“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

Graphicast just closed the books on the incredible month of November 2011. Our shipments were among the five best months in the last 10 years, and our bookings exceeded our previous best month by over 35%! Our backlog is at its highest level in five years and we’re running 7 days per week. We’re planning a plant expansion, and we can’t get equipment in fast enough as far as we’re concerned.

We’re hearing similar stories from other companies in the state. Although unemployment remains high and the overall economy is slowing growing, there is a major expansion underway in some parallel economy that’s not showing up in the normal data. One explanation is that the manufacturing economy is driven by global economics, not national economics. As there are parts of the world nicely expanding, those of us in manufacturing are expanding as well. I wonder what things would be like if the US economy really took off?

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

We just successfully completed our Stage 2 ISO 9001:2008 certification audit . Our auditor’s findings will next go through a technical review by other auditors, and we should receive our registration information within four to six weeks. We managed to complete the entire process in just under a year, which is a credit to Dave Gregory, our quality manager, and the entire Graphicast team. Our employees embraced the process and the concepts of a formalized quality system from the start. Now that we’ve reached this point, the challenge of maintaining and improving the system remains in front of us. We’re looking forward to this next phase of the ISO 9001 journey.

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

While Graphicast has always maintained a reputation for quality products, we did not have a lot of market pressure to become an ISO-9001 registered supplier. Our customers were happy with our quality system and we regularly passed quality audits. That is, until the recession hit us square in the face. We found very quickly that in response to the recession, many companies were actively strengthening their supply chains. Besides ensuring that their suppliers were financially viable, they were also trying to eliminate internal costs associated with working with those suppliers. One way to reduce costs was to reduce vendor audits and any vendor uncertainty. This put the pressure on us to be able to succeed in this environment. So began our ISO 9001-2008 registration and certification journey.

With a good production quality system in place. our efforts were aimed at the documentation and control aspects of the ISO quality system. We’ve made a lot of progress in the past nine months and just completed our certification stage 1 audit. Based on the results of that audit, we have our registration audit scheduled for the end of July.  If all goes well, we will have completed the first part of the ISO journey, getting our ISO 9001-2008 certification. Then the challenge of maintaining and improving the system begins. We’re looking forward to it!

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

No, I’m not talking about surfing. I’m talking about an economic wave that’s in its early stage of emergence and will drive our economies for the next 50 to 60 years. In the 1920s, a Soviet economist, Nikolai Kondratiev, studied capitalist economies and noticed that they went through repetitive cycles of expansion and contraction. These  “Kondratiev Waves” last about 50 years. He identified the first wave as occurring in the early 18th century. His ideas eventually lead to his execution in the late 1930s, but other economists continued his work, trying to understand the reasons for these cycles. Although this theory is not universally accepeted, it does offer insight into societal, political, and technological changes that have occurred throughout history.  In the 1980s, Cesare Marchetti offered supportive research when he wrote about society as a learning system and decribed Invention/Innovation Cycles whose ebb and flow correspond to these economic waves.

The Kondratiev Wave consist of four periods. As liquidity expands in the initial phase of the cycle, commodity prices rise reflecting the increasing business activity and inflation. As business activity and inflation accelerate, speculators bid up commodity prices due to their fear that inflation will continue to accelerate. After the rate of inflation peaks and starts to fall, the acceleration premium is removed from prices. Thus, commodity prices start to fall despite continued but slowing inflation, a trend called disinflation. At the same time, a change in psychology away from fear and toward feelings of relief and hope induces people to channel the excess purchasing media created during disinflation into bidding up the prices of investment assets such as stocks. Because inflation continues, the wholesale prices that manufacturers charge for finished products, the retail prices that stores charge for goods and the levels of wages that employers pay for labor all continue to rise but at a continously lesser rate, following the rising but slowing trend of business activity and inflation. Near the end of the cycle, the rates of change in business activity and inflation flip to zero. When they fall below zero, deflation is in force. As liquidity contracts, commodity prices fall more rapidly, and prices for stocks, wages and wholesale and retail goods join in the decline. When deflation ends and prices reach bottom, the cycle begins again.

Most who subscribe to the Kondratiev Wave theory identify our current economic situation as being in the last phase of the fifth wave cycle. The authors of The Sixth Wave have suggested that the emerging wave will be powered by the economics and technology of scarcity. Those who can do more with less and reduce waste will prosper. Industrial trends such as Lean Manufacturing, Six Sigma, and Theory of Constraints are all associated with elimination of waste, reduction of variability, and improvement of production velocity. These practices support a Sixth Wave mentality. 

At Graphicast, we recently described our experience with a customer who worked with us to take an expensive assembly of four machined components and turn them into a single, economical casting that was stronger, more rigid, and less wasteful to produce. There are many more opportunities to reduce costs by redesigning and rethinking your needs, than by just making the old design “cheaper” by outsourcing to a low labor cost area. In the long run, the better design is the most productive way to succeed in the Sixth Wave economy.

Good luck getting ready for the next wave. We may not yet be out of the Kondratiev “winter”, but prosperity awaits those who embrace the upcoming “spring”.

After working with Graphicast to convert the design, National Optronics has taken what was a four piece pin and screw assembly, down to a single, precision machined casting.

 This project reduced part inventory, assembly time, and made for a much more rigid design.  Oh yeah, they also brought the cost down!

Sound like something that can help you?  CLICK HERE to read the story.

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

Graphicast was again named among the 10 Best Small Companies to work for in New Hampshire by Business NH Magazine. For the fifth year in a row, Graphicast’s culture and employee benefits made it one of the prime employers in the state. “Even in these tough economic times and with the sluggish recovery, I think we’ve maintained a consistency that resonates with our employees. Our employees are loyal and recognize the efforts we’ve made to keep things as normal as possible.’”

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

Kiva Systems, one of our favorite customers. was the subject of a recent article in Business Week magazine. Kiva manufactures robotic systems for warehouses. Based on traffic control software developed by Kiva, dozens of robots can simultaneously operate in a warehouse, picking items, and bringing them to stations where orders are consolidated for shipping. The system is also self organizing; it keeps track of frequently picked items and moves them closer to the consolidating areas to reduce transit time. These systems reduce worker fatigue and give the operators the ability to handle more volume, an especially important factor during the holiday shipping season. Congratulations to our friends at Kiva for this most recent recognition.

“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.

Graphicast participated in two trade shows last week, one in Marlborough, MA and the other outside of Toronto. That this was the first time we attended two shows at the same time is, in itself, an indication of the activity level in manufacturing. The view from the show floor was an even better indicator of the market. Both shows were very crowded, even over the lunch period, and the interest level was very high. This was not a week for just getting out of the office. Our reading is that manufacturing in New England and southern Ontario is coming back quickly, and with lots of energy. There is definitely interest in on-shoring production that had been sent overseas, and lots of new products ready to hit the market. We are following up on leads this week and will have all our sales people out of the office making calls; another sign of interest and a reboundin market. 

We’re also seeing this rebounding  in shipments. Our September shipments were the highest in two years. The only downside is the volatility of the activity. The trend is up year to year, but on a month to month basis we seem to be in the three forward, one backward mode.