morale, industry news, LIT, maintaining talent, optimization, skills gap, strategic planning
Like the rest of the metal-cutting industry, machine shops were eager to see the end of 2015 due to weak demand. Unfortunately, experts are anticipating that market conditions in 2016 will, at best, be a mixed bag.
Taking a look back, 2015 started off strong. According to Gardner’s metalworking business index (MBI), industry conditions expanded in March 2015 for the 15th consecutive month. The streak stopped in April when the market contracted for the first time since December 2013, with the largest month-to-month decline since April 2013. Production also slowed while new orders declined. That contraction continued until the industry bottomed out in October and November and then ended the year with a slight uptick in December.
While growth did return at the start of 2016, it was often short-lived and fragile. For example, industrial production decreased 0.5 percent in February after increasing 0.8 percent in January, according to the Federal Reserve. On the other hand, according to Gardner’s most recent MBI index results, as reported by Modern Machine Shop, the metalworking industry has started showing signs of life. Despite the industry contracting as a whole, the trade publication says the market has improved significantly since December.
Spending trends are also a bit mixed. According to the Modern Machine Shop report, while future capital spending plans are still below the historical average, those rates are on the rise and have increased to their highest level since last March. “Compared with one year earlier, planned spending was down just 1.2 percent in March, the slowest rate of contraction since September 2014,” the trade publication reported. “This trend indicates that capital spending could begin improving later this year.”
Preparing for Returned Growth
While the start to 2016 hasn’t been the best the industry has seen, it also isn’t the worst and creates an opportunity for machine shops to invest in their operations, especially if they can afford the time to do so.
Like in 2015, most shops will continue to work on process optimization to increase productivity. However, this year, industry leaders will also need to focus on the next generation of machine shop operators to fill any skills gaps and prepare for an eventual market rebound. Based on the “Top Shops” benchmarking survey from Modern Machine Shop, leading U.S. machine shops are doing that and more.
Findings from the publication’s fifth annual survey revealed that leading U.S. shops are focusing on the following four key areas in 2016:
- Machining technology. A higher percentage of top shops use turn-mill multitasking machines at nearly 54 percent compared to 27 percent of other shops, helping to minimize work in process (WIP) and the number of times a part is touched during production. Top shops also use enterprise resource planning (ERP) software to help manage scheduling, costing and estimating and ensure they know all aspects of the workflow at any point in the process.
- Shop floor practices. According to the survey, top shops integrate unattended processes with new technology such as sensors and equipment monitoring technologies, including the Internet of Things (IoT) and MTConnect. Nearly 25 percent of survey respondents reported they’ve integrated machine-tending robots into their processes compared to 11 percent in 2011. Continuous improvement remains to lead on the floor with 62 percent of shops adopting formal improvement programs.
- Business strategies. Top shops report a median profit margin of 13.5 percent compared to 8 percent for other shops. Leading shops also invest more in capital equipment, spending 9.5 percent of gross sales versus the 3.5 percent spent by average shops. In addition, they invest in value-added services such as design for manufacturability (DFM) engineering services, which help refine product designs by working with customers early in the product development cycle and simplify machining and production costs.
- Human resources. Top shops use benefits to attract and retain employees. This is key as the majority of experienced workers get ready to retire. Top shops offer annual review and pay-raise programs, paid medical benefits, and bonus plans to attract top talent. They are also more willing to invest in growing the skills of their employees with education reimbursement and formal training programs. (For more information on workforce trends in 2016, check out this article from Production Machining magazine.)
As the past few years have taught us, no one can truly predict what the rest of 2016 will bring for machine shops and other industrial metal-cutting organizations. However, leaders remain focused on optimizing operations. By investing in workforce training and talent, improving shop floor practices, and investing in future technology, machine shops can survive current market conditions and, more importantly, prepare for growth in the future.
How are you preparing for growth? What is your shop focusing on in 2016?
April 10, 2016 / continuous improvement, industy, LIT, maintaining talent, operator training, skills gap, strategic planning
As we covered in our annual Industrial Metal-Cutting Outlook, the outlook for 2016 is—in a word—flat. Slow growth from 2015 carried over into the first quarter of the year, leaving most analysts expecting little to no growth.
According to the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production will likely register zero growth in the first half of 2016, with 1 to 2 percent growth in the third and fourth quarters. For the entire year, the research firm forecasts only 1.1-percent growth.
Unfortunately, MAPI’s outlook for fabricated metal parts is also a little disappointing. The most recent forecast shows production of fabricated metal parts down 0.9 percent in 2016, with small growth of 1.4 and 2.0 percent in 2017 and 2018, respectively.
A recent uptick in manufacturing activity in March, however, provides some hope. The monthly Purchasing Manufacturers’ Index (PMI) from Institute for Supply Management (ISM) increased by 2.3 percentage points in March, putting the index above the 50-percent growth threshold for the first time in 2016. In addition, ISM reports that 12 of 18 manufacturing industries reported growth in March, including the fabricated metal products and primary metals industries. According to one survey respondent from the fabricated metal products segment, “Capital equipment sales are steady.”
Even with some small movements forward, business for most of the metals industry has been tough. For fabricators, a lot of the challenges stem from the struggling agriculture and energy sectors, as well as bigger picture issues like high inventory levels and a strong dollar. However, none of those challenges seem to be sending the industry into a total panic.
According to an industry survey from The Fabricators & Manufacturers Association Intl. (FMA), most small and medium-size job shops and fabricators entered the year expecting growth. Specifically, the survey found that 39 percent of respondents were positive about 2016, and 38 percent said conditions are at least stable. Even so, a significant number (23 percent) didn’t expect conditions to get any better.
FMA’s “2016 Capital Spending Forecast” projected that total capital spending will increase a little more than 2 percent next year, with some equipment categories such as welding and bending seeing dramatic gains. As reported by The Fabricator, “…this shows that the metal fabrication manufacturing technology business has regained its losses from the Great Recession and then some.”
Whether or not that is true is up for debate, but it seems some fabrication shops are finding ways to still be profitable in the midst of an uncertain market. According to an editorial from Tim Heston, senior editor at The Fabricator, several fabricators he has spoken to are faring really well, depending on their customer mix and the specific OEM plants they serve.
“2016 really will be about hitting the right spot when it comes to the customer mix,” Heston notes. “Some sectors will continue to struggle, but others will thrive.
“Figuratively, the future will really be about hitting…the right mix of fabrication services, talent, technology, and customers,” Heston continues. No matter what economic headwinds may come, the right mix will help a custom fabricator land on its feet.”
Finding the Right Mix
Like any strategic decision, this so-called “sweet spot” will require some risk and will depend largely on your current customer base, capacity, and resources. In other words, there is no silver bullet formula. While it is tempting to assume that growing markets like automotive and aerospace should be your target, as Heston noted in his editorial, some aspects of agriculture (i.e., small equipment) are still profitable.
There are some key areas, however, fabricators should focus on as they attempt to make 2016 a profitable year. Based on our research, the following three areas deserve consideration:
- Diversification. In uncertain economic times, it is not uncommon for manufacturers to diversify to dilute the risks that may be associated with some OEM segments. As described here, diversification saved many fabrication shops in 2015, and experts believe the trend will continue in 2016. In some cases, this may mean forming new customer relationships, or it could mean offering existing customers a few value-added services for a more predictable stream of revenue. One fabrication shop, featured here, added prototypes to its mix as an added service.
- Advanced Technology. Fabricators both large and small can no longer afford to underestimate the role technology can play in their shop’s success. Whether you decide to invest in predictive analytics, mobile technology, or the latest cutting technology, the truth is that today’s competitive environment requires leaders to stay on top of manufacturing advancements. Jett Cutting, a metal-cutting company featured here in a case study, says that investing in new technology allows his shop to offer competitive pricing, which has led to many new customers. “We need to constantly keep on top of the latest technology out there,” Baron states. “We don’t want to spend extra money, but if it’s going to cut 20 percent quicker than I do now…then we’ll go after it.”
- Good Talent. As most manufacturing executives are well aware, the industry’s skills gap continues to widen. As The American Society of Quality’s 2016 Manufacturing Outlook Survey confirmed, an increasing number of U.S. manufacturers are struggling to fill open positions. Respondents stated that the biggest challenge was the lack of qualified applicants, followed by the time it takes to hire a new employee and lack of budget to fill open positions. However, the survey also found that many companies are proactively addressing the issue: 55 percent of manufacturers say they’ve hired an agency and 41 percent are working with local colleges on programs that teach the required skills.
Will 2016 be a year of growth for your fabrication shop? Although economists may tell you no, some strategic shuffling and smart investments may just prove them wrong.
April 1, 2016 / agility, continuous improvement, human capital, industry news, lean manufacturing, LIT, maintaining talent, operator training, preventative maintenance, quality, strategic planning, supplier relationships, supply chain
Although many hoped that 2016 was going to be a year of full recovery and growth, expansion in the industrial manufacturing sector has been slow moving. High inventory levels, a strong dollar, falling commodity prices, and a slowdown in China have left many industrial metal-cutting companies disappointed and more than a little cautious.
Evidence of slow growth started at the end of 2015. According to estimates from the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production was unchanged from the third to the fourth quarter of 2015. Monthly data has shown erratic patterns of growth and decline that have pretty much cancelled out any movement forward—a trend that is expected to continue.
“We expect the volatility to continue through the first half of 2016, a situation that will result in essentially no manufacturing production growth,” MAPI stated in a recent report. “Manufacturing production should be flat in the first and second quarters of 2016 before accelerating to a 3-percent annual rate in the second half of 2016.”
For the entire year, MAPI expects manufacturing production to decelerate rather than accelerate compared to 2015. “Production increased 2 percent last year, and we forecast only 1.1-percent growth in 2016,” MAPI states. The good news is that MAPI predicts growth in industrial manufacturing of more than 2 percent for both 2017 and 2018.
Unfortunately, the forecast for steel demand also shows little to no growth, although 2016 is expected to be an improvement over 2015. According to the Short Range Outlook 2015-2016 from the World Steel Association (worldsteel), global steel demand decreased 1.7 percent in 2015 but is expected to grow by 0.7 percent in 2016.
“It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China,” Hans Jürgen Kerkhoff, chairman of the worldsteel Economics Committee, said. “Combined with China’s slowdown, we also face low investment, financial market turbulence, and geopolitical conflicts in many developing regions.”
The only bright spot is that steel demand in developed countries is expected to show positive growth of 1.8 percent this year. The U.S. in particular should see demand increase by 2 percent in 2016, worldsteel predicts.
While no one wanted the year to start off slow, most manufacturers aren’t too surprised. In a roundtable discussion with Metal Center News (MCN), Michael Bush, a vice president at Esmark, Inc., was quoted as saying that he didn’t expect the market to pick up until at least May. “Even though it will pick up in the second half, we expect 2016 to be down 1 percent for the year,” Bush told MCN. “That’s our general feeling going into the market.”
Bush isn’t alone. The American Metals Market annual survey of metals executives showed that 30 percent of respondents in the steel, aluminum, and other metals sectors expected business to be worse in 2016, and 70 percent predicted that the domestic economy would not fully turnout until 2017 or later. (You can read the full report here.)
The reality is that the U.S. is still in the middle of an economic recovery, which means that metal-cutting companies and other manufacturers won’t likely see any major growth this year. According to MAPI, manufacturing industrial production must grow another 3 percent in order to reach the pre-recession production level achieved in the fourth quarter of 2007, which means a full recovery is expected in the third quarter of 2017. Non-high-tech manufacturing production is 5 percent below the prerecession level and will not be fully recovered until the third quarter of 2018.
On a positive note, the latest numbers from the Institute for Supply Management (ISM) show some improvement. As reported by Plant Engineering, ISM’s monthly Purchasing Manufacturers’ Index (PMI) jumped 2.3 percentage points in March to 51.8 percent, putting the index solidly above the 50-percent growth threshold for the first time in 2016.
Out of 18 manufacturing industries, ISM says that 12 reported growth in March, including Fabricated Metal Products and Primary Metals. One survey respondent from the Primary Metals segment stated, “Our business is still going strong.” Another respondent from the Fabricated Metals Products segment said, “Capital equipment sales are steady.”
The big question, of course, is will this momentum continue? Analysts believe that continued growth will depend largely on continued strong employment because it creates new income growth and a solid base of consumer spending. MAPI says that another impetus is easy credit availability, which propels big-ticket spending for motor vehicles, residential housing, and nonresidential construction.
While the overall data is certainly sobering, there are a few signs that suggest the metals sector can still snap out of the lull. As Modern Metals recently reported, “The average age of a vehicle on the road still exceeds 10 years; construction season is coming and Congress passed a long-term highway bill in December.”
Metal executives participating in MCN’s roundtable believe that automotive—which is predicted to top 17 million vehicles this year—will be the big market driver, as well as residential and nonresidential construction, white goods, and anything associated with “green energy.”
A report from Fabricating & Metalworking says that surviving 2016 will require manufacturers to use the current market conditions to their advantage. “U. S. manufacturers should be aggressive to take advantage of falling costs while at the same time finding new opportunities created by these economic forces,” the report says. Specifically, the article states that companies should consider employing two key strategies:
- Target those markets that benefit from lower energy and commodity prices such as transportation.
- Modify supply chains to reflect the new realities.
From an operations standpoint, continuous improvement activities will continue to be critical for industrial metal-cutting companies as they push through this slow period. Finding ways to optimize what is happening inside your shop doors is perhaps one of the most effective ways to balance the uncertainty of what is happening outside your doors. What does that look like? An eBook from the LENOX Institute of Technology’s lists five performance-boosting best practices that can help metal-cutting companies improve internal operations:
- Get lean. Although lean manufacturing is not a new movement, it is evolving. Companies that “got lean” years ago are focusing on continuous improvement, and a growing number of high-mix, low-volume operations are tweaking traditional lean methodologies to fit their specific situation. Regardless of your organization’s size, lean manufacturing should be at least part of your operational strategy.
- Invest in human capital. Industry data indicates that metal executives tend to invest in technology over people, but the tide is changing as the manufacturing industry deals with a serious shortage of skilled production workers. Managing this skills gap will require changing the way companies train and maintain talent, whether by beefing up training programs or rethinking their hiring tactics.
- Focus on quality as a process. There is no question that speed and agility are critical in today’s fast-paced market, but managers need to make sure that meeting demand doesn’t come at the expense of accuracy. To meet this challenge a growing number of market leaders are putting practices in place to ensure that their quality goals are met and maintained.
- Embrace preventative maintenance. In almost every manufacturing operation, machine breakdowns are one of the top causes of lost productivity. While some downtime is inevitable, proper maintenance and proactive care of equipment and tooling can reduce its occurrence. One benchmark survey revealed that 67 percent of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report an upward trending job completion rate.
- Form strategic supplier relationships. In today’s competitive marketplace, it is easy to base supplier relationships on price. However, a growing number of manufacturing leaders are placing more value on their supply chain. 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.
Ready and Waiting
All things considered, 2016 won’t likely be a banner year for industrial metal-cutting organizations. However, not all hope is lost. Recent upticks in manufacturing may indicate some positive (albeit slow) momentum, and many experts believe growth is in the long-term future, even if we have to wait another year. Until then, metal-cutting companies can continue to apply strategies that address external trends while also improving internal operations, putting them in the best position possible when the market finally turns around.
January 1, 2016 / best practices, industry news, LIT, maintaining talent, operator training, skills gap, strategic planning
For the last few years, analysts and industry experts have spent a lot of time and money trying to figure out how to solve the manufacturing industry’s current skills gap. Research studies, conferences, webinars, and trade articles have widely discussed the issue, which seems to be getting more and more challenging by the day.
As a new eBook from the LENOX Institute of Technology explains, there are several layers to current workforce challenge. First, skilled production workers are one of the largest workforce segments facing retirement in the near term, which will have an impact on the number of experienced workers on the shop floor.
Meanwhile, the current talent pool isn’t what it should be. Streamlined production lines and more process automation have changed the nature of manufacturing work, and the incoming generation of workers either isn’t interested in working anywhere near a production line or lacks the necessary skills and technical knowledge.
While there is no silver bullet solution to the skills gap issue, some manufacturers are addressing the current problem by dragging out some old strategies. Specifically, some manufacturers are bringing back their apprenticeship programs to help fill their employee pipeline.
ArcelorMittal, for example, recently refreshed its apprenticeship program in an effort to recruit more maintenance technicians, according to an article from IndustryWeek. “We realized we would be losing in excess of 200 mechanics and electricians per year,” Gary Norgren, ArcelorMittal’s manager of raw materials, told IndustryWeek. “We decided we would never be able to keep up with that with internal candidates, so we needed to do something new.”
To address the issue, the steel company has partnered up with local colleges to develop coursework in areas such as welding, metallurgy, physics, hydraulics and pneumatics. The company also participates in a program that allows students to take two eight-week internships at their local ArcelorMittal plant, where they work alongside experienced technicians. In addition, students who would like to be considered for employment after graduation can take an entrance exam, but it has to be completed during their internship. “That way, if there are areas they feel they’re weak in, they can get extra help from their mentor right on the spot,” the article explains.
Many others, including big names like Bosch Rexroth, Volkswagen and Siemens, have developed similar programs. Oberg Industries, a manufacturer of precision components and tooling, says it has always relied on its apprenticeship program, which dates back to 1971. According to an article from the U.S. Department of Labor web site, Oberg believes its apprenticeship program offers the following four benefits:
- It ensures that all employees will have the job competency skills the company needs to be successful today and tomorrow and instills our corporate values and culture in new employees.
- Provides each apprentice with the ability to earn family-sustaining incomes and learn a skill at the same time.
- Establishes a culture of continuous learning for incumbent workers.
- Contributes to the overall success of the organization by enhancing the company’s reputation, strengthening its brand, and setting it apart from the competition.
While apprenticeship programs certainly have a “dated” feel to them compared to many of today’s fast-paced hiring tactics, they could also be exactly what manufacturing needs—again. For an industry that has spent a lot of the last few decades focusing on process and efficiency, maybe it’s time to place the focus back on people. By investing time and resources in building a skilled workforce, you are ultimately investing in your company’s long-term success.
How is your company recruiting and building a skilled workforce? Could apprenticeship or internship programs help close the skills gaps in your operation?
December 15, 2015 / best practices, industry news, LIT, maintaining talent, operator training, skills gap, strategic planning
It’s no secret that the manufacturing industry is facing some serious workforce challenges. As we reported in this white paper and several blog posts, skilled production workers are one of the largest segments facing retirement. This, coupled with increased demand, is leaving industrial metal-cutting companies no choice but to find new ways to hire, train, and maintain skilled employees in order to remain successful and competitive in today’s market.
One way industrial metal-cutting companies can meet this challenge is by building a diverse workforce and tapping into a demographic that is grossly underrepresented in manufacturing—women.
According to the U.S. Bureau of Labor Statistics, women comprise nearly half of the U.S. workforce, but just over a quarter of the manufacturing workforce. Although the reasons for the skewed representation are debatable, it is likely a combination of industry bias and stigma, and based on some research, disinterest on behalf of women.
A survey conducted by the trade group Women in Manufacturing revealed that only 7 percent of women selected manufacturing as a top career choice, and an overwhelming 68 percent are not likely to consider manufacturing as a career path. However, the survey also found that of the women currently working in manufacturing, 82 percent think the field offers interesting and challenging work, and 50 percent believe it offers good compensation. In other words, once women do choose manufacturing as their career, they are satisfied and are likely to stay.
Data also shows that the financial business case for building a diverse organization is strong. Fortune 500 companies with high percentages of women officers had a 35 percent higher return on equity and a 34 percent higher total return than companies with fewer women, according to this study conducted by nonprofit organization Catalyst and published by Deloitte. Plus, women represent a skilled talent pool: They earn more than half of the associate’s, bachelor’s and master’s degrees in the U.S., according to the National Center for Education Statistics.
So how can metals companies overcome the misconceptions of the manufacturing industry and help close the skills gap with women? A report commissioned by The Manufacturing Institute, APICS Supply Chain Council, and Deloitte lists several ways:
- Start at the top. Senior leaders must be aligned for change to take place in the manufacturing industry, which can help recruit and retain women talent. One way to reinforce your commitment is to create diversity and inclusion programs, set goals across the organization and then regularly communicate the progress of those programs and goals. This shows management holds diversity as a business priority.
- Address gender bias. Actively dispel bias about gender and leadership in the manufacturing industry. Targeted training can help executives consciously adjust their behavior and decision-making process to eliminate conscious or subconscious gender bias. Some companies even remove gender-related information on resumes so reviewers can focus on skills and capabilities.
- Create a more flexible environment. Work-life balance is an increasingly important factor across all industries, including manufacturing, and not only for women, but for Millennials and Baby Boomers as well. Metal-cutting companies can shift to focusing on results versus the time a worker spends on the job to help support workplace flexibility while maintaining production.
- Foster sponsorship. A formal or informal mentor program can help attract and maintain women in the manufacturing workforce. Support can range from creating roles and identifying sponsors and participants, building awareness of the program, and providing training and resources to participants. The Alcoa Foundation, for example, recently partnered with The Manufacturing Institute, to host a networking series developed to provide women in manufacturing the opportunity to hear from women industry leaders and connect with others.
- Promote personal development. Women ranked learning and development programs as one of the most impactful talent initiatives in their organizations. Companies should encourage top talent to target a higher role within the organization and then map out a career path to achieve that.
- Develop the manufacturing workforce early. With less overall interest in the manufacturing industry—and less formal education to support it—active encouragement for female students to pursue careers in manufacturing is needed. A new Forging Industry Women’s Scholarship is doing just that by introducing women into the manufacturing industry and enabling them to achieve their career aspirations in engineering, management, marketing, manufacturing and other comparable studies.
How are you working to build a diverse workforce in your industrial metal-cutting organization? Could hiring more women help you close the skills gap at your company?
November 15, 2015 / employee incentives, industry news, maintaining talent, operator training, skills gap, strategic planning
As more and more Baby Boomers near retirement, most industrial metal-cutting organizations are being forced to replace the lion’s share of their workforce, including senior management. Unfortunately, a lot of workers that should be the natural replacement—Generation X—never really took an interest in manufacturing, so many companies are now looking to Millennials (also known as Generation Y) to fill the gap. In fact, an article from California Manufacturing Technology Consulting (CMTC) estimates that by 2025, three out of four people in the American workforce will fall into the Millennials category, which includes individuals born between the 1980s and 2000s.
The challenge for manufacturers, then, has been finding ways to attract this up-and-coming generation of workers. This has initiated several discussions within the industry about some of the characteristics of Millennials and what companies need to do to cater to their “tendencies.” On the plus side, some experts are saying Millennials are tech-savvy optimists that have a lot to offer the manufacturing industry. Others, however, are stereotyping them as self-centered and sheltered.
In an effort to find some real answers about Millennials, IBM conducted a multi-generational, global study of employees from both small and large organizations. In the study, the manufacturing giant compared the preferences and behavioral patterns of Millennials with those of Gen X and Baby Boomers. What IBM found was surprising.
“We discovered that Millennials want many of the same things their older colleagues do,” the company wrote on its website. “While there are some distinctions among the generations, Millennials’ attitudes are not poles apart from other employees’.”
Based on the study results, IBM debunks five common myths about Millennials:
- Myth 1: Millennials’ career goals and expectations are different from those of older generations.
- Fact: Millennials place much the same weight on many of the same career goals as older employees do.
- Myth 2: Millennials want constant acclaim and think everyone on the team should get a trophy.
- Fact: Millennials want a manager who’s ethical and fair. They think it’s less important to have a boss who recognizes their accomplishments.
- Myth 3: Millennials are digital addicts who want to do everything online.
- Fact: Millennials’ top three preferences for learning new skills at work are physical, not virtual.
- Myth 4: Millennials, unlike their older colleagues, can’t make a decision without first inviting everyone to weigh in.
- Fact: Gen X – even more than Millennials – believes in soliciting lots of opinions.
- Myth 5: Millennials are more likely than others to jump ship if a job doesn’t fulfill their passions.
- Fact: Employees of each generation share the same reasons for changing jobs.
Regardless of what you may or may not have believed about Millennials, here’s another fact: They will be a large part of the workforce and, as a result, will play a role in the success of your company. Some metals executives, like Bob Weidner, president of the Metal Service Center Institute, are welcoming this new influx of workers and look forward to the opportunities they offer the industry. In his editorial, “To the Class and Industry Leaders of 2015,” Weidner writes:
“We are now aggressively looking for a new generation of creative employees. A new workforce of leading edge innovators with the talent, intellect and productive energy that will keep the American metals industry ahead of the global pack in the face of a gale of disruptive forces that are altering the way we do business. We are looking for dedication, for people who want to do meaningful, socially important work in these shifting times.”
Weidner goes on to state that it is important for the metals executives to continually look at the industry and the workforce “through a new lens” and that companies should always welcome “opportunities to adapt.” As pointed out by the e-book Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, this may require some companies to change the way they train and maintain talent, whether that means beefing up training programs or rethinking their hiring tactics. For others, it may mean simply figuring out how to leverage the strengths of a multi-generational workforce. Either way, change within the workforce is happening. Perhaps it’s time to adapt.
How is your company preparing for the next generation of workers?
November 1, 2015 / continuous improvement, Cost Management, industry news, LIT, maintaining talent, operator training, productivity, supplier relationships
For the last several years, metals CEOs have been, at best, cautiously optimistic about market conditions. Even when all signs pointed to a full recovery, uncertainty about external factors such as economic activity and commodities pricing continued to plague the industry. As one of our white papers points out, this uncertainty has pushed many managers to focus on improving internal operations—the only aspect of their business they can control.
It isn’t too surprising, then, that the latest report from PricewaterhouseCoopers (PwC) found that this uncertainty about the market remains among metals CEOs. What is surprising is that in some cases, this uncertainty has turned into pessimism. According to PwC, “Metals CEOs are more pessimistic about the economy, their own prospects, and a wide range of threats.”
Compared to CEOs from other industries, PwC’s survey revealed only 24% of metals CEOs believe the economy will improve this year compared to 37% of the overall sample. “And fewer are very confident of growth, compared to the total sample,” PwC states.
Based on current economic data, it seems metals executives have reason to be tentative. Despite economic expansion, data from Institute for Supply Management (ISM) revealed that 11 manufacturing industries contracted in September, including the Primary Metals and Fabricated Metal Products segments.
To cope with market conditions, the PwC survey found that half of metals CEOs are looking to diverse partnerships, while the vast majority is cutting costs. PwC also found that digital technologies are lower on the strategic agenda for metals CEOs and that skills shortages are a huge concern.
The good news is that the survey revealed that 75% still expect to increase their company’s revenues in the next 12 months. “Like CEOs in other industries, they’re looking to the US, China and Germany to generate growth,” PwC reports.
Read below for a summary of some of the key trends PwC discovered from the survey:
- Metals CEOs are wary but determined. Metals CEOs are more inclined to think threats to growth have increased over the past three years than their peers in any other industry. They’re particularly concerned about the increasing tax burden, impact of government indebtedness, and over-regulation.
- Metals CEOs have their eyes on diverse partnerships. Strategic alliances are a major area of interest to metals CEOs. 54% plan to partner with other entities (primarily customers, suppliers, academia, or firms from other industries) in 2015. That’s a huge leap from last year, when only 16% planned to collaborate.
- Metals CEOs are cautious about digital transformation. Only 66% of metals CEOs think it’s important to champion the use of digital technologies. In contrast, 86% of the overall sample believes the CEO plays a key role in encouraging the adoption of such technologies.
- Metals CEOs are looking for the right people. A whopping 85% of metals CEOs are worried about finding candidates with the right skills, compared to 73% of CEOs overall. However, only 59% have widened the search for talent, and only 41% have adopted a strategy for promoting talent diversity.
- Metals CEOs continue to streamline operations. Metals CEOs continue to actively pursue operational efficiency. 90% of survey respondents said they planned to start a cost reduction initiative in 2015.
To read the complete 18th Annual Global CEO Survey, including the survey findings by industry segment, click here.
How is your industrial metal-cutting company coping with market uncertainties?
October 30, 2015 / best practices, Cost Management, Employee Morale, LIT, maintaining talent, operator training, productivity, quality, ROI, skills gap
After years of focusing on automation and processes, today’s manufacturers are starting to realize the growing importance of allocating resources to the workforce. According to 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 Americans age out of the workforce. This shortage in skilled production workers—often referred to as the “skills gap”—is forcing managers to rethink how they spend their time and their money.
As explained in a white paper from the LENOX Institute of Technology, there are two reasons for the growing skills gap. “First, a large number of workers are facing retirement in the coming years, which will have a significant impact on shop floor experience,” the paper states. “In addition, reports state that by 2020, companies will have up to five generations in the workforce at once. This unbalanced level of skill and experience in a metal-cutting operation can have a significant impact on both
quality and productivity.”
Michael Collins, president of MPC Consulting, feels one of the root causes of today’s workforce challenge is the fact that companies haven’t invested in advanced training, either because they didn’t want to or because they didn’t have the money. “It has been at least 25 years since the alarm was sounded on skills shortages in manufacturing and the threat of retiring baby boomers,” Collins writes in an article published in IndustryWeek. “Just about everyone who follows manufacturing has known about this problem for a long time. So the question is: Why didn’t we invest in advanced skill training before it became a serious problem?”
Collins goes on to suggest that it’s time for manufacturers to learn from their mistakes and to start making changes. Specifically, he lists four ways manufacturers can acquire the highly skilled workers they need. These include the following:
- Invest in training
- Recalculate the ROI of training
- Stop the pursuit of low-cost labor
- Demonstrate that manufacturing jobs are a secure career opportunity
Some industry leaders have already started to make some changes. As we reported here, ball and roller bearing manufacturer Timken Co. is working with Apprenticeship 2000, an apprenticeship partnership located in the Charlotte, NC region, to offer technical career opportunities to high school students and employment after graduation.
Pegasus Manufacturing Inc., a Middletown, CT-based fabricator of tubing and parts for jet engines, is taking advantage of its state’s training and efficiency programs. “Our focus on maintaining the workforce here in Connecticut and adding to it, getting the pipeline out of the technical skills system, making sure we have high caliber folks, is really second to none in the United States and probably worldwide,” Chris DiPentima, the Pegasus CEO, told the Hartford Courant. Since participating in the state-wide programs, Pegasus has added 16 jobs to its payroll in less than a year.
In the end, successfully managing the skills gap will require manufacturing executives to take a hard look at how they are investing in their workforce, whether that means investing money into advanced training programs or investing time into seeking apprenticeship opportunities. Companies that fail to make real, active changes now may find themselves dealing with bigger, bottom-line challenges in the future.
How is your company actively tackling the skills gap?
October 1, 2015 / Employee Morale, industry news, LIT, maintaining talent, operator training, skills gap, strategic planning, value-added services
All year long, the manufacturing industry has had its sights set on a healthy 2015. As we reported in April in our 2015 Industrial Metal Cutting Outlook, all signs pointed to a full economic recovery. According to the latest data from MAPI, GDP is growing and will continue to grow in 2016.
The good news is that many manufacturers and industrial metal-cutting companies have felt the benefits of the improving economy and experienced increased demand; however, others are a little disappointed with the way the year is turning out.
According to the Institute for Supply Management’s September PMI report, economic activity in the manufacturing sector expanded in September for the 33rd consecutive month, and the overall economy grew for the 76th consecutive month. However, 11 industries, including primary metals and fabricated metal products, contracted in September. One fabricated metal producer told ISM that it had “concerns about the China downturn and its effect on our consumer confidence.” Another manufacturer in the primary metals segment said that it continues to feel the impact of the oil and gas market slowdown. “Aerospace demand has also been slower than expected,” the company added.
Meanwhile, factors like the upcoming presidential election and unstable foreign affairs continue to feed into uncertainty, leaving manufacturers conflicted about how they should manage their operations. Should they prepare for increased demand or play it safe now that growth has been slower than expected?
Of course, there is no silver bullet answer to this question, but there are some ways that companies can strategically navigate the ups and downs of the market. Below are just a few ways industrial metal-cutting companies can adjust to market “ups” and expand when needed, while also preparing for the potential “downs” and changing conditions.
When business is booming and orders are up, it’s easy to get overwhelmed by increased demand—especially after several slow months. However, there are ways manufacturers can adjust. U.S.-based automaker Ford, for example, recently cut its traditional two-week summer break short to meet demand.
IndustryWeek offers five ways manufacturers can take advantage of the uptick without making any monumental changes to their operation:
- Round up your top talent. A shortage of skilled talent is a business risk for one-third of businesses, according to manufacturing.net. Case in point, training and maintaining talent is one of the three operating challenges in industrial metal cutting, according to this white paper from the LENOX Institute of Technology. Establishing ongoing operator training can help balance the skill level on the shop floor and across shifts. Enlisting your top performers and asking for their input on projects will go a long way when it comes to motivation and morale.
- Stick to what you know. Although it’s tempting to start adding new specialties when demand is up, don’t be too quick to jump on the bandwagon. Be selective and choose projects that can easily be added to your line-up and offer the most profitability.
- Pick your projects carefully. Again, don’t accept work for the sake of work. Accept projects that you can execute quickly and easily without huge disruptions in your current production processes and workflow.
- Revisit recognition. Ensure motivation stays high by recognizing those who go above and beyond expected responsibilities. A simple “thank you” goes a long way.
- Create incentives. Hard work pays off—make it a reality for your team. Tie rewards to specific goals, timelines, or projects and be timely with the reward.
In a cyclical business like manufacturing, a slowdown is inevitable. However, most manufacturers don’t know how to prepare for market shifts and, as a result, fail to strategically adapt when conditions change. The answer, according to one Forbes article, is to embrace uncertainty.
“In our experience, the most effective leadership teams develop a clear and actionable portfolio of strategic actions that balance commitment with flexibility,” Martin Toner, a partner at Bain Insights, writes in the Forbes article. “Instead of relying on a planning exercise defined by conditions at a discrete point in time, they commit to a cycle of ‘execute, monitor and adapt,’ redirecting the company toward the best opportunities over time.”
Toner goes on to offer four ways companies can form a strategy around uncertainty:
- Define uncertainties. Make a list of the uncertain things you face and then prioritize them.
- Create probable scenarios. Imagine how the future might look. Discuss the possible threats and opportunities of each.
- Develop strategic options. For every scenario, plan an action that would help balance threats while maintaining flexibility to adjust to others.
- Identify signals. Determine what indicators signal market changes and know when to start making those scenarios a reality.
How do you navigate the ups and down of the market? What strategies do you find are the most successful?
July 15, 2015 / best practices, Employee Morale, human capital, industry news, LIT, maintaining talent, operator training, skills gap, strategic planning
Over the last few years, manufacturing experts and industry leaders have been discussing the shortage of skilled production workers. From Forbes and IndustryWeek to the Harvard Business Review, everyone is weighing in on the “skills gap” and how the manufacturing industry should be addressing it. In fact, the LENOX Institute of Technology has written a white paper and several blogs about the hot-button topic.
However, with all of this “talk,” one has to wonder if the so-called “skills gap” truly exists, or if it is just an industry trend that is being fabricated or blown out of proportion. To dig into this issue, the LENOX Institute of Technology turned to a few industrial metal-cutting companies to discuss the skills gap, whether or not it is affecting their organization, and, if so, how they are handling it.
The Gap is Real
All three organizations we interviewed agreed that there is indeed a skills gap in the industrial metal-cutting industry. “I have felt the impact of this,” says Matthew Dobratzl, production supervisor at Thyssen Krupp. “It seems that as more of the skilled guys are retiring, they are being replaced by employees who have not had the proper training.”
Barry Grider, operations manager at Standard Locknut, LLC, and Brandon Dodds, operations manager at EMJ, part of the Reliance Group, admit they are also feeling the affects of the skills gap. Specifically, Dodds says it is getting harder and harder to find workers that meet the level of quality his company expects.
To tackle this issue, Dobratzl, Grider and Dodds say it is imperative for companies to be both proactive and strategic. Below are three ways they are addressing—and filling—the skills gaps within their own organizations:
- Screen New Hires. According to Grider, bridging the skills gap starts with making quality hires. He accomplishes this at Standard Locknut by putting potential employees through a “very thorough screening and interviewing process.”Dodds of EMJ says he also relies heavily on screening. “In this current climate, we usually choose potential employees from temporary agencies and put them to work for several months to ‘feel’ them out and see if this is the right fit for them,” Dodds explains. “We usually see potential or non-potential in the first three days and then make decisions based on performance and work ethic.
- Focus on Training. The most critical aspect of filling the skills gap is training, according to Dobratzl of Thyssen Krupp. “Our strategy is to provide the best hands-on training with our new hires and teach them best practices,” Dobratzl says. “This is extremely important to our success, as we need our employees working error free.” Grider of Standard Locknut agrees, adding that his company actively invests in internal and external training for both new and existing employees.Dodds believes training should always be a focus for manufacturers, skills gap or not. “If your organization does not focus on training, then you can’t expect your employees to produce a quality product,” Dodds says. “Building a strong organizational team to meet the ever-changing customer demands will go far, but in the end, it all boils down to quality training.”
- Value Employees. With a small talent pool, it will also serve manufacturers well to intentionally work at maintaining and valuing their current employees. Grider says Standard Locknut does this by continually investing in employees and by “treating them with respect and providing them with all the tools necessary to perform their jobs.”Dodds echoes this sentiment and adds that good managements boils down to “training your employees well, treating your employees well, and compensating your employees fairly.”
As the above feedback confirms, industrial metal-cutting companies are feeling the effects of the manufacturing skills gap. With more and more workers retiring, this gap stands to only grow larger, unless companies start acting now.
Today’s managers will need to be strategic in the way they hire, train, and maintain their employees if they want to successfully move forward. These days, industry leaders are finding that human capital is not just valuable, but an essential part of success.
How is your metal-cutting organization approaching and equipping its next generation of workers?