From: Products Finishing,
Profit 360, LLC
Consider market and industry trends, and modify strategy to take advantage of them
In this space last month we contemplated predictive analytics, the idea that we can use the data collected in our businesses to predict future customer, supplier and employee behavior, and then use the data to get a jump on the competition. Another valuable process is to consider market and industry trends, and modify strategy to take advantage of them. Consider the following finishing industry trends and the opportunities they create in our markets:
CAPITAL SPENDING AND NEED FOR CAPACITY
A move that should come as welcome news to those working in coatings operations and their suppliers alike, the moratorium on capital asset investments finally has been lifted. Talk to just about anyone involved in manufacturing and he will tell you that economic activity in his sector is robust. Growing production volume brings with it a need for additional capacity, as well as investments in repairs and upgrades that were deferred during the extended downturn. The good news is that growing production volumes also bring the incremental cash flows necessary for such investments. Thus, finishers are beginning to open up their checkbooks and make investments in their equipment and operations.
While capital dollars are beginning to flow again, the purse strings are not wide open, and strict payback and return-on-investment criteria govern which projects get funded and which do not. In today’s economy—I call it the “exponential economy” —product life cycles and production contract terms are shorter, and economic uncertainty remains. The result is that the payback periods (the time required for the cost reductions or additional profits generated by a capital investment to offset the amount of the investment) are shorter than ever. I recently engaged in a conversation with the vice president of operations of a major Midwestern OEM and contract manufacturer who bluntly told me, “If the payback isn’t less than a year, it’s not going to happen.” This trend mandates that leaders of coatings operations become familiar with payback calculations and that their suppliers learn to accurately quantify and perhaps even guarantee the cost reductions provided by their products.
Anyone who spends time in the finishing departments of large original equipment manufacturers these days knows the growing emphasis that manufacturers are placing on safety. Bump caps, ear plugs, steel-toed shoes, metatarsal boots, safety glasses, yellow-striped walkways … it would appear that American industry has gone berserk with safety. It has, and with good reason. Providing a safe workplace doesn’t just make ethical sense, it makes financial sense. A 2011 study performed by the International Social Security Association determined that, for every dollar invested in workplace [injury] prevention, companies can expect an economic return of $2.20. Do phrases like “zero tolerance,” and total incident, severity and DART rates seem like a foreign language? If so, it might be a good idea to invest some time understanding the safety trend. Leaders who gain such an understanding, and suppliers who learn how to present the safety-related features and benefits of their products, will have the edge.
Lean concepts and kaizen are nothing new, but ever more finishers are using kaizen events (or continuous improvement events, as they are called by some) as a means to drive significant improvement in process productivity. A kaizen event is typically geared toward improving a specific aspect of a manufacturing or administrative process, and involves a keen focus on driving waste out of the process, which in turn improves productivity among other key measures of performance. They are not rocket science, and just about anyone willing to spend a few hours in learning how a kaizen event is structured and conducted can facilitate one.
If terms like “kaizen blitz,” “value stream mapping,” the “seven deadly wastes,” “kanban” and “andon” are not already part of your vernacular, it is time to get on the bandwagon.
Top-down leadership is dead. Forward-thinking leaders are finding new ways to involve all of their people (from the front line to the “C suite”) in initiatives that drive performance improvements. From consumer-driven healthcare plans and the involvement of team members in the aforementioned kaizen events, to soliciting their ideas for improving work place safety and holding them accountable for their role in cultivating a safety culture, progressive employers are engaging their people in more ways than ever before.
Involve all team members in discussions that lead to improvement initiatives and reap the benefits when most of them enthusiastically work to implement their own ideas.
To win in today’s competitive marketplace it is not nearly enough to react to what happens. Rather, finishers and their suppliers must remain abreast of industry trends, and modify tactics and strategy as necessary. n
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