September 28, 2014 / benchmarking, best practices, continuous improvement, KPIs, lean manufacturing, LIT, operations metrics, operator training, Output, performance metrics, productivity, quality, strategic planning
At this point, most metals executives have heard the message of continuous improvement loud and clear. As a benchmark study from the LENOX Institute of Technology (LIT) confirms, a large number of industrial metal-cutting organizations are embracing smarter, more proactive operations management to stay competitive in today’s uncertain market.
However, knowing where to start can often be both intimidating and frustrating. Active change takes time and costs money, so managers need to be sure they are strategically choosing the right methods to achieve their operational goals.
Two improvement methodologies that are widely used in industrial metal cutting are lean manufacturing and Six Sigma. While both are used to improve productivity and profitability, their approaches are not the same. Understanding the difference between both methods is important not only for managers trying to choose the right organizational improvement program, but also for managers who may want to consider using them together.
According to leanproduction.com, lean manufacturing is “a collection of tips, tools, and techniques that have been proven effective for driving waste out of the manufacturing process.” Toyota is credited for developing it the 1980s, and over the years it has been used by manufacturers worldwide to improve all facets of the manufacturing business, from quality assurance to human resources.
Below are some key attributes of lean manufacturing, as defined by The Process Excellence Network:
- Focuses on Eliminating Waste. The main goal of lean manufacturing is to eliminate waste and superfluous processes in order to reduce production time and costs. Toyota defined seven types of waste, including transport, inventory, motion, waiting, overproduction, over-processing, and defects.
- Uses Simple Tools. Lean tools are relatively easy to understand and can be used by anyone in the organization. Examples include 5S, value stream mapping, kanban, and poka-yoke (error proofing).
- Culture-Oriented. For Lean to be successful, experts agree it has to permeate the business silos and receive universal backing amongst senior management and employees. It typically only used in manufacturing applications.
- Fast implementation. Lean’s strength is its quick turnaround. Immediate benefits relate to productivity, error reduction, and customer lead times. Long-term benefits include improvements to financial performance, customer satisfaction, and staff morale.
iSixSigma defines Six Sigma as “a disciplined, data-driven approach and methodology for eliminating defects in any process, from manufacturing to transactional and from product to service.” It was developed in the mid-1980s by Motorola engineers who were unhappy with traditional quality metrics. In response, they developed a new standard, as well as the methodology and needed cultural change associated with it. Six Sigma gained popularity in the 1990s after General Electric adopted it as part of its business strategy.
Below are some key attributes of Six Sigma, as defined by The Process Excellence Network:
- Focuses on Quality. The main purpose of Six Sigma is to limit defects and variability in business processes to achieve overall process improvement. Using statistical methods, teams identify errors and then work to eliminate them as much as possible. Perfect performance is the goal.
- Uses a Sophisticated Toolset. Six Sigma tools typically require more extensive training, including formal engineering skills and use of sophisticated software. It uses two project methodologies: DMAIC (define, measure, analyze, improve, control) and DMADV (define, measure, analyze, design, verify).
- Built Around Process Improvement Teams. Six Sigma’s implementation is based on a dedicated improvement team. This team is divided into hierarchies based on a “belt” accreditation system that ranges from “black belts,” who lead teams, down to “white belts,” who are still learning the basics and can’t yet participate in project teams.
- Multifaceted Methodology. Six Sigma can be used in a manufacturing environment, but it also can be used for error reduction in non-manufacturing fields. Broadly speaking, it provides companies with a framework to train its employees in key performance areas, shape strategy, align its services with customer needs, and measure and improve the effectiveness of business processes.
The above is just a brief overview of two of the industry’s improvement methodologies and only touches on some of the main characteristics. For a more in depth, side-by-side comparison of lean manufacturing and Six Sigma, check out this article from Chron.
In an upcoming blog, LIT will explore how managers can strategically utilize both methodologies to achieve what some experts believe are longer lasting business results.
August 15, 2014 / best practices, bottlenecks, continuous improvement, Cost Management, customer satisfaction metrics, KPIs, LIT, operations metrics, Output, performance metrics, productivity, quality, strategic planning, value-added services
If the words the “Internet of Things” and “real-time data” mean nothing to you or your metal-cutting operation, you may want to lean in. A growing number of industry experts believe these buzzwords may just transform the manufacturing industry.
“Today’s more powerful sensors and devices, connected to back-end systems, analytics software, and the cloud, are transforming industries, right now,” says Sanjay Ravi, Worldwide Managing Director, Discrete Manufacturing Industry at Microsoft in this blog post. “With the rise of these connected operations, manufacturing executives are not only finding new ways to automate and create efficiency, they are also focusing on a big new opportunity for revenue growth—services.”
In other words, forward-thinking manufacturers are finding that connecting their production equipment to the Internet and/or to other devices is providing insight into their internal operations they may not have been able to get otherwise. By gathering production data and then using software to make it understandable, they are improving efficiency and uncovering new service opportunities.
And according to Ravi, this is no passing trend. Quoting research from IDC (commissioned by Microsoft), Ravi says “manufacturers stand to gain $371 billion in value from data over the next four years.”
A recent article from Forbes echoes this sentiment, stating that factories that are connected to the Internet are more efficient, productive, and smarter than their non-connected counterparts. However, the article also says that only 10 percent of industrial operations are currently using the connected enterprise, which means 90 percent are missing out.
The way in which manufacturers can use connectivity will vary by industry and application, but as this article from O’Reilly Radar describes, the Internet of Things (IoT) and connectivity are revolutionizing manufacturing policies and procedures in two key ways:
- For the first time, managers can actually know what’s happening on the assembly line to both products and machinery in real time.
- That information can be shared, also in real time, with anyone inside or outside the enterprise who could improve their operating efficiency and decision-making with that real-time data.
As the Forbes article describes, companies like manufacturing giant GE, bread maker King’s Hawaiian, and Sine-Wave, a provider of technology solutions, are already taking full advantage of what many are calling the “information revolution.” At GE’s Durathon battery factory in Schenectady, NY, for example, 10,000 sensors on the assembly line, along with sensors located in every single battery it produces, allow managers to instantly find out the status of production.
This is happening in the metal-cutting world as well. According to this white paper from the LENOX Institute of Technology (LIT), one metal service center developed an internal software system to automatically track the number of square inches processed by each band saw and each blade. At any point, the operations manager can go to a computer screen, click on a saw, and see how many square inches that saw is currently processing and has processed in the past. This has allowed the service center to easily track trends and quickly detect problem areas.
Tim Heston, senior editor at The Fabricator, also sees the opportunities sensors, data, and connectivity offer the metal fabrication industry and its supply chain. “Imagine a future in which you have trillions of sensors able to predict customer demand throughout the supply chain, monitor machine conditions to prevent unplanned downtime; and a future with machine tool technology and manufacturing methodologies allowing shops to change over between jobs within seconds (some of this technology is already here), all synced with customer demands,” he says in a recent editorial. “In short, imagine a future in which the majority of activities in the supply chain add value.”
Does connectivity have a place in your metal-cutting operation? Could it? At the very least, these are the questions leading companies should be asking. Unless, of course, they are part of the 10 percent that is already connected.
August 10, 2014 / benchmarking, best practices, bottlenecks, KPIs, lean manufacturing, LIT, Output, performance metrics, productivity, quality
Over the last several years, a growing number of fabricators and other industrial metal-cutting companies have started measuring overall equipment effectiveness (OEE). This is definitely a good trend, as measurement is a critical part of continuous improvement. However, many companies are jumping on the OEE bandwagon without being fully informed, which is causing a lot of misunderstanding and misuse of this important metric.
Knowing what OEE is—and what it isn’t—is the only way to make sure you are using it effectively. Here’s a quick primer.
What OEE Is
According to leanproduction.com, OEE is a best practices metric that measures the percentage of production time that is truly productive. It takes into account all six types of loss, resulting in a measure of productive manufacturing time.
In simple terms, OEE can be described as the ratio of fully productive time to planned production time. According to leanproduction.com, it can be measured in one of two ways:
(Good Pieces x Ideal Cycle Time) / Planned Production Time
Availability x Performance x Quality
(You can find a more detailed description of the calculation here, as well as a sample calculation.)
A plant with an OEE score of 100 percent has achieved perfect production—high quality parts as fast as possible, with zero down time. While that’s ideal, it’s not quite possible in the real world. According to oee.com, studies show that the average OEE rate among manufacturing plants is 60 percent, which leaves substantial room for improvement. Most experts agree that an OEE rate of 85 percent or better is considered “world class” and is a good long-term goal for most operations. The good news it that 85 percent is achievable. As this case study from Metalforming magazine describes, Magellan Aerospace in Kitchener, Ontario, Canada was able to improve its OEE from a mere 36 percent to a world-class 85-percent-plus.
Managers can use OEE as both a benchmark and baseline. Specifically, leanproduction.com says it can be used to “compare the performance of a given production asset to industry standards, to similar in-house assets, or to results for different shifts working on the same asset.” It can also be used as a baseline “to track progress over time in eliminating waste from a given production asset.”
What OEE Isn’t
Even with a basic understanding of OEE, many operations are still misinterpreting it and, therefore, aren’t using it effectively. This blog post, for example, argues that OEE is not a key performance indicator (KPI), and it shouldn’t be measured at a company or plant level. The author goes on to state five reasons why OEE is not a good KPI, including the fact that it is not comparable between different pieces of equipment and/or different locations. Instead, he suggests OEE should be used as a way to help identify and eliminate waste in front of a process, line, or equipment.
Another misconception is that OEE is the same thing as Total Productive Maintenance (TPM). An article from IndustryWeek (IW) says this is definitely not the case. “OEE is the measure most closely associated with TPM, but OEE is not equivalent to TPM,” the IW article states. “At its heart, TPM is not about complex metrics; it’s about developing the capabilities of people.” So while a good understanding of OEE can help with TPM, the two terms shouldn’t be used interchangeably.
How to Use OEE Effectively
So how do you use OEE correctly? Below are a few pointers we called out from the IW article:
- Use OEE as an improvement measure—not a KPI.
- OEE is best used on a single piece of equipment or synchronized line.
- There is no absolute that works as an OEE benchmark or target—it’s relative to your situation.
- Use it as a yardstick, not a club.
Also, if you are short-run, high-mix fabricator, don’t assume OEE isn’t for you. Check out this article from thefabricator.com, which describes how automated data collection can help you to better measure OEE in more custom manufacturing applications.
As the IW article states, OEE is often misused, but it is not a “bad metric.” In fact, it can be very useful in helping companies quantify improvement opportunities. Just be sure you know the facts before you start using OEE measurements to make strategic decisions.
August 5, 2014 / benchmarking, best practices, continuous improvement, human capital, lean manufacturing, LIT, material costs, Output, performance metrics, predictive management, preventative maintenance, productivity, quality, strategic planning
Whether or not you consider yourself a “lean” operation, there are some lean manufacturing principles that are universal to almost every manufacturer. One of those is waste. As a metal service center, your ultimate goal is to turn material into profit as efficiently possible, which means you want to avoid waste and downtime at all costs. And while this isn’t groundbreaking information, many service centers aren’t effectively tackling waste because they don’t know where to start.
Identification of the Six Big Losses is one tool manufacturers can use to understand the most common forms of waste or “loss” within their operations. According to leanproduction.com, the Six Big Losses are key because ”they are nearly universal in application for discrete manufacturing, and they provide a great starting framework for thinking about, identifying, and attacking waste.”
The first step to reducing waste in your organization is to identify your losses. There are six types of loss every manufacturing operation faces, and each fall under three main categories—downtime loss, speed loss, and quality loss.
The following is a brief description of each of the Six Big Losses:
- Breakdowns. These are considered a downtime loss and could include tooling failure, unplanned maintenance, and motor failure.
- Setup and Adjustments. This is also a downtime loss and could include changeover, material shortage, operator shortage, and warm-up time.
- Small Stops. This is considered a speed loss, and it only includes stops that are less than 5 minutes and don’t require maintenance. This might include a blocked sensor or minor cleaning.
- Slow Running. This is another speed loss, and it covers anything that prohibits equipment from running at its optimal speed. Incorrect setting of parameters and equipment wear are prime examples.
- Startup Defects. This quality loss covers any scarp or rework that occurs during setup or very early in the production phase.
- Production Defects. This is the second form of quality loss. This refers to any scrap or rework that happens during the steady-state production process.
Once you have identified the Six Big Losses and the events that contribute to them, the next step is to record and monitor what you find within your operation. The only way to do this effectively is through measurement and documentation. This article from oee.com gives several tips for addressing each loss category and includes helpful links to help you accurately measure your losses.
The final step is attacking your losses and preventing them from happening again. This is where strategy comes into play. In a recent benchmark study of industrial metal-cutting organizations, the LENOX Institute of Technology (LIT) identified three key areas where organizations can gain additional productivity and efficiency on the shop floor. These include the following:
- invest in smarter, more predictive operations management;
- embrace proactive care and maintenance of saws and saw blades; and
- invest in human capital.
To read more about these recommendations, you can download the full report here.
As a service center that cuts and processes metal, some waste and loss are inevitable. However, the only way to keep those losses from hurting your business is to identify, monitor, and attack them, one by one. Add in a little strategy, and you might just be able to turn those losses into opportunities for improvement and growth.
July 25, 2014 / benchmarking, best practices, continuous improvement, Cost Management, cost per cut, KPIs, lean manufacturing, LIT, material costs, operations metrics, performance metrics, productivity, quality, root cause analysis
In industrial metal-cutting, a small amount of scrap is inevitable. However, reducing material waste should still be a top goal for forges that cut and process metal. Like all other forms of waste, scrap negatively affects profitability, especially if it is generated out of error.
The truth is that any amount of scrap or rework you’re experiencing in your operations provides an opportunity for improvement. Taking the time to reduce scrap often leads to better productivity and higher quality cuts. According to this article from CONNSTEP, a Connecticut-based continuous improvement organization, reducing scrap and rework rates can also improve cash flow. “The number one reason small businesses go out of business is lack of cash flow,” the article states. “If the scrap rate is 8 percent of your production now and it is reduced to 6 percent, that newly created 2% may now be used to produce new/additional product and your savings should account for the cost avoidance of using new/additional material to complete the existing order.” In other words, by reducing rework and scrap from occurring, industrial metal-cutting organizations can actually generate money that goes right to their bottom line.
If you are a forge that cuts and processes metal, here are a few strategies we gathered to help you reduce your scrap rates:’
- Measure and compare. As with any continuous improvement activity, you need to start with measurement. If you aren’t measuring your scrap rate, this is your first step. If you are tracking scrap, you may also want to consider other helpful metrics, including first-pass yield, overall equipment effectiveness (OEE), dock-to-dock time, manufacturing cycle time, and inventory turns. You should also know your scrap and rework costs. Once you have some quantifiable data, you should compare your operation to others in your industry. Benchmarking is the only way to gauge whether or not you need serious improvement. For example, 81 percent of the industrial metal-cutting companies surveyed by the LENOX Institute of Technology (LIT) said their scrap and re-work costs are “always” (23 percent), “mostly” (45 percent) or “occasionally” (less than 5 percent). How does your operation stack up?
- Evaluate Operators. If you know your scrap and rework rates could be better, identifying the root cause of the issue is the only way to make any real, sustainable improvements. Often times, high inventory levels and scrap rates are indicators of “hidden” inefficiencies such as operator error. Are all of your operators properly trained on how to use equipment? Are they running saws at optimal levels, or are they just focused on getting the job done as fast as possible? Have you recently taken on a new job that may require a different cutting tactic or a blade type? Poorly trained operators that misuse equipment or fail to perform basic tasks like breaking in blades often lead to low-quality cuts, higher instances of scrap due to error, and shortened blade life—all of which add up to elevated costs.
- Pick for clean. While quick turnaround is always a goal, scrap can quickly get out of control if operators are reaching for a new piece of material every time they start a job. That’s why many companies are moving away from the “pick for speed” method of inventory selection and, instead, are embracing “pick for clean” methods. Picking for clean is the practice of picking high-quality leftover materials from a previous job to use up the inventory. In other words, you reach for remnants first. This keeps inventory and material costs low. Structural Steel of Carolina, a fabricator featured here in a series of industry case studies, uses a software-based inventory system to help facilitate this strategy. According to Superintendent Gary Kirkman, the software system tells operators exactly what material to use and how much drop off they can expect. “That is how we determine what we keep and what we throw away,” he explains. “Scrap less than 4 feet in length is considered waste, but any pieces 5 feet and longer are entered back into the inventory system to be reused.”
In the end, scrap is just one of the many areas of waste that today’s leading forges are trying to attack. However, with the cost of inventory being so high, no industrial metal-cutting organization can really afford to ignore a pile of wasted material that could have been used for profit. When it comes down to it, every piece of scrap counts in today’s lean manufacturing world. However, by implementing some of the above strategies, not every piece of scrap has to count against you.
June 20, 2014 / agility, best practices, industry news, LIT, operations metrics, performance metrics, ROI, strategic planning
According to research quoted in a recent article from MetalForming Magazine, 45% of manufacturers list “improving business execution” as a primary goal for 2014. In today’s uncertain marketplace, this isn’t much of a surprise. In short, agility is key.
However, manufacturers are finding that achieving this goal is a lot harder than it sounds. As the MetalForming article states, companies need to start by clearing “some common hurdles, most notably delays in decision-making due to a lack of timely information, and an inability to quickly react to change.”
This is why more and more companies are focused on data-driven manufacturing. As stated in the 2014 Industrial Metal-Cutting Outlook from the LENOX Institute of Technology (LIT), best-in-class machine shops are forming strategies, making decisions, and optimizing their operations using hard, quantifiable information. Anything else is just guessing.
The challenge is finding an efficient way to not only gather “timely data” but also store it, interpret it, manage it, and share it across your entire organization. Odds are you don’t have a fully staffed IT department waiting in the wings.
This is where business management software like Enterprise Resource Planning (ERP) can be helpful. ERP software is typically a suite of integrated applications that allows an organization to efficiently manage their business and automate back office functions. It combines all facets of an operation, including product planning, development, manufacturing, sales and marketing. It can be managed in-house, or as is the case with many machine shops, purchased as software as a service (SaaS).
Top-tier manufacturers and large enterprises have been touting the benefits of ERP systems for years. They can improve productivity, enhance cross-functional communication, and speed the “quote to cash” cycle. Even so, smaller shops often shy away from these systems because they can also be expensive, complex, and far too often, fail to provide bottom-line results.
That’s not to say you should write off ERP systems all together. It just means a little research is in order. Below are a few resources we gathered to help you dig a little deeper into the benefits ERP can offer your machine shop, along with a few pointers to ensure success.
- Key Considerations Before Implementation. A recent article that appeared in Project Times provides five key points to consider before you decide whether or not to implement an ERP system. Written by supply chain consultant Lisa Anderson, the editorial starts by warning manufacturers to refrain from getting all the bells and whistles. “Take a step back and focus 80% of your efforts on the 20% of functionality that drives your business,” Anderson suggests. You can read the rest of the article here.
- Purchasing Tips When Selecting a System. Once you have decided to move forward and invest in an ERP system, choosing the actual system can be overwhelming. This article from ThomasNet provides some important tips to follow when choosing an ERP system for a manufacturing business. The article goes through six critical points, such as taking a look at your company’s technology strategy and capabilities, as well as closer evaluation of the cost implications of the system.
- Lessons From Your Peers. Knowing what has worked and hasn’t worked for other machine shops can provide valuable information and reduce the trial-and-error phase for your shop. Check out this Modern Machine Shop article, which provides links to several case studies of shops that have implemented ERP systems. You should also consider speaking with your supply chain partners to see if they have had success with an ERP system. As LIT’s white paper on managing supplier relationships suggests, they may even be willing to assist you in determining key data points.
June 15, 2014 / best practices, continuous improvement, LIT, operations metrics, operator training, performance metrics, productivity, quality, ROI, strategic planning, value-added services
Most manufacturers understand that they are only as good as their supply chain. Quality starts well before a product enters the doors of a production facility.
Industry leaders, however, are finding that with a little strategy, the supply chain can add a lot more than a quality service or product. When positioned correctly, they can add value.
A recent report from Tompkins Supply Chain Consortium confirms this philosophy. After polling 172 supply chain professionals, a strong 80% of respondents reported that they felt that the supply chain is an enabler of business strategy. A majority of companies also felt that supply chain is a source of business value and a competitive advantage. This, along with the report’s other findings, led the Consortium to conclude that the importance of an integrated supply chain and overall business strategy cannot be ignored. “The better the level of alignment is, the more likely it is that companies are achieving their objectives for cost reduction, customer service, and other metrics,” the report stated.
What’s interesting, however, is the report revealed that a fairly high 35% consider the supply chain a standalone function. This indicates there still is some work to be done. Positioning and treating your supply chain as trusted partners—not just as independent service providers—can be an effective strategy in helping you achieve company goals. For instance, if your goal is to increase productivity, perhaps your suppliers can offer troubleshooting expertise and even training in specific areas of your operation. Or, as was the case with leading metal service center Aerodyne, they may even be able to provide useful, practical tools like free software to help your operators work smarter.
As this Forbes article states, long-term, worthwhile suppliers should treat manufacturers as more than just clients. They, too, should treat you like a partner, which means they should be willing to offer more than one-dimensional service. If that isn’t the case for your organization, it may be time to reevaluate your supply chain or, even more so, reevaluate how you are utilizing your supply chain.
How do you position your supplier relationships to bring value to your company? A recent white paper from the LENOX Institute of Technology offers the following strategies:
- Schedule on-site visits. Expect your prospective supplier to assume a “partner” role from day one by focusing more on service than on the sale of the product. To facilitate this relationship, start by asking for an on-site needs assessment. This gives you the opportunity to discuss your business goals in person, as well as providing the vendor with a full overview of your operation.
- Do your homework on supplier claims. While many companies often promise unmatched service and technical support, the key is to look for companies that provide resource allocation metrics that support their claims. Do they have adequate field coverage? What is the tenure and continuity of their support team?
- Include training in your purchase agreement. Most suppliers should be willing to provide some level of value-add training as part of the purchase agreement. This is especially important when it comes to your equipment and tooling providers. No one knows your production equipment better than the people who designed it, and they should be willing to share that expertise with you.
- Expect thought leadership and self-service tools. Industry-leading partners should be able to support your business by providing informational and educational materials, as well as practical tools and services. You can and should rely on your supplier to be an industry thought leader that provides a steady stream of valuable industry trends data, operational strategies, and technical product information.
- Have your partner help you measure performance. Most managers have heard the mantra, “You can’t improve what you can’t measure.” However, most industrial metal-cutting companies don’t possess all of the knowledge, resources, or infrastructure necessary to collect efficiency data, let alone analyze it. This is where a supply partner can help. By working closely with your supplier, you should be able to gather some quantifiable, useable data.
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.
April 30, 2014 / agility, benchmarking, best practices, continuous improvement, industry news, KPIs, LIT, operations metrics, Output, performance metrics, predictive management, preventative maintenance, productivity, strategic planning
A recent report from Gartner continues to build the case that metrics and smarter, more predictive management strategies are critical for industrial metal-cutting companies that want to succeed in today’s competitive landscape. In fact, according to the consulting firm, organizations that use predictive business performance metrics will increase their profitability by 20 percent by 2017.
“Using historical measures to gauge business and process performance is a thing of the past,” Samantha Searle, research analyst, said in a Gartner press release. “To prevail in challenging market conditions, businesses need predictive metrics—also known as ‘leading indicators’—rather than just historical metrics (aka ‘lagging indicators’).”
Gartner said that predictive risk metrics are particularly important for mitigating and even preventing the impact of disruptive events on profitability. The key is for companies to have predictive metrics that contribute to strategic key performance indicators (KPIs); however, Gartner discovered that many companies are failing to do just that.
Metrics vs. Strategic KPIs
After conducting a survey of 498 business and IT leaders in the fourth quarter of 2013, Gartner analysts found that while 71% of business and IT leaders understood which KPIs are critical to supporting the business strategy, only 48% said they can access metrics that help them understand how their work contributes to strategic KPIs. In addition, only 31% had a dashboard to provide visibility into KPIs.
However, according to Searle, even visible metrics won’t help drive strategic business outcomes if business leaders don’t have the right metrics in place. The problem, she says, is that managers often misinterpret the goal of a KPI.
The first thing companies need to realize is that KPIs are metrics, but not all metrics are KPIs. A KPI is a measure that should indicate what you need to do to significantly improve performance—or that indicates where performance is trending—which means it is predictive in nature. However, Gartner’s Searle says many companies don’t have predictive measures in place. “They persist in using historical measures and consequently miss the opportunity to either capture a business moment that would increase profit or intervene to prevent an unforeseen event, resulting in a decrease in profit,” she explains.
If you are still unsure of what qualifies as a KPI, check out this article, which lists five rules for selecting the best KPIs for your manufacturing organization. As the article states, “the key to success is selecting KPIs that will deliver long-term value to the organization.”
The larger lesson here is that in today’s fast-moving market, companies need to anticipate business events—not react to them. From a high level, Gartner is saying that this requires KPIs that are predictive. But what does this mean from a plant-floor level? What type of shop floor metrics can help businesses anticipate business events and provide input into strategic KPIs?
A benchmark study from the LENOX Institute of Technology (LIT) may provide a little insight. The following are two of the study’s key findings:
- 67% of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report 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.
- 51% of organizations that “always” follow scheduled and preventative maintenance plans say that blade failure is predicted “always or “mostly.” This shows that preventative maintenance helps operations predict blade failure. And as any metal-cutting leader knows, predicting blade failure not only keeps production flowing, it also helps tooling and maintenance costs under control.
Both of the benchmark findings are, in fact, key metrics that can help industrial metal-cutting companies better understand strategic KPIs. In this case, we discovered that a proactive strategy like preventative maintenance can help managers plan for downtime and, in essence, allows them to create “predictive downtime,” which can actually improve cutting performance and extend equipment life. This is a much different from “interruptive downtime,” which can hurt performance, reduce on-time customer delivery, and increase material costs.
Based on this example, the KPI might be whether or not an organization is hitting its preventative maintenance schedule or whether or not the cadence of preventative maintenance is increasing or decreasing. For instance, if production was increasing but preventive maintenance measurements were static, it could predict massive failure issues.
Moving forward, here are a few questions to consider: What metrics are you using to measure business performance? Are they KPIs? Are your management strategies focused on being proactive or reactive? Are there ways you can predict business events such as blade failure and machine downtime?
Answering these key questions may help you determine whether or not your company is on track to increased profitability or at risk for being stagnant. Proactive strategies like the predictive metrics suggested by Gartner and the preventative measures suggested by the LIT study are critical for industrial metal-cutting companies that want improve their agility and, most importantly, their bottom line. Leaders are realizing that they need to act now—not later—if they want to be successful in the future. When it comes to today’s manufacturing landscape, good things will not come to those who wait.
April 20, 2014 / continuous improvement, human capital, industry news, LIT, maintaining talent, operations metrics, operator training, performance metrics, skills gap, strategic planning
Here’s the good news: Data continues to show that 2014 will likely be a year of growth. Gardner’s most recent metalworking business index (MBI), for example, showed that conditions in the metalworking industry expanded in March for the third straight month and the fourth time in five months. According to Modern Machine Shop, this was the fastest rate of growth since March 2012. Additional MBI findings revealed positive trends in several key business areas, including new orders and production, capacity utilization and spending, employment, and supplier deliveries. You can read the full report here.
All of this good news, however, comes with some uncertainty. As reported in LENOX Institute of Technology’s (LIT) 2014 outlook, most metals executives are only cautiously optimistic about the near-term future. Political issues, pricing pressures, and talent shortages are issues weighing heavily on industrial metal-cutting companies, leaving executives with no choice but to focus on continuous improvement as they attempt to strategically approach a shaky marketplace.
For machine shops, taking the time to make improvements is a challenge in itself, especially if business is starting to pick up. However, leading-edge shops know that in today’s demanding market, optimization is the only way to stay competitive. In other words, they are making time.
While you may not have the resources to undergo a major improvement initiative in 2014, the following are two key trends today’s machine shops need to consider:
- Data-Driven Manufacturing. Yes, “big data,” the Internet of Things, and digital manufacturing have all become industry buzzwords. But as this article from Modern Machine Shop Editor Mark Albert suggests, behind all of this terminology is a trend that can’t be ignored: Today’s machine shops need to make decisions based on information. In fact, Albert says this is the only way that production can move forward. “Facts and figures determine the path a manufacturing process should take, and they propel it ahead,” he states. “To drive manufacturing, factual information has to be available so that people, as well as computers, can use it.” Whether you are manually measuring cut times or implementing cutting-edge monitoring software, the point is that today’s manufacturing decisions need to be based on real, quantitative data.
- Closing the Gap. For years, experts have been warning manufacturers about the skills gap, but it is just now starting to have an impact. Case in point: Prime Advantage Corporation, a buying consortium for midsized manufacturers, recently conducted a survey of CFOs from its member companies. According to the results, 65% of those surveyed said they have open positions that they are seeking to fill, but are having difficulty filling the jobs because of a lack of qualified labor. Other reports are revealing similar trends. To close this gap, companies are discovering that they need to start investing in their human capital. This is a change from the last few years, when metals executives invested more in technology and equipment. In addition to addressing the skills gap, LIT’s benchmark survey of industrial metal-cutting companies provides evidence that investing in areas like training can provide additional benefits, including better quality, faster on-time customer delivery, higher revenue per operator, and lower rework costs.
To read more about trends we expect to see in 2014, check out LIT’s 2014 Industrial Metal-Cutting Outlook.
April 5, 2014 / best practices, continuous improvement, human capital, industry news, KPIs, LIT, maintaining talent, operator training, performance metrics, skills gap, value-added services
As the industry heads into the second quarter, uncertainty remains. In fact, as we state in our 2014 Industrial Metal-Cutting Outlook, uncertainty may be the only thing that is certain right now.
Like most sectors of the metal-cutting industry, metal service centers have experienced little if any growth in 2014. January started off with a much-needed improvement over December, with small increases in shipments and reduced inventory levels. However, February wasn’t as strong as many had hoped. According to the latest figures from the Metal Service Center Institute, U.S. service center steel shipments in February 2014 increased by 0.4% from February 2013, and 2014 year-to-date steel shipments increased by 0.2% from the same period in 2013. When looking at total volume from January to February, service centers’ shipments of steel and aluminum actually declined, reports IndustryWeek.
In other words, we aren’t quite there yet. Experts like the Manufacturers Alliance for Productivity and Innovation (MAPI) are hopeful that the rebound is coming, but until then, there are several industry trends that we feel will be key for metal service centers in 2014. Here are a few to keep in mind:
- Diversification. Shrinking profits and political issues like budget sequestration are making diversification a key strategy for service centers. In a recent column appearing in the March/April issue of Forward magazine, business journalist William P. Barrett stresses that this is especially important for companies that service the military. He states, “But it also seems prudent, in these times of daffy congressional budget strategies, to diversify as much as possible to dilute the risk that haunts the business of military contracting.” In some cases, this may mean forming new customer relationships, or it could mean offering existing customers a few value-added services (e.g., sawing, laser cutting, and parts fabrication) for a more predictable stream of revenue. You can read a great case study of one metal-cutting company’s successful “reinvention” here.
- The Skills Gap. We’ve all heard about the skills gap, and at this point, we may even be sick of hearing of hearing about it. But the issue is real, and like every manufacturer, service centers need to address it. For example, the latest U.S. Total Manufacturing Index revealed that manufacturing job openings for the latest three months is 16.1% above the year-ago quarter, and the rates-of-change are improving. According to analysis from IndustryWeek, this means that manufacturers should “expect upward pressure on wages as skilled labor becomes even harder to find.” While finding and training new employees is a large part of addressing the gap, as this white paper from LIT points out, it is just as important for today’s industrial leaders to focus on maintaining and improving their existing workforce.
- Metrics, Metrics, Metrics. Continuous improvement is the mantra of most manufacturing leaders these days, and as any lean consultant will confirm, this requires measurement. There is no question that industry buzz words like “metrics” and “KPIs” will continue to be important tools for industrial metal-cutting leaders; however, knowing where to start and what to measure can be a daunting task. Although the “right” KPI will vary by organization, as this blog discusses, there are a few simple guidelines managers should follow to determine the most effective performance measurements for their metal-cutting operation. For those who want a more in-depth look at metrics, MESA International is offering a webinar, “Manufacturing Metrics that Really Matter” on April 16. Based on a 5-month research study by MESA and LNS Research, the webcast is targeted at manufacturing executives, continuous improvement team members, and plant managers/supervisors that want to use metrics to optimize their business performance.