While Santa didn’t give us any clues as to what he had in his bag for our shops, I have consulted with some of his economists -uhh- favorite elves- to try to get a sneak peek, as well as some sensemaking from our own Business Trends Report. Our Business Trends Report has been reporting an 8% or more higher level of sales and shipments for our industry all year- we and our favorite economists see that continuing in 2018 first half for sure…
Here’s what I think Santa has in his bag for you going into 2018:
New Technology – Yes, we know that you can’t find the additional people that you need to run new machines. THAT IS ALL THE REASON YOU NEED to try to automate everything that you already have, so that you can free up the talent that you already have to move up to their highest and best use. That highest and best use will be on the newer equipment you will need to stay competitive in the strong markets ahead. Also, reconsider your approaches to tooling and accessories for what you have now. Cheapest cost per tool makes economic sense (maybe) in a slow market and hunker down economy. When your shop is so busy that you are routinely scheduling overtime and are at the limits of your capacity, tooling and accessories that reduce set up time, operate longer between adjustments, and provide additional benefits such as tighter tolerance capability are an investment that leads to maximizing income from the capacity that you have available. Talk to PMPA’s Tech members to see how their tools, accessories, software, specialty materials and metalworking fluids can help you wring more production out of your current capacity in less time.
Training, Training, Training – The talent already on your team is your strongest asset. Training them to perform at their highest and best use creates a win win for them and for your shop. The best people that will be in your workforce in five years are probably the people that are already on your team today. Whatever you can do to improve their skills will pay dividends all the way around. PMPA has created an online training program called PMPA MFG to help you upgrade the knowledge and competencies of your new hires as well as existing performers. Check it out here: PMPA MFG Workforce Training or give Sterling Gill, III a call at PMPA HQ to get a personal demonstration.
Increa$ed Working Capital – If you really intend to take advantage of the strong demand for manufactured products in the next year, you will need to look at your working capital and adjust accordingly. The economists – uhh- Santa’s Helpers- that we follow have walked back their “recession in 2019” forecast and are now talking about a much more likely “soft landing.” Continuing strength for our shops through the first half for 2018 and a slight slowing in Q3 and Q4. The capital needs of a business in a strong and growing market are much different than those needed when we were all in “hunker down mode”in a barely tepid economy. Our Business trends shows that the market for our products has shifted to a new higher level, and we see that strength continuing in our immediate and actionable future. Plan for success. Talk to your banker.
Fewer Regulatory Surprises – Regulatory surprises have been the basis for my personal economy and full employment since the 2008 election. The current administration’s noticeably different approach has allowed me to focus my attentions to other areas of compliance, improvement, and member service. However, we are now on the lookout for Trade and Tariff storms which could suddenly disrupt the markets and demand for our components (By forcing Santa’s sleigh to pull over until they pass.) On the regulatory side, as shop owners we need to continue to be diligent, train, document, and audit our systems for safety and compliance. If we do this we will both intelligently manage our risk, and also allay any fears of finding a stocking full of coal…
That’s what I caught a sneak peek of when I met with Santa. I hope that you consider these points and take appropriate action. It is up to us to respond appropriately to the strength in demand and markets. PMPA members looking for further details are welcome to contact me at PMPA.
The economics of precision machining can be understood with just 4 factors- Machining Cost, Material Cost, Tool Cost, and Cost of Non-productive Time (Set-up Costs).
The line labeled “machining cost” (which is made up of labor and overhead cost of time per piece) reduces with increasing speed by reducing operating (cycle) times.
The cost for tools, on the other hand, increases with increasing speed. This is because tool life decreases with increasing speed.
Since machining and tool costs vary with the speed of operation, a minimum total cost occurs at a definite set of conditions for material, tooling and operating speed.
Purchasing improved tools is one way to move the machining cost and total cost per piece curves to the right and down. As is adding coatings, improved metalworking fluids and their delivery, etc..
As long as the gain in speed and the resultant drop in cost to produce are larger than the cost of the improved tooling, or other process improvements, you can improve or further optimize the economics of your production.
Our industry has benefited greatly from the many improvements in tool materials, coatings, metalworking fluids and design improvements.
Are you taking full advantage?
Graph and discussion based on AISI Cold Finished Steel Bar Manual 1968