Viewpoints: This Economy Has a Silver Lining
No one needs to be told that the past year has been a tough one for American manufacturers. The economic crisis has had a profound effect on business, and the overwhelming majority of shops have experienced significant reductions in orders. On the other hand, although the current environment negatively impacts sales, it also offers a singular chance to create or improve long-term strategic advantages. Our company sees an increasing number of shops taking advantage of this opportunity by investing in new technology and using downtime to streamline processes and enhance the expertise of personnel.
While the current economic conditions would be harmful in any situation, they have had an even more severe effect because things were going very well before their onset. Influenced by high spending on the part of consumers and businesses, many companies accumulated large inventories to meet forecast demand. When demand fell far short of expected levels, the cash needed to continue operations was tied up in inventory that could not be sold. Businesses with excessive inventory have reacted to the situation by cutting production drastically, while offering steep discounts on products to create cash flow. Additionally, incoming orders for many shops dropped well below demand levels, as customers attempted to liquidate existing inventories. This feedback from the market has often translated into significant downtime, and operating well below capacity.
To make the best of the situation, a large number of shops are using downtime to make changes that would be difficult to carry out if they were dealing with a heavy workload. Processes can always be improved, but many manufacturers avoid dramatic alterations during times of consistent workflow. When the floor operates at a slower pace, significant process improvements can be implemented without upsetting delivery or turnaround times.
In addition to finding that there is now time to evaluate and improve processes, other opportunities exist as well. Many equipment manufacturers are currently attempting to significantly reduce their inventory levels. In some instances, highly innovative technologies are being offered at very competitive prices. Shops with an eye for the long term are capitalizing on these factors, upgrading machines and streamlining their operations.
Investing in new technology and refining processes provides substantial benefits, but enhancing workforce capability is equally important. Many suppliers, whether they provide machine tools, cutting tools, or manufacturing software, offer free or affordable training programs. For shops currently experiencing excess labor capacity, right now is a good time to improve workforce expertise.
Our company believes that a great many shops in North America are already using the downturn as a chance to improve their operations. Participation in our Productivity Improvement Programs (PIPs) has increased significantly. During these programs, our technicians work with customer personnel to optimize manufacturing options. They collaborate with the customer to consolidate tooling and inserts, reduce production costs, increase machine capacity, and identify metalcutting issues. Companies are also sending higher numbers of employees to other sorts of training sessions. In the first week of our recent Modern Art of Milling events, during which we presented ideas on milling techniques and processes, more than 600 shop owners and employees attended.
Manufacturers who are using the present situation to improve their operations will possess a very tangible competitive advantage when the economic turnaround begins. Furthermore, many of the initiatives they are undertaking serve to increase the leanness of their operations, minimizing inventory and costs while the downturn continues. Their efforts will help to ensure survival today and success tomorrow.
Before long, conditions will begin to improve. In the near term, production levels will rise to meet current demand as inventories become depleted. Following that near-term surge, the economy will turn around and workloads will increase quickly and substantially. Shops that currently are just tightening their belts and waiting for a brighter day will likely find themselves at a disheartening disadvantage when that day dawns. Shops that make the most of today's very unwelcome downtime by improving efficiency and worker expertise will minimize the impact of the current crisis, and possess a strong advantage when it ends.
This article was first published in the October 2009 edition of Manufacturing Engineering magazine.