November 1, 2016 / continuous improvement, industry news, maintaining talent, operator training, resource allocation, ROI, skills gap, strategic planning
Although recent reports paint a brighter picture of U.S. industrial manufacturing, many companies are still unsure of what the future will bring—and how to prepare for it.
The first half of 2016 didn’t start off strong for industrial manufacturing. Industrial production was essentially unchanged in the first quarter of 2016 and then fell at a 1% annual rate in the second quarter. However, conditions made a turn in the right direction in third quarter when industrial production rose at an annual rate of 1.8 percent—the first quarterly increase since the third quarter of 2015.
Recent data continue to show good overall conditions. The Institute for Supply Management’s Report On Business, for example, states that activity in the manufacturing sector expanded in October, and the overall economy grew for the 89th consecutive month. Specifically, the October PMI registered 51.9 percent (a reading of 50 or higher indicates growth), an increase from the September reading of 51.5 percent.
Unfortunately, ISM’s report wasn’t all good news, especially for the metals sector. Just like in September, both the Primary Metals and Fabricated Metal Products sectors reported contraction in October, although one survey respondent from the Fabricated Metals Products sector stated, “Business is much better.”
With the year drawing to close, what does all of this mean for industrial metal-cutting companies? As executives evaluate performance and look to strategize for the future, the question of whether or not to invest in information and technology advancements will likely be at the forefront of discussion. With terms like “machine-to-machine communication” and “Internet of Things” flying around, many companies are trying to discern whether or not these ideas are truly worth the investment, or if they are nothing more than “buzz words.”
As stated in the white paper, Tackling the Top 5 Challenges In Today’s Metal-Cutting Industry, today’s uncertain market requires managers to carefully and strategically determine whether or not allocating resources to automation and technology will offer a true return on investment. Based on some recent reports from industry experts, technological investments are not only worth it, but necessary for future success, regardless of economic conditions.
A recent article from PwC put it this way:
“Manufacturing may be facing some headwinds, but it’s undeniably in the midst of a technological renaissance that is transforming the look, systems, and processes of the modern factory. Despite the risks — and despite recent history — industrial manufacturing companies cannot afford to ignore these advances. By embracing them now, they can improve productivity in their own plants, compete against rivals, and maintain an edge with customers who are seeking their own gains from innovation.”
Of course, this type of transition is easier said than done. There is a lot to consider before companies start planning, strategizing, and investing in what many are calling “Manufacturing 4.0.” To help give companies a little perspective, the Manufacturing Leadership Council has identified six critical Issues facing the manufacturing industry as it undertakes the journey toward an information-based future. Described in detail here, these issues include the following:
- Factories of the Future. Large and small manufacturers, in both process and discrete manufacturing, must now understand and embrace the potential of new and evolving production models, materials and technologies along the journey towards Manufacturing 4.0 to help them create more autonomous, flexible, connected, automated, intelligent, reconfigurable, and sustainable factories and production models for the future.
- The Integrated Manufacturing Enterprise. To maximize the potential of Manufacturing 4.0, manufacturers of all sizes need to actively transform traditional, inhibitive functional silos to create more integrated, cross-functional, collaborative enterprise structures, both within and beyond their organizations. These structures must be supported by new digital thread technologies that stretch across the value chain from ideation, to product end of use.
- Innovation in Manufacturing. Manufacturers must now successfully develop and manage rapid, continuous, collaborative, and often disruptive innovation processes across the enterprise to drive growth, new products and services, operational efficiencies, and competitive success in the world of Manufacturing 4.0.
- Transformative Technologies. Manufacturers must learn how to identify, adopt, and scale the most promising M4.0-enabling technologies in order to achieve greater agility and competitiveness and to drive innovative new business models and better customer experiences.
- Next-Generation Manufacturing Leadership & the Changing Workforce. Manufacturing 4.0 requires manufacturing leaders and their teams to become more collaborative, innovative, and responsive and to make decisions based on a greater understanding of manufacturing’s role in company strategy. That means leaders must embrace new behaviors, structures, and strategies. And they must transition the talent within their organizations by identifying, attracting, developing and retaining the next generation of people and skills.
- Cybersecurity. In the face of increasing vulnerability to external cyber threats and potential internal disruption, manufacturing companies must identify the most effective cybersecurity processes and technologies and create a culture that will ensure operational continuity, data security, and IP protection.
While the industry still has a way to go before Manufacturing 4.0 becomes mainstream, there is no question that technology is changing the manufacturing landscape. Today’s economic conditions may be uncertain, but industrial metal-cutting companies need to ask themselves if they’re willing to do what it takes to prepare for whatever the future holds.
July 30, 2016 / best practices, continuous improvement, LIT, operator training, productivity, skills gap
As manufacturers continue to seek ways to reduce the industry’s skills gap, more and more emphasis is being placed on human capital. While the tendency has been for companies to focus more on technology than on people, companies are starting to understand the value of investing in their employees as they attempt to attract a new generation of workers—a generation that doesn’t have the necessary skills or even interest in manufacturing.
One huge area that manufacturers are focusing on is operator training. Many companies are either updating their current programs or rebuilding their entire training process to not only ensure that new employees have the right skills, but to keep them motivated and excited about their manufacturing careers.
Of course, there are several tactics ball and roller bearing manufacturers can employ to enhance their training programs. Based on research from the LENOX Institute of Technology, the following four strategies are worth noting:
- Use Technology. As discussed in an earlier blog post, mobile technology is changing the manufacturing landscape. Besides increasing productivity, portable devices can be leveraged for other business functions, including training. For example, devices can be used as virtual training textbooks. As an article from American Machinist explains, companies can create web-based training that is optimized for smartphones and tablets to help employees brush-up on best practices, learn new techniques, and develop new skills anywhere and at any time. This tactic may be especially attractive to the incoming, tech-savvy generation of workers.
- Use Visual Aids to Motivate. Although technology can certainly have its benefits, a simple visual aid can also speak volumes to employees by both motivating them and holding them accountable. Tech Manufacturing, a contract machine shop featured here in Modern Machine Shop found this to be true. In an effort to improve cross-training among employees, the company began tracking employees’ time with various equipment, awarding bronze, silver or gold status based on the hours logged. The sheet is posted in the shop for any staff member to see. There was no reward system attached to the status level; however, the company found that cross-training began to increase as soon as it began posting the skills and status levels.
- Use Diverse Skills as an Asset. By 2020, companies will be challenged with balancing five generations in the workplace, according to the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Company. However, managers can use the different strengths found within a multigenerational workforce as an asset. While younger, less experienced workers may lack industry knowledge, they are typically more technology savvy and more willing to embrace new techniques. Seasoned workers, on the other hand, may be resistant to both change and technological improvements; however, they typically have a vast amount of experience and loyalty, and may be able to mentor new employees. When leveraged appropriately, many companies are finding they can use this diversity as an opportunity to improve operations and create new and innovative solutions to traditional problems.
- Use Ongoing Training to Develop Leaders. One important best practice for any manufacturer is to implement an ongoing training program, either internally or with the help of a supply chain partner. According to the white paper, The Top Five Operating Challenges Ball and Roller Bearing Manufacturers Face in Industrial Metal Cutting, too often metal-cutting operations only provide upfront training, as opposed to continually reinvesting in their operators. Leadership training, in addition to basic operator training, will be key for managers struggling to fill skills gaps and replace retired employees. Just like existing customers are often the greatest source of new business, the underdeveloped potential of existing employees could be an operation’s greatest source of new talent.
What strategies are you using to improve training at your manufacturing operation?
July 15, 2016 / employee incentives, Employee Morale, industry news, LIT, maintaining talent, operator training, productivity, skills gap
With more baby boomers leaving manufacturing jobs than entry-level candidates choosing a career in manufacturing, there’s no doubt that the manufacturing skills gap exists. However, a recent study by PricewaterhouseCoopers (PwC) and The Manufacturing Institute found that while some manufacturers aren’t feeling the gap yet, others are worried the gap will widen.
According to the June 2016 PwC study, 33% of manufacturers say they have little or no difficulty hiring talent while 41% have “moderate difficulty.” This doesn’t mean, however, that a worker shortage isn’t on the horizon: 31% of manufacturers see no skills shortage now but expect to see one within the next three years. In addition, another 26% believe the gap has already peaked and 29% think it will only get worse.
While no one knows if or when the gap will worsen, the point is that companies need to address it now. In most cases, managing the gap will require companies to change the way they train and maintain talent. According to the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, companies are rethinking their hiring tactics and beefing up training programs to help bridge the gap.
Aluminum manufacturer Alcoa, for example, has quadrupled the number of its internships at its Technology Center in New Castle, Penn., in the past three years to ensure it attracts and retains top talent, according to an article from IndustryWeek. In addition, the company is partnering with a community college to train 60 students in additive manufacturing and 3-D printing.
The Fabricators & Manufacturers Association Intl. is also working to boost enrollment in metal forming and fabricating career paths. As reported here, the association developed a multi-media site to showcase stories, videos and interactive resources to raise awareness of technical education. Educators at 12 schools across the country will have memberships to the site (www.eduFACTOR.org) in an effort to attract and develop a new-generation workforce.
In addition to new hiring strategies, companies also need to be sure their training programs are designed to take on a new generation of workers. According to an article from American Machinist, there are a few ways to implement effective training to help bridge the skills gap:
- Make training mobile. As we discussed in this blog post, mobile technology is changing the manufacturing landscape. Besides increasing productivity, portable devices can be used as virtual textbooks. Create web-based training that is optimized for smartphones and tablets so your workforce can brush-up on best practices, learn new techniques, and develop new skills anywhere and at any time.
- Make it easy to digest. Keep training content short and sweet, especially given that manufacturing and engineering subjects can be detailed and, let’s be honest, not the most exciting to read. Create training content that is streamlined, divided into short chapters or sections, and that is clear, concise, and geared toward employee engagement.
- Teach skills they won’t find somewhere else. Training, in general, will help your industrial metal-cutting operations run more efficiently, but it can also help you edge-out the competition when it comes to attracting and retaining talent. Provide training that equips employees with the skills unique to your operation and products, especially with entry-level employees. Custom training will not only boost operational productivity, but will also create an incentive for those employees to grow along with your operations.
Proactively attracting new talent and investing in training can help bridge the skills gap within your industrial metal-cutting operation, but they are only two pieces of the puzzle. Cultivating a company culture that actively and continually invests in its employees can have a long-term effect on not only the quality of your workforce, but the quality of your operations as well. People affect process and can play a huge role in an operation’s success.
Do you think the skills gap is affecting your metal-cutting operations? What strategies are you implementing to bridge the gap?
June 20, 2016 / agility, human capital, industry news, KPIs, lean manufacturing, maintaining talent, operations metrics, performance metrics, skills gap, strategic planning
In today’s lean manufacturing world, managers and executives are encouraged to “stay grounded” and find out first-hand what is happening in their operations. As we stated in a previously published blog, improvement decisions can’t be made in an ivory tower. Instead, lean experts advise manufacturing executives to make the time to visit the shop floor—also known as taking a “gemba walk”—so they can see their operation from the front lines.
At the same time, however, today’s competitive market requires leaders to keep a pulse on “megatrends” so they can create innovative, strategic solutions that balance internal efficiency with external demands. In other words, even small shop managers need to be tracking larger scale trends so they can stay competitive and respond to changing customer expectations and an evolving manufacturing industry.
According to Modern Machine Shop, the recent MFG Meeting in Palm Springs, CA highlighted some bigger picture trends that are shaping manufacturing. Below is a summary of three key trends, as reported by Editor Mark Albert:
- Navigating a sea of information. Albert notes that in three to five years, more than a trillion objects will be networked. “Products and user communities will merge,” he states. “The structure of the factory will evolve into a social network. Designers and manufacturers must be ready to create products that behave like living organisms.”
- Cyber security. “The pervasive interconnection of things (which exists today) exposes every company to a massive threat from cyber criminals and malicious hackers,” Albert states. “Companies must adopt defensive strategies that build in, not bolt on, protection at every level.”
- Stay optimistic. Albert says that despite what seems to be persistently negative influences and nagging uncertainties, the economic outlook for U.S. manufacturing is positive. As one leading economist asserted at the MFG meeting, a calm and rational analysis sees better times ahead—as indicated by the numbers, not the emotions.
A contributed article appearing in IndustryWeek echoed similar trends, but zeroed in on the effect “Big Data” will have on manufacturing. “The ability to collect and analyze large volumes of data in economic transactions has revolutionized customer care in the retail and finance sectors,” the article states. “In manufacturing, Big Data will accelerate the integration of IT, manufacturing, and operational systems on the shop floor and lead to better forecasting and understanding of plant performance.”
The IW article also noted the changing demographics of the workforce—a trend of which most machine shops and industrial metal-cutting companies are well aware. According to the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal Cutting Organization, by the year 2020, most companies will have five generations in the workplace. This may certainly create some challenges, but as the eBook explains, managers can also use this demographic mix to their benefit by leveraging the different strengths found within their multigenerational workforce.
“While younger, less experienced workers may lack industry knowledge, they are typically more technology savvy and more willing to embrace new techniques,” the eBook explains. “Seasoned workers, on the other hand, may be resistant to both change and technological improvements; however, they typically have a vast amount of experience and loyalty, and may be able to mentor new employees.”
Of course, these are just some of the big-picture trends affecting machine shops, and many are already responding. As reported in our “Machine Shop Outlook for 2016,” a benchmarking study from Modern Machine Shop revealed that leading U.S. machine shops this year are focusing on workforce training and talent to close the skills gap, improving shop floor practices to optimize processes, and investing in future technology to stay competitive.
How is your shop responding to these megatrends?
June 1, 2016 / best practices, Employee Morale, human capital, LIT, maintaining talent, operator training, skills gap
Like any fad, management trends come and go. However, that isn’t to say that they aren’t valuable and worth considering. In fact, most of the time, management trends are in direct response to shifts in cultural expectations and work attitudes.
The incoming millennial generation is a good example. As the manufacturing industry attempts to fill the widening skills gap, experts and manufacturing giants like IBM have been suggesting several ways companies can attract this new generation and get them excited about careers in manufacturing.
One trend that continues to gain ground is the push for transparency. In fact, Forbes lists this is as one of the top management trends of 2016 based on research. “Simply put, people like and appreciate being dealt with openly and honestly,” Forbes notes.
According to an article from the Harvard Business Review, there are several terms that describe this trend, including open-book management (OBM), economic transparency, and ownership culture. “Whatever you call it, it means encouraging employees to think and act like businesspeople rather than like hired hands,” the HBR article explains.
In other words, today’s managers should treat employees in a way that engages them and encourages them to take ownership of their jobs. “At open-book companies, it’s part of everyone’s job to contribute to the success of the business,” the HBR article states. “Managers help employees understand, track, and forecast key numbers. They welcome ideas for improvement. They reinforce the ownership mindset by sharing profit increases with everyone, usually through bonuses funded by the increase itself.”
LeanWerks, a contract manufacturing shop featured here in Modern Machine Shop, has instituted an OBM style that allows operators to readily see how their performance affects the company’s bottom line. Reid Leland, president, uses OBM in his shop to facilitate a better line of communication and understanding between management and employees, creating a more transparent and “flattened” organization.
According to the MMS article, Leland’s shop bases its OBM style on three key elements:
- Financial Training. New employees are formally trained on topics such as the time value of money, project management, income statement, balance sheet and cash flow, and ratios such as debt to equity and gross profit to operating expenses (GP/OE).
- Shared Information. Leland’s shop has a large viewing monitor located in a prominent area of the shop that displays a spreadsheet that is updated regularly. The spreadsheet includes company financial information, a list of all shop machine tools, and the gross profit that individual machines produce each day of the month.
- Profit Sharing. At the end of the month, if the GP/OE ratio reaches a certain level, part of the monthly profits is shared with the employees. This information is readily available on the spreadsheet for employees to view so they can monitor profit levels themselves.
Of course, not every shop owner will feel comfortable sharing financial details and may not be able to share profits, but there are certainly benefits to actively engaging employees and creating more of a reciprocal relationship between the executive office and shop floor. According to the eBook, Five Performance-Boosting Best Practices for your Industrial Metal-Cutting Organization, a growing number of managers are finding that operators who take ownership of their process or work area can be invaluable assets to the company.
“Employee “buy-in” can positively affect all aspects of an industrial metal-cutting operation, including quality, productivity, and in the end, the bottom line,” the eBook states. “Similarly, when employees feel disconnected, those same business areas can be negatively affected.”
As the eBook points out, operators who feel valued are more likely to value their jobs and their employer. Even if you aren’t ready to open up your books for the whole company to see, strategies such as collecting feedback, investing in continued education, and setting goals and incentives can all help encourage employee ownership, foster better communication, and improve morale.
How transparent is your industrial metal-cutting organization? In what ways could you encourage employee ownership and facilitate better communication?
April 25, 2016 / continuous improvement, Cost Management, customer delivery, customer service, industry news, skills gap, strategic planning
As we reported in our 2016 Industrial Metal-Cutting Outlook, forging shops and other industrial metal-cutting companies entered the year fairly optimistic. Unfortunately, expansion in the industrial manufacturing sector has been slow moving. While current conditions have left many companies cautious, long-term forecasts point to better times ahead.
While not everyone anticipated huge growth in 2016, very few expected it to be worse. According to an annual industry survey from Forging Magazine, almost half (49.2%) of forgers entered the year with a positive outlook, while 41.5 percent expected 2016 to be “about the same.” Based on the survey results, aluminum forgers (61.1%) and impression-die forgers (62.5%) were the most optimistic about rising shipments in 2016.
Confidence was also seen in forgers’ spending plans for 2016. According to Forging, 53% of all survey respondents have plans in place to add new manufacturing equipment at their operations; for nearly 14% of these respondents, the investment will encompass new building construction, either an addition to a plant or a separate, new plant. However, for those forgers affirming capital spending plans, 47.6% indicate the value of their investments will be about equal to their 2015 totals—an indication that many companies may still be a little hesitant to make huge investments.
Confident but Cautious
Based on current data, that hesitation is founded. Monthly data on manufacturing activity has been up and down this year, leveling out to little or no growth. According to the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production will likely register zero growth in the first half of 2016, with 1% to 2% growth in the third and fourth quarters. For the entire year, the research firm forecasts only 1.1 % growth.
Still, forges have reason to keep their positive attitude. Short-term forecasts for the manufacturing industry may be grim, but the forging industry has historically shown an ability to outperform the broader trends. In addition, a recent uptick in manufacturing activity in March provides some hope. The monthly Purchasing Manufacturers’ Index (PMI) from the Institute for Supply Management (ISM) increased by 2.3 percentage points in March, putting the index above the 50-percent growth threshold for the first time in 2016.
Long-term prospects for forgers are also hopeful. According to a report from Zion Research, North America’s demand for the forging industry is expected to reach $15.4 billion in 2020, growing at a compound annual growth rate (CAGR) of 4.76% between 2015 and 2020. Global forecasts are even brighter. A report from TechNavio predicts that the global forging market will exhibit a healthy CAGR of around 8% between 2016 and 2020.
That’s not to say, however, that the industry doesn’t have some concerns. Based on Forging Magazine’s survey, forging producers expect to face the following challenges in 2016:
- lack of new orders
- foreign competition
- energy costs
- availability of labor
- availability of capital
- raw materials lead times
Like other industrial manufacturers, forges will have to approach the current market strategically by balancing internal improvements with external influences. According to the TechNavio report, there are four key trends forges should keep an eye on in 2016:
- Movements in Automotive. As the biggest end-user of forged parts, the automotive industry will continue to play a crucial role in boosting demand for forged products. However, the automotive segment is reaching a mature stage in the forging market, and the global economic slowdown has adversely affected its growth. As a result, sales of forged parts in this industry fell in 2015, compelling many vendors of the forging market to reduce their shares and investments in the automotive industry. Even so, the automotive sector is expected to grow at a CAGR of around 7% during the forecast period of 2016-2020.
- Expanding Business Opportunities. Recent trends suggest that major vendors are investing in R&D to explore avenues in the non-automotive sector to increase the market revenue. In fact, according to the report, “other non-automotive sectors will mostly contribute to the growth of the global forging market until 2020.” This includes sectors such as aerospace and defense, agriculture, construction, mining, general industrial equipment, and material handling. Some companies are also looking at fresh ways to approach the automotive market, including addressing the trend toward lightweight design.
- Technology Improvements. Following larger manufacturing trends, forges are looking to new technology to improve operations. “Vendors are developing new and improved die material interfaces and increasingly using new die designs and modeling software,” an analyst from the report’s research team said. “The market is also implementing controls and sensors to monitor the forging process in a bid to automatically sense and compensate for any variation in the process.”
- Growth in Asia-Pacific. The Asian and Pacific Coasts (APAC) region accounts for the largest share of the forging industry, contributing about 61% of the total revenue generated. The report expects the region to grow at a CAGR of around 9% between 2016 and 2020. “Increasing outsourcing of forging activities to low-cost countries in the region is expected to drive this regional market,” the report states. “Demand for infrastructural development in developing countries and the emergence of India as the manufacturing hub for the automotive industry will propel the growth of the market in this region.”
April 20, 2016 / best practices, continuous improvement, Cost Management, customer service, Employee Morale, industry news, LIT, maintaining talent, optimization, skills gap, strategic planning
Like the rest of the metal-cutting industry, machine shops were eager to see the end of 2015 due to weak demand. Unfortunately, experts are anticipating that market conditions in 2016 will, at best, be a mixed bag.
Taking a look back, 2015 started off strong. According to Gardner’s metalworking business index (MBI), industry conditions expanded in March 2015 for the 15th consecutive month. The streak stopped in April when the market contracted for the first time since December 2013, with the largest month-to-month decline since April 2013. Production also slowed while new orders declined. That contraction continued until the industry bottomed out in October and November and then ended the year with a slight uptick in December.
While growth did return at the start of 2016, it was often short-lived and fragile. For example, industrial production decreased 0.5 percent in February after increasing 0.8 percent in January, according to the Federal Reserve. On the other hand, according to Gardner’s most recent MBI index results, as reported by Modern Machine Shop, the metalworking industry has started showing signs of life. Despite the industry contracting as a whole, the trade publication says the market has improved significantly since December.
Spending trends are also a bit mixed. According to the Modern Machine Shop report, while future capital spending plans are still below the historical average, those rates are on the rise and have increased to their highest level since last March. “Compared with one year earlier, planned spending was down just 1.2 percent in March, the slowest rate of contraction since September 2014,” the trade publication reported. “This trend indicates that capital spending could begin improving later this year.”
Preparing for Returned Growth
While the start to 2016 hasn’t been the best the industry has seen, it also isn’t the worst and creates an opportunity for machine shops to invest in their operations, especially if they can afford the time to do so.
Like in 2015, most shops will continue to work on process optimization to increase productivity. However, this year, industry leaders will also need to focus on the next generation of machine shop operators to fill any skills gaps and prepare for an eventual market rebound. Based on the “Top Shops” benchmarking survey from Modern Machine Shop, leading U.S. machine shops are doing that and more.
Findings from the publication’s fifth annual survey revealed that leading U.S. shops are focusing on the following four key areas in 2016:
- Machining technology. A higher percentage of top shops use turn-mill multitasking machines at nearly 54 percent compared to 27 percent of other shops, helping to minimize work in process (WIP) and the number of times a part is touched during production. Top shops also use enterprise resource planning (ERP) software to help manage scheduling, costing and estimating and ensure they know all aspects of the workflow at any point in the process.
- Shop floor practices. According to the survey, top shops integrate unattended processes with new technology such as sensors and equipment monitoring technologies, including the Internet of Things (IoT) and MTConnect. Nearly 25 percent of survey respondents reported they’ve integrated machine-tending robots into their processes compared to 11 percent in 2011. Continuous improvement remains to lead on the floor with 62 percent of shops adopting formal improvement programs.
- Business strategies. Top shops report a median profit margin of 13.5 percent compared to 8 percent for other shops. Leading shops also invest more in capital equipment, spending 9.5 percent of gross sales versus the 3.5 percent spent by average shops. In addition, they invest in value-added services such as design for manufacturability (DFM) engineering services, which help refine product designs by working with customers early in the product development cycle and simplify machining and production costs.
- Human resources. Top shops use benefits to attract and retain employees. This is key as the majority of experienced workers get ready to retire. Top shops offer annual review and pay-raise programs, paid medical benefits, and bonus plans to attract top talent. They are also more willing to invest in growing the skills of their employees with education reimbursement and formal training programs. (For more information on workforce trends in 2016, check out this article from Production Machining magazine.)
As the past few years have taught us, no one can truly predict what the rest of 2016 will bring for machine shops and other industrial metal-cutting organizations. However, leaders remain focused on optimizing operations. By investing in workforce training and talent, improving shop floor practices, and investing in future technology, machine shops can survive current market conditions and, more importantly, prepare for growth in the future.
How are you preparing for growth? What is your shop focusing on in 2016?
April 10, 2016 / continuous improvement, industy, LIT, maintaining talent, operator training, skills gap, strategic planning
As we covered in our annual Industrial Metal-Cutting Outlook, the outlook for 2016 is—in a word—flat. Slow growth from 2015 carried over into the first quarter of the year, leaving most analysts expecting little to no growth.
According to the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production will likely register zero growth in the first half of 2016, with 1 to 2 percent growth in the third and fourth quarters. For the entire year, the research firm forecasts only 1.1-percent growth.
Unfortunately, MAPI’s outlook for fabricated metal parts is also a little disappointing. The most recent forecast shows production of fabricated metal parts down 0.9 percent in 2016, with small growth of 1.4 and 2.0 percent in 2017 and 2018, respectively.
A recent uptick in manufacturing activity in March, however, provides some hope. The monthly Purchasing Manufacturers’ Index (PMI) from Institute for Supply Management (ISM) increased by 2.3 percentage points in March, putting the index above the 50-percent growth threshold for the first time in 2016. In addition, ISM reports that 12 of 18 manufacturing industries reported growth in March, including the fabricated metal products and primary metals industries. According to one survey respondent from the fabricated metal products segment, “Capital equipment sales are steady.”
Even with some small movements forward, business for most of the metals industry has been tough. For fabricators, a lot of the challenges stem from the struggling agriculture and energy sectors, as well as bigger picture issues like high inventory levels and a strong dollar. However, none of those challenges seem to be sending the industry into a total panic.
According to an industry survey from The Fabricators & Manufacturers Association Intl. (FMA), most small and medium-size job shops and fabricators entered the year expecting growth. Specifically, the survey found that 39 percent of respondents were positive about 2016, and 38 percent said conditions are at least stable. Even so, a significant number (23 percent) didn’t expect conditions to get any better.
FMA’s “2016 Capital Spending Forecast” projected that total capital spending will increase a little more than 2 percent next year, with some equipment categories such as welding and bending seeing dramatic gains. As reported by The Fabricator, “…this shows that the metal fabrication manufacturing technology business has regained its losses from the Great Recession and then some.”
Whether or not that is true is up for debate, but it seems some fabrication shops are finding ways to still be profitable in the midst of an uncertain market. According to an editorial from Tim Heston, senior editor at The Fabricator, several fabricators he has spoken to are faring really well, depending on their customer mix and the specific OEM plants they serve.
“2016 really will be about hitting the right spot when it comes to the customer mix,” Heston notes. “Some sectors will continue to struggle, but others will thrive.
“Figuratively, the future will really be about hitting…the right mix of fabrication services, talent, technology, and customers,” Heston continues. No matter what economic headwinds may come, the right mix will help a custom fabricator land on its feet.”
Finding the Right Mix
Like any strategic decision, this so-called “sweet spot” will require some risk and will depend largely on your current customer base, capacity, and resources. In other words, there is no silver bullet formula. While it is tempting to assume that growing markets like automotive and aerospace should be your target, as Heston noted in his editorial, some aspects of agriculture (i.e., small equipment) are still profitable.
There are some key areas, however, fabricators should focus on as they attempt to make 2016 a profitable year. Based on our research, the following three areas deserve consideration:
- Diversification. In uncertain economic times, it is not uncommon for manufacturers to diversify to dilute the risks that may be associated with some OEM segments. As described here, diversification saved many fabrication shops in 2015, and experts believe the trend will continue in 2016. In some cases, this may mean forming new customer relationships, or it could mean offering existing customers a few value-added services for a more predictable stream of revenue. One fabrication shop, featured here, added prototypes to its mix as an added service.
- Advanced Technology. Fabricators both large and small can no longer afford to underestimate the role technology can play in their shop’s success. Whether you decide to invest in predictive analytics, mobile technology, or the latest cutting technology, the truth is that today’s competitive environment requires leaders to stay on top of manufacturing advancements. Jett Cutting, a metal-cutting company featured here in a case study, says that investing in new technology allows his shop to offer competitive pricing, which has led to many new customers. “We need to constantly keep on top of the latest technology out there,” Baron states. “We don’t want to spend extra money, but if it’s going to cut 20 percent quicker than I do now…then we’ll go after it.”
- Good Talent. As most manufacturing executives are well aware, the industry’s skills gap continues to widen. As The American Society of Quality’s 2016 Manufacturing Outlook Survey confirmed, an increasing number of U.S. manufacturers are struggling to fill open positions. Respondents stated that the biggest challenge was the lack of qualified applicants, followed by the time it takes to hire a new employee and lack of budget to fill open positions. However, the survey also found that many companies are proactively addressing the issue: 55 percent of manufacturers say they’ve hired an agency and 41 percent are working with local colleges on programs that teach the required skills.
Will 2016 be a year of growth for your fabrication shop? Although economists may tell you no, some strategic shuffling and smart investments may just prove them wrong.
February 29, 2016 / best practices, continuous improvement, employee incentives, Employee Morale, human capital, LIT, operator training, productivity, quality, skills gap, strategic planning, workflow process
As ball and roller bearing manufacturers strive for continuous improvement and optimization within their operations, there is no question that process improvement is a top priority. Leaders know that today’s competitive environment requires them to invest time and resources in finding new tools, technology, and strategies for increasing productivity and reducing waste.
However, managers need to be sure they are not so wrapped up in process improvements that they are neglecting the other half of the continuous improvement equation—people.
As explained in the white paper, Accounting for Operator Inefficiencies in the Metals 2.0 Environment, people affect process. “Mechanical inefficiencies can often be solved with technology, but industry leaders are finding they can no longer ignore the human variables that contribute to productivity,” the paper states. “A lack of skill sets, business knowledge, and employee morale can affect vital areas of an operation, from inventory and parts costs to output and safety.”
When managers fail to focus on their operators, they are likely hurting their processes and, even more so, missing out on a prime opportunity for improvement. According to an article from The Manufacturer, a valued workforce can make the biggest impact on a factory’s efficiency. “Creating an environment where your workforce feels valued and respected results in motivation and loyalty,” the article states. This, it adds, can add up to tangible benefits, including higher output and lower absenteeism.
“Studies have found if employees are engaged, they put in twice as much effort, and will take just two-and-a-half sick days/year instead of six-and-a-half,” the article states. “This involvement leads to staff identifying with the company, its products, and sharing the corporate values.”
Indeed, a growing number of manufacturers are finding employee engagement can be just as critical as skills training when it comes to operator productivity. According to the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, operators who take ownership of their process or work area can positively affect all aspects of an industrial metal-cutting operation, including quality, productivity, and in the end, the bottom line. “Similarly, when employees feel disconnected, those same business areas can be negatively affected,” the eBook states.
The following are three key ways managers can better engage operators and make them feel valued:
- Listen. Operators that work with equipment every day are a valuable source of information. Collect feedback and implement some of their ideas.
- Equip. Invest in an employee’s future with incentives like continued education or management training. This shows employees that you value their personal success and provides them with new skills that can benefit your operation in the long run.
- Reward. Studies continue to show that goal setting and incentives are effective motivational strategies. Empower your operators by letting them set their own goals. This also holds them accountable for their work and promotes long-term “buy-in” and loyalty.
A recent article from the Liquid Planner also encourages managers to be intentional about creating a positive work environment by simply engaging in meaningful in-person conversations. “We’re all human, and most humans respond well to the real thing—in-person communication that says ‘you matter,’” the article states.
Perhaps an article from IndustryWeek states it best: “Most employees don’t need a $10 gas card; they just need to know that they can have an impact, their ideas matter, and they are appreciated.“
Yes, the idea of engaging and empowering employees sounds a bit cliché, especially as technology advances and competition intensifies. However, managers are finding that operators who feel valued are able to bring more value to the business.
In what ways could you better engage your operators?
January 1, 2016 / best practices, industry news, LIT, maintaining talent, operator training, skills gap, strategic planning
For the last few years, analysts and industry experts have spent a lot of time and money trying to figure out how to solve the manufacturing industry’s current skills gap. Research studies, conferences, webinars, and trade articles have widely discussed the issue, which seems to be getting more and more challenging by the day.
As a new eBook from the LENOX Institute of Technology explains, there are several layers to current workforce challenge. First, skilled production workers are one of the largest workforce segments facing retirement in the near term, which will have an impact on the number of experienced workers on the shop floor.
Meanwhile, the current talent pool isn’t what it should be. Streamlined production lines and more process automation have changed the nature of manufacturing work, and the incoming generation of workers either isn’t interested in working anywhere near a production line or lacks the necessary skills and technical knowledge.
While there is no silver bullet solution to the skills gap issue, some manufacturers are addressing the current problem by dragging out some old strategies. Specifically, some manufacturers are bringing back their apprenticeship programs to help fill their employee pipeline.
ArcelorMittal, for example, recently refreshed its apprenticeship program in an effort to recruit more maintenance technicians, according to an article from IndustryWeek. “We realized we would be losing in excess of 200 mechanics and electricians per year,” Gary Norgren, ArcelorMittal’s manager of raw materials, told IndustryWeek. “We decided we would never be able to keep up with that with internal candidates, so we needed to do something new.”
To address the issue, the steel company has partnered up with local colleges to develop coursework in areas such as welding, metallurgy, physics, hydraulics and pneumatics. The company also participates in a program that allows students to take two eight-week internships at their local ArcelorMittal plant, where they work alongside experienced technicians. In addition, students who would like to be considered for employment after graduation can take an entrance exam, but it has to be completed during their internship. “That way, if there are areas they feel they’re weak in, they can get extra help from their mentor right on the spot,” the article explains.
Many others, including big names like Bosch Rexroth, Volkswagen and Siemens, have developed similar programs. Oberg Industries, a manufacturer of precision components and tooling, says it has always relied on its apprenticeship program, which dates back to 1971. According to an article from the U.S. Department of Labor web site, Oberg believes its apprenticeship program offers the following four benefits:
- It ensures that all employees will have the job competency skills the company needs to be successful today and tomorrow and instills our corporate values and culture in new employees.
- Provides each apprentice with the ability to earn family-sustaining incomes and learn a skill at the same time.
- Establishes a culture of continuous learning for incumbent workers.
- Contributes to the overall success of the organization by enhancing the company’s reputation, strengthening its brand, and setting it apart from the competition.
While apprenticeship programs certainly have a “dated” feel to them compared to many of today’s fast-paced hiring tactics, they could also be exactly what manufacturing needs—again. For an industry that has spent a lot of the last few decades focusing on process and efficiency, maybe it’s time to place the focus back on people. By investing time and resources in building a skilled workforce, you are ultimately investing in your company’s long-term success.
How is your company recruiting and building a skilled workforce? Could apprenticeship or internship programs help close the skills gaps in your operation?