Interesting Turn to the Economy

January 22, 2013

We run a sales forecasting model every month to try to predict how we’ll do for bookings one and two months out.  Our model is a neural network model based on company performance, econometric data, and market trends. This type of model uses years of historical information to try to develop predictive trends. We run the model multiple times to get a range of predictions. Sometimes they are tightly grouped, and other times, they can bounce around. This happens even though the same data are used. When things bounce around, there are usually conflicting data. Data that usually move together begin to come apart. That’s what happened in December. Good econometric information was clashing with negative emotional measures and the predictions bounced back and forth between dismal and pretty good. The real, numerical data was showing  growth, but people were still negative on the economy.

We were expecting that the emotions would begin to turn to mirror the numbers, and that began to happen in January. Prior to January, most of of our bookings had been from recently added customers, seemingly unaffected by the slow economy, while our legacy customers, more affected by the economy, were not ordering. That changed in January. We began to see orders from companies who had been dormant for the past few years. Additionally, the newer customers started ordering larger quantities of parts. This is beginning to feel more “normal”, if such a term can describe our post recession economy. In any event, we’re enjoying the change. Hopefully, it will continue. Maybe the forecasting model will start showing more stable numbers and operate as if the world has returned to a more predictive mode.

Urban Mining in Jaffrey, New Hampshire

June 26, 2012

Jaffrey, New Hampshire is a small town in the southwest corner of the state. It’s an old mill town that still supports a number of manufacturing and industrial companies. I came across an interesting company yesterday, one that does “urban mining”. Urban mining is the process of extracting and recycling valuable components from discarded items. The big push is on electronic waste, which has become an immense disposal problem. The company, E-Waste Recyclers, brings in all types of electronic and electrical devices for recycling and value extraction, much like conventional mining. They have about 30,000 square feet of warehouse space filled with piles and bales of segregated components such as printed circuit boards, plastic cabinets, sheet metal frames, wiring, and other hardware. Their activity, and the value of the recycled components, is very much affected by the global economy.

Right now, there is a big market for components containing rare earth minerals. These minerals find their way into dozens of high tech products. The main source of rare earths is China, which is tightly controlling the export market, putting pressure on other sources of these minerals. Besides reopening closed mines elsewhere in the world, extracting rare earths from other sources, such as recycled magnets and electronics is a growing market.

At one time, almost all e-recycling was done in China. It’s a labor intensive process, and with few environmental and safety standards in place, and low wages for their workers, the Chinese dominated the market. With the exposure of the Chinese labor and environmental abuses, increased transportation costs, and the growing value and improved methods for extracting  value from components, environmentally safe facilities providing decent wages have sprung up closer to the sources of the e-waste. This is good news and a hidden factor in the broader subject of re-shoring manufacturing, and recycling, back to the US.

 

Manufacturing Jobs Still Pack the Biggest Punch for Economic Growth

June 20, 2012

• 

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

  An interesting relationship exists between manufacturing jobs and service jobs. The New Hampshire Center for Public Policy issued a report on the impact of Smart Manufacturing and High Technology on New Hampshire’s economy in March 2011. Besides the fact that Manufacturing and High Tech are the largest portion of the state’s economy (at 19%), more manufacturing jobs equates to more services jobs. In referencing economic scenario models done by Fairpoint Communications, the Public Policy Center reported that every 100 manufacturing jobs created 138 indirect and induced jobs in other sectors, creating a total of $16.5 million in personal income. By contrast, 100 health care jobs created 55 indirect and induced jobs, creating $7.3 million in personal income. Further down on the list, 100 tourism jobs only created 32 indirect and induced jobs, for a total personal income impact of $4.4 million. More manufacturing creates a wealthier economy for all. We need more skilled workers to grow the manufacturing economy!

Get a Quick Cost Estimate with Graphicast’s “Ballparker’ Application

May 31, 2012

Graphicast has added a new feature to our website – the Price Ballparker. This tool will give you a quick estimate of the cost of a machined casting just by entering the volume of your part, the estimated production lot size, and then comparing your part to photos of easy, moderate, and difficult to machine parts. That’s it. The Ballparker tool determines these costs based on mathematical modeling of the various production steps of thousands of production runs of parts at Graphicast. We’re able to give you a reasonable estimate of costs just by entering the information and comparing your part to the most similar part in our model. If your part is considerably smaller or larger than the parts shown, the model is less accurate. Just go to the Engineering and Design pull down menu to access the estimator. Please contact us with any questions you may have or if you want us to look at your part in more detail for a more accurate quotation.

Go Big or Go Home!

April 5, 2012

Go Big or Go Home. This was the title of an article by machine tool builder Mori Seiki about one of their customer’s decisions to buy some large pieces of equipment to give them a competitive advantage. The concept relates to much more than machine tool size.

In manufacturing, continuous improvement is a mantra of the Lean Manufacturing crowd. Small, steady steps in improving your day to day activities can lead to increased productivity, elimination of waste, and improved profitability. However, making a decision to employ these concepts in your company is not a small step. It is a big decision. It is a major cultural  transformation and a multi-year, if not a permanent commitment to a new operating philosophy. Going Lean is going big. The same could be said about committing to an ISO 9001 quality system. Or employing Theory of Constraints. Or adopting Quick Response Manufacturing.

Going big also relates to capital investments, new facilities, acquisitions, developing new products, or entering new markets. Although business people are  characterized as conservative by nature, making big decisions often requires bold risk taking and an audaciousness not present in the ranks of most corporate managers. Business dynasties aren’t created by just crunching numbers and analyzing data.  Mixing number crunching with guts and vision is what it takes to  make things happen. To paraphrase New Hampshire native son, newspaper editor Horace Greeley, “Go big, young man, go big”.

 

Something Good is Happening in Manufacturing

November 30, 2011

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?

What Would Small Manufacturers Occupy?

November 7, 2011

We have the Tea Partiers occupying Congress (or at least a part of it) to protest intrusive government. We also have the 99 Percenters occupying Wall Street to protest an intrusive banking and financial services industry.  Although some of us in manufacturing may sympathize with these other protest movements, if we formed a coalition unique to small manufacturing, what would we protest? Government regulations? Government gridlock? Ineffective public education? Predatory banking? Labor unions? Red tape at all levels of government? Globalization? Is there one issue we could all rally around that would help us, or are we too regionalized and diverse to have a common gripe? I certainly don’t have the answer, but you may. Let’s hear from you.

Are You Ready for “The Sixth Wave”?

April 8, 2011

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”.

Next Page »