In its second annual survey of machine shops, American Machinist has identified key indicators and best practices that lead to improved productivity and profitability for machine shops in the U.S. In addition to the 15 differentiators listed, this article addresses Kaizen event factors most critical to short-term and long-term performance improvement.

American Machinist magazine recently published a landmark survey that points out some key differences/differentiators between shops “whose performance puts them in the lead of all the shops.”

The authors, who surveyed 274 shops across the United States, separated the results from all the replies into the top 20 percent based on return on invested capital. While those in the top 20 percent (a.k.a. “Benchmark shops”) saw a median return during the current year of 20 percent, other shops have seen a median return of half that (10 percent).

Key differences between the two groups, based on medians, were as follows:

• Benchmark shops spent $92,500 annually for tooling; those not in this group spent $30,000 a year.

• Those in the top 20 percent group each produced 90,725 units annually; all other shops made 5,000 units.

• The top 20 percent had 29 employees on the shop floor while others had 11 shop-floor workers.

• Shops in the top group said they derive more of their sales from outside the U.S. than they were three years ago; all of the other shops said they see less than 1 percent of their sales from off-shore sources.

• Firms in the top group use multitasking far more than other shops.

• Benchmark companies use laser cutting and water-jet cutting.

• Shops in the top group spent 8 percent of sales on capital equipment; the other shops spent 5 percent of sales on capital equipment.

• Leading shops lead in using cellular manufacturing, automation, CAD, SPC, robots, on-machine monitors and CAM and 3D CAD.

• Slightly more than 96 percent of shops in the top group rely on a continuous improvement program, compared with more than a quarter of the other shops doing so.

• More than 85 percent of top shops use tooling presets; a little more than half of mediocre shops use this function.

• Nearly half of the top shops surveyed use multiple-pallet-changing systems, whereas 30.1 percent of other shops use them.

• Benchmark shops cut machining cycle time and setup time.

• While nearly 58 percent of top shops have apprenticeship programs, only about a quarter of mediocre shops have such programs.

• Almost 44 percent of top shops listed their production tools as automated; nearly 22 percent of mediocre shops listed their tools as automated.

• More than 45 percent of top performers use total productive maintenance, but only 19.5 percent of mediocre performers use it.

(The publication noted its results for the Benchmark shops are composites. As such, they do not represent one shop’s performance, but rather the combined performance from all the best shops. Be sure to check out American Machinist for the detailed analysis of findings.)

“Both the benchmark shops and the other shops increased their returns on invested capital from three years ago, with the benchmark shops making a 10 percent improvement, and other shops making a 6 percent improvement in this fundamental area,” reports American Machinist‘s Bruce Vernyi and Lawrence Haftl in their 2007 Top Shop Analysis.

When drawing conclusions from this list, it may be helpful to consider the key differences/differentiators as a starting point for change to improve the return on capital-fund investment in the short term.

One tool that some companies have been using to make operational improvements includes Kaizen events in which participants merge their thinking to cut costs and make processing more efficient.

Indeed, as IMT noted last summer:

In manufacturing organizations, collaboration processes are commonplace. Kaizen meetings are one considered-critical methodology used in manufacturing for team-based improvements. Such meetings are supported by data that characterize a process or condition that is being investigated. A team associated with the process is assembled to work on improvements, and the meetings — “structured collaborative events” — build on the team and its combined experience’s strengths. (Another plus of well-working Kaizen projects is that they frequently meet for short periods of time — 20-30 minutes — to generate momentum and progress.)

Reliable Plant recently examined a Kaizen event to identify event factors most critical to short-term and long-term performance improvement. The research team, which has partnered with nine different organizations, provided some insights that may guide those who plan these events.

The Kaizen event — studied by specialists in industrial, manufacturing and systems engineering — focused on developing a floor layout for two new pieces of equipment: a press and a glue spreader. The general location for the equipment was decided before the event, while the Kaizen team was responsible for the more detailed solution (e.g., determining how to fit the equipment into the prescribed space).

According to the researchers:

Results show that design and impact of Kaizen events can vary even in organizations with a long history of success in Kaizen event usage. They underscore the tradeoffs leaders must make in designing Kaizen events.

In particular, leaders should look at the relationship between goal difficulty and scope. For instance, the relatively small event scope and the pre-specified general solution seemed to help the team spend more event time in implementation versus analysis/design. However, this design likely caused the team to feel they had less autonomy, and may have had lower impact on employee attitudes, skills and knowledge.

For events intended to implement improvements rapidly, small scope and pre-planning might be preferred, whereas a larger scope might be better for events meant primarily for training employees in Lean concepts and tools.

It is also important to consider what impact event planning and implementation decisions may have on sustainability of event outcomes.

Only by studying Kaizen events across multiple organizations and across time can the full set of factors related to planning, implementation, sustainability and support be identified. Through this research, managers can have much more concrete guidelines to help assure that their efforts will lead to both short-term and sustainable performance improvement.

Resources

2007 Top Shop Analysis
by Bruce Vernyi and Lawrence Haftl
American Machinist, July 10, 2007

Kaizen Event Success and Sustainability
by Toni L. Doolen, Eileen Van Aken, Jennifer Farris and June Worley
Reliable Plant, July 2007