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performance metrics

Three Ways Metal Service Centers Can Prepare for Growth

July 5, 2015 / , , , , , , ,


As we reported in our Metal Service Center Outlook for 2015, metal service centers went into the new year optimistic. Unfortunately, shipment data has failed to meet expectations. According to monthly data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments have been down all year compared to the same months in 2014. In May, MSCI reported that steel shipments decreased by a whopping 12.6% compared to May 2014, and shipments of aluminum products also registered the first decrease of the year, down 3.3% compared to May 2014.

In light of current conditions, it’s hard to fathom that any service center would turn down work. One would imagine that sales teams are working hard to ensure a steady stream of contracts, all the while hoping to land that huge, game-changing order. After all, growth is always the goal.

But what happens when that big order finally comes in, and it is clear that taking it on will require capital investment in either equipment or labor? What if you are running at capacity and the money just isn’t there, yet the growth opportunity a new customer represents is undeniable? What then?

As this article from Canadian Metalworking explains, most companies are left with three possible options:

  1. Delay fulfillment of the order, if at all possible.
  2. Beg the customer for a 50% down payment, hoping he has the financial wherewithal.
  3. Turn the customer away—or worse—send him to the competition

Obviously, none of these options are ideal, but this scenario is all too often the case for a large number of service centers that cut and process metal. However, not all hope is lost.

While there will always be instances when a company has to decide whether or not the business risk is worth it, there are ways to proactively prepare for potential growth. Below are three strategies that can help service centers be in a better position to accept new growth opportunities.

Focus on Reducing Operating Costs
In the midst of the day-to-day grind, it’s easy to put the most focus on getting the job done. However, keeping operational costs under control should always be a top priority for managers. According to consultant Lisa Anderson, businesses looking to find ways to grow profitably need to stay focused on maintaining low operational costs. Doing so not only saves money, it “provides pricing flexibility as you are able to reduce your breakeven point for covering costs.” Anderson explains.

In most cases, lowering operating costs won’t require any capital investment, but rather is a matter of taking better care of the investments you’ve already made. For instance, according to the white paper, The Top 5 Operating Challenges for Metal Service Centers, proper management and proactive maintenance of metal-cutting equipment and tools can save companies a lot of money. On a band saw, for example, low coolant levels can lead to premature and uneven wear of band wheels, which typically cost about $1,000 each. By instituting regular coolant checks as part of a PM program or daily operator checks, managers can eliminate this unnecessary maintenance cost, as well as the time needed to replace the band wheel.

Anderson agrees that PM is a key strategy and goes on to list several other strategies here. In the end, reducing operating costs is a good practice for any company, but it is essential for companies looking to expand.

Evaluate Your Position
In addition to cost readiness, managers need to be able to gauge whether or not their operation could logistically handle any growth. This requires measurement. An article from IndustryWeek describes several metrics that can help managers determine factory readiness.

Below are two key metrics that should be evaluated quarterly, according to IW:

Get Finances in Order
If that big order does come in, companies should be sure their finances are in order just in case financing is required. According to the Canadian Manufacturing article, the following best practices can help companies of any size can be in a better position to get financing:

performance metrics

Smart Manufacturing Boosts Productivity for Industrial Metal Cutting Companies

June 1, 2015 / , , , , , , , , ,


With market demand finally on the rise, industrial metal cutting companies need to keep up. However, there is only so much managers can optimize through traditional lean practices and proven technology. While automation has helped create new efficiencies across many industries, including metal cutting, most experts believe the factory of the future lies in “smart” manufacturing.

As reported in this blog post from LENOX Institute of Technology (LIT), “smart” manufacturing technologies such as the Internet of Things (IoT) and real-time data are poised to transform the way manufacturers improve operational efficiency and productivity. In fact, according to an IDC Manufacturing Insights survey, manufacturers expect IoT to lower operational costs, increase the potential to retain and attract customers, improve service and support, and further differentiate themselves from the competition. [LINK].

Traditionally, monitoring shop floor operations in real-time has been cost prohibitive. However, with the prevalent availability of new technology, a growing number of manufacturers are investing in hardware adapters and software upgrades, with hopes of a big return.

As this Fabricating & Metalworking article points out, the potential return on investment is huge. For example, only 5 percent of the estimated 64-million computer numerically controlled (CNC) machines around the world are currently connected to the industrial Internet. However, if the remaining machines were connected and started reporting data, they could contribute a staggering $15 trillion to the global GDP by 2030, according to research by GE.

But can “smart” and connected manufacturing facilities really drive performance—and, —ultimately, drive profits—for industrial metal cutting companies? In the Fabricating & Metalworking article, author David McPahil says, “yes.” According to McPahil, “smart” manufacturers have seen positive results in key performance indicators like overall equipment effectiveness (OEE). Below are several ways connectivity can positively affect the three ratios used to calculate OEE:

It’s important to note that getting “smart” doesn’t always require brand new, high-tech equipment. As described in a recent white paper from LIT, one metal service center developed an internal software system to automatically track the number of square inches processed by its existing sawing equipment. At any point, the manager can go to a computer screen, click on particular band saw or circular saw, and see how many square inches each saw is currently processing and has processed in the past. This allows the service center to easily track trends and quickly detect problem areas.

Of course, upgrading to a “smart” manufacturing operation does require some investment, but it often has a high return. If you haven’t already made the jump to add connectivity to your industrial metal-cutting operation, it may be worth looking into—and soon. As many “smart” companies have discovered, the results are both measurable and promising.

performance metrics

Predictive Operations Management Holds Benefits for Forges

May 25, 2015 / , , , , , , , , , , ,


Benchmarking, peer reviews, and ongoing analyses are considered universal best practices among leading organizations, regardless of industry or industry segment. However, in today’s competitive marketplace, companies need to know more than where they stand among their peers; they need to know where their company is headed.

In other words, today’s leading manufacturers must be proactive in their strategic approaches, not reactive. That’s why a growing number of forges are now transitioning to using predictive operations management strategies, allowing them to not only measure performance, but to also predict and prevent future challenges. Based on research, this approach is paying off for many companies.

For example, the LENOX Institute of Technology’s Benchmark Survey of Industry Metal-Cutting Organizations found that investing in smarter, more predictive operations management could result in additional productivity and efficiency on the floor. The study, which surveyed more than 100 industrial metal-cutting companies, found that 67 percent of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report an upward trending job completion rate that their job completion rate is trending upward year over year—a meaningful correlation. The implication is that less disruptive, unplanned downtime and more anticipated, planned downtime translates into more jobs being completed on time.

Manufacturers are also benefiting from more advanced, data-based predictive management strategies. As reported here, research from Aberdeen Group shows that 86 percent of top performing manufacturers are using predictive analytics to reduce risk and improve operations, compared to 38 percent of those companies with an average performance and 26 percent of those with less then stellar results. The research firm also notes that companies that use analytics to measure their data can more easily obtain a “big picture” of their operations, identify risks, and figure out where to focus their efforts.

According to Aberdeen, these best performing companies also report 18 percent higher overall equipment effectiveness and 13 percent less unscheduled asset downtime compared to the lowest performing organizations. The following are a few other traits the top performers have in common, according to the research:

So how does your forging operation measure up to these “top performers?” Are you simply responding to operational challenges, or are you equipped to identify risks before they negatively impact your bottom line?

By following a strict preventative maintenance schedule or using advanced tools like data analytics, today’s forges can easily identify hidden problem areas or looming operation failures. As research shows, these types of predictive operations management practices can help you reduce risk, improve productivity, and maybe even make you a top performer among your forging peers.

performance metrics

One Way Ball and Roller Bearing Manufacturers Can Stay Competitive in 2015

April 30, 2015 / , , , , , , , , , , , , , ,


As reported in the 2015 Industrial Metal Cutting Outlook from the LENOX Institute of Technology (LIT), many manufacturing executives expect 2015 to be a solid year. A survey of executives conducted by Prime Advantage, for example, shows that the vast majority of small and midsized industrial manufacturers anticipate revenues to increase or match 2014. For metals companies, industries such as automotive, commercial construction, and energy are expected to drive growth.

Mixed Forecasts
It comes as no surprise, then, that analysts expect growth in the ball and roller bearing segment as well. With the economy poised for recovery, research firm IBISWorld says that demand for downstream markets like automotive will rebound, which will bolster demand for ball bearings. A separate study from Grand View Research echoes these sentiments, forecasting that the global bearings market will reach $117.27 billion by 2020 at a compound annual growth rate (CAGR) of 7.5% from 2014 to 2020.

Industry leaders, however, seem to have some concerns. In late January, The Timken Company, a bearing manufacturer based in North Canton, OH, said it was viewing its markets “slightly more cautiously than 2014.” Specifically, the company said that “new business wins combined with modest market growth are expected to result in approximately 4% organic growth, but that will largely be offset by the impact of currency.”

Earlier this month, SKF, a global bearing maker based in Sweden, forecast flat second quarter demand for its business. SKF CEO Alrik Danielson said that while there are some positive signs for growth in Europe, they were “not robust enough to merit a more positive outlook,” Reuters reports. He also said there was still a lot of uncertainty about what the market would do in the next quarter.

Using Connectivity to Stay Competitive
The fact is that the last several years have made it difficult for any company to be anything but cautious. However, regardless of where the market lands, the goal for manufacturers should still be continuous improvement. To be competitive, especially on a global scale, companies need to stay focused on efficiency so that they can be agile enough to respond to whatever 2015 brings.

Of course, there are several ways to attack continuous improvement. Traditional lean tools are always effective; however, more and more manufacturers are literally working smarter by using technology. According to the Prime Advantage survey, many industrial manufacturers are leveraging digital tools, additive manufacturing, and other technological advancements to operate more efficiently.

A separate report from manufacturing.net agrees, adding that manufacturers that want to stay competitive in an ever-changing global market cannot underestimate the value of connectivity. According to the article, leading manufacturers started in 2014 to put buzz words like the industrial Internet of things (IIoT), machine to machine (M2M), and “big data”  into practice. To be successful in 2015, the manufacturing.net author suggests that the trend needs to continue.

How? The article states that manufacturers need to start by creating a fully connected framework for top asset performance and strategic data analysis. This framework should include three important processes:

(For a more in-depth explanation of these steps, you can view the full manufacturing.net article here.)

A Year of Improvement?
In the end, the forecast for 2015 is no more certain than any annual forecast. Even the most educated analyst knows that there is no crystal ball to accurately gauge how the market will fare. There are just too many factors at play. However, by regularly measuring, monitoring, and managing your operation’s performance, ball and roller bearing manufacturers can more accurately gauge how their operations will fare.

Will 2015 be the year your operation improved? That is perhaps the only factor today’s manufacturing executives can control.

performance metrics

Forges Stay Focused on Growth in 2015

April 25, 2015 / , , , , , , , , , ,


Most metalworking companies started off 2015 with positive expectations. As the LENOX Institute of Technology reported in the 2015 Industrial Metal Cutting Outlook, early forecasts painted a positive picture, with manufacturing production projected to grow by 3.7% in 2015 and 3.6% in 2016.

However, recent reports have clouded expectations a bit. A mid-April outlook from the Manufacturers Alliance for Productivity and Innovation (MAPI), for example, stated that short-term outlook for industrial manufacturing is “murky” and “fairly bleak.” According to the report, manufacturing production fell by 1.2 percent during the first quarter of 2015, the first quarterly contraction in factory sector output since the second quarter of 2009. And even though there was a modest gain in factory output growth in March (0.1%), MAPI points out that production in key industry sectors such as primary metals, aerospace, and furniture contracted.

Staying Focused
Even with this sobering data, many manufacturers remain optimistic that 2015 will be a year of growth, even if it is only slightly better than last year. Two articles from Forge magazine give some specific reasons why forges can remain hopeful now and in the years ahead.

In its “Aerospace Industry Outlook,” Forge states that based on the 20-year projections from Boeing and Airbus, the long-term outlook for the aerospace industry (one of the forging industry’s biggest markets) is positive. While the demand projections between these two top companies differ slightly, both expect growth, which is good news for the forging industry.

“Whichever forecast you want to believe, many planes will be ordered during the next two decades,” the article states. “The world’s leading forgers, many of which are located in North America, will be asked to supply a wide assortment of forged products made of high-performance and lightweight materials.”

In a separate article, “North American Forging is Advanced Manufacturing,” the industry publication argues that the forging industry has several reasons to be confident in its future position in the metals industry. According to the article, forging is not only an enduring industry, but “is vibrant, technologically challenging and critical to the country’s economic health and defense.” The reason forging endures, the articles adds, is because it provides the parts for critical applications that cannot be produced by any other manufacturing process.

“If the application is important, it depends on a forging,” the article states. “Why would any designer choose any metalworking process not capable of providing the optimum combination of strength, toughness and fatigue resistance required of the application?”

Have a Plan
The point is that regardless of what current data shows, the long-term prospect for the forging industry is bright, which means that managers need to stay focused on growth. However, that means you need a plan. As any leading metals executive knows, success in today’s market requires a strategic plan focused on continuous improvement while also accounting for external challenges.

What does that look like? Below is a brief outline from Canadian Metalworking that will help forging executives create a simple but workable planning process for their business:

(For a more in-depth explanation of these steps, you can view the full article here.)

Are you ready for whatever 2015 brings? If you remain focused on growth and have a strategic plan in place, odds are you are more ready than you think.

performance metrics

2015 Industrial Metal Cutting Outlook

April 1, 2015 / , , , , , , , , , , , , , , ,


Like most manufacturers, industrial metal-cutting companies went into 2015 with both optimism and caution. While all signs seem to be pointing to a full economic recovery, concerns surrounding an unstable political landscape, foreign markets, and pricing continue to keep many metals companies on their toes.

Some Growth Ahead
As we enter the second quarter of 2015, most experts anticipate growth in the metals industry. Early predictions painted a positive picture for the year, and recent reports are confirming that the industry will, at the very least, see slight improvements over 2014.

According to the Manufacturers Alliance for Productivity and Innovation (MAPI), industrial production increased at a 3.8% annual rate in the fourth quarter of 2014 and posted 3.6% growth for the year as whole—over a percentage point higher than the 2.4% gain in the overall economy. The manufacturing outlook for 2015 and 2016 calls for a minor acceleration from the 2014 growth rate. According to the MAPI Foundation’s most recent U.S. Industrial Outlook, manufacturing production is forecast to grow by 3.7% in 2015 and 3.6% in 2016.

MAPI’s outlook also predicts that 21 out of 23 industries will show gains in 2015. This includes growth in metals industries such as iron and steel products (5%), alumina and aluminum production and processing (7%), and fabricated metal products (3%). The top industry performer will be housing starts, which is expected to increase by 16%.

Forecasts for steel demand are also positive, but growth rates will not be as strong as they were in 2014. According to the Short Range Outlook 2014-2015 from the World Steel Association (worldsteel), U.S. steel demand is expected to increase by 1.9% in 2015—much lower than the 6% growth the U.S. experienced in 2014. Globally, worldsteel forecasts that global apparent steel use will increase by 2.0% this year. This is a downward revision from previous forecasts, due to a slowdown in emerging economies like China.

“Recoveries in the EU, United States and Japan are expected to be stronger than previously thought, but not strong enough to offset the slowdown in the emerging economies,” stated Hans Jürgen Kerkhof, chairman of worldsteel’s Economics Committee. “In 2015, we expect steel demand growth in developed economies to moderate, while we project growth in the emerging and developing economies to pick up.”

Concerns and Challenges
Buying into the positive forecasts, most metals manufacturers expect business to improve this year. According to an annual survey of metals executives by American Metal Market (AMM), 42% of respondents expect the economy to turn around in 2015 and 67% expected business to improve overall, mostly due to growth in the auto and energy sectors.

However, AMM reports that respondents did have some reservations. Political events, cheap imports, and foreign markets were all causes for concern, as well as uncertainty about “where important industry segments like construction might be headed,” AMM states in its survey report.

In his State of the Industry address earlier this year, Robert Weidner, president and CEO of the Metals Service Center Institute (MSCI), listed several trends that will affect the metals industry in 2015 and beyond. Below are the five challenges he outlined, as reported by thefabricator.com (You can read the full coverage here.):

 

 

Strategic Approaches
With both forecasts and anticipated challenges in mind, industrial metal-cutting companies can strategically approach the market from both a business and operational standpoint. In fact, as we reported here, it is critical for today’s managers to develop operational short-term plans that are effective in achieving the overall strategy set forth in the business plan. For instance, if the goal is continuous improvement, then make sure your metrics, your daily practices, and communication with your team all point to that overall strategy.

As a global company serving the industrial metal-cutting industry, we at LENOX Tools have a unique vantage point of what is happening in the marketplace. We have watched some metal companies barely survive, while others have found ways to thrive. The difference, in most instances, seems to be the company’s commitment to making improvements. Whether investing in new equipment to improve cutting time and quality or investing in training to improve and empower their human capital, industry leaders are continuing to focus on making positive changes on the shop floor so they can be ready to respond to changing customer demands. In other words, the only way to offset external uncertainties is to focus on making internal improvements.

Based on industry trends and our own experience, LENOX sees the following as key strategies for industrial metal-cutting companies that want to be successful in today’s marketplace:

performance metrics

Benchmarking Resources for Your Forging Operation

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


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

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

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

performance metrics

Choosing Metrics that Matter for Your Fabrication Shop

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


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

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

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

performance metrics

Implementing Process Control in High Production Metal Cutting

December 15, 2014 / , , , , , , , , , , , , , ,


While process and workflow bottlenecks are a common challenge for any manufacturing operation, it can be especially challenging for high production metal-cutting companies. The fast pace and constant volume can tempt operators and managers to focus on speed before quality, which often leads to failures in equipment and blades, costly mistakes, and a decrease in overall productivity.

This is why process control is critical. When production requirements increase, it is imperative that systems are in place to keep quality consistent and, even more so, make it easy to identify and correct any mistakes or maintenance issues that create bottlenecks.

There are several strategies high production metal-cutting organizations can implement to keep processes under control and production moving. The following are a few best practices used by high production metal-cutting leaders:

performance metrics

Supplier Management Strategies for Fabricators

November 10, 2014 / , , , , , , ,


In today’s competitive marketplace, it is tempting for fabricators to base their supplier relationships on price. Yes, quality may be important as well, but cost typically makes or breaks the deal.

However, a growing number of manufacturing leaders are starting to place more value on their supply chain and seeing it as an enabler of business strategy. Aligning Supply Chains with Business Strategy, a report by Tompkins Supply Chain Consortium, makes a strong case for the importance integrating strategy with supply chain management. According to the report, 80 percent of participants felt it was important to connect your supply chain strategy with your business strategy.

“We found that the better the level of alignment, the more likely it is that companies are achieving their objectives for cost reduction, customer service, and other metrics,” states Bruce Tompkins, executive director of the Consortium and author of the report. “The greatest take-away from this report is that the importance of an integrated strategy cannot be ignored.”

There are many ways to strategically manage your supply chain. For example, this article from the Institute of Supply Management outlines a tool known as “supplier relationship management” (SRM). However, the first step in good supplier management is to clearly identify and define the relationships you currently have. “The Strategy Behind Choosing Strategic Suppliers,” an article published by IndustryWeek, divides supplier relationships into four categories:

Paul Ericksen, author of the IW article, warns managers to make sure they categorize their suppliers carefully. While it might seem logical to throw suppliers of commodity products in the “basic” category, these types of suppliers can actually be strategic (“approved” or “key”) depending on how critical they are to your operation. “It is important to be highly disciplined such that suppliers are categorized solely based on the potential for negative financial impact that resourcing from them presents, not by the type of products they supply,” Ericksen says in the IW article.

Once you have identified your strategic suppliers, the next step is to position those relationships so that they bring value to your company. A white paper from the LENOX Institute of Technology offers a few best practices:

In the end, today’s competitive marketplace requires manufacturers to focus more on value than on cost if the objective is long-term success. While cost-effective products provide short-term benefits, aligning the right suppliers with your business strategies—and then leveraging their services to achieve company goals—will likely offer a greater ROI than any product ever could.

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