Gaining Competitive Advantage in 2018 and Beyond
Forging companies are often faced with the decision about whether to add services to offer their customers. The investment in and addition of, for example, heat treating or machining service departments to your operation are viable growth strategies. The efficient integration of additional services also requires a management software platform to help take your business to the next level.
The forging industry has been, and currently is, a critical link between various key manufacturing segments, including ferrous and nonferrous metal suppliers and a host of end-user industries. Forging services, which show up in 20% of the products representing the gross domestic product (GDP) of the U.S., are essential to the country’s national security, the industrial economy and society in general.
Everyone knows that meeting today’s tough demands for improved quality, cost efficiency and on-time delivery are an important business focus, but there is another business differentiator that is gaining ground in the forge business space that helps to separate a company from its competitors.
Regardless of the industries you serve (transportation, agriculture, energy, oil and gas, off-highway and railroad equipment, industrial, construction, hand tools/hardware, ordnance, marine and aerospace), you may be able to add new “captive services” to your existing facilities and capabilities. In other words, to be truly competitive in today’s marketplace, a forge company’s expertise and technology need to run deeper and broader than just raw-metal forging.
Adding Services is a Growth Strategy
Operating in a culture that jumps at every opportunity to apply technologies and add services in ways that help your customers be more competitive – to save them time and dollars – starts with a change in mindset. Think about what your business can do (as a true business partner) to reduce some of the “pain points” that your customers have vocalized to you (e.g., shortening lead times, reducing transportation costs, etc.).
Whether you do custom, captive or catalog forgings, some of the additional services that you could add as a new captive department, or core competency, may include CNC machining, heat treating, plating, coating and metal finishing, cutting/sawing, shot-blast cleaning, metallurgical inspection and a testing laboratory.
By way of example, according to the Metal Treating Institute (MTI), there are already over 15,000 captive heat treaters in the U.S. and Canada, and many of them need to outsource heat-treating projects that are either over their capacity or have special needs that they cannot fulfill. So, this could provide additional ROI if you added a captive heat-treating department that had the time and resources to also satisfy some of the local commercial heat-treating needs.
In another example, some companies that manufacture hollow structural sections (HSS) do not have on-site thermal-processing facilities for reheating HSS to comply with required specifications. This forces them to send the material to an outside heat-treatment contractor located some distance away, which can add two weeks to the overall lead time.
A key focus of many of your customers may be the need to further consolidate their supply chain. Adding in-house precision machining or an accredited metallurgical testing laboratory to analyze chemical and structural composition, verify mechanical properties and perform failure analysis may be just what you need to do to separate your business from your competitors and gain more market share of the customer base.
Considering Business Convergence
Some of these examples are forms of business convergence. As the name suggests, this represents different things coming together, which, from a business perspective, is where executive management thought patterns need to reside as you define the future of your company.
You can recognize convergence (on a smaller scale) by taking a look at the number of varied functions that your smartphone can perform. Some of these include photography, GPS navigation, calculating, video/audio recording, taking notes, watching TV shows and serving as a flashlight, a wakeup alarm, a calendar, an alert system, a health monitor and the list goes on. In the past, all those individual functions were housed in separate devices. Well, not anymore.
As you read the daily headlines from various trade journals, you can see that convergence is also occurring on a large industrial scale within multiple industries. During your company management brainstorming sessions, ask, “How will the forging industry be impacted by convergence? What other industries will converge with forging? What trends can you identify now that your business should take advantage of in foreseeable convergences?”
In other words, what does the future look like? What opportunities can you anticipate that will allow your company to move past your competitors?
From a business-external standpoint, also consider your clients and customers. How will convergence impact them? What types of industries will converge with your customers’ industries? How will their services and products (and prices) change once convergence takes hold? Anticipating these questions will help your company get a head start in providing additional captive services that align with what your customers are going to need, further distancing you from your competition.
"One of the key considerations that must be addressed … is whether your current business software system(s) has the functionality and capability to take your business to the next level in your preferred growth process."
The Case for Adding Captive Services
To position itself for world leadership in the next few years, the forging industry (through various surveys and studies) has already determined that its primary efforts should fall into five primary program groups: production efficiency, energy efficiency, recycling, environmental protection and enterprise issues. Since production efficiency is first on the list, that would be a good place to start, and it will position your company for growth without your MES/QMS software “shortcomings” being a hindrance to effectively moving forward.
The addition of captive shops and services, whether they are machine shops, fab shops, tool shops or heat-treat shops, is a growth strategy to consider. Your business can benefit from a total solution that integrates all the forge and job-shop functions and makes it easy to manage the business. This is as opposed to multiple disjointed systems with disparate silos of data (sometimes redundant) that you either don’t have access to or can’t get summarized into meaningful reports.
Most forge companies focus on:
- Eliminating waste – This is the first step to producing a quality product. Control and monitor your jobs and work orders from start to finish, and work to eliminate wasted time and efforts through better planning of processes and the operating steps that are comprised within.
- Ensuring consistent quality – When you take the time to carefully set up your various processes so that they cannot be altered (or bypassed) by someone in the plant, consistent quality becomes a standard of your business. You need to be able to see work in process (WIP) in real-time, be alerted in real-time if certain triggering events occur, and then have a complete and detailed WIP history of every job or order completed. By the way, this dramatically cuts down the length of time and overall effort required for internal and external audits.
- On-schedule delivery – This is a goal of every business, but delivering a product on time means nothing if the job isn’t done correctly. Your production-floor software needs to be able to schedule jobs – to work centers, equipment and personnel – and facilitate getting the job done right the first time (to meet promised dates given to your customers by overzealous salespeople).
Good Management Software is Key
One of the key considerations that must be addressed, which you may already be thinking about, is whether your current business software system(s) has the functionality and capability to take your business to the next level in your preferred growth process. Advanced technologies help to increase precision and quality, as well as improve production-floor efficiencies, all of which lead to reduced cost and increased profit margin.
In order for the forging industry to remain the world leader in materials development and utilization, it also needs to be a leader in process-based production and application, energy management and efficiency, environmental responsibility, and effective utilization of advanced technology. This includes real-time preventive maintenance tied directly to quality management and processing steps on the production floor. With that said, there are software breakthroughs available today that can have a dramatic positive effect on forging businesses, which, in some cases, can radically change the existing process to produce parts that satisfy the customer while increasing efficiencies and reducing rework.
The forging industry must respond by transforming its production-facility MES/QMS software, leading to agile, intelligent manufacturing plants. These use advanced tools and technologies to optimize production that conforms to customer specifications and regulatory guidelines. Additionally, since the current energy consumption of the forging industry is significant, even incremental improvements through software advances can reduce current costs and conserve energy use.
Securing Your Data in the Cloud
Technology is not a means to itself but a pathway to transforming existing processes, and it helps to create new products and services. You have all heard of software running “in the cloud.” For years, the cloud was determined to be insecure, so there are still many companies today that would never even think of migrating to a cloud-based strategy. So, they stick with their current server that is housed and maintained within their brick-and-mortar facility, which actually costs them more money and is much less secure than they think.
Like everything else in the world, this has changed. A previous decision that the cloud was insecure might have been valid years ago, but holding onto this or any previous business conclusion indefinitely, without doing additional research to understand new options, is not good management. The old adage, “If it ain’t broke, don’t fix it,” will not work with today’s fast-changing technological advances. Ignore this and you may be left behind.
Here’s a good example. Major defense contractors, who are some of the most security-obsessed people on the planet, over and over again saw the cloud as insecure. That’s because their decision was derived from a study that was done at a given point in time. Needless to say, their attitude has shifted considerably in recent years. Today, those same defense contractors are saying, “We need to get in the cloud; it’s the only place that’s secure now.” I can give you many examples of companies that had their servers hacked over the past several years (and all their data encrypted by ransomware) that subsequently switched to cloud processing and have had no more data-security issues.
The Internet of things (IoT), artificial intelligence (AI) and machine learning (ML) were the buzzwords that the big technology companies couldn’t stop talking about in various 2017 trade shows and presentations. Expect more of the same in 2018.
Your business may not directly implement all of these, but it will certainly employ some combination of software and services that tap into the “tech.” My bet is that your business strategies will “touch” this tech more than ever before in 2018 and, if properly implemented, see the associated returns.