Manufacturing in 2011 – Up, Down, or Sideways?
January 13, 2011
“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
Although there are many polls out there indicating the manufacturing pundits’ opinion on 2011, it seems we’re all still guessing about the future. Some say up, but slowly. Others say up and steady. There a few saying up, but volatile. From our view of the world, I think I will agree with the last group. We can clearly show an upward trend beginning in June 2009, but the path is anything but steady. Month to month can fluctuate +/- 40%, but year to year is measurably up. It’s a tough way to plan and execute. Is this the new normal, or will we finally settle down to some stability, perhaps with a new landscape? We’ll keep on the lookout for any clues.
Old Machines Making Money
December 22, 2010
“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
I just read an interesting article on how a number of machining houses are making money and growing their businesses using older equipment. What sets them apart is their attitude toward business, not modern, high productivity equipment or low cost labor. They cross train their people, they eliminate wasted time and effort, they pay fair wages and provide benefits, they treat their customers and suppliers well. If you ever read Goldratt’s book, The Goal, you’ll recognize these businesses. They’re doing the same thing Alex Rogo did in his factory to turn it around. All these machining houses are applying a Theory of Constraints mentality to their operations, even if they don’t recognize it as that. Congratulations to them for their insight and commitment to their businesses.
Is Lean Manufacturing in the Job Shop Undergoing a Transformation?
December 16, 2010
“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
As a small job shop owner, I’ve always looked at lean manufacturing as a collection of management and manufacturing tools unified by an overarching philosophy. However, what Toyota may have developed for a large, integrated manufacturing company does not always translate well into a job shop environment. I’ve felt that in a job shop, you need to pick the appropriate lean tools or your lean implementation will fail, as the shop floor quickly decides on the relevancy of any program introduced to change the manufacturing environment. If the tools make sense, they will be embraced. Doing this, we’ve successfully employed a number of lean tools over the past ten years. You can pick from the lean buffet if you know what you want to do and how you will measure the results.
In the past few weeks, I’ve read one article on the changing economy’s negative impact on lean, another on the need for small companies to focus on agility instead of lean , and then an argument against both these opinions. I am a firm believer that lean manufacturing needs to adapt to the circumstances, not the other way around. Lean principles and philosophy can be applied in many different environments, but the use of lean must evolve from first principles to fit that environment. The same concept should also be applied to six sigma and theory of constraints, both of which we also employ at Graphicast. In our operation, we use theory of constraints as our overarching management philosophy, with lean and six sigma methods employed to reduce waste and process variation. We use throughput accounting methods as our mangerial accounting platform to measure the financial impact of our changes.
I’m pleased to see people openly discussing the difficulties of employing “big company” methods in the job shop, and the need to adapt these methods to the small shop to gain the greatest benefit. We need more voices in this discussion,
Kiva Systems’ Robots are Invading Warehouses
December 1, 2010
“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.
Manufacturing Capacity Utilization is on a Steady 40 Year Decline. Will This Recovery Buck the Trend?
November 29, 2010
“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
In looking at manufacturing capacity utilization trends over the past forty years, a sobering realization emerges. As expected, capacity drops during a recession. But for each recession, the ensuing recovery brings manufacturing to a capacity level lower or no greater than the peak preceding the recession. This trend continues, recession after recession. From a high of 89% back in January of 1967, capacity utilization is now at about 75%. In the last ten years, the highest it’s been is about 82%, in November of 2007. At the bottom of the current recession, capacity was about 68%, the lowest in the past forty years.
A very high capacity utilization rate can fuel inflation and lead to late orders and lack of agility; it is not necessarily a good thing. Surprisingly, a low utilization rate can be beneficial. Companies can be more responsive and agile to demand because they have the excess capacity available. However, this works only if you recognize the opportunity and have the means to put the capacity to use – cash for growth and skilled labor to run the capacity. For many small manufacturers, both are currently in short supply.
It will be interesting to see if US manufacturing can use the current low utilization rate to increase market share and improve agility. If it can, it will be bucking the trend of the last forty years. Such a reversal of the past would indicate that manufacturers are wisely looking at their market opportunities and manufacturing abilities, not just blindly playing a numbers game of cost reduction and capacity abandonment.
From the Field – Manufacturing is Ready to Roll
November 10, 2010
“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.
The Power of Collaboration
October 22, 2010
“Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
Caterpillar recently highlighted how they reduced the cost of a component 20% by working with their supplier from the start of the design step. Graphicast has been pushing this concept for the past several years as we’ve recognized that designs coming to us later in the design process were not able to take advantage of all the features a casting can provide. By getting our customers working with us from the beginning, we can help them optimize their parts for manufacturing while still meeting the design specifications for function and performance. We offer our Design and Rapid Prototyping Service as a means to this end, and it has been very successful, with nearly half of our new customer projects starting out with a design consultation at the beginning of the design phase.
Governments – Stop Trying to Pick the Winners. Give Manufacturers a Stable Foundation.
September 23, 2010
- “Geoff Forester photograph, courtesy of the New Hampshire Community Loan Fund”.
Have you noticed the recent headlines on manufacturing? President Obama has been all over the Midwest, touting the latest high tech industrial start up. Senators and congressmen are becoming outspoken advocates for revitalizing our manufacturing sector. State and local governments are falling all over themselves offering incentives for companies to relocate to their particular area. Everyone wants to get in on the high tech or green bandwagon. Government officials love all this stuff. It makes great press. Unfortunately, it’s not great industrial policy.
Other than support for basic and applied research, governments have a terrible record in picking market viable technologies to support. These decisions are influenced by political winds that usually overlook the defining economics of an industry. Let the markets take the risk, not the taxpayer.
Some will argue that start ups are the source of most of the new jobs and that we need to support start ups to get out of the recession. However, a company that is already established and has a marketable product can add jobs much more efficiently if there is a place in the market for their increased output or new products. Indeed, conflicting analysis of Census data makes it easy to support either side of the argument about which firms create jobs – start ups or existing companies.
In the August 23 & 30, 2010 issue of Newsweek , an essay by three authors from McKinsey concludes that instead of trying to pick winners, government should focus on getting the basics right – stable laws and legal systems, efficient infrastructures, strong competition within sectors (no subsidies), transparency in regulated sectors, and providing workers with on-going education and skills needed for the 21st century.
Instead of a local official having a press conferences with a high tech entrepreneur who will create four or five jobs in the next year with his $1 million government grant, how about a press conference with a company that can create four or five jobs this month with a stable business environment and a $10 thousand training grant. It’s not as sexy, but it’s a lot more effective.
American managed.
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