The Precision Metalforming Association (PMA) held an executive conference in Irvine on February 6-7, 2013 for their forming and fabricating members. Attendees came from as far away as Illinois, Minnesota, and Ohio. The companies represented ranged in size from a low of 50 employees to a high of 350 employees.
On the first day, the schedule of events included presentations on business conditions and benchmarking by PMA President, Bill Gaskin. Mr. Gaskin reported that the metal forming and fabricating industry had sustained 40 months of a general upturn in business since the Great Recession officially ended in the summer of 2009.
In 2011, orders were up 8% over 2010, and shipments were up 11% over 2010. The Year to Date figures through November for 2012 showed an upturn of 6% for orders and 5% for shipments based on the control group of 100 member companies. Employment was up 4.3% on the average, and 34% of companies had openings for skilled workers.
Other good news was that metal prices in general had gone down by about 50% since 2011, except for copper and high nickel stainless steel alloys. In turn, prices that the companies get for scrap material have dropped.
Then, Kathie Poindexter, Manager of Production Marketing of Epicor Manufacturing gave a presentation on “Maximize Lean Strategies with Mobile Technologies on the Plant Floor. One of the top business drivers is utilizing an Enterprise Resource Planning (ERP) strategy to reduce cost of operations (44%) and because workers are increasingly mobile (39%).
About 35% of manufacturers provide front-line workers with mobile devices to increase worker productivity and improve collaboration. Some of the benefits of utilizing hand-held mobile devices on the shop floor in conjunction with Epicor’s ERP software solutions are:
- Asset tracking
- Real-time equipment usage
- Electronic Kan Ban
- Instant inventory counts
- Electronic work orders
- Maintenance scheduling
- Quality and error proofing
- Labor tracking per job or piece of equipment
- Real-time production management
- Support for lean initiatives
- Improved decision making
- Increased management effectiveness
Laptops, tablets, and “smart” phones utilized by field sales and service personnel provide “business anywhere, anytime” benefits:
- Instant quotes
- Real-time inventory
- Immediate order processing
- Real-time delivery status
After this presentation, the group was bused to the nearby facility of MK Products/MK Manufacturing to see how the Epicor ERP solutions have been utilized by the company. MK Products is a privately owned company, founded in 1966, to manufacture a full line of Push-Pull welding products and Orbital welding systems, welding “guns” and fusion tube welding products. The sister company, MK Manufacturing, performs contract design, engineering, and manufacturing services, including machining, fabrication, processing, and assembly.
Chris Westlake, President, conducted the tour of the over 100,000 sq. ft. facility and gave an enthusiastic description of how they have utilized the Epicor ERP solutions and hand-held mobile devices from the initial concept design to manufacturing, processing, assembly, and shipping. Real-time tracking and retrieval of inventory for use on the shop floor reduced their labor needs and improved efficiency substantially.
After dinner, I gave a presentation on “Returning Manufacturing to America,” focusing on how American metal forming and fabrication manufacturers can use the principles of Total Cost of Ownership and the Total Cost EstimatorTM developed by Harry Moser of the Reshoring Initiative to help their customers and prospects understand the benefits of returning manufacturing to America.
I presented case studies showing that many manufacturers often make the decision to offshore based on faulty assumptions that prove to be far off from reality in execution. Many times the anticipated cost savings in offshoring have been offset by the hidden costs and risk factors in doing business offshore. This has resulted in an increasing number of companies, even multinational corporations such as General Electric and NCR, to return product line manufacturing to the United States. The Reshoring Initiative estimates that about 10% of manufacturers have “reshored” resulting in 50,000 jobs.
The next day featured breakfast and a tour of the re-opened Amada America, Inc. Solution Center in Buena Park California. The Solution Center is Amada’s equipment showcase and technical center for the western United States. Amada America, Inc. was established in Seattle, Washington in 1971 and has been located in California since 1973. Its company headquarters are located in a nearby building in Buena Park.
Amada America COO and President, Mike Guerin, began the tour with overview of Amada’s history as a company in Japan and America. What was exciting to me was the fact that in 2011 Amada made a decision to manufacture laser-cutting machines in America, opening a new plant recently in Brea, California to do so, with plans to also manufacture turret presses and brakes at the facility in the future. The main reasons are: lower labor rates in the U. S. than Japan, reduced transportation costs, and proximity to their major market.
The facility tour was conducted by Joe Greeninger, Division Manager, and featured several new models of fiber laser machines with 3-axis linear drive systems, traditional servo-driven lasers, turret presses, automation equipment, and press brakes.
The technical capabilities of the new fiber laser machines were quite impressive compared to CO2 laser cutting systems. Some of the advantages are:
- No harmful emissions because they don’t require gas to generate the laser beam
- Expanded capabilities – can cut copper, brass and titanium in addition to aluminum and steels and can cut thinner gauge material
- Lower maintenance because there are no mirrors in the laser source
After returning from the tour, the attendees participated in a business roundtable discussion of “hot button” business issues. The top issues were:
Skilled workers - A few of the companies attending were providing training in-house using ToolingU curriculum and others were using paying for employees to take classes at local community colleges. One of the Illinois companies had an apprenticeship program through the Technology Manufacturing Association in Illinois. California attendees from Walker Corporation mentioned getting training through a private company in San Bernardino, Technical Employment Training, Inc. Training is also available through California’s Manufacturing Extension Program (MEPs), CMTC in southern California and Manex in northern California. I shared information about the new Workshop for Warriors in San Diego providing training for veterans in machining, sheet metal fabrication, welding, and manufacturing software.
Economy – Manufacturers need certainty to be able to plan, and there is no certainty with the fear of sequestration, high federal budget deficits, and national debt. Companies are remaining lean and not adding people unless need to replace someone or need special skills.
One company shared how they reduced utility costs by paining walls white and converting from pneumatic to electric compressors. Another company shared that their utility company did and energy assessment and provided them with free lighting to reduce energy usage.
Health Care – Most of the companies pay for all or most of their employees’ health insurance now, but it will be cheaper to pay penalty when Obamacare goes into full effect. Question is whether they can get and retain skilled employees if do not provide some health care benefit. One company pays for cost of “Medigap” insurance to retain older skilled workers when they qualify for Medicare.
Doing business in California – California attendees reported that their supply chain is going away, their Workers’ Compensation insurance costs are higher, and regulations by Cal OSHA, Cal EPA, and the Air Quality Monitoring District are more stringent than federal regulations. In addition, the cost of living, housing prices, and taxes are higher than other states. The only advantages most could see were the great weather and that California seems to be a hotbed of invention/innovation by startups coupled with a strong angel and Venture Capital investor network.
Sustaining Lean – Attendees agree that you need a lean “champion” and cultural change to succeed. Engaging customers to help and networking with others is important. Setting an annual goal of regularly scheduled Kaizen events is beneficial. The ERP system you use can help of hurt lean sustainability.
Taxes – It is important to get elected representatives at the state and federal level to realize that 60-70% of manufacturers are sub-chapter “S” corporations so they are taxed at the individual rate. Reducing taxes for “C” corporations as is being discussed will not help these companies. The R&D tax credit needs to be made permanent instead of renewed every year. The Value Added Taxes (VATs) charged by most other countries were discussed, but no one thought they would be seriously considered in the near future.
Suggestions for the next executive conference included having a sub-group for technical personnel to share knowledge and case studies on how to make particular parts and having a tour of a metal forming and fabricating member company near the conference location.
It is great that the U. S. metal forming and fabricating industry has remained strong, but it would be even better if more manufacturing sectors were doing as well so they could be providing more jobs. One of the reasons that metal forming and fabricating industry is so doing so well is that new, state-of-the-art equipment is very automated and highly efficient so it is less labor intensive than many other manufacturing industries. Transportation costs for metal parts, especially larger parts, cost more than plastic or rubber parts so there is more incentive for original equipment manufacturers to use vendors that are closer to them. This means that there has been less outsourcing offshore for metal formed and fabricated parts than plastic and rubber parts. As transportation costs and labor rates increase even more than they already have, there will be even less incentive to offshore metal formed and fabricated parts in the future.