May 5, 2017 / agility, best practices, continuous improvement, Cost Management, industry news, optimization, strategic planning
Although 2016 didn’t end on a high note for metal service centers, many industry leaders and experts are confident about 2017.
Overall, 2016 wasn’t a stellar year for service centers. According to the Metals Service Center Institute (MSCI), service center shipments in the U.S. and Canada finished 2016 with year-over-year declines in both steel and aluminum. Inventories mostly remained below prior-year levels, though stocks crept up at year’s end.
Coming into 2017, forecasts were hopeful but guarded. As reported here by Metal Center News, analysts like Chris Kuehl of Armada Corporate Intelligence warned that factors such as the interest rates, inflation, the strong dollar, government grid lock, and tax reform would all play a role in determining the health and strength of the U.S. economy in 2017. In late January, M. Robert Weidner III, president and CEO of MSCI, voiced his concerns and urged the new Trump administration to take serious and immediate action to restore growth and to help the industrial metals supply chain fully recover from the lingering effects of the Great Recession and government policy.
Confidence, however, is growing in recent months. As stated in LIT’s 2017 Industrial Metal-Cutting Outlook, metal service centers and other industrial metal-cutting organizations are getting more and more optimistic about the near future, and the latest market data looks promising.
After a flat February, U.S. service center steel shipments grew substantially across the board in March. Specifically, steel shipments increased by 9.7% from March 2016, and shipments of aluminum products increased by 13.0% from the same month in 2016. Inventory levels also showed improvement.
Meanwhile, industry leaders like Reliance Steel & Aluminum Co reported strong first-quarter results. According to the company, sales were up 11.9% from the first quarter of 2016 and up 17.4% from the fourth quarter of 2016. Gregg Mollins, president and CEO, said that improved demand, higher metal pricing, and continued strong execution resulted in record quarterly gross profit dollars and Reliance’s highest earnings per share and net income since the first quarter of 2012.
“2017 is off to a great start,” Mollins said in a news release. “Both pricing and demand levels are better than they were a year ago, and we are optimistic with regard to increased infrastructure and equipment spending on the horizon. We will continue to focus on maximizing our gross profit margin while diligently managing operating expenses and inventory levels as well as maximizing market opportunities to drive our earnings higher.”
In an April press release, Ryerson said it is “cautiously optimistic on demand for metal products in the first half of 2017.” The company anticipates higher revenue for the first quarter of 2017 compared to the fourth quarter of 2016 and the first quarter of 2016, with higher average selling prices and higher tons sold for the current quarter as compared to both periods. The key, the company states, will be to see “how positive sentiment ultimately converts to real demand for industrial metals.”
According to a report from MetalMiner, positive sentiment was also evident among attendees and speakers at this year’s S&P Global Platts Steel Markets North America conference, held in Chicago in late-March. Presentations and forecasts were mostly optimistic, MetalMiner writes here, although there were differences in opinions of what attendees should focus on in the coming months.
One of the conference presentations, given by Roy Berlin, president of Berlin Metals; Donald McNeeley, president of Chicago Tube & Iron; and Michael Lerman, president of Steel Warehouse, offered attendees three ways service centers can offer more value to the market. As reported by MetalMiner, these included the following:
- Embrace change but find an identity. Berlin noted that finding an identity in the industry is key. “Decide what it is you’re going to do and do it well. No, do it great, actually,” he said.
- Do more with less. According to McNeeley, service centers have to interject more automation. He said they need to do more with less and they cannot drive input costs down any more. On output costs, McNeely said companies cannot get customers to pay a premium for the market, so the only thing left in that channel is “operational excellence.”
- Tackle your internal costs. Lerman concluded by sharing that his company stays competitive by attacking its main internal costs: logistics, scrap, safety and healthcare. He also said that in today’s volatile market, service centers should seriously consider learning how to use and apply financial hedges where appropriate. “I know we have been taking advantage of it, and I think it is going to be more and more important as we move forward,” he noted.
Another key strategy will be for service centers to think outside the box when it comes to spending—and saving costs. According to the news brief, Resource Allocation Strategies for Leading Industrial Metal-Cutting Organizations, managers focused on continuous improvement should explore all of the ways they can save their operation time and money. For example, if new equipment isn’t in the budget, perhaps second-hand equipment is an option. Although there is some risk in buying used equipment, when done correctly, this can be a cost-saving alternative for companies looking to expand their capacity or capabilities.
Onward and Upward
Most companies know by now that there are never any guarantees when it comes to the industrial metals sector. As stated in a recent article from Modern Metals, projections “still err on the side of caution, but much less so than their forecasts of previous years.” With renewed confidence and a few strategies in their back pockets, service centers can position themselves for both new opportunities and growth in 2017.
April 1, 2017 / benchmarking, best practices, continuous improvement, Cost Management, industry news, LIT, maintaining talent, operations metrics, optimization, performance metrics, productivity, skills gap, supplier relationships
While no one would likely call it a “boom,” recent months have provided good news for industrial manufacturing. Reports have been positive, and business confidence among metal-cutting companies and other industrial manufacturers is up. Experts admit that some challenges and risks remain, but most believe that growth will continue in 2017 and well into 2018.
There is no question that uncertainty has plagued the manufacturing sector for the last several years. Hints of recovery followed by sluggish growth have made it hard for many companies to trust that business was fully rebounding. Last year, terms like “cautiously optimistic” were being thrown around, but many were still wondering — “Are we there yet?’”
Reports and forecasts indicate that we are at least heading in the right direction—both globally and within the U.S. The JP Morgan Global Purchasing Managers’ Index (PMI) has remained above the neutral 50.0 mark throughout the past 13 months and registered 53.0 in February and March—its highest level in 69 months. According to the bank, the expansion in March “remained broad-based by product type, with PMI readings for the consumer, intermediate, and investment goods sectors all signaling further solid growth.”
Forecasts from Manufacturers Alliance for Productivity and Innovation (MAPI) also point to growth, although slower than some would like. According to the latest outlook, manufacturing growth is expected to be 1.2% in 2017 but then accelerate to 2.6% in 2018. Average annual manufacturing output growth is expected to be 1.5% between 2017 and 2020.
Recent data show U.S. manufacturing expanded in March, following a very strong February. The Institute for Supply Management Purchasing Managers’ Index (PMI) hit 57.2% in March, a 0.5 percentage point reduction from a record-setting 57.8% in February 2017. Of the 18 manufacturing industries, 17 reported growth in March, including Fabricated Metal Products and the Primary Metals industries. According to one survey respondent from the Fabricated Metals segment: “Regional business is strong. Hiring qualified team members has improved.”
Cliff Waldman of MAPI says that March data adds to mounting evidence that U.S. manufacturing output performance is on track for moderate improvement, relieving the factory sector from the sluggish growth that has plagued it since 2013. “Data on actual manufacturing output from the Federal Reserve are basically in sync with the recent ISM data as they show an acceleration of growth in U.S. manufacturing since the beginning of 2017,” Waldman said in a blog post. “However, the year-over-year improvement thus far is moderate. Nonetheless, the reasonably broad-based nature of factory sector growth in both January and February suggests growth stability.”
Business confidence among industrial metal-cutting companies and other manufacturers is also up. The first-quarter Manufacturers’ Outlook Survey from The National Association of Manufacturers (NAM) revealed that manufacturers’ optimism rose to a new all-time high in the survey’s nearly 20-year history.
According to NAM, the rising confidence stems from the hope that the new administration in Washington, D.C. will bring much-needed regulatory relief, as well as tax code reforms and a significant infrastructure package. “Indeed, business leaders are cautiously hopeful that pro-growth policies from Washington will allow the country to emerge from the sluggish expansion seen in the years since the Great Recession,” the association said in the report.
Metal companies are confident as well. According to industry leader ArcelorMittal, global apparent steel consumption is estimated to have expanded by 1% in 2016. Based on the current economic outlook, ArcelorMittal expects global apparent steel consumption to grow further in 2017 by between 0.5% and 1.5%.
In the U.S., Mittal says that apparent steel consumption (ASC) declined in 2016 by approximately 1.0% to 1.5%, driven in large part by a significant destock in the second half of 2016. “However, underlying demand continues to expand and the expected absence of a further destock in 2017 should support ASC growth in the U.S. of approximately 3.0% to 4.0% in 2017,” the company said in its 2016 Annual Report.
Sentiment about customer markets is also positive. Mark Millett, president and CEO of Steel Dynamics Inc., told Modern Metals that he expects growth in the energy sector and continued growth in construction spending, “especially for larger public sector infrastructure projects.”
And although there have been reports that automotive manufacturing peaked in 2016 and will decline in 2017, metals companies don’t seem too worried. AK Steel told MM that a richer product mix, including the premium pricing that can be obtained on newer, more specialized or custom grades, should help offset declines. “Our volumes are going to be fairly stable, and fairly steady compared to what they were last year,” Kirk Reich, AK Steel president and COO, said in the MM article.
Trends to Watch
That’s not to say that companies don’t still have some concerns. In late January, M. Robert Weidner III, president and CEO of the Metals Service Center Institute (MSCI), urged the new Trump administration to take serious and immediate action to restore growth and to help the industrial metals supply chain fully recover from the lingering effects of the Great Recession and government policy.
“The industrial metals sector needs action now,” Weidner said, noting that service center aluminum shipments are registering 20 percent below their pre-Great Recession peak, and carbon steel shipments from service centers are still down 30 percent. “The erosion in the U.S. industrial metals supply chain hurts our communities; erodes local, state, and federal tax revenue; and reduces the pool of well-paying U.S. jobs,” Weidner continued.
The strong dollar and reduced capital spending are also concerns. “Signs of wide, yet modest, improvement in global growth are the key drivers of better performance in U.S. manufacturing,” Waldman of MAPI says. “Unfortunately, the problems of a high dollar, a long-term capital spending malaise, and significant policy uncertainty remain to challenge the magnitude of the U.S. manufacturing improvement, even as the world finally provides much-needed support for U.S factories.”
Many industrial manufacturers also remain risk averse. In a recent PwC survey, only 30 percent of U.S.-based industrial manufacturing senior executives said that their companies were planning to increase spending on information technology in the subsequent 12 months. “There is a remarkable opportunity here,” PwC says in a blog post. “Yet the industrial manufacturing sector remains risk averse, unwilling to spend on new machinery, software, and talent during a period of protracted slow growth and limited proven solution.”
According to PwC, there are six actions industrial manufacturers can take to be more profitable in 2017. You can read the full list here, but the following four strategies are the most applicable to industrial metal-cutting companies:
- Leverage data and analytics in a new business model. By upgrading their technical capabilities, industrial manufacturers can bundle a variety of services enabled by connectivity and data, replacing the increasingly outmoded model of selling one big complex machine under warranty and a service agreement for maintenance and repair.
- Develop strategic partnerships. Industrial manufacturers must become more active players in the technology ecosystem, seeking expertise outside the industry in order to develop equipment connectivity, data analysis, and software that are beyond their current abilities.
- Mine operational data. If connected machines—the primary components of the Internet of Things (IoT)—are to be the backbone of industry in the near future, industrial manufacturers will have to figure out how to manage the data coming from an avalanche of sensors, integrated equipment and platforms, and faster information processing systems. There is a critical need to hire people who can mine these bits and bytes of information and work more closely with customers to use the data to improve equipment performance and open new revenue streams.
- Create strategies for talent development and retention. industrial manufacturers must purposefully map out an exciting technology strategy with specific benchmarks and achievements anticipated for the next 18 to 36 months—and then communicate this story clearly to job candidates. Even companies that have not yet felt the shortage of technology-savvy staffers need to take steps to prepare for it as the number of job openings in this field will continue to outpace the number of available hires for the foreseeable future.
Of course, a major technology overhaul may not be possible for every shop, but there are always improvements that can be made. As stated in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, thriving in today’s market requires companies to embrace change and focus on continuous improvement in all areas of their business.
“Whether implementing a lean manufacturing tool to improve processes or investing in training to develop people, proactive leaders are focused on making positive changes in their operations so they can quickly respond to today’s changing customer demands,” the eBook states.
Yes, the sentiment among industry players and experts is positive, but that doesn’t mean companies should put improvement activities on the backburner. Industrial metal-cutting organizations that keep a close eye on mega trends while continuing to optimize their internal operations may not only do well in 2017, but exceed expectations.
March 25, 2017 / best practices, continuous improvement, human capital, industry news, lean manufacturing, LIT, maintaining talent, operator training, optimization, productivity, Safety, strategic planning
For years, manufacturers have relied on lean processes to improve productivity and to reduce waste. This is certainly a good thing from an operations standpoint. However, from a safety and health perspective, lean manufacturing can have a few drawbacks.
For example, lean practices make jobs highly repetitive. As pointed out in this article from Industrial Engineer, repetitive jobs often eliminate critical rest time for employees. “The repetitive jobs take their toll on employees as stressful postures and high forces are repeated over and over throughout the day,” the article says. “In the long run, the financial savings from the productivity gains and quality improvements are used to pay for the higher cost of workers’ compensation claims.”
This is why many forges and other industrial metal-cutting organizations have incorporated ergonomics into their production processes. According to the U.S. Occupational Safety and Health Association (OSHA), ergonomics is defined as fitting a person to a job to help lessen muscle fatigue, increase productivity, and reduce the number and severity of work-related injuries. Strategic equipment placement and improved ergonomics not only keep employees safe and healthy, but they are key aspects of high productivity and optimized workflow. The fewer times an operator touches a material, the fewer chances for injury and human error, both of which contribute to productivity.
Not sure where to start? An article from IAC Industries describes possible workplace risk factors and suggested solutions. For example, there are at least six different types of musculoskeletal risk factors operators may face:
- Forceful exertions and motions.
- Extreme or repetitive exertions, postures and motions.
- Duration of exertions, postures, motions, vibration and cold.
- Insufficient rest or pauses.
- Work factors (for instance, close performance monitoring, wage incentives, machine-paced work).
- Environmental factors.
The article then goes on to describe an example of an ergonomic workstation design. According to IAC, incorrect working height is often responsible for extreme postures and motions at the workstation. Recommendations for the appropriate working height are as follows:
- Six inches above elbow height for fine work such as proofing documents or inspecting small parts.
- Four inches above elbow height for precision work such as mechanical assembly.
- Same height as elbow for writing or light assembly,
- Four inches below elbow for coarse or medium work such as packaging.
Of course, this is just one of the many ways a manufacturer can improve ergonomics within their operation. Another article from Ergonomics Plus, an Indianapolis, IN-based company, offers a 10-point checklist to help managers create a framework for building a successful ergonomics process. According to the company, a solid ergonomics process doesn’t have to be complicated to be successful, but it can be challenging to get all the right pieces in place and achieve sustainable results. You can review the entire checklist here.
If these suggestions feel overwhelming or you don’t quite know where to start, you may want to consider bringing in some professional help. Earle M. Jorgensen Company (EMJ), a metal service center featured here in a white paper from the LENOX Institute of Technology, decided to perform an in-depth ergonomic study at one of its metalworking facilities. With the help of a third-party resource and input from its shop floor employees, the company made several changes to the shop floor to eliminate unnecessary handling and transportation of material. Ergonomic improvements ranged from repositioning band irons to adjusting the height of staging tables. By optimizing the workflow, EMJ has seen a reduction in employee injuries, improvements in operator efficiency, and increased output. The service center has also seen an increase in shop floor morale, as operators feel they are playing a critical role in helping the facility succeed.
In what ways could you incorporate ergonomics into your forging operations?
March 20, 2017 / best practices, continuous improvement, Cost Management, human capital, industry news, LIT, operations metrics, operator training, optimization, performance metrics, preventative maintenance, productivity, resource allocation, ROI, strategic planning
As we reported in a previous blog, capital spending among machine shops and other metalworking companies has been down for the last several years. This has been largely due to an unstable marketplace and low business confidence among shop owners. The good news is that industry reports suggest a rebound in the near future.
However, this dip in spending has caused many shops to take a closer look at the value of their existing equipment. When new equipment isn’t in the cards—and even if it is—it is important for today’s managers to understand the total cost of running their metal-cutting equipment and, even more so, what their total worth is from an operations standpoint.
Below are just a few ways shops can be sure they are looking at the value—not just the cost—of their existing equipment:
- Look at profitability, not just productivity. As explained here, overall equipment efficiency (OEE) is a critical metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time. According to a recent article from Modern Machine Shop, OEE is helpful, but it may not be enough on its own. “Managers have to balance decisions about maximizing the part-making capability of their equipment with decisions about the money-making potential of this equipment,” the article states. “OEE ratings alone provide an incomplete picture.” The article goes on to describe a measurement called Financial OEE (FOEE), a trademarked name for a new feature of a communications platform from Memex, which accounts for profitability. As stated in the article, “FOEE helps a shop understand how machine performance is helping (or hurting) profitability. This insight provides guidance—and incentive-to focus on the most appropriate productivity improvement efforts.” More specifically, FOEE is the current-state hourly profit divided by a value representing a world-class level of profit. This ratio compares what profit a company made with what profit could have been made at world-class levels. This information can help shops see the financial value of improving the machine’s performance. To read more about this metric, check out the full article here in Modern Machine Shop.
- See existing equipment as an asset. A common struggle among many shops is finding enough working capital to invest in new equipment. To help fight this battle, a recent article from Canadian Metalworking discusses how shops can use the value of existing equipment on the floor. “An asset-based lender, one who has experience in the manufacturing industry, will recognize that a good, brand-named machine tool that has been paid for in full, is an asset that can be leveraged,” the article states. “The equipment is used to provide collateral for financing new machinery, or as a resource to raise working capital to cover the additional costs of product development using existing equipment.” This does require the shop to have a full understanding of how existing equipment is evaluated and how it can be leveraged. To read some tips on properly evaluating and grading your machinery, click here for the complete article.
- Consider the value of maintenance. It’s a pretty simple fact: Equipment that isn’t running is pretty much worthless. This seems obvious, but many shops still put preventative maintenance (PM) and other housekeeping tasks on the back burner in an effort to stay productive. The irony is that this usually ends up hurting productivity in the long run. As stated in the brief, Cost Management Strategies for Industrial Metal-cutting Organizations, there are several aspects of equipment maintenance that contribute to overall costs. “From an operations standpoint, managers can keep costs under control by making sure metal-cutting equipment is operating as optimally as possible,” the brief states. This includes ensuring that equipment is running at the proper settings and that fluids are adequate. Closely monitoring blade life and maintenance reports are also critical. Perhaps the most important consideration is a strong preventative maintenance program. Programs can be as detailed as a shop feels is necessary, but a few checkpoints are outlined here in a white paper from the LENOX Institute of Technology. If limited personnel is the issue, check out this blog about getting equipment operators involved in daily PM tasks.
What other factors contribute to the value of your metal-cutting equipment?
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?
May 10, 2016 / best practices, Cost Management, cost per cut, KPIs, lean manufacturing, operations metrics, optimization, predictive management, productivity, ROI, workflow process
As fabricators continue to seek new ways to optimize their operations, many are turning to software. Whether using it to connect the plant floor to the front office, or to measure key performance indicators (KPIs), data shows that more and more fabricators view software as a smart—and necessary—manufacturing tool.
For example, according the “2016 Capital Spending Forecast” from the Fabricators & Manufacturers Association International, more than 94 percent of survey respondents said their software spending this year would either remain the same or increase. This is significant, especially as more and more reports show that many companies are pulling back on spending this year.
A separate benchmarking survey from Modern Machine Shop shows that leading shops are more likely to utilize advanced software programs in their operations. Specifically, the survey found that top-performing machine shops (referred to as “top shops”) are more apt to utilize software solutions like enterprise resource planning (ERP) and toolpath simulation software in comparison to other shops.
While there are many reasons software is becoming a valuable tool for manufacturers, for fabricators, a lot of it has to do with evolving customer demands. “As more custom fabricators are taking on more design work—beyond just design for manufacturability—engineering and estimating functions become more complex, especially as that work focuses on more subassemblies and full assemblies that call for multilevel bills of material and a multitude of sourced parts,” states a report from thefabricator.com. This, the article continues, is causing shops to invest in better methods of communication, as well as software tools like CAD/CAM, nesting systems, and ERP.
The good news is that as more manufacturers embrace software, the more tools are being developed—both by software designers and supply chain partners. Like consumers, industrial manufacturers are finding that where there is a need or challenge, there is indeed “an app for that.”
In metal cutting, specifically, there are several tools fabricators can use to help optimize their operations—many of which are free of charge. Below are two in particular that fabricators may find helpful:
- Bandsawing. SawCalc, a web-based software program from LENOX, is a free online tool that helps plant managers and operators solve band-sawing challenges encountered in the field by providing cutting recommendations for maximum blade performance. Users have free access to the program, which determines the proper cutting parameters based on material composition, size and shape, as well as the machine model. The program’s library of materials is regularly updated, providing accurate cutting recommendations for 54 country standards, and more than 35,000 materials and 9,000 band saw machines. Because the program is web-based, managers and operators can access the service right from the shop floor. Aerodye Alloys, a service center featured here in a case study, says that using the online tool has helped increase efficiency at one of its facilities by about 15 to 20 percent.
- Circular Sawing. For fabricators using circular saws, Tsune America has developed Sawculator, a free web-based software tool to assist fabricators and other industrial metal-cutting companies with pre-planning their sawing requirements. The downloadable program allows users to perform automatic US and Metric Dimensional Conversions on the fly, makes automatic suggestions for proper blade selection and chip load, provides more than twenty cutting job outlines, and calculates everything from estimated blade life and bar utilization to trim cut and net cutting time. Users can report prospective cutting jobs to their computer screen, as well as send it to concerned participants on the job via a local printer, email or Smart phone outputs. You can view a video of how the program works here.
Enhance Your Toolbox
Having the right tool for the job has always been a critical part of any metal-cutting operation, but fabricators are finding that it pays to have more than just hardware in their strategic toolbox. While it will never replace the important work machinery and other hardware tools perform on the shop floor, software tools can further optimize cutting operations by measuring important metrics, analyzing job trends, automating certain functions, and educating operators on proper cutting parameters. Although some software programs can be costly in terms of both money and training time, there are plenty of free tools available that can help even the smallest fabrication shop improve their operations.
What software tools are helping your shop optimize operations?
April 30, 2016 / continuous improvement, industry news, optimization, Output, productivity, strategic planning
So far, 2016 hasn’t been a stellar year for the manufacturing industry. Not that anyone expected it to be. Like most industrial manufacturers, ball and roller bearing manufacturers anticipated little to no growth in 2016, and unfortunately, market data has confirmed those suspicions. With longer-term forecasts looking hopeful, industry leaders are focusing on optimizing internal operations to stay profitable and edge out the competition.
As we reported in our 2016 Industrial Metal-Cutting Outlook, expansion in the industrial manufacturing sector has been slow moving. The market is—in a word—flat. Monthly data on manufacturing activity has been up and down for the last several months, which has pretty much canceled out any real growth.
For example, the monthly Purchasing Manufacturers’ Index (PMI) from the Institute for Supply Management (ISM) showed no growth in January and February, but then increased by 2.3 percentage points in March. This put the index above the 50% growth threshold for the first time in 2016, offering manufacturers some hope. Unfortunately, April’s PMI declined by 1 percentage point to 50.8%, barely above the 50 level that indicates stagnation. According to IndustryWeek, challenges such as lax global demand and the fallout from a weakened U.S. energy industry continue to stifle manufacturing growth.
Short-term forecasts expect the market to remain flat. According to the Manufacturers Alliance for Productivity and Innovation (MAPI), industrial manufacturing industrial production will likely register zero growth in the first half of 2016, with 1% to 2% growth in the third and fourth quarters. For the entire year, the research firm forecasts only 1.1% growth.
Long-term forecasts are a little brighter. MAPI predicts growth in industrial manufacturing of more than 2 percent for both 2017 and 2018. Demand for ball and roller bearing manufacturing in particular is also expected to improve. According to an industry analysis from research firm IBISWorld, slowly growing exports and relatively low metal prices have limited revenue growth over the last five years. However, IBIS anticipates that “persistent demand for roller and ball bearings promises to buoy industry revenue in the five years to 2020.” While growth is likely to remain moderate because of heightened import competition, IBIS believes that slowly recovering metal prices should help operators raise their selling prices.
Focused on Improvement
While no one is happy about the sluggish market, industry leaders weren’t anticipating major growth. In its annual report, Sweden-based SKF estimated that the global roller bearing market’s size in 2015 grew by only 0 to 1% year-on-year. Entering the first quarter of 2016, Alrik Danielson, SKF’s president and CEO, said the global bearings company expected macro-economic uncertainty to continue. “As a result, we expect demand to be relatively unchanged sequentially but slightly lower year-on-year,” he stated.
North Canton, OH-based Timken reported a similar forecast for 2016 after releasing its first-quarter results. “During the quarter, we executed well and delivered first-quarter results in line with our expectations even though market conditions globally remain weak, particularly in commodity-related sectors,” said Richard G. Kyle, Timken president and chief executive officer. “Looking ahead, we expect continued challenging market conditions in 2016.”
To weather the current conditions, Timken said it was focused on winning new business and delivering on its cost-reduction initiatives, while SKF said that it planned to invest in “improving and optimizing its existing production capacity.” This falls in line with what many others are doing as well. As described in the white paper, The Top Five Operating Challenges Ball and Roller Bearing Manufacturers Face in Industrial Metal Cutting, staying competitive in today’s global market requires manufacturers to find new ways to both differentiate themselves and minimize costs.
“This means continuous improvement is critical,” the paper states. “To keep costs low and production efficient, best-in class companies are optimizing every aspect of their operation, including basic shop floor processes like metal cutting. From getting the most out of their circular saw blades to enforcing daily preventative maintenance checks, today’s top executives know that even the smallest improvement has a bottom-line implication.”
Although no one can truly predict what the rest of 2016 will bring for ball and roller bearing manufacturers, it seems safe to say that growth will be minimal in the short-term. However, leaders that remain focused on optimizing operations can survive current market conditions and, more importantly, prepare for growth in the future.
How are you preparing for growth? What continuous improvement activities is your manufacturing operation focusing on in 2016?
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?
March 30, 2016 / best practices, continuous improvement, Employee Morale, lean manufacturing, LIT, optimization, productivity
Like every other high-production manufacturing segment, ball and roller bearing manufacturers have embraced lean manufacturing and the benefits it can bring. Some industry leaders like Timken have gone through total lean transformations, while others have opted to incorporate some simple lean tools or basic principles into their operation.
One lean manufacturing tool that continues to gain popularity among operations managers is “going to the Gemba” or taking a “Gemba walk.” This practical lean tool gives management a clear view of what is happening on the plant floor and, more importantly, reveals areas for possible improvement.
As explained in the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, “Gemba” is the Japanese term for “actual place,” but has been redefined by lean thinkers as the place where value-creating work actually occurs. In a manufacturing environment, this is typically the shop floor. Many lean experts advise manufacturing executives to make time to visit this place—known as taking a “Gemba walk”—so they can see their operation from the front lines.
“Managers are not supposed to use this walk as a time to find fault or enforce policy, nor as a time to solve problems or make changes on the spot,” the eBook states. “Instead, a Gemba walk should be a time of observation and learning. Leadership should go on the walk with an open mind and welcome suggestions from operators and other shop floor employees.”
Why is a Gemba walk so important? A recent article from The Leadership Network provides three reasons why a regular Gemba walk is beneficial:
- First-hand knowledge is the highest form of information. A regular Gemba walk will give managers transparent and unmediated knowledge that is needed to challenge and validate assumptions made by data.
- Perspective is gained through experience. A regular Gemba walk allows managers to understand the challenges employees need to overcome on a daily basis to deliver the results that are being promised in the boardroom.
- Both people and process matter equally. A regular Gemba walk will help develop a culture that fixes the problems in a process and not one that blames the people performing the process.
In theory, a Gemba walk sounds fairly simple. Walking around and talking to operators seems pretty straightforward. However, there are a few tips managers should keep in mind before heading to the shop floor. IndustryWeek offers managers five suggestions to consider as they prepare for their Gemba walk:
- Have a theme or topic in mind. Walking with a theme and having discussions with people in Gemba related to something they have recently heard or been impacted by sends a powerful message: The organization cares enough to spend time learning from, and spending time with, people in Gemba.
- Have a planned route. In larger facilities it’s wise to keep track of where you’ve been so as not to spend too much time away from one area. Sometimes the theme will dictate your route, and in smaller work places it’s fine to simply walk, watch and listen.
- Be on the lookout for waste and seek input from people. They most likely know far more about what’s going on than you’ll ever know from looking at charts and sitting in meetings.
- Ask open-ended questions. Try to avoid asking questions that people would answer with a simple yes or no.
- Take notes. Write down what you see and hear, and note whom you talk to. Most leaders at some point facilitate or at least participate in all-hands meetings or other settings where large groups are pulled together.
March 25, 2016 / best practices, continuous improvement, industry news, LIT, operator training, optimization, strategic planning
It should go without saying that training is critical to the success of your forging operation. However, many shops still lack formal training programs and simply rely on seasoned operators to casually show “newbies” the rope. While this tactic may have worked in the past, the industry’s growing skills gap is changing the way many companies train both new and existing employees.
As described here in a white paper from the LENOX Institute of Technology, skilled production workers are one of the largest workforce segments facing retirement in the near future, which will have an impact on the number of experienced workers. In fact, according to the paper, one of the largest challenges metal-cutting executives will face in the years to come is an unequal balance of talent on the shop floor. This means a strong training program is more critical than ever.
“Most facilities have multiple shifts, which means inexperienced night-shift operators may be running the same machinery as seasoned day-shift operators, causing inconsistencies in quality and productivity,” the white paper explains. “At the same time, seasoned operators may not be familiar with some of the more recent technology advancements in metalworking equipment, blades, and techniques. By instituting regular operator training, managers can level the shop floor talent and add consistency to production procedures.”
While formal training programs are certainly not a novel idea, research shows that historically, manufacturers have invested more in technology than in people. As the workforce landscape shifts, however, so does the focus. Multiple reports, such as this one from Forbes and another from Training Magazine, confirm that people have become a top priority, and companies are investing more in maintaining and training their talent.
As a result, some manufacturers are scratching their old ways of training and building brand new programs, while others are simply improving what they already have in place. In most cases, however, experts believe the real change needs to be in the way companies approach training. Instead of looking at it as a necessary evil, executives should treat it as another opportunity to apply strategy and achieve optimization.
According to an article from small business publication Chron, an effective training strategy can be vital to a company’s success. “Developing a strategy for training gives your company a competitive advantage and helps propel you into the future,” the article explains.
To help forges build an effective training strategy, below are five key steps managers can take, as listed in the Chron article:
- Step 1. Meet with your company leaders and determine your organization’s business strategy and mission statement. Discuss the goals and objectives of your company, including its human resource needs.
- Step 2. Identify training needs by comparing company goals and human resource needs. Discover gaps between company goals and employee development needs.
- Step 3. Develop your training plan to narrow performance gaps. Establish learning objectives for each training program. Identify programs that employees need to attend. Ensure that training is included in all employee evaluations.
- Step 4. Obtain management support and agreement before you implement your plan. Review your plan with your leaders and obtain buy-in for its execution.
- Step 5. Schedule and implement your plan. Identify resources for your training. Select and train instructors, and reserve training facilities.
Even if you manage a small forging operation, some form of formal training program or training strategy should be on your radar. By investing time and resources in building a skilled workforce, you are ultimately investing in your company’s long-term success.
In what ways could you improve your operations training program?