Author: Miles Free

PMPA Business Trends 2011 Review and Summary

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PMPA’s Index of Sales of Precision Machined Products rose to 114 for the year, up 15 percent from the 2010 average of 99.

11 out of 12 months above 100 in 2011.

The good news is that the Precision Machining Industry is back on track.

The decline in sales in December was due to seasonal factors. The standard deviation of sales for the year is 8.33, not far from last year’s 7.82, and a far cry from the shock and awe volatility of 2008 when the standard deviation was 13.8. What is most important to note is that in 2011, 11 of the 12 months were all above 100 (baseline) and that December’s 98 is the highest value we can recall (It was 99 in 2006, a virtual tie). December 2011 shipments were 108% of those in 2010.

The Q4 average for shipments of 109 is down five points from the yearly average, but due to seasonal factors in December.

It was interesting to note that the percent drop in sales in December from the average of October and November was on the low side of the range at 14.8% for December 2011; In 2008 it dropped 26.4 %; 18.2% in 2007. We believe that seasonality explains the 3 month vs. 12 month moving average indicator.

The average shipments index for 2011 was 114.

The average shipments index for our base year of 2000 was 100.  According to our data, we show less than 2% per year growth since 2000; what has made for our greatest challenge has been that all of that growth has come in the past year. We do not expect 2012 to post such large increases.

What do you expect for shipments in 2012? Based on what?

2012 Top Shop Survey – Free Tool You Can Use

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Is  there a swiss type machine in your future? How would you know?

Last year’s Top Shops Survey found that 24% of  the top tier (top 10%) of shops reporting in the survey reported Swiss technology in their shops. This compared to just 11% for the balance of shops reporting.  This is a trend that you probably ought to be following if you want to stay up to date on trends in precision machining.

Last year Modern Machine Shop launched its first annual Top Shops Survey. Almost 200 machining facilities took part in that benchmarking survey. The Top Shops Report of that survey’s results had a number of interesting shopfloor practices worth considering. The report also provided a number of operational and business metrics which can help a shop your shop stay competitive and become a better business.

Well worth a few minutes of your time.

The survey will be available until February 15th, so click the link to  go to Modern Machine Shop’s description of the survey which includes a link to the online survey site. TOP SHOP ARTICLE

Direct link to Survey.

PMPA co-publishes Production Machining Magazine in partnership with Gardner Publications in Cincinnatti Ohio. Production Machining focuses on our high precision, high mix, production industry.  Gardner’s flagship publication is Modern Machine Shop– which covers the broader contract machining industry.

The survey will only be posted for a short time, so now is the time to benchmark to your peers.

2011 OSHA 300 A Summary Must Be Posted By February 1, 2012

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All employers maintaining the Occupational Safety and Health Administration’s 300 Logs for workplace injuries and illnesses pursuant to OSHA’s recordkeeping standard must post their 2011 annual summary by February 1, 2012.

Do as I say, and as I do...

Employers must utilize the annual summary form (form 300A) when complying with the posting requirements.

Here is a link to the OSHA Forms page for 300 and 300A on the OSHA site.

I want you to get it done. NOW!

Uncle Sam

EPA Revising UST Regulations

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Comment period open until February 16, 2012.

The notice in the federal register identifies Manufacturing Sector NAICS codes 31-33 (thats us!) as potentially affected by the proposed changes.

Got UST's?

EPA’s proposal revises the UST technical regulation in 40 CFR part 280 by:

  • Adding secondary containment requirements for new and replaced tanks and piping
  • Adding operator training requirements for UST system owners and operators
  • Adding periodic operation and maintenance requirements for UST systems
  • Removing certain deferrals
  • Adding new release prevention and detection technologies
  • Updating codes of practice

While we don’t see this update as unreasonable (its been 24 years since the 1988 UST regs first came into effect)  we could see how the updates could result in large expenses by small manufacturers if they are required to update secondary containment and interstitial montitoring for their USTs.

Federal Register Notice UST

EPA UST  Proposed Regs Page

If you would like to comment- here’s the link: UST Proposed Reg Comments

Need training in this area? Rutgers is offerring a UST training course on March 6, 2012

Why this rule?

Because we all deserve better than this.

Photo 1 credit

Photo 2 credit

Why We Don’t Post About Unemployment

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Low unemployment numbers can be deceiving. When the unemployment rate declines, it does not necessarily mean that more people found jobs. Instead the number can reflect people  dropped off the official unemployment rolls and out of the workforce. How is that “good news?”

Unemployment figures should be taken with a grain of salt.

In the county where I live, the number of unemployed dropped from 6800 to 5600 in November, according to county workforce director  in a recent news story in our weekly paper,  The Post.

Yay ! 1200 people no longer unemployed? A 17.6 % drop- in  unemployment?

Not so fast.  “…the number of people employed in Medina County remained at approximately 91,700 over that same period.”

People who run out of benefits and quit actively  seeking work drop off the list of unemployed and are also no longer counted as part of the workforce.

The estimated workforce in Medina County dropped from 98,500 in July to 97,300 in November.

1200 in all.

The 1200 people  that dropped from the unemployment rolls- would seem to be the 1200 people  who also dropped out of the workforce between July and November.

So that 1200 person drop in unemployment is not good news- it doesn’t mean that 1200 people now have found good paying jobs.

In reality, it means that those 1200 people have run out of benefits and are not counted by the officials as unemployed nor as part of the county workforce.

That’s why we don’t report on changes in the unemployment rate- the changes are PRESUMED to mean that the employment situation got better. The reality is that those people are now officially invisible, as they aren’t even counted in the workforce, nor are they counted as unemployed. But they are unemployed.

When a change in an indicator can mean more than one thing, it is questionable to use it as an indicator. Does it mean this? Does it mean that?

Ambiguous indicators are worse than worthless- they are deceptive. Changes in the unemployment rate are ambiguous indicators- they could mean an uptick in hiring, or they could mean people have run out of benefits and are no longer being counted as part of the workforce.

In the case of unemployment statistics,  what appears to be good news (a drop in the unemployment rate) is not always good news (the people are just no longer counted as unemployed nor as part of the workforce).

That’s why we don’t post about unemployment. And when anyone does, we suggest you take it with a grain of salt.

Glenn Wojciak article in The Post

Morton Salt photo

U.S.Mint In 2011- Reflecting the Challenges of Manufacturing

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Significant revenue growth. Increased costs of materials. Products produced above cost. Injury and Illness rates up slightly. New collective bargaining agreement. Improvement in best workplace standings.

These are all challenges that small manufacturers face too.

Making money on small metallic parts is difficult  due to variable and rising metal prices. But other costs to produce are also a factor.

In 2011, to make each penny  it cost the U.S.Mint 2.4 cents. Each nickel cost 11.2 cents per coin to produce. And the U.S. Mint isn’t able to raise their prices…

2.4 cents for your thoughts...

Higher demand and increased unit costs of production resulted in a combined loss of $116.7  million dollars  for pennies and nickels last year.

That is the impetus behind the Coin Modernization, Oversight, and Continuity Act of 2010-  to provide authority for alternative metallic materials for circulating coins.

I like to benchmark to the U.S. Mint  for the production of high volumes of small metallic parts. Like us they face rising prices, high volumes, changing mix, and require advanced machine technology to produce their essential products. So when I see that they have to implement a new method for allocating SG&A expenses, struggled with highly variable and escalating material prices, and had to do a lot of heavy lifting in the labor relations area, I compare to our industry in 2011 and smile.

Congratulations to Deputy Director Richard A. Peterson and his team at the U.S.Mint.  I happen to have two pennies in my pocket to rub together, even if they did cost you darn near a nickel to make…

Link to U.S. MINT 2011  Report

Pennies

Speaking of Gutenberg

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One of the reasons I blog is for “Knowledge Retention.” I want to be sure that the stuff I know and take for granted makes the cut into the electronic realm.

In 5o years or so (the apparent limit of paper’s routine usefulness in my experience) the out of print books with the stuff that I practice will be pretty much lost.

These won't be kept around as "useful."

We think we are living in an information age. Actually, the books that those of us over 50 learned from will be mostly lost, and we will be considered by history to have lived in the last “Dark Age.”

So my blogging is my “Project Gutenberg” for Metallurgy, Machining, Management and this Moment in time in our Market.

What knowledge do you (your people) have that will be lost when you (they) leave? What is your plan for assuring it is not lost?

Disney had a plan. Jobs had a plan.

What’s your plan?

Mine is speakingofprecision.

Nevada Heat Treating Hosts Senator on Plant Visit

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PMPA Technical Member Nevada Heat Treating recently hosted U.S.Senator Dean Heller at their plant in Carson City Nevada.

Advanced manufacturing is leading the recovery.

Senator Heller told the employees at Nevada Heat Treat that “I just think it is incredibly important for America to continue to lead in manufacturing. After visiting manufacturers in Northern Nevada, Carson City, Douglas County, and across the state, manufacturing is alive and well.”

"U.S. manufacturers can help push the economy forward"

Nevada Heat Treat is demonstrating that the best way to influence lawmakers is to bring them in to our shops and show them how our people create value and that our jobs are real jobs  that make us global leaders in advanced manufacturing.  And the frank dialogue that can take place on your shop floor is actually heard by officials, rather than filtered out by beltway assistants and aides.

Bottom line for Nevada Heat Treat is that the Senator “…understands that we work very hard and that we expect them to work very hard for us also.”

Congratulations  to Nevada Heat Treat for being selected for the visit, and thanks for helping tell our advanced manufacturing story.

Are you interested in hosting an elected official at your plant? Download PMPA’s free pdf on How to Organize a Plant Visit

Nevada Heat Treat Web link

5 Ideas To Thrive Despite Market Uncertainty

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Volatility. Uncertainty. Complexity. Ambiguity. Welcome, to the year 2012!

The headlines are filled with factors that make our planning for the year ahead futile at best. Eurozone Sovereign Debt. China Currency. U.S. Economic Problems. High Unemployment.

With all of these issues potentially ready to emerge at any second, what can we do to intelligently manage our risk?

Here are 5 ideas to thrive in the face of today’s uncertain market environment:

1) Edit your customer list. In the old days, adding customers was the thing to do. But noone ever made up for low margins with volume.Edit your customer list to those customers that provide you with a return at or above your cost of capital. Just like we add value by taking stock removal from barstock, removing the customers who cost you more than they contribute will free up limited resources so that you can better serve the customers who do cover your costs. (Note: this will really pay dividends for you with your banker, who is no longer lending on B.S.)

2) Work your supply chain- in both directions. Communication and cooperation are critical to success when facing uncertainty. You just might find that your communications is what is keeping your part of the turned products market thriving. Communicate, communicate, communicate.

3) Manage your inventory and dollar cost average in high variability times.There is no doubt that the year 2012 will be one of high variability. Rather than making a few outsize buys of raw materials, placing smaller regular purchases will enable you to dollar cost average as the market does its roller coaster thing based on whatever news story is hot that day. You can’t sell parts this week if raw material is 4 month lead time. You know what you typically use. Intelligently manage risk, have material on hand to make parts, and then you won’t have to listen so carefully to the news.

4) Producing low value added in a high cost location is a losing business strategy. Your peers have been leaning, innovating, and reducing their costs to remain competitive. In addition to editing your customers, you need to edit those low value added jobs out of your business plan. Editing adds value.

5) Improve cross functional communications between your team and your customers’. This is a great year to take your people to meet your  their customers and counterparts and to exchange ideas on ways to improve performance and reduce costs and waste all the way around. While this might be seen as a corollary of idea number 2, the fact is that taking your people to customers is a great idea for continuous improvement anytime.

We have no idea when any of the crises we know of will blow up. We have no idea when the sword might fall. But inspite of increased volatility, uncertainty, complexity and ambiguity, we can improve our chances for success by taking the steps outlined above.

What do you think is the most likely issue to emerge in 2012 that we have not listed above which will affect your business?

Sword of Damocles