May 15, 2014 / agility, best practices, continuous improvement, Employee Morale, human capital, lean manufacturing, LIT, maintaining talent, strategic planning
One of the foundational principles of lean manufacturing is employee engagement. As we covered here, one way for executives to do this is to literally walk the shop floor and interact with operators. This not only allows management to see firsthand what happens on the floor, it creates a more team-centered approach to decision making and empowers employees. In the best-case scenario, it also births innovation and improves productivity—both of which can improve the bottom line.
Although a growing number of manufacturers have adopted these types of collaborative lean strategies, Evan Rosen, author of The Bounty Effect: 7 Steps to The Culture of Collaboration, argues that most companies still operate within the age-old paradigm of “command and control.” In other words, a few people are paid to think, while the rest of the employees are expected to simply carry out orders. Rosen, however, believes our culture is in the midst of a major shift that will require companies to adopt a more collaborative, “all hands on deck” approach to business.
Based on Rosen’s model, collaboration goes far beyond employee engagement. In a recent column in IndustryWeek (IW), the author provides five ways that manufacturers can adopt a more collaborative structure. These include the following:
- Establish All-Access People Policy
- Design Collaborative Workspaces
- Collaborate with Customers
- Collaborate with Competitors
- Create Mirror Zones
For some great examples of what these strategies might look like in an industrial metal-cutting environment, check out this case study from ThomasNet.com, which describes an industry-wide collaboration, and this LIT white paper on how to create more collaborative supplier relationships.
What are some ways your company has taken a more collaborative approach?
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 28, 2014 / continuous improvement, Cost Management, human capital, industry news, lean manufacturing, LIT, predictive management, preventative maintenance, strategic planning
For most of the industrial metal-cutting industry, things are staring to look up. Earlier this month, the World Steel Association released its Short Range Outlook for 2014 and 2015. The forecast projects that global apparent steel use will increase by 3.1% in 2014 and by 3.3% in 2015. Regional projections are also positive. While the U.S. showed a decrease of -0.6% in apparent steel use in 2013, the global association forecasts that apparent steel use in the U.S. will grow by 4.0% in 2014 and by 3.7% in 2015.
However, even with its positive forecast, World Steel expects continued volatility and uncertainty to create a challenging environment for steel companies this year. And many metals executives are feeling that uncertainty. As stated in LIT’s 2014 Outlook for Industrial Metal-Cutting Companies, most industrial metal-cutting companies are only cautiously optimistic about today’s market.
This is especially true of many forging industry executives, who were encouraged by sales increases in 2012, only to be disappointed with no growth and some decreases in 2013. Specifically, the Forging Industry Association (FIA) reports that total industry shipments for the custom impression die forging industry were at $7.313 billion in 2013, down slightly from $7.337 billion in 2012. Meanwhile, 2012 total industry shipments by the custom open die forging industry were 15% below 2012, and shipments for the custom seamless rolled ring forging industry were basically flat. (You can view FIA’s final sales data here.)
As forging executives move into the second quarter, there are some trends unfolding in 2014 that they should be watching closely. A recent column from IndustryWeek does a good job of describing five higher level trends that are affecting most of the manufacturing industry. These include the following:
- Increased reliance on automation and robots
- Rapid prototyping
- Smaller orders
- Leaner factories
On an operations level, there is perhaps one prevailing trend—the relentless push for continuous improvement. In an uncertain market, operations managers are realizing they have no choice but to optimize and become more agile. In some cases, this requires capital investment, but many industry leaders are discovering alternative ways to improve operations. LIT’s benchmark study of industrial metal-cutting companies, for example, identifies three key areas where managers can make improvements without adding new capital expense:
- Invest in Smarter, More Predictive Operations Management
- Embrace Proactive Care and Maintenance of Tools & Equipment
- Invest in Human Capital
Of course, there is no crystal ball for what 2014 will bring, and as the last few years have taught manufacturing executives, nothing is ever certain. In the end, the key will be for forging companies to strategically consider industry trends (i.e., smaller orders), while also proactively improving what is happening inside their doors.
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 10, 2014 / continuous improvement, Cost Management, industry news, LIT, strategic planning
Late last month, the LENOX Institute of Technology (LIT) published its 2014 Industrial Metal-Cutting Outlook. Echoing the sentiments of many industry analysts, the report expects 2014 to be another year full of uncertainty. Metal fabricators, as well as every other manufacturing segment, are finding it difficult to anticipate what this year might hold, which makes planning extremely challenging.
There are, however, several trends that fabricators should keep in mind as they attempt to strategically navigate this unpredictable market. Here are a few we gathered from the industry’s top resources:
- Government Setbacks Continue. As pointed out by Dan Davis in a recent blog from thefabricator.com, a lot of today’s market uncertainty stems from political dysfunction. As Davis states, “the government can’t get out of its own way,” which is why many business leaders are “increasingly calling on Congressional leaders to work together to chart some sort of course for the future.” In all reality, political games are likely to continue this year, which means manufacturers shouldn’t expect the government to help the economy grow in 2014.
- Wages and Costs Will Rise. Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association International (FMA), predicts that costs will rise across the board by mid-year. “The producers of metal and other raw materials have been reducing production to bring supply in line with demand,” Kuehl states in an FMA forecast report [LINK] published in late December. “Wages will rise for the people needed as they will be in short supply, and any pickup in business will make them that much more valuable.”
- Some Growth is Expected. There is some good news. Most reports expect at least some growth in production over the next two years. According to the latest outlook from MAPI, fabricated metals production is forecast to post moderate gains of 4% in both 2014 and 2015. The manufacturing organization also reports that nearly all major types of fabricated metal products have shown production increases in the three months ending January 2014 relative to the same period one year ago. Forging and stamping was up 4%, architectural and structural metals rose 4%, machine shop turned products and fasteners grew 6%, and coating, engraving, and heat treating grew 1%.
- Improvement Continues to be Critical. While the MAPI numbers may not be indicative of a full rebound, they give some indication that there is opportunity for growth, especially for companies focused on improving the one thing they can control—their operations. Lean techniques and technology investments will continue to be important strategies for managers to consider, but as this white paper from LIT states, optimization starts with your operators. Ongoing training is key for existing employees and becomes even more critical for new employees as fabricators attempt to bridge the current skills gap. There is no question: continuous improvement is the new normal for metal fabricators that want to thrive in today’s competitive market. And if you think you have no time for improvement, check out this article from thefabricator.com. As the article shows, you can—and need to—make time.