There Is No Time Like the Present

With the talk of a possible recession, you are forgiven for worrying about the future of your business. But for precision parts manufacturers who can see how to reduce the cost of the parts they produce, the global economy offers many potentially profitable opportunities.
It all depends on what you listen to and your vision for the future.

When we hear about recession, we may limit our purchases to essentials, and we cut back on investments (especially high ticket items). A slow down in purchasing can cause  manufacturers of these items to reduce output. This, in turn, can lead to layoffs and cutting work hours—hallmarks of a recession.
The companies that can see beyond this have the opportunity to leap ahead of their competitors.

Some industries are slow, but others are doing well. Activity in the aerospace and medical fields has been healthy. For example, in 2007, sales of aerospace and defense products and services were at a record high. For 2008, economists have projected a 6-percent increase compared with that for 2007. With few exceptions, U.S. Department of Labor figures show that we continue to increase our manufacturing output each year.

Our total output of manufactured goods is higher now than 10 years ago when the machine tool industry was doing very well. We are producing more with less labor input. Although cutbacks in labor are painful for those involved, overall it is a sign of efficient production, not manufacturing failure.

A reason for improved manufacturing efficiency has been investment in capital equipment that can produce parts complete in one operation. Parts makers can boost daily production and reduce labor cost. Per-piece cost is reduced, and quality is improved. And that is what worldwide customers want.

Because of the improved quality and lower piece cost, dropping complex (high-value) parts in one operation has become the differentiator between manufacturers who are busy and those who are crying the blues. The consistency and accuracy of finished products is assured because the part is never released from the machine. We have customers who use our machines to make complete parts, running as many as 34 machines with only six to seven people. These machines run 24 hours per day, 7 days a week making high-value parts.

A successful precision parts making strategy, therefore, will have you making parts complete in one operation, running 24/7, as many as 168 hours per week. Our customers are very profitable doing this and have told me that they have no problem competing with China or anyone else on a global scale.

It is a bit difficult, though, to take a long view when you are told to justify equipment purchases made in a 2- or 3-year period—only a fraction of its useful life. In Europe, users justify machine tools purchased in a 7-year period in many cases, and in other countries, it is a 10-year period. The need to justify a machine tool in only 2 years may prevent some manufacturers from taking advantage of opportunities to meaningfully improve their manufacturing efficiency. Cheaper, less capable machines are not engines of manufacturing profitability.

While labor input is being reduced, the remaining need for labor must be filled by an increasingly competent, skilled workforce. According to a report from the Interagency Aerospace Revitalization Task Force, the average age of that industry’s workforce is 45, and the workers will be retiring in greater numbers throughout the next 3 to 5 years. Training the next generation of employees is a major and growing concern for manufacturers of any product.

Twenty years ago I was selling CNC machines to shops that had only manual equipment. Some shops said their business was slow and they didn’t have enough work to invest in the new technology of CNC. They said they would purchase some new equipment when business got better. Within a few years, they were gone.

What these customers didn’t realize is that the reason their business was slow was because they were not competitive anymore. Business was never going to get better—their price per part was too high. By continuing to use old, outdated technology, they would never be able to make parts as efficiently as the companies with the new CNC machines.

Just as there was a place for the manual equipment in the shop 20 years ago, there is a place for standard CNC machines today. But the standard of performance is changing. The companies that invest in advanced technology will be here tomorrow. The others will not survive.

Equipment like our Index and Traub lathes that can drop complex, high-value parts complete in one operation are becoming the sign of a successful manufacturing plant today and will be the norm for American manufacturing in the future. If a company intends to be profitable making precision parts, it would do well to develop a manufacturing strategy to upgrade its capabilities. It’s the only way to compete.  