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Sailing in a Storm

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

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

I had a meeting of my CEO Peer Group on Monday.  As a treat to ourselves at the end of our 2012/2013 meetings, we met on the sailboat of one of our members, a 38 foot Catalina.  Moored at an ideal spot in Portsmouth, NH harbor, we boarded quickly and were soon in the Gulf of Maine sailing out to the Isle of Shoals, about ten miles off the New Hampshire coast. The weather was spectacular – a light breeze, calm seas, and sunny, with a few puffy clouds. The forecast was for the possibility of scattered thunderstorms later in the afternoon. No problem. It took about two hours to get out to the islands, and looking back we could see some darkening, but nothing too concerning. We spent the next hour conducting our meeting, enjoying the cool breezes and the slight rock to the boat. Getting ready to go back, we noticed a significant change toward shore. Scattered thunderstorms was not quite correct. A dark mass with some ugly clouds, indicative of a front rather than isolated thermal storms, was covering the shore. Now we were concerned that the weather was going to be much worse than forecast. We decided to head back,  stowing the sails and motoring at full speed. The seas and winds picked up. We headed in toward the coast,  then  turned to run with the storm a little to give us more maneuvering room. By the time we turned toward the coast again, the storm was upon us and we headed through it. The seas rose to six to eight foot waves and the winds exceeded 70 knots. It was more like being in a hurricane than a scattered thunderstorm. Even without the sails, the boat heeled in the swirling wind. Waves crashed over the bow. Our helmsman kept his eye on the seas and the weather, applied his knowledge of sailing and his boat, and got us through in good shape.  When we re-entered Portsmouth harbor the water was calm, and the sun was out. Damage on shore was significant, including parts of a nearby dock which had fallen into the harbor. Our experienced captain said it was the worst weather he had ever sailed.

The business metaphor of this trip is too hard to avoid. Know you business. Know your markets. Look at the forecasts. Enjoy the propitious weather and the profits of a good run. Be prepared for changes. Use your skills to navigate the worst economic storms, surviving with your business and bringing it to calmer times to prepare for another profitable journey. This sounds a lot like the last five years. There couldn’t have been a better lesson for a boat full of business owners.

Interesting Turn to the Economy

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

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

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

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

  • “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!

Go Big or Go Home!

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

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

“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?

What Would Small Manufacturers Occupy?

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

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.

Economy Recovering in the Mountain States

Graphicast participated at the AMCON Show in Denver, held in the spacious and modern Colorado Convention Center.  Upon arriving at the Center, we were greeted by a menacing 40 foot “Blue Bear”  statue which appeared to be peaking into the Convention Center.  The 10,000 pound bear is made up of 4,000 interlocking triangles!

 It could be another ride on the economic recovery roller coaster, but it was refreshing to meet a number of visitors to our booth who are working on new part designs with a casting process in mind. Two of the visitors stated that their companies have made a decision to move manufacturing back to the USA from China.  The rising cost to manufacture there, coupled with the high scrap rate and supply chain management costs, triggered the move. 

Many of the small business exhibitors expressed a continuing lack of confidence in a sustained economic recovery. Even with this caution, the consensus was that things are clearly better.  The activity at this trade show certainly supports this.

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Taking Innovative Casting Technology to Your Bottom Line™

Graphicast Inc.

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Jaffrey, NH 03452
phone: 603-532-4481
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