Month: November 2013

Where is the best bang for investing your bucks?

This morning I read a re-post of an interview done a couple of years ago by Karl Forth (CabinetmakerFDM) with Jim Sherbert, CEO of Bush Industries, one of the few remaining RTA manufacturers in the US. The core topic of the interview was, “How did Bush survive the recession?”

Early in the interview, Mr. Sherbert was asked about the investments and productivity improvements that Bush made. The response was, “With the market depressed, there is little need to add capacity, and even enhanced productivity efforts have a limited payback. We have focused technology and software on improving customer and consumer services. This has made dealing with the various Bush business segments easier, quicker and more cost effective. New CRM systems and expanded supply chain support are among the advancements.”

Save or Invest in Your Business

It seems that many manufacturing companies are often focused on just the shop floor, and particularly machinery. However, as Mr. Sherbert’s experience points out, sometimes much higher payback can be had from investments in other processes that improve customer service or the supply chain. Even lean improvement methodologies often measure results based on bringing value to customers, not just productivity. Bush survived not only the US recession, but also foreign competition, which is especially tough in their market segment. Clearly their viewpoint was of the larger picture, which took into account the entire enterprise.

No doubt, incremental improvements in manufacturing throughput should always be worthy of consideration, but it is also important to consider the broader picture. As Eli Goldratt made so clear in his book The Goal, putting big bucks into new machinery is not always the best option, and in some cases can actually be counterproductive.

In today’s economic environment, it is more important than ever to ensure your investments are put to the best possible use. The front office and all the non-production supporting processes are just as critical to your company’s success and your manufacturing equipment. Failure to improve those areas can hold your company back, just as seriously as low manufacturing productivity.

Chippendale’s Parametric Ordering System in 1754

Thomas Chippendale published The Gentleman and Cabinet Maker’s Director, becoming a well-known celebrity in the furniture and interior design world, by cataloguing an amazing range of styles which were considered the pinnacle of his art. However, in addition to Chippendale’s artistic skill, he was clearly a marketing genius. He pushed the state-of-the-art, using what we call today, parametrics. His book never shows only one version of anything; it offers options for almost every detail.

Options - Representing Parametric Ordering System

In present day make-to-order manufacturing, parametric systems are common. For example, CNC programs running on all kinds of automated machinery, can easily be modified using parameters controlling dimensions of the part being made. This is one of the simplest forms of parametrics. Chippendale was using the concept at the sales phase of the process, offering an almost limitless range of features and options, which were all easy to visualize from his excellent catalogue. Even with the huge variety, each option was actually pre-designed.

Today, manufacturers with such wide ranging options can leverage their marketing, at the same time as they improve the overall productivity of their entire workflow. Everything Chippendale’s company did was manual, from paper drawings to hand carving. Today we have the Web, with full-color, feature rich configurators to customize an order in minutes. Instant gratification, a pleasant ordering experience, and low-cost transactions from quote to cash.

But it takes more than a power coder, building an artistic Web commerce site to make all of this work smoothly. The key to success today is integration with the entire workflow process. ERP systems are the plumbing that connects all of the activities, seamlessly avoiding errors and duplicate entries. With such under underlying framework to ensure efficient throughput of information, your Web commerce front end provides the ultimate ROI.

Chippendale differentiated himself from the many other fine cabinetmakers, by making it easier for his customers to order what they wanted. This isn’t rocket science, smart businessmen have been doing it for centuries. The technology available today, makes it cost effective to market your products and at the same time, streamline your ordering to manufacturing process.

Adding Employees or Technology

Most of us have seen shops that are very labor intensive and others, doing similar volume with far fewer employees, as a result of technology investments. Compare for example, the casework manufacturer with CNC, where high volumes of precision parts are made with only a few workers, as opposed to another company, cutting on table saws, and then boring and grooving using several other manual machines. The labor content, part quality, and overall throughput will be substantially different, making the CNC operation much more cost effective.

Costs VS Benefits - Technology

This comparison is well-known and often taken for granted in our industry. It has become “conventional wisdom” for companies to make these kinds of machinery investments, as a safe and effective way to improve productivity. Companies that take these steps will enjoy much higher output, better and more consistent quality, all with fewer employees. As a result, more work can be taken and higher profit margins will follow.

However, that same conventional wisdom is often forgotten when it comes to front office productivity. When companies need more estimating, more purchasing, more project management… an ad is placed for an additional employee. The cost for such skilled workers is high in terms of wages and benefits, plus there will be extensive training and acclimation before the new hire becomes productive. And in such specialized areas, there is a high risk that the new worker will not fit, wasting huge amounts of time and money as the search starts again.

Just as technology investments reap large returns in the factory, the same can be true in the front office. In fact, implementing an integrated ERP system properly, will almost always produce more measurable productivity gains and cost reductions, than comparable investments in machinery.

So why do companies still seem to favor adding staff over integration of software systems? it usually comes down to fear and lack of knowledge. Manufacturers are reasonably comfortable investing in machinery, but software is scary stuff, an unknown and risky investment, with no clear guidance to help with selection and implementation.