1. Continued small lot sizes requiring more time to set up then to run
  2. Inability to find “what used to be easy to find standard (materials, tools, holders, etc.)” (disappearing suppliers and products)
  3. Lack of lead time on jobs; Increase of lead time for needed materials
  4. Increase in rejects  from remaining suppliers to our shops
  5. Too much to worry about, externally
  6. Regulatory uncertainty– HR, EPA, OSHA; approved and banned materials; Increasing local  agency “oversight”
  7. COBRA
  8. Workers Comp
  9. Difficulty to get financing
  10. Inability to break through Voice mail at customers
  11. Uncertainty on pricing for needed materials
  12. Cost of capital to make investments to meet new regulations (cleaning and VOC’s in California, for example)
  13. Customer attitude that says you need to be financially strong before we give you an order;  when everyone is in the same boat.
  14. Desperate competitors who take an order below their cost just to sustain cash flow.

These are not our favorite things.

Julie Andrews won’t be singing about these subjects anytime soon.

Michelle Applebaum is the analyst we follow for steel industry developments.
She has the best handle on the statistics that we care about and a lifetime of experience to help her craft that “handle.”
In her latest piece  for American Metal Market  Ms. Applebaum lists 3 meaningful structural issues to be addressed:
1) Call China a currency manipulator once and for all.
2) Steer clear of trade agreements that turn into legalized rape.
3) Create a government platform where stability – of environmental costs, social costs, and defense against assaults on our trade laws will enable industry to make long term financial commitments.
Michelle led her piece with the following line- I think it is really the perfect closing to this discussion:
“Its absurd- and even arrogant- to expect to be able to export our products into other countries when we can’t even defend our markets at home.”

How 'bout them apples?

How ’bout them apples?

I’m really more focused on Quality.
On draining the swamp, not swamp beautification.
Quality Assurance.
Organizational Improvement. (People and Processes.)
Lean is just another way of saying eliminate waste.
Six Sigma uses statistical jargon, but how many people in top management can even get close to describing the area under the normal curve at +/- 3 sigma? Or know that a sigma is a standard deviation? And what that means?
Let alone recognize non-normal data?
(“Six Sigma” is just another term for “Magic ” to the guys wearing ties at the OEM’s…)
I’m not into cute names for serious tools. We were using  powerful  statistical techniques before they got new cute  names and became safe  Okay fashionable  to say up in the carpeted front office.

Draining the swamp doesn't need tools with cute names.

However, if you are serious about Quality. Quality Assurance. Organizational Improvement. And Tools You Can Use to drain the swamp, instead of reading crap of unknown provenance from the web,  here’s your reading list:
1) Competing Against Time by Stalk and Hout
2) Toyota Way by Jeffrey Liker.Frankly, if you haven’t already read
3) The Goal, by Eliyahu Goldratt, (get this one first it will give you key insight into how to think about manufacturing.)
4) The Machine That Changed The World by Womack is also worth your time.
Take these tools, and love it.
Excavator photo credit.

Lessons from  the Japanese:  Monozukuri, Quality, Cost Cutting, and the Risk of Recall.

In this case, up is "Not good."

Graphic credit.
Recalls on products sold in Japan (excluding cars, food and drugs) are up more than 80% from three years earlier, according to a Wall Street Journal report credited above.
It’s not just Toyota.
It’s not just Cars.
Is it the relentless pursuit of cost cutting?
Is it the reduction in part count (sku reduction)? As a component is used across many products, increasing scale and  so reducing price per piece,  this also  increases the scope and scale of a recall if the design or manufacture is defective.
It’s not just Japan.
Ford recalls 2007-2010: 15.505  million vehicles according to my analysis of the data here. See our post from October 21 2009 here.
Where was Congress when Ford announced these huge recalls?
GM recalled 1.5 million of its vehicles last year.
Did Congress weigh in? (I mean, besides bailing them out with lots of our tax dollars.)
Why is Congress suddenly calling for hearings?
I think that OEM manufacturers and businessmen  EVERYWHERE, not just in JAPAN, have taken their eyes off the ball of continuous improvement in their manufacturing processes.  They have been distracted by the fleeting flash of lower prices.
Continuous reduction in ‘costs’ is not the same as paying  continuous attention to Quality. And when you take your eye off the Quality ball, it  really shows up when you have a near perfect record.
Cultural footnote: This summer, I spoke with managers at Japanese auto companies who told me that MONOZUKURI is about ‘the existential joys of making things.’  Of ‘implementing a process that realizes a design to product.’  This was a really big deal. It was their long and storied tradition. It’s their national heritage, and they are “sharing it with the world.”
 I’m starting to  think that MONOZUKURI is really more about mercantilist economics and economic nationalism
 And maybe 安価.  Or 失敗.

The role of Manganese in steel in our precision machining shops.

Manganese ore like this comes from Turkey.

Carbon is a chemical element that is the primary hardening constituent in steel. Manganese is a chemical element that is present in all commercial steels, and contributes substantially to a steel’s strength and hardness, but to a lesser extent than does carbon.

  1. The effectiveness of Manganese in increasing mechanical properties depends on and is proportional to the carbon content of the steel.
  2. Manganese also plays an important role in decreasing the critical cooling rate during hardening. This means that manganese helps to increase the steel’s hardenability. It’s effect on hardenability is greater than that of any of the other commonly used alloying elements.
  3. Manganese is also an active deoxidizer, and is less likely to segregate than other elements.
  4. Manganese improves machinability, by combining with sulfur to form an soft inclusion in the steel that promotes a steady built up edge and a place for the chip to break.
  5. Manganese improves yield  at the steel mill by combining with the sulfur in the steel, minimizing the formation of iron pyrite (iron sulfide) which can cause the steel to crack and tear during high temperature rolling.

Manganese is an important constituent of today’s steels.
Now you know a few reasons why Mn (the abbreviation for Manganese) is the second element shown on the chemical analysis report (right after carbon).
It’s That Important!
Mn Ore Photocredit.

These past two years have taught us all some valuable lessons. But, we haven’t yet recognized the change that these lessons have brought with them. I found a brilliant description of the change and the lessons laid out in a book. The book is titled Linchpin, written by Seth Godin.

The only MUST READ book for you this year!

Here are three lessons about our new world of work:
Lesson 1: There are fewer and fewer jobs where you can get paid merely for showing up. (Page 23) Instead progressive shops are looking for people who make a difference and they are shedding everyone else.
Lesson 2: If you want a job where you get to do more than follow instructions, don’t be surprised if you get asked to do things they never taught you to do in school.(Page 30) No one today is looking for people who need to be told what to do. Shops that are busy today are desperate to find talented, courageous, competent people who know what to do.
Lesson 3: For nearly three hundred years…factory owners wanted compliant, low paid replaceable workers to run their machines. (Page 7) We just lived through the last two years of management in our  precision machining shops doing everything they could to keep their most talented, dare I say it, most indispensable people on the payroll.
We have come through an incredible change in business and manufacturing in the past two years. The days of business success being assured by having a high Percentage of Easily Replaced Laborers (PERL) is over. (Page 10)  Low cost labor in Asia and former Eastern Bloc countries win that game hands down. The system of show up, do what they tell you, work hard, keep your head down, fit in, try to be average, stick it out, be part of the system, died an ugly death over these past two years. (By the way, it didn’t work so well in junior high either.)
THE SYSTEM HAS CHANGED. You know it as an employee. You know it as an employer. This book  explains the change. And how you (and your organization) can thrive in this new reality.
This is not just a book for managers. This is not just a book for employees. This is not just a book for people who want the latest thinking. This book  will give you, no matter who you are or what  you do, tools you can use to make sense of today’s new world of work, and your essential part in it.
Without you...

You have brilliance in you. Your contribution is valuable. What you create is precious. (In our industry, often it saves lives!) Only you can do what you do. Bring your best with you to work. We’re counting on you! (Page 3)

A tentative agreement reached between the U.S. and Canada would provide Canadian suppliers access to state and local public works projects under the American Recovery and Reinvestment Act of 2009. At the same time, US suppliers will now have access to provincial, territorial, and municipal supply contracts in Canada.

Reciprocal rights to sell in US and Canada means win win.

Originally, the  Buy American provisions of the ARRA had mandated that all steel and manufactured goods purchased with the stimulus funds be made in the United States or in countries with U.S. agreements on government procurement. Local-level projects were also mostly confined to U.S.-made goods.
 Canadian Officials contested these provisions, despite Canada’s exclusion of US suppliers from bidding on provincial and territorial  supply contracts.
Guaranteed Reciprocal Access
According to the  february 5, 2010 agreement, Ottawa will also provide U.S. suppliers with access to construction contracts across its provinces and territories, as well in as a number of municipalities – a breakthrough according to US officials.
This administration made clear to Canada from the outset that any agreement to provide Canada with expanded access to U.S. procurement absolutely must provide guaranteed reciprocal access for US exporters to supply goods and services to Canada through provincial and territorial procurement contracts,” USTR Ron Kirk, the top U.S. trade official, said. “USTR has won that access for American firms, and I look forward to signing the agreement soon,” he said. “The value of new job-supporting contracts open to US firms will be tens of billions of dollars.”
Nice to see that win-win based on mutual respect and mutual opportunity can be the basis of trade. Trade  doesn’t just have to be beggar thy neighbor.
Ooops, wrong Kirk.

Hey Kirk, how about taking that line  of reasoning to Beijing?
Kirk Comments.
US Canada Joint Statement.
Infrastructure Photo Credit.
Capt. Kirk Photo credit.

These keys will keep you out of trouble!

 Keep these 6 Keys to Using Free Machining (12XX) Steels in mind:

  1. These steels are not generally sold for applications requiring high standards of strength, hardness or other related properties.  Applications where vibratory, torsional or alternating stresses approach the grades’ static limits  are NOT recommended.
  2. These steels are frequently case hardened or carburized in order to achieve desired surface hardness.
  3. When cold drawn, these steels can be notch sensitive. Highly polished fatigue specimens may achieve expected endurance values, but poor surface finish, tool marks, or sharp corners in the design may cause lower than expected performance.
  4. These grades have relatively low impact strength at reduced temperatures and should not be used for sub-zero impact applications.
  5. These steels are not recommended for applications where severe cold work  follows machining. Crimping, staking and swaging may be performed, especially in non-renitrogenized grades. But severe crimping, cold metal movement, and bending may not be satisfactory in these grades.
  6. The addition of Lead or Bismuth does not alter the mechanical properties in tension. 12L14 and 1215 of same nominal size and process will be indistinguishable by hardness or tensile testing.

Free Machining Steels in the 12XX series- 12L14, 1215, etc., are selected in order to reduce the time needed to make large volumes of complex parts. This  reduces the cost per part. The usual application is one where bulk and shape (mass and geometry) are the chief requirements. The factors that make these steels highly machinable also influence behavior of the products in service. Designers and engineers should keep the above 6 Keys in mind when considering the material for an application.
6Keys: Photo credit .


Guest Post by Peter Morici, professor at the Smith School of Business, University of Maryland,
and former Chief Economist at the U.S. International Trade Commission.

  1. American businesses need customers to create jobs and the statistics indicate domestic demand for what those enterprises make is growing at no more than a 2 percent annual pace.
  2. As the U.S. economy expands, the trade deficit will again drag the economy down,as the price of oil and purchases of Asian consumer goods and electronics rise.
  3. To recoup jobs lost during the Great Recession, growth must be in the range of 5 to 6 percent over the next three years.
  4. Unless the President addresses the trade deficit with China, he simply won’t accomplish 4 percent growth on a sustained basis, never mind 5 to 6 percent.

Since the Democrat’s debacle in Massachusetts, President Obama has been campaigning.

Campaigner in chief?

In the State of the Union address, his new budget and other staged events for the
faithful gather for hope, the President has the audacity to double down on class
warfare and crowd frenzying envy, and tout as success an economic recovery about
as thin as the Chicago Cubs World Series record book.
The economy is growing again but the President instead of divining new tax-the-rich
and spend policies should recognize the economic recovery simply won’t create enough
jobs to drive down unemployment, because his administration has not addressed the
trade deficit.

Instead of blaming George Bush and indulging in sparkling oratory, our constitutional
law professor and now president should seek a brief tutorial from White House economic
advisor Lawrence Summers on GDP, employment and international trade.
Fourth quarter GDP growth was 5.7 percent, but 60 percent of that was a slower pace
in depletion in business inventories. Businesses continued to sell more goods off
their shelves than they produced
, but the reduction in inventories fell from $157
billion in the third quarter to $40 billion in the fourth.
In the arcane world of GDP accounting, that increased GDP by 3.4 percentage points-another
example of why most folks view economists as sorceresses dressed in academic robs
in lieu of the customary pointy hats and magic wands.
Domestic consumption and investment, which most define the sustainable pace of GDP
growth, contributed a paltry 1.8 to those 5.7 percentage points, and despite all
the bravado from the White House, government spending contributed zero
, zilch,
With nearly $800 billion in stimulus spending and tax cuts, all Secretary Geithner’s
Treasury can manage is to take pails of water from the deep end of the swimming
pool to the shallow end.

American businesses need customers to create jobs and the statistic indicates domestic
demand for what those enterprises make is growing at no more than a 2 percent annual
pace. That anemic showing was in the second quarter of economic recovery. Ouch!
Exports did grow faster than imports in the fourth quarter, contributing 0.5 percent
to growth, but that was likely a temporary jolt made possible by the dollar’s dip
against the euro. Atlantic markets are not likely to drive U.S. demand up much more-they
are simply not growing very fast.
As the U.S. economy expands, the trade deficit will again drag the economy down,
as the price of oil and purchases of Asian consumer goods and electronics rise.

Unless, Obama finally finds the courage to confront China about its mercantilist
currency policies and protectionist tariffs and regulations against competitive
U.S. exports, the U.S. recovery will just not accomplish the growth necessary to
bring down unemployment.
An iron law of economics-if there such a thing beyond the comfortable confines of
college colloquiums-is that GDP growth must exceed the sum of potential labor force
growth and productivity growth to bring down unemployment.
In the United States that is between 3 and 4 percent. Labor force growth is determined
by the expansion of the adult population, and productivity growth by technology
To recoup jobs lost during the Great Recession, growth must be in the range of 5
to 6 percent over the next three years.
That sounds ambitious, but remember, Chinese
growth has been pushing 10 percent by exporting more to the United States than importing.
Unless the President addresses the trade deficit with China, he simply won’t accomplish
4 percent growth on a sustained basis, never mind 5 to 6 percent.

Campaigning in Ohio or Baltimore or Timbuktu won’t do that for him, taxing the wealthy
won’t help, another bogus jobs package and more loans for small businesses won’t
accomplish much, and his constant cursing the shortcomings of Republican governments
past is getting tiresome.
Only coming back to Washington and getting to work a trade policy toward China will
save the economy and his Presidency from disaster.
Peter Morici is a professor at the Smith School of Business, University of Maryland,
and former Chief Economist at the U.S. International Trade Commission.
Peter Morici
Robert H. Smith School of Business
University of Maryland
College Park, MD 20742-1815