The idea behind continuous improvement (CI) is that as operational efficiencies increase, machine shops will eventually achieve world-class status and thus be more attractive to current and potential customers, as well as be more profitable.
Simply put, a world-class company provides consistently high levels of product quality, maintains on-time delivery schedules, reduces production costs to the lowest possible levels (lean), and maximizes workplace safety. The result is a high level of customer satisfaction, which leads to repeat orders and, via word-of-mouth and other references, new business.
In a recent survey, the Tooling U-SME Manufacturing Insights Report, 85 percent of respondents rated CI as important or highly important to their businesses. The proportion of companies that actually support this approach in tangible ways and see substantial results, however, declined significantly when practices were considered. The survey found that just 35 percent of respondents provide significant support for CI in their facilities, and only 5 percent achieve world-class status.
"Manufacturers have trouble moving from recognizing the importance of continuous improvement to success [in gaining world-class status] with CI initiatives," the survey stated.
For the survey, Tooling U-SME, based in Cleveland, which supplies in-house and online training resources for manufacturers, high schools, and technical colleges, queried U.S. companies earlier this year, the largest proportion of which were job shops (21 percent) engaged in machining (77 percent of them), assembly (72 percent), and fabrication (55 percent).
The respondents overwhelmingly reported that CI, along with workforce training and development and production planning of new products, is critical to growth and profitability. Yet many machine shops fall well short in implementing these measures. As manufacturing business trends up -- duly noted by a plethora of economic indicators and industry trackers -- a failure to develop these areas could put shops in a competitive hole.
From Tooling U-SME's survey, the reasons for the disconnect that occurs between acceptance of continuous improvement and implementation of the procedures CI requires appear to be organizational inertia, workforce pushback, and corporate culture.
For example, the top five objectives that respondents cited as critical or important to CI were improving product quality (84 percent), reducing manufacturing costs (76 percent), improving workplace safety (68 percent), eliminating process waste (64 percent), and reducing setup times (59 percent).
The biggest challenges blocking full implementation of CI procedures, though, included organizational acceptance of the need for change, application of automation and other technologies, changing workforce culture, sustaining improvements, skill gaps and training, and dedicating time and resources to improvement practices.
Most of these challenges reflect problems of commitment rather than shortfalls in money and resources. A machine shop can determine fairly accurately how soon it will achieve a return on investment from an automated work cell. But it's not always easy to convince workers and managers of the need for change in operational areas, much less to constantly promote the reasons and benefits for new procedures. To be successful, a company must break away from a "business as usual" mentality and accept that new thinking and different ways of doing things are vital to its own vitality in a competitive marketplace.
Implementation of new technologies, training, and follow-through require money and time, and the returns may not be fully understood or seen for a while. Nevertheless, operational metrics eventually show the benefits of CI.
Consider this: In the Tooling U-SME study, 16 percent of manufacturers reported that scrap and rework rates consume 4 percent or more of sales. This means that a plant doing $50 million of business annually loses $2 million every year in reworking or discarding products. The largest amount of respondents, 38 percent, reported losing 1 to 2 percent of sales to scrap and rework every year. For a $50 million operation, this still means $500,000 to $1 million is lost - money that could buy a new machining center, automation equipment, world-class training for employees, or any of a number productivity enhancements.
Among other metrics, the study found that in the 96 to 100 percent range, only 16 percent of respondents reported machine availability at scheduled uptimes, 45 percent achieved first-pass quality yields, and 35 percent claimed on-time delivery.
In terms of gross profit, defined in the study as the revenue remaining after accounting for the cost of products sold, 13 percent of respondents retained more than 40 percent of revenue. Most respondents - 47 percent - were in the 10 to 25 percent range, while one-fifth kept less than 10 percent and an equal number kept 10 to 25 percent of revenue after costs.
Companies that achieve world-class status or approach it will, according to the data, see higher productivity, faster product turnaround (and thus greater throughput), and greater profitability, or as surmised by the Tooling U-SME study: "Continuous improvement is a cornerstone of world-class manufacturing."
Continuous improvement is certainly worth the effort and well worth the investment.
In my final look at the Tooling U-SME study, I will examine what it discovered about production planning for new products.
MORE FROM PAT TOENSMEIER: Tooling U-SME: Shops Fail to Do What They Stress with Workforce Training
The use of automation and other productivity-enhancing technologies are among the keys to achieving world-class manufacturing status in the Tooling U-SME study.