December 1, 2016 / agility, best practices, blade selection, industry news, material costs, productivity, skills gap, strategic planning
Over the last few years, uncertainty has plagued the manufacturing industry. Currency fluctuations, material costs, customer demands, labor shortages, and political issues are just a few of the factors feeding into an overwhelming feeling of doubt and apprehension among manufacturers.
Instead of fearing change, most companies have come to expect it. This has led many industry leaders to focus their efforts on becoming more “agile” so they can quickly respond to changing customer demands. As explained here in a blog post, “agile organizations operate on a ‘sense and respond’ mode rather than the ‘predict and control’ mode.”
An agile company is able to take advantage of short windows of opportunity and adapt to fast changes in customer demand. According to a previously published blog, this tactic can be especially attractive for industrial metal-cutting companies that are trying to gain an advantage over offshore competitors.
However, the question is whether this renewed focus on agility should come at the cost of long-term planning. While short-term goals and gains are important, is it really wise for today’s manufacturers to ditch long-term strategic planning because the future looks uncertain? Does it really pay to be shortsighted?
An article from Forbes suggests that the answer to that question is no. According to the article, one of the top-five questions managers should ask during a strategic planning session is where they want to be in the next three years. “While some might balk at long term plans, they help people to frame a future vision,” the article states. “When teams don’t articulate long-range goals, they get trapped into incrementalism. Each year a little more growth is expected, a few changes are made and revenue and profit targets are increased. The result is a business that probably inches forward.”
According to an editorial from IndustryWeek, there are also risks associated with companies that are fixated on the short term. In fact, the article asserts that short-term goals can often lead to long-term problems. “I am a firm believer in capitalism but capitalism cannot thrive if we remain focused on short-term profits at the expense of long-term sustainability,” the article author states.
From an operational standpoint, this theory holds some weight, as short-term decisions can have long-term consequences. The white paper, Tackling the Top Five Operating Challenges of Industrial Metal Cutting, gives two examples:
- Some metal-cutting operations use the “pick for speed” method to meet growing demand and improve short-term productivity. This means operators are grabbing fresh material every time and ignoring scrap. However, many industry leaders are finding that “pick for clean” is a better long-term solution. In most cases, using remnants first and striving to keep inventory low leads to increases in productivity and quality in the longer term because operators take the time to perform cuts right the first time. This also keeps material costs low, which affects the bottom line.
- One machine shop found that upgrading to a carbide-tipped band saw blade provided a substantial improvement in efficiency. Previously, the shop was using bi-metal band saw blades to cut stainless steel, which could take up to two hours. Now, with the carbide-tipped blade, cuts are performed in minutes, which has provided huge time savings and has freed up the sawing equipment to do more cutting. While the short-term cost of the newer blades was higher, the machine shop found that the long-term productivity benefits were well worth the investment.
While there is no question that today’s companies need to be able to adapt to change, long-term thinking and planning are still an important part of business success. An article from Harvard Business Review puts it this way:
“Don’t just say that the future is uncertain, and that you will act when it gets here. It is the responsibility of a forward-looking leader to share a point of view about the role the company might play in specific scenarios. Communicate how customers are changing, and how your organization can address those needs in the future.”
What is your company’s long-term point of view?
November 15, 2016 / bottlenecks, continuous improvement, industry news, KPIs, lean manufacturing, material costs, productivity, root cause analysis, strategic planning
The metals industry is constantly facing challenges—high inventory levels, fluctuating raw material costs, and declining shipments to name a few. To help offset the challenges and meet customer demands, industrial metal-cutting companies have long turned to continuous improvement practices to reduce downtime and boost productivity.
In fact, continuous improvement is an essential practice for today’s metal-cutting organizations. As stated in the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, the difference between a metal-cutting company that survives versus one that thrives is continuous improvement.
One continuous improvement tool executives are incorporating into their operations is “obeya.” As defined here in a blog from visual solutions provider Graphics Products, obeya (also spelled oobeya) is a Japanese term for “big room” or “great room.” In lean manufacturing, it is a dedicated room that is reserved for employees to meet and make decisions about any production challenges.
According to the blog, the idea behind obeya is for employees to collaborate easier and solve problems faster by having a central location to meet, share, and discuss key information. Benefits of using obeya include:
- Efficiency – Leadership can save time by brining visuals, data, and other vital resources together in one place.
- Focus – Project leaders can focus on the right issues faster by having the right team members in the same room at the same time.
- Collaboration – Employees can easily work together in real-time across disciplines, saving time and improving communication.
Like other lean practices, obeya is part of the Toyota Production System (TPS), which also includes 5S, Kaizen, and Total Productive Maintenance (TPM). According an article from IndustryWeek, obeya is also referred to as the “brain” of TPS and is often called the “Adrenaline Room” at Toyota.
“We call it the Adrenaline Room because we are trying to encourage our manager to address the day, every day, urgently, to improve the output to our customers, internal and external,” Scott Redelman, senior manager, production control and logistics at Toyota Industrial Equipment Manufacturing, told IndustryWeek. “So if we think about each process or each person—even within our four walls—as the customer, how do we aggressively have the adrenaline and the energy, the sense of urgency to quickly react and grow together to make that improvement for the customer? We have to have the adrenaline to do it.”
Industrial metal-cutting companies have also benefitted from obeya. As described in IndustryWeek, ball-bearing manufacturer Timken created an obeya at its Shiloh, N.C. plant four years ago to help meet sudden growth at the time. The company also added an obeya at its Honea Path, S.C. plant earlier this year. According to operations manager Robert Porter, the investment is paying off with productivity improvement year over year, even in down years.
Obeya, however, isn’t just placing your managers in a room and hanging charts on the wall. To ensure obeya is an effective tool, the Lean Enterprise Institute suggests managers focus on a few key issues:
- Customer complaints. Reviewing customer complaints keeps the organization focused on the customer, as well as the end product. The obeya is the space where employees can find ways to improve the process, product, and value the company offers.
- KPIs and objectives. Track key performance indicators (KPIs) and clearly display the overall objective. Have manages report on performance improvement progress and discuss ways to achieve the goal faster.
- Future changes. Post planned changes in the obeya so that everyone can start thinking about possible challenges or problems the change may create.
While there are many continuous improvement tools available, obeya has proven itself valuable. In fact, Toyota considers it one of its lean pillars. Industrial metal-cutting companies that are looking to stay ahead of the competition in today’s challenging market can experience the benefits of obeya too.
What lean manufacturing tools are you using to improve your metal-cutting operation? Is obeya one of them?
November 5, 2016 / blade failure, bottlenecks, continuous improvement, customer delivery, lean manufacturing, material costs, optimization, productivity, quality, workflow process
Process improvement strategies are nothing new to manufacturing. As an industrial metal-cutting company in today’s challenging market, chances are you’ve spent time finding ways to reduce costs while increasing output to keep up with rising material costs and customer demands.
However, with a slew of improvement strategies, tools, and technologies available, many managers have lost sight of one of the simplest ways they can optimize the performance of their operations—process control.
Process control can help metal service centers ensure consistent quality, and minimize blade and machinery failures that can cause a workflow bottleneck. While there are many ways to implement process control, standardization is perhaps the easiest and most successful way to keep employees moving in the same direction.
Standardized practices, as defined by leanmanufacture.net, dissect larger, overall processes into simple, easy-to-follow steps that any operator can easily perform. This standardized approach allows operators to perform tasks the same exact way every time, which results in using resources, such as time and raw materials, more efficiently.
According to the Lean Enterprise Institute, standardized work “is one of the most powerful, but least used lean tools. By documenting the current best practice, standardized work forms the baseline for kaizen or continuous improvement. As the standard is improved, the new standard becomes the baseline for further improvements and so on. Improving standardized work is a never-ending process.” The approach consists of three elements:
- Takt time, or the rate at which products must be made in a process to meet customer demand.
- The work sequence in which an operator performs tasks within takt time.
- The standard inventory, including units in machines, required to keep the process operating smoothly.
Benefits of standardized practices include:
- Reduced re-work due to errors in the production process or between operators
- Reduced wasted time looking for tools, documents, or required inputs to complete tasks
- Better, more comprehensive, training procedures for new staff and retraining of existing operators
- Improved quality, if implemented throughout the production process and focus on quality at the source
Not convinced such a simple approach can make a big impact? Case in point—McDonald’s, the world’s largest restaurant chain. As cited in this article by consulting firm WIPRO, McDonald’s has standardized it “manufacturing” process for hamburgers so well that most of the organization is focused on growing the business, product development and marketing.
As described here, metal manufacturer ThyssenKrupp reduced work-in-process by 40%, reduced operator movement by nearly 5,000 feet per day and improved productivity by 9% by implementing standardized work at two working stations at its Sao Paulo, Brazil plant.
In today’s fast-paced market, process control is essential for metal service centers that want to grow against competition. According to the industry brief, Strategies for Improving Workflow and Eliminating Bottlenecks in Industrial Metal-Cutting, as the pace on the shop floor increases, metal service centers can’t afford a blade failure or costly mistakes that can slow down and stop production. Today’s metal service centers must focus on the process to identify and correct any mistakes on the shop floor immediately. By implementing standardized work, metal service centers not only gain insight into potential workflow bottlenecks, but also have a solid foundation for a continuous improvement plan going forward.
Even if your metal service center has a cutting-edge improvement plan in place, take a step back and look at your processes. Are they standardized? Have they gotten too complex? By going back to the basics and standardizing work practices, managers can optimize operations and ensure that every employee—and every process—is successful, every time.
What process controls and improvements have you implemented at your metal service center? Is standardized work one of them?
September 10, 2016 / agility, best practices, blade life, blade selection, continuous improvement, industry news, material costs, strategic planning
For the last several years, the U.S. auto industry has been a growth driver for many industries, including industrial metal cutting. As we reported in our “Metal Service Center Outlook for 2016,” the automotive sector is one of two industries expected to help metal fabricators “ride out the storm” of today’s uncertain market.
While recent reports have shown that U.S. auto industry sales have started to cool, most experts still believe auto sales will remain strong over the next few years, even if they aren’t breaking any new records. In theory, this is good news for metal fabricators and other companies serving the auto segment. However, sales aren’t the only trend suppliers should be tracking.
According to an article from PricewaterhouseCoopers (PwC), the auto industry is in the midst of change, and the supply chain needs to be ready to respond. “It’s not clear how cars will change in the coming years, but automakers and suppliers no longer have the luxury of sitting out the transformation,” the PwC article states. “If you are an executive at an OEM or an auto equipment supplier, your strategic acumen — your ability to place your company in the vanguard of product trends without running afoul of ever more stringent environmental rules — will surely be tested.”
Put simply: if automotive is one of your key customer segments, it’s time to pay attention.
One of the biggest shifts happening within automotive manufacturing has been the growing use of lightweight materials. To meet federal emission standards, a growing number of U.S. automakers like Ford are using lightweight metals to decrease the weight of their vehicles and, therefore, increase the fuel economy. Many in the industry refer to this trend as “lightweighting.”
Of course, with new materials come new equipment and tooling needs, as well as new cutting parameters and techniques. To ensure that fabricators are prepared, below is a short summary of two materials trends worth following:
- Aluminum. As this American Metals Market (AMM) article states, aluminum is now second to steel as the most used material in automotive design. According to AMM, the use of aluminum is growing because it is a fast, safe, environmentally friendly, and cost-effective way to improve performance, boost fuel economy, and reduce emissions. Key aluminum suppliers like Alcoa have been reaping the rewards of this trend and expect growth to continue on a global scale.
As any metal-cutting expert can attest, every material has its own distinct properties that affect how it is cut. Aluminum is a softer material, but it is also abrasive, which can present some machining challenges. According to an article published by Canadian Industrial Machinery (CIM) magazine, aluminum’s abrasive property can wreak havoc on a saw blade, accelerating tooth wear and diminishing blade life. To combat aluminum’s abrasive quality, most manufacturers recommend carbide-tipped band saw blades over bi-metal blades. This is because carbides are harder, tougher, and more durable, Matt Lacroix of LENOX explains in the CIM article. “Carbide tips are slower to wear and better suited to handle the high machining speeds,” Lacroix writes. Other blade factors, such as backing steel and tooth geometry, can also help improve the efficiency of sawing aluminum, he adds. (To read more about cutting aluminum, check out the entire CIM article here.)
- Magnesium Alloys. Although it hasn’t received nearly as much attention as aluminum, metals experts quoted here in an article from Canadian Fabricating & Welding believe that magnesium alloys will have a place in lightweight auto design in the future. “The weight reduction we experience using aluminum in place of steel is 40 percent,” Adrian Gerlich, associate professor in the Department of Mechanical and Mechatronics Engineering at Waterloo, tells the magazine. “Using magnesium alloys in place of aluminum sees a further comparative weight reduction of between 30 and 40 percent.”
Gerlich adds that despite its lightweight properties, magnesium alloys do present a host of manufacturing challenges. Because it is less stiff than aluminum, magnesium alloys require the addition of stringers and stiffeners, he explains. In addition, the material is difficult to weld, has to be formed at a higher temperature if it is to be used for stamped parts, and is more susceptible to corrosion. “The oxide of magnesium isn’t inherently protective; it continues to corrode, so careful protection of the material is required,” Gerlich states. Even with these challenges, however, Gerlich and others believe that with more research, magnesium alloys could have huge potential in automotive applications.
Steel Still Reigns—For Now
Even with these new materials hitting the automotive scene, steel will likely continue to be the dominant metal used in automotive manufacturing. According to Automotive World, the average vehicle is still made using between 800kg and 900kg of steel.
As Tim Triplett, editor of Metal Center News, said in an archived editorial, the steel industry won’t likely lose any ground in auto design but, instead, will simply adjust to the trends. “Just as many headlines heralded new developments in lightweight, advanced high-strength steels,” Triplett wrote. “Steelmakers claim the auto industry can meet the government mileage standards by using the new steel alloys, in combination with power train innovations, and at a lower cost than switching parts to aluminum.”
Indeed, reports show that auto manufacturers are already testing the use of lightweight steel alloys, and innovators like GM are even trying mixed-metal manufacturing in which steel and aluminum parts are welded together.
Regardless of which automotive material trends take hold, the point is that fabricators and other suppliers serving this market need to be ready: Do the research, ask the questions, and be ready to adapt accordingly.
August 10, 2016 / best practices, continuous improvement, Cost Management, lean manufacturing, LIT, material costs, resource allocation
For any industrial metal-cutting operation, inventory management is an ongoing challenge. Ensuring the right amount of inventory in-house while simultaneously working to reduce overall operating costs is not an easy task.
This has been especially true in recent years. As we reported here in our annual industry outlook, high inventory levels were a major challenge for fabricators in 2015.
As a result, many fabricators are now re-evaluating their inventory management tactics, and more and more shops are moving away from holding large amounts of inventory. According to industry survey results published by The Fabricator, a little more than half (54 percent) of the respondents said they hold less finished-goods inventory today than they did three years ago. “Custom fabricators don’t want to drown in inventory,” states an article from thefabricator.com. “In fact, for fabricators having customers requiring them to hold finished-goods inventory, those inventory requirements aren’t as high as they once were.”
Many metal-cutting shops are also starting to use more remnants, a strategy often known as “pick for clean.” As explained in the white paper, The Top 5 Operating Challenges Facing Fabricators’ Metal-Cutting Operations, this tactic “promotes a cleaner inventory, which makes shops safer, more productive, and profitable.”
Of course, there are many strategies shops can use to better manage their inventory. In fact, supply chain expert Lisa Anderson says she could write 100 articles on the subject because there are so many ingredients to an effective inventory management system. However, Anderson does say there are three key questions every manager should address when it comes to inventory:
1. Do you have the right talent? “It is surprising how often this question is overlooked, yet it is #1 to achieving bottom line results,” Anderson writes. “Although inventory could be considered a ‘basic’ fundamental skill and is often on the resume of every supply chain and operations job applicant, all talent is not created equal.”
She also says there is vast confusion surrounding inventory skills and which skills are needed for which job functions. For example, do you need inventory control? Inventory accuracy? Inventory planning? Supply chain planning? Inventory tracking? “Most of these roles require far more than inventory expertise,” Anderson explains. “They require the right combination of analytical skills and communication skills.”
2. Is your system working? This question, Anderson notes, should cover both process and system. “The second most common mistake is to try to put a square peg in a round hole,” she writes. “Instead of dictating the process or system based on whatever worked in a previous life or what your ERP system says is ‘best practice,’ I’ve found the key to success is to understand what works for each particular situation (unique combination of people, processes and systems).”
3. Have you eliminated complexity? “I gain tremendous traction in delivering bottom line results solely from eliminating complexity,” Anderson writes. “I find that complexity is enticing – the more complexity, the more people feel valued and indispensable. So, instead of getting lost in complexity, encourage and reward simplicity.”
Anderson suggests getting a team together to brainstorm ways to unscramble the complexity. In what ways can you categorize your inventory in order to prioritize? Can you start with one machine? One commodity? One location? One customer? One supplier?
In the end, taking a close and honest look at your inventory management system can have real, bottom-line results. As Anderson explains, if you improve inventory accuracy by 10%, you can end up with anywhere from 10 to 100+% improvement in on-time delivery and/or efficiency. If you improve inventory turns by 10%, you could end up with more cash and increased efficiency. Put simply—it pays to evaluate your inventory management system. How does yours stack up?
July 25, 2016 / best practices, blade failure, blade life, continuous improvement, Cost Management, material costs, preventative maintenance, productivity, strategic planning, supplier relationships
Cost reduction will always be a top priority for manufacturers. However, in today’s ultra-competitive and uncertain market, manufacturing executives need to be both creative and strategic as they look for new ways to reduce costs.
As stated in the white paper, Top Five Operating Challenges for Forges that Cut and Process Metal, there are several ways forges are reducing operational costs. Measuring total cost, monitoring blade life, and instituting ongoing preventative maintenance programs are just a few examples. According to the recently revised Forging Industry Technology Roadmap, the forging industry as a whole is also working toward finding new ways to reduce material and energy usage costs—two of the most significant cost factors in forging.
A recent article published by Thomasnet, however, notes that while the tendency is for small and mid-sized businesses to focus on reducing costs for their overall operations, there is also a huge benefit to reducing costs within specific business functions, most notably procurement.
“Small businesses spend between 45 and 65 percent of sales revenue on procurement of inputs,” the article states. “Therefore, procurement should be considered a viable opportunity to reduce costs and improve efficiency. Even basic changes to the procurement process can cut procurement costs by 5 to15 percent and start a smaller business on the road to strategic sourcing.”
The article goes on to list five strategies small and mid-size operations can use to improve procurement. Read below for a summary of three of the five best practices (You can read the full article here.):
- Build and Maintain Strategic Partnerships. Small firms should seek strategic partnerships with key suppliers. Purchasing from fewer suppliers saves time and resources while building trust. A small business owner can talk openly with a strategic partner and ensure the company is not overspending due to unnecessary costs.
- Improve Internal Procurement Processes. Procurement efforts should include annual analysis of spend and demand, with supplier pricing reviews occurring semi-annually or even quarterly. Use spend analysis to detail all costs and terms associated with procurement and demand analysis to define essential needs with a focus on improving cost and quantity.
- Organize with Others to Increase Buying Power. Partnering with other small businesses can yield volume discounts and achieve savings. Consortiums put the benefits of economies of scale into effect for small businesses that would otherwise be left paying premiums.
Of course, there are no quick fixes when it comes to cost reduction. However, by taking the time to approach cost strategically—and perhaps even one business function at a time—small and mid-sized forges can make improvements that may have a long-term and sustainable impact on the bottom line.
What strategies has your forge adopted to reduce costs?
June 15, 2016 / agility, best practices, blade selection, industry news, material costs, strategic planning
As we reported in our 2016 Industrial Metal-Cutting Outlook, this year has started off much slower than experts had hoped or anticipated. However, there are still a few industry segments that are sparking demand for industrial metal-cutting companies. One of these segments is solar power.
Over the last few years, the solar power industry has experienced exponential growth. In 2010, solar only totaled 4 percent of all forms of electric generation but has since grown to 30 percent in 2015, according to the latest U.S. Solar Market Insight report from the Solar Energy Industries Association (SEIA).
The sector shows no signs of slowing down either. In the first quarter of 2016 alone, solar accounted for 64 percent of all new electric capacity in the U.S., adding more capacity than natural gas, coal, nuclear, and wind industries combined. SEIA forecasts that the solar industry will nearly quadruple by 2021. In addition, Congress recently extended the Solar Investment Tax Credit (ITC) until the end of 2021, which provides a substantial federal tax credit for both residential and commercial projects until a permanent 10-percent credit takes effect in 2022. The Solar ITC also allows owners who start construction before the end of 2021 to claim a larger credit as long as it’s complete and in service by the end of 2023.
According to an article from IndustryWeek, one of the reasons solar is booming is due to large-scale installations, which will account for approximately 75 percent of all installations this year. The utility and large-scale solar installations require many metal products for towers, including structural tubing, racking, and torque tubes for fixed and tracking systems—all of which have to be cut and shipped.
Industrial metal-cutting companies that want to grow with the solar power market need to be aware of customer needs and how the market is evolving. Based on our research, there are two trends worth noting.
1. Metal Wars
Following suit with other industries, price is driving metal material preferences for solar power installations. According to this article from American Metals Market (AMM), Aaron Faust, vice president of business development and co-founder of Applied Energy Technologies (AET) explained: “During our first four years, we sold predominately stainless products. In the last three years, galvanized steel has taken the lion’s share of our products. For a long time, it was the perfect storm—stainless could complete with aluminum and galvanized. But margin has been squeezed so tight across the board. Prices are driving everything now.”
In addition to price, solar requires high quality and durability to withstand the weight of the installation itself and weather conditions. While aluminum and stainless steel have long been used in solar applications, many aluminum rack suppliers are now offering galvanized steel products, as they not only meet strict specifications for custom utility and large-scale installations but also are highly resistant to corrosion. “Two things that will define next year are the availability of steel and the capacity of companies to process it,” Faust tells AMM. “There’s not much concern over availability, but the market could face some limitations with the market concentrated on certain forms.”
Given a shift in material preference, it is important for metal-cutting companies to have the right tool for the job. For example, carbide band saw blades are designed to cut faster and last longer for a variety of applications, including aluminum and hardened materials like galvanized steel. However, high-performance bi-metal blades may provide a cost-effective solution for carbon steel and structural steel tubing. (For more information on choosing the right blade, check out the Blade Selector tool from the LENOX Institute of Technology.)
2. Fixed vs. Tracking Systems
Besides the preferred metal type for utility grade solar installations, the type of installation itself will have an impact on what industrial metal-cutting companies will be cutting. GameChange Solar, a New York-based manufacturer of commercial and utility scale solar racking and tracker systems, recently switched to pre-galvanized steel for its production after aluminum prices increased, according to an article from Modern Metals. In addition to the material switch, the company recently increased its use of metal tubing and sourced 40 million pounds of sheet and tubing due in part to the growing use of solar trackers. Unlike fixed systems that simply collect sunrays as they pass over the panel, tracking systems follow the sun throughout the day with the use of structural tubing. Panels are then installed on the tube so they can pivot back and forth to increase a panel’s efficiency. GameChange Solar’s President Andrew Worden estimates that the tracker market will total $1 billion this year in the U.S. alone, with the world market growing to an estimated $3 billion.
With nothing but growth in the forecast for the solar power industry, the metal industry is poised to grow alongside it. Industrial metal-cutting companies that stock the right material and cutting tools will be prepared to take full advantage of this market opportunity and gain a competitive edge.
May 5, 2016 / best practices, continuous improvement, Cost Management, customer delivery, industry news, LIT, material costs, strategic planning
For any metal service center, inventory management is an ongoing challenge. Ensuring that the right amount of inventory is in-house while simultaneously working to reduce overall operating costs is not an easy task. Service centers have had an especially tough time striking this balance over the last few years.
As reported in our Metal Service Center Outlook for 2016, service centers spent most of 2015 working to wipe out their leftover inventory from the year before. Due to declining prices, service centers held their purchase orders in hopes prices would improve. According to data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments declined in February by 4.6% from the prior-year, while shipments of aluminum decreased by 2%. As metal service centers focused on offloading high-priced materials, steel and aluminum inventories decreased by 20.6% and 21.6%, respectively from the prior-year.
Despite hopes the market would improve, prices only declined further, pushing service centers to continue offloading inventory and holding orders for better prices. The latest figures from MSCI report U.S. service center steel shipments in March decreased 9.2% from March 2015, and shipments of aluminum products decreased by 11.3% compared to the same time last year. Inventories in March also decreased 1.4% and 1.9%, respectively, from February alone.
A New Approach
Like any other operational area, managers need to approach inventory management with a commitment to continuous improvement. As stated in the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Company, this is critical to thriving in today’s market. While there is likely no one “silver bullet” answer to the industry’s current inventory challenge, one strategy may help service centers find that critical balance.
As reported by Supply Chain 24/7, a new tactic called the Science of Theoretical Minimums (STM) is said to reduce cost and increase customer service. Unlike other inventory strategies, such as Just-In-Time and forecasting that only push the costs of inventory back to the supplier, STM reveals how much profit is currently untapped throughout the entire supply chain. This provides service centers with a clear picture of where to focus their efforts so they can monetize those supply chain gaps.
The basic premise of STM links actions to results by tracking two metrics—physical lead time and informational lead time. Physical lead times (PLT) are related to how long it takes to procure parts and transportation times. Informational lead times (ILT) track the time it takes for information to move between supply chain participants. After assessing both lead times, areas that can be improved are made evident, pointing out where operations can focus on optimizing the process to reduce costs.
According to the article, managing STM involves three key steps:
- Define a supply chain with zero ILT
- Define the PLT and its corresponding variability
- Define the cost difference between ILT and PLT
Together, the three steps inform managers where they can make beneficial changes with the most impact on cost. “The theoretical goal of supply chain management is quantified as the theoretical minimum, which is defined as that point where informational lead time is zero,” the article explains. “STM provides a theoretically grounded foundation for this goal, and does so in a way that is actionable for supply executives.” (To read more about the specifics about STM, you can read the full article here.)
Strategy into Action
Of course, the real test is when a theory is put into practice. According to the article, several big names have achieved quantifiable success after applying STM principles:
- Walmart, for example, is using STM in its Supplier Portal Allowing Retail Coverage. The portal relies on real-time supply chain information to “stay in stock” with low inventory levels and ultimately reduces ILT and PLT. As a result, the retail giant has reported improved gross margin return on inventory investment.
- After adopting STM, food producer Del Monte Foods reduced inventory by 27%, increased in-store service levels to 99%, and improved forecast accuracy by 20%.
- Hewlett Packard reduced lead times and doubled its on-time deliveries with STM by identifying informational lead time delays and implementing a three-stage process that included communicating to their supplier their delivery dates, production time and end product deliver times. As a result, inventory expenses decreased by $9 million.
While today’s metal service centers need to operate lean and reduce operating costs in the wake of declining prices and shipments, they also need to complete orders in a timely manner and meet increasing customer demands. Finding the right inventory level will likely always be a challenge for service centers, but industry leaders focused on continuous improvement know that even age-old problems can be solved with new solutions.
What new strategies have you implemented to manage inventory levels while reducing costs?
April 5, 2016 / agility, continuous improvement, Cost Management, industry news, LIT, material costs, strategic planning
Last year was a rough one for the metal-cutting industry. While many metal service centers were glad to put a close on 2015, most are bracing themselves for more of the same challenges in the year ahead.
For metal service centers, most of 2015 was spent playing catch-up with high inventory levels from the year before. Continued low demand and prices didn’t do much to free-up working capital, so the cycle continued: Metal service centers actively worked to reduce inventory in an effort to maintain, or at least even out, prices.
While the automotive and construction categories did boost demand in 2015, as forecasted in our Metal Service Center Outlook for 2015, the energy sector dealt a blow with historically low oil and gas prices, essentially negating any uptick the metal industry experienced to date.
At the end of 2015, shipments of steel and aluminum were not only down month-over-month but year-over-year as well. According to data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments declined in December by 11.4% from the prior-year, while shipments of aluminum decreased by 3.5%. As metal service centers focused on offloading high-priced materials, steel and aluminum inventories decreased by 16.2% and 3.3%, respectively, from the prior-year.
The decline seen in 2015, unfortunately, continued to impact metal service centers during the first two months of 2016—even with drastically reduced inventory levels—albeit slower than before. The latest figures from MSCI report U.S. service center steel shipments in February decreased 4.6% from February 2015, and shipments of aluminum products decreased by 0.4% compared to the same time last year. Inventories in February also decreased 20.6% and 7.7%, respectively, from the prior-year period.
Gloomy Forecast Ahead
With growth falling short of expectations to date, the manufacturing industry is expecting to see more of the same challenges throughout 2016. In fact, the Manufacturers Alliance for Productivity and Innovation (MAPI) recently lowered its manufacturing forecast for 2016 and 2017 due to high inventory levels and plummeting oil prices. In addition, slightly more than half of manufacturing respondents believe 2016 will be the same or worse than 2015, according to the December 2015 Semiannual Economic Forecast from the Institute for Supply Management.
Staying the Course
While 2016 clearly isn’t going to be one for the record books, there are still opportunities for growth. According to an executive roundtable report by Metal Center News, the following two industries are expected to help metal service centers ride out the storm:
- Automotive. Like last year, the automotive sector is expected to see continued growth. According to a report from the National Automobile Dealers Association, new light-vehicles are set to rise to 17.7 million units—the seventh straight year of increasing U.S. new-vehicle sales. General Motors started off 2016 with 0.5 percent more vehicles than in January 2015, and Ford’s CEO Mark Field has said he expects 2016 to be “another strong year,” American Metals Market reports. Continued low fuel prices and interest rates should also help drive sales.
- Residential and non-residential construction. Construction, as a whole, has been showing signs of life for years, and now all segments are expected to grow, including commercial, residential and non-residential sectors. According to Dodge Data & Analytics, total construction starts in 2016 will grow 6%. Low long-term interest rates by the Federal Reserve and moderate job growth will help the segments expand throughout the year.
Yes, the rest of 2016 is set to be a challenging year for metal service centers thanks to inventory levels and low oil prices. Despite the obstacles, however, there are a few bright spots. As described above, increasing demand from the automotive and construction industries provide some opportunities for growth. Some reports are even forecasting increased steel demand from the solar energy sector.
Service centers that take advantage of market opportunities while continuing their strategic planning and continuous improvement activities should be able stay the course in 2016, and, hopefully, position themselves for a strong performance in 2017.
What sectors is your metal service center focusing on in 2016? What strategies are you following to see out the rest of the year?
December 5, 2015 / blade life, blade selection, Cost Management, cost per cut, LIT, material costs, optimization
Any metal-cutting expert knows that having the right blade for the job is critical. Although it may seem like a small operational detail, blade performance impacts several key business areas, including productivity, maintenance, quality, and tooling costs.
Like any purchasing decision, blade selection needs to be strategic, taking into consideration a host of variables—business goals, material type, equipment, and operator skill level, to name just a few. Blade performance is also based on several variables—the cutting application, blade specification, number of teeth per inch, tooth set, etc. Put simply, not every blade is created equal, and choosing the wrong blade can result in poor quality cutting and higher operational costs.
The problem is that many of today’s service centers don’t even realize they are using the “wrong” blade. In many cases, companies settle for “good” instead of “great.” Managers and operators become content with the blade technology they’ve been using for years and end up missing out on the benefits a new blade technology could bring to their operation.
This is a common occurrence in band sawing. For example, many service centers have used bi-metal band saw blades over the years and have had decent results. And in many cases, bi-metal blades are a good choice. However, there are applications in which carbide blade technology would be the better choice.
Many companies are finding that making the switch to carbide blade technology can provide savings and productivity gains they would never have achieved with bi-metal blades. This was the case for Aerodyne Alloys, a metal service center featured here in Today’s Energy Solutions. For years, the company’s Greenville, South Carolina facility used bi-metal blades to cut its toughest metals, including stainless steel, nickel alloy, and super-alloys like Inconel 718 and Hastelloy.
To gain more performance out of its band saws, Aerodyne decided to upgrade to carbide blades. Carbide-tipped band saw blades use strong, durable materials to provide high performance, faster cutting, and prolonged blade life. The blade tooth has carbide tips welded to a high-strength alloy backing, allowing the metal service center to take on hard, nickel-based alloys, as well as stainless steel, tool steel, and titanium.
In addition to tackling hard-to-cut metals, carbide-tipped band saw blades offer longer blade life and faster cutting. The white paper, Characteristics of a Carbide-Friendly Band Saw Machine, further elaborates the benefits of the carbide technology by providing a real-life comparison between a bi-metal blade and a carbide-tipped blade. The test produced the following results:
- The bi-metal band saw blade (LENOX Contestor GT) ran 120 feet per minute with a feed rate of 0.53 inches per minute.
- The carbide blade (LENOX Armor CT Black) ran at 320 fpm with a feed rate of 3.11 inches per minute.
Ultimately, the higher speed and feed rate of the carbide blade enabled it to make the cut 13 minutes faster, translating into 160 more parts produced during an 8-hour shift than its bi-metal counterpart.
Carbide-tipped band saw blades can also deliver benefits to a metalworking operation by producing an improved surface finish. In many cases, a cut part will require additional processing steps downstream in order to refine the finish. By having a smoother finish, the carbide blade can reduce the number of secondary processes, which saves both time and money.
A good example of this is LENOX’s new carbide blade technology, which was featured in the latest issue of Modern Metals. Developed to cut aluminum and nonferrous alloys, the carbide-tipped band saw blade is able to make straight cuts at high speeds without sacrificing surface finish. As stated in the article, the blade tip’s particular grade of carbide wears very slowly, which is ideal for cutting aluminum. A multi-chip tooth pattern balances the chip load and reduces cutting forces, and sharp-edged teeth and high rake angles penetrate material more easily. The cutting tool is said to be the latest blade designed specifically to cut aluminum and nonferrous parts often used in today’s aerospace and automotive applications.
As carbide blade technology continues to advance, the more options service centers have to optimize and grow their operations. Whether the goal is to take on a harder material, improve performance, or increase quality, carbide-tipped blades are an investment worth considering. While the upfront product cost may be higher than other blade types, benefits like improved productivity, lower operational costs, and higher customer satisfaction will pay off in the long run.
For more information on the benefits of carbide blade technology, click here to download the white paper, “Leveraging Carbide Blade Technology to Increase the Productivity of Your Sawing Operation.”