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supplier relationships

3 Ways Machine Shops Can Build Value into Supplier Relationships

July 20, 2016 / , , , , ,


Most manufacturing organizations agree that supplier relationships are one of the key building blocks of success. While there are still some companies that base their supply chain on price, many industry leaders believe that a strong supply chain can (and should) be about more than the most affordable product or service.

In an interview with Modern Metals, Aviva Leebow Wolmer, CEO of Pacesetter, stresses that cultivating strong ties with suppliers is critical to achieving the metal service center’s goals—goals that go far beyond price. “Pacesetter believes in the power of teamwork, where the entire supply chain comes together to focus on reaching goals,” Wolmer tells MM. “It’s easy to provide a low-price model to try to buy business away from the competition, but not every company is built to offer the level of service, partnership and trust that Pacesetter’s customers and suppliers are accustomed to. We want our suppliers and customers to feel they are a part of the Pacesetter family.

“Facilitating long-term partnerships helps to create value and offer advantages that may not be available if we focused only on price,” Wolmer continues. “We promote collaborative efforts up and down the supply chain and find long-term solutions to satisfy everyone’s needs.”

Other companies are taking a similar approach when building supplier relationships. For example, American Axle & Manufacturing (AMM), an automotive parts supplier featured here in Supply Chain World, works closely with suppliers long before price is even discussed.

“Our goal is to source several years in advance by working on new technologies and bringing suppliers in before we talk about price,” explains Jake Stiteler, AMM’s chief procurement officer. “We look at them to find the best technology and delivery, and we look at advanced cost modeling to agree on what prices should be. We’ve flipped the spectrum by having technology and capabilities drive the process, and by working with prequalified suppliers on finding ways to take cost out upfront instead of negotiating pricing at the end.”

Of course, in today’s market, price will still be important for machine shops and other industrial metal-cutting organizations looking to stay competitive. However, there are ways organizations can build more value into their supplier relationships. An eBook from the LENOX Institute of Technology lists three strategies to do just that:

  1. 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.
  2. 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.
  3. 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.

In addition to the above three strategies, managers should also do their 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? What can they bring to your shop that other suppliers aren’t offering? Therein lies the value.

Ultimately, the goal for any manufacturer should be to turn vendor relationships into strategic partnerships. By looking beyond price and by focusing on value, machine shops can develop a strong supply chain that can have a significant impact on the bottom line.

supplier relationships

2016 Industrial Metal-Cutting Outlook

April 1, 2016 / , , , , , , , , , , , ,


Although many hoped that 2016 was going to be a year of full recovery and growth, expansion in the industrial manufacturing sector has been slow moving. High inventory levels, a strong dollar, falling commodity prices, and a slowdown in China have left many industrial metal-cutting companies disappointed and more than a little cautious.

Slow Growth
Evidence of slow growth started at the end of 2015. According to estimates from the Manufacturers Alliance for Productivity and Innovation (MAPI), manufacturing industrial production was unchanged from the third to the fourth quarter of 2015. Monthly data has shown erratic patterns of growth and decline that have pretty much cancelled out any movement forward—a trend that is expected to continue.

“We expect the volatility to continue through the first half of 2016, a situation that will result in essentially no manufacturing production growth,” MAPI stated in a recent report. “Manufacturing production should be flat in the first and second quarters of 2016 before accelerating to a 3-percent annual rate in the second half of 2016.”

For the entire year, MAPI expects manufacturing production to decelerate rather than accelerate compared to 2015. “Production increased 2 percent last year, and we forecast only 1.1-percent growth in 2016,” MAPI states. The good news is that MAPI predicts growth in industrial manufacturing of more than 2 percent for both 2017 and 2018.

Unfortunately, the forecast for steel demand also shows little to no growth, although 2016 is expected to be an improvement over 2015. According to the Short Range Outlook 2015-2016 from the World Steel Association (worldsteel), global steel demand decreased 1.7 percent in 2015 but is expected to grow by 0.7 percent in 2016.

“It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China,” Hans Jürgen Kerkhoff, chairman of the worldsteel Economics Committee, said. “Combined with China’s slowdown, we also face low investment, financial market turbulence, and geopolitical conflicts in many developing regions.”

The only bright spot is that steel demand in developed countries is expected to show positive growth of 1.8 percent this year. The U.S. in particular should see demand increase by 2 percent in 2016, worldsteel predicts.

Realistic Expectations
While no one wanted the year to start off slow, most manufacturers aren’t too surprised. In a roundtable discussion with Metal Center News (MCN), Michael Bush, a vice president at Esmark, Inc., was quoted as saying that he didn’t expect the market to pick up until at least May. “Even though it will pick up in the second half, we expect 2016 to be down 1 percent for the year,” Bush told MCN. “That’s our general feeling going into the market.”

Bush isn’t alone. The American Metals Market annual survey of metals executives showed that 30 percent of respondents in the steel, aluminum, and other metals sectors expected business to be worse in 2016, and 70 percent predicted that the domestic economy would not fully turnout until 2017 or later. (You can read the full report here.)

The reality is that the U.S. is still in the middle of an economic recovery, which means that metal-cutting companies and other manufacturers won’t likely see any major growth this year. According to MAPI, manufacturing industrial production must grow another 3 percent in order to reach the pre-recession production level achieved in the fourth quarter of 2007, which means a full recovery is expected in the third quarter of 2017. Non-high-tech manufacturing production is 5 percent below the prerecession level and will not be fully recovered until the third quarter of 2018.

On a positive note, the latest numbers from the Institute for Supply Management (ISM) show some improvement. As reported by Plant Engineering, ISM’s monthly Purchasing Manufacturers’ Index (PMI) jumped 2.3 percentage points in March to 51.8 percent, putting the index solidly above the 50-percent growth threshold for the first time in 2016.

Out of 18 manufacturing industries, ISM says that 12 reported growth in March, including Fabricated Metal Products and Primary Metals. One survey respondent from the Primary Metals segment stated, “Our business is still going strong.” Another respondent from the Fabricated Metals Products segment said, “Capital equipment sales are steady.”

The big question, of course, is will this momentum continue? Analysts believe that continued growth will depend largely on continued strong employment because it creates new income growth and a solid base of consumer spending. MAPI says that another impetus is easy credit availability, which propels big-ticket spending for motor vehicles, residential housing, and nonresidential construction.

Moving Forward
While the overall data is certainly sobering, there are a few signs that suggest the metals sector can still snap out of the lull. As Modern Metals recently reported, “The average age of a vehicle on the road still exceeds 10 years; construction season is coming and Congress passed a long-term highway bill in December.”

Metal executives participating in MCN’s roundtable believe that automotive—which is predicted to top 17 million vehicles this year—will be the big market driver, as well as residential and nonresidential construction, white goods, and anything associated with “green energy.”

A report from Fabricating & Metalworking says that surviving 2016 will require manufacturers to use the current market conditions to their advantage. “U. S. manufacturers should be aggressive to take advantage of falling costs while at the same time finding new opportunities created by these economic forces,” the report says. Specifically, the article states that companies should consider employing two key strategies:

From an operations standpoint, continuous improvement activities will continue to be critical for industrial metal-cutting companies as they push through this slow period. Finding ways to optimize what is happening inside your shop doors is perhaps one of the most effective ways to balance the uncertainty of what is happening outside your doors. What does that look like? An eBook from the LENOX Institute of Technology’s lists five performance-boosting best practices that can help metal-cutting companies improve internal operations:

  1. Get lean. Although lean manufacturing is not a new movement, it is evolving. Companies that “got lean” years ago are focusing on continuous improvement, and a growing number of high-mix, low-volume operations are tweaking traditional lean methodologies to fit their specific situation. Regardless of your organization’s size, lean manufacturing should be at least part of your operational strategy.
  2. Invest in human capital. Industry data indicates that metal executives tend to invest in technology over people, but the tide is changing as the manufacturing industry deals with a serious shortage of skilled production workers. Managing this skills gap will require changing the way companies train and maintain talent, whether by beefing up training programs or rethinking their hiring tactics.
  3. Focus on quality as a process. There is no question that speed and agility are critical in today’s fast-paced market, but managers need to make sure that meeting demand doesn’t come at the expense of accuracy. To meet this challenge a growing number of market leaders are putting practices in place to ensure that their quality goals are met and maintained.
  4. Embrace preventative maintenance. In almost every manufacturing operation, machine breakdowns are one of the top causes of lost productivity. While some downtime is inevitable, proper maintenance and proactive care of equipment and tooling can reduce its occurrence. One benchmark survey revealed that 67 percent of industrial metal-cutting operations that follow all scheduled and planned maintenance on their machines also report an upward trending job completion rate.
  5. Form strategic supplier relationships. In today’s competitive marketplace, it is easy to base supplier relationships on price. However, a growing number of manufacturing leaders are placing more value on their supply chain. By leveraging the knowledge and services of trusted suppliers, companies can turn vendor relationships into strategic partnerships that have a real impact on the bottom line.

Ready and Waiting
All things considered, 2016 won’t likely be a banner year for industrial metal-cutting organizations. However, not all hope is lost. Recent upticks in manufacturing may indicate some positive (albeit slow) momentum, and many experts believe growth is in the long-term future, even if we have to wait another year. Until then, metal-cutting companies can continue to apply strategies that address external trends while also improving internal operations, putting them in the best position possible when the market finally turns around.

supplier relationships

Four Ways Forges Can Get More Value Out of Their Supply Chain

December 25, 2015 / , , , , , , , ,


In today’s competitive marketplace, it is tempting to base supplier relationships on price. Yes, quality is always a consideration, but cost typically makes or breaks the deal. However, a growing number of manufacturers are starting to place more value on their supply chain by focusing less on price and more on building strategic partnerships that offer long-term benefits.

In fact, supply chains are expected to be “a key value driver” for engineering and manufacturing companies over the next 10 years, according to the report, Building the World: Engineering & Manufacturing 2025+ from DHL Customer Solutions & Innovation. Specifically, the report says that manufacturing leaders will understand the importance of collaboration and will create new supply chain concepts to differentiate themselves in the market and stay competitive. For example, some companies may build regionalized supply chains to better adapt to shifts in economic activity.

Big name companies like Cargill, Coca-Cola, and Amcor Asia-Pacific are already establishing more collaborative supplier relationships, and they are seeing results. A case study on Bob Evans Farms and Gordon Food Services (GFS) featured here in Supply Chain Quarterly provides a great example. For the last four years, Bob Evans and GFS have been working to jointly identify and actualize opportunities for profit growth through the use of cross-functional teams. So far, the financial benefits have exceeded $31 million dollars, according to the article.

Forges and other industrial metal-cutting organizations can take a similar approach with their supply chains. While smaller operations may not have the time or resources to adopt the in-depth methodology utilized by Bob Evans and GFS, there are some simple ways forges can position their supply chain to bring more value. A new eBook from the LENOX Institute of Technology provides four strategies managers can use to build more value into their supplier partnerships:

Ultimately, the goal is to build a relationship that benefits both you and your suppliers. How can you create more of a win-win relationship with your supply chain?

To read more about the benefits of value-added supplier relationships, including some key areas where suppliers can help, download the eBook, Five Performance-Boosting Best Practices for Your Industrial Metal-Cutting Organization, or check out the white paper, Managing Your Blade Manufacturer Relationship.

supplier relationships

Industry Survey Reveals Key Trends Among Metals CEOs

November 1, 2015 / , , , , , , ,


For the last several years, metals CEOs have been, at best, cautiously optimistic about market conditions. Even when all signs pointed to a full recovery, uncertainty about external factors such as economic activity and commodities pricing continued to plague the industry. As one of our white papers points out, this uncertainty has pushed many managers to focus on improving internal operations—the only aspect of their business they can control.

It isn’t too surprising, then, that the latest report from PricewaterhouseCoopers (PwC) found that this uncertainty about the market remains among metals CEOs. What is surprising is that in some cases, this uncertainty has turned into pessimism. According to PwC, “Metals CEOs are more pessimistic about the economy, their own prospects, and a wide range of threats.”

Compared to CEOs from other industries, PwC’s survey revealed only 24% of metals CEOs believe the economy will improve this year compared to 37% of the overall sample. “And fewer are very confident of growth, compared to the total sample,” PwC states.

Based on current economic data, it seems metals executives have reason to be tentative. Despite economic expansion, data from Institute for Supply Management (ISM) revealed that 11 manufacturing industries contracted in September, including the Primary Metals and Fabricated Metal Products segments.

To cope with market conditions, the PwC survey found that half of metals CEOs are looking to diverse partnerships, while the vast majority is cutting costs. PwC also found that digital technologies are lower on the strategic agenda for metals CEOs and that skills shortages are a huge concern.

The good news is that the survey revealed that 75% still expect to increase their company’s revenues in the next 12 months. “Like CEOs in other industries, they’re looking to the US, China and Germany to generate growth,” PwC reports.

Read below for a summary of some of the key trends PwC discovered from the survey:

To read the complete 18th Annual Global CEO Survey, including the survey findings by industry segment, click here.

How is your industrial metal-cutting company coping with market uncertainties?

supplier relationships

Preventative Maintenance of Circular Saws in Ball and Roller Bearing Production

September 30, 2015 / , , , , , , , ,


In ball and roller bearing manufacturing, circular sawing is just one of many steps in the production process. However, one maintenance hiccup in the middle of a long production run can throw off the entire schedule.

This is why preventative maintenance is so critical. When equipment and tooling is well maintained, it is more reliable, more predictable, and more productive—all of which adds up to a more efficient operation.

For example, a benchmark study from the LENOX Institute of Technology (LIT) revealed that 67 percent 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.

Being proactive—not reactive—when it comes to maintaining your manufacturing equipment can bring major benefits to your operation. This is especially true in high-speed, precision metal-cutting applications.

To help ball and roller bearing manufacturers implement an effective preventative maintenance (PM) program for their circular sawing operations, the LENOX Institute of Technology (LIT) offers the following best practices:

supplier relationships

A Look at Inbound Quality Inspection in Your Forging Operation

September 25, 2015 / , , , , , , ,


When most managers think about quality, they tend to think about their internal operations and the competency of their employees. Quality control is largely based on the processes that managers have put in place to ensure that tolerances are met, cosmetic expectations are achieved, and errors are kept to a minimum.

However, it is important for managers to remember that quality begins with the supply chain. According to the white paper, Top 5 Operating Challenges for Forges That Cut and Process Metal, operations managers need to be sure they are tracking the quality and accuracy of the material coming from the supplier. Product liability and traceability continue to be huge concerns for forges and other metal-cutting companies, and raw material mix-ups can be both expensive and dangerous. Even major organizations like Boeing and NASA have learned this lesson the hard way.

Put simply: thorough inbound inspection processes are just as critical as outbound quality processes. By taking the time to confirm what is coming in the door, forges can confidently supply products that are both accurate and fail-safe.

The most successful way to ensure inbound quality is to devise a standard operating procedure (SOP). If you don’t already have one in place, an archived article on alloy verification from thefabricator.com provides a good starting point. According to the article, a good SOP should include the following six components:

(For a detailed explanation of these six components, check out the full article here.)

If you already have a standardized inbound quality process in place, another article from Quality Magazine suggests ten ways manufacturers can optimize this critical procedure. Below are a few best practices that will likely apply to your forging operation:

In the end, quality starts well before a piece of material even makes its way to the shop floor. Don’t underestimate the value of verification—or the cost of assumption. By implementing, enforcing, and optimizing inbound quality inspection processes, managers can stand behind every product that comes in—and goes out—their doors.

supplier relationships

2014 Industrial Metal Cutting Outlook

March 30, 2014 / , , , , , ,


Steel has a rich history in America and around the globe. It has often been called both the backbone of manufacturing and the building block of society—and rightly so. We rely on steel in many industry sectors, including automotive, aerospace, infrastructure, and consumer durables. The health of our sector is critical to the economy, as well as the quality of life that many of us enjoy.

As a global company that services the industrial metal-cutting industry, we at LENOX Tools have a unique vantage point of what is happening within the larger metals market. We have watched some companies barely survive these last few years, and we have also seen leaders rise to the occasion. And while there is still a lot of uncertainty within the marketplace, we are confident that with the right tools, 2014 can be a year of opportunity for many of our customers.

Cautiously Optimistic
According to the Steel Manufacturers Association, the short-term prospects for the steel industry are no more certain in 2014 than they were in 2011, 2012, or 2013. While 2012 was a good year for the industry, with significant increases in both crude steel production and consumption, 2013 wasn’t as good as everyone had hoped. According to the World Steel Association, U.S. steel production was down 2% in 2013 compared to 2012, and forecasts estimate that apparent consumption only grew a mere 0.7% in 2013 over 2012. (Final data has not been released.)

But there are some promising signs. The World Steel Association’s October outlook stated that steel demand is expected to increase by 3.0% in 2014, aided by the improving global economy and activities in the automotive, energy, and residential construction sectors. In addition, as reported by Modern Metals, both automotive sales and construction housing starts are expected to increase in 2014.

Even with these positive indicators, most metals companies remain cautiously optimistic about the near-term future. According to an annual survey of metal executives by American Metal Market, the majority of respondents expected business to improve, with only 8% stating they were less optimistic about business as they headed into 2014. However, three in four respondents said political events have heightened uncertainty, and only 30% of executives expected the economy to turn around this year.

Strategic Shifts
As the industry continues to wait for a true economic comeback, we are seeing some major strategic shifts in the businesses that we service. Unfortunately, a few businesses just could not find a way to survive, but many others were able to adapt and found smarter ways to work. They became leaner, more productive, and made investments where they mattered. We have also seen the emergence of several industry trends, such as consolidation and an influx of new services and products, as companies attempt to remain profitable.

One trend that we hear a lot about is “on-shoring” or “near-shoring”—the process of moving a business operation from overseas back to the local country. China, of course, has been the common landing spot for outsourced manufacturing in recent history. However, with rising labor and energy costs, China’s cost advantage is disappearing. That, along with the difficulties in managing a business across the globe in countries with vastly different work and social cultures, is helping drive the “on-shoring” trend. This is great news for the U.S. metal-cutting industry, as we will help rebuild America one business at a time.

When the market does finally rebound, companies need to be ready. Based on our experience, we at LENOX Tools see the following best practices as critical action items for companies that want to be prepared for quick growth:

Another Year of Improvement
The reality is that no one knows what 2014 will bring, which makes agility and strategy critical. In fact, uncertainty is perhaps the only thing that is certain in this market. However, there are two things the last few years have taught us: you can never be too prepared, and there is always room for improvement.

Industrial metal-cutting leaders know they cannot afford to rest on their laurels—not in 2014 or in the future. Continuous improvement is the only way to succeed in today’s market, and best-in-class managers are proactively encouraging change at all levels of their organization. We at LENOX Tools are ready for another year of improvement, and we look forward to helping equip our customers and their employees with the tools they need to make this year one of their best.

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