Monthly Archives: November 2016

Like any other industry, metal manufacturing can benefit greatly from a reduction in operational expenses. Smarter, data-driven processes have the potential to eliminate waste in smelting and deliver sustainability at ore extraction sites even during troubled times. What lies ahead for metal producers the world over, and how might operational excellence help them rise to the occasion as their industry matures?

“2017 looks to be an upward-trending year for steel and iron ore prices, but only barely.”

Pricing forecasts show slow improvement
After the commodities boom peaked in 2011 and plummeted thereafter, any small gains to entrenched businesses are welcome. According to Knoema, 2017 looks to be an upward-trending year overall for steel and iron ore prices, but only barely. The projections also show a plateau throughout the rest of the decade, a sign that market value will not soon return to the twofold or even threefold per-tonne prices the metal industry enjoyed at the start of the 21st century.

With this in mind, businesses should feel comfortable instituting opex-cutting initiatives like predictive analysis for asset performance or standardized operating procedures for changeovers. After all, operationally efficient strategies will allow the companies that adopt them to become more responsive to not only their needs, but the needs of their customers, as their interests and expectations shift because of pricing. Operational excellence, therefore, makes room in the budget to build a better, more attractive product with a lower risk of financial turbulence.

Labor costs increase as ore grades decrease
Much of the metal industry’s costs upstream of smelters revolve around labor – around 40 to 50 percent in the mining sector, for example, according to a 2016 study from Deloitte. Industry leaders know the implausibility of simply pushing mining staff to extract more ore at a faster clip. Even though the depletion of high-grade ore deposits across the globe has led to the development of equipment potentially capable of cost-efficient low-grade ore extraction, the exchange has not been commensurate. The loss of high-grade ore opportunities currently trumps any gains reclaimed through innovation.

metal

Operational excellence helps low-grade ore mining become more cost efficient.

With prices as low as they are in 2016 and mining companies squeezing what they can out of already overextended mines, something else has got to give. Metal producers need eyes on upstream operations and actionable intelligence to know how, where, and when to optimize effectively, particularly if they wish to avoid labor fallout from unobtainable operational demands from their workforces.

Economic improvement in other sectors pushes metal to produce under strain
As dim as the short-term outlook appears for many metal producers, long-term growth in areas like construction and automotive provide a silver lining. According to PricewaterhouseCoopers, construction output volumes around the world will increase 85 percent between now and 2030, with China, India, and the U.S. leading the charge. And while U.S. auto sales might stagnate over the next couple years, the incorporation of new gadgets into the average vehicle could prove to be a boon to rare metals used primarily in electronics. Moreover, project sales boosts in China signal even more innovation requiring a bounty of diverse materials.

As we mentioned earlier, operational excellence make businesses lighter on their feet and should not be seen exclusively as a method for tightening spend management. After all, the best defense is a good offense. So while metal producers incorporate new processes designed to navigate the disruptions affecting their sector, they shouldn’t lose sight of the opportunities for success on the horizon. To achieve them, however, these companies will need flexibility and agility, both of which they can gain through operational insight and optimization.

The home appliance market has a lot to celebrate: As the housing market continues to recover – however slowly – new homeowners with disposable incomes will seek brand-new appliances to furnish their spaces. Yet, appliance manufacturers ought to stay aware of burgeoning trends that could impact their product designs, compliance efforts, and the reception of their goods.

1. Possible housing shrink
For the most part, American homes are bigger now than they have ever been – according to U.S. Census Bureau data released in 2015, the average single-family house ballooned by more than 1,000 square feet between 1973 and 2014.

However, appliance manufacturers should refrain from letting such growth lull them into a false sense of security over the size of their products. Other market factors indicate the economic upturn that empowers young homebuyers could also push them to be more conservative with space. Both the median and average sizes of newly built single-family homes plateaued in the last few years and have even begun to drop.

appliance

Are American homes trending tinier? What does that mean for the home appliance manufacturer?

Could this be the start of a new generation of smaller entry-level homes? If so, appliance makers will need a strategy for quickly developing and producing goods with smaller footprints.

2. Easing refrigerant regulations
Earlier this year, the Association of Home Appliance Manufacturers pledged to stop using hydrofluorocarbon refrigerants in next-generation goods, phasing them out entirely by 2024. The organization asked for assistance from both the United States and Canadian governments, as current regulations may be too strict for alternative refrigerant options under consideration.

With all appliance makers have done in recent years to increase the energy efficiency and environmental sustainability of their products, refrigerant changes could place financial and operational strains on residential and commercial refrigerator, freezer, and air conditioner manufacturers looking to stay green. Participation from the AHAM should be seen as a give-and-take: Appliance makers will make the switch, if the government helps businesses shoulder the burden by loosening materials regulations.

Effective earlier this month, the U.S. Environmental Protection Agency did end up expanding feasible HFC substitutes to include propane. However, the appliance industry should take note of the estimated annualized compliance costs for 100 affected companies included in the EPA notice: between $58.8 million and $71.3 million depending on a 3 percent versus 7 percent discount. Manufacturers should begin formulating a basic framework of the organizational change required to keep production swinging, risk management on task, and operational costs even.

3. Consumer input online
While manufacturers may have the retail “middleman” separating them from end users, the expanding online marketplace for appliances could open a direct connection – and not necessarily in a good way.

PricewaterhouseCoopers research shows today’s consumers still choose to purchase their appliances at brick-and-mortar stores over online – 59 percent to 29 percent respectively – but the gap is closing fast. Mobile devices also make it easier for shoppers to investigate in-store goods before buying, which should worry manufacturers who haven’t vetted their digital presence and addressed any concerns flagged on the internet by former customers. A bad review with good search engine optimization can hang like an albatross around a company’s neck.

Responsiveness to customer concerns in online forums will only better a business as we push further into the future. As appliance manufacturers strive for innovation in their products, they should give equal attention to the channels of hype surrounding their brands.

For such an integral commodity in the lives of hungry consumers, food and beverage manufacturers have a high potential for producing waste. A recent National Resources Defense Council study uncovered as much as 40 percent of all food farmed or produced in the United States goes straight into the trash.

However straightforward this issue may appear, food waste is multifaceted. It is not only limited to what should have been eaten, but how it should have been prepared, packaged, and transported, giving food and beverage manufacturers a much fuller plate than perhaps they previously anticipated. Thankfully, this also affords them many opportunities to achieve leaner processes and heightened organization if they know exactly where to look.

Delicious logistics
Food and beverage manufacturers operate in a very active, fickle consumer market. Tastes change quickly, and conforming to a customer’s palate means the difference between making a sale and going stale.

“Process optimization can decrease the likelihood of waste.”

According to Food Processing, in the decade between 2003 and 2013, the youngest generation of consumers shifted the market appetite away from heavily processed meals in favor of fresher feasts by a factor of 20 percent “over 100 billion eatings.” This trend has also reached the foodservice industry. Everyone from fast food joints to sit-down restaurants have begun to see a substantial swing towards fresh ingredients and on-demand preparation.

At the manufacturing level, as food and beverage businesses transition away from food preservatives that extend the shelf life of the products they create, process optimization can decrease the likelihood of waste. While a Food Waste Alliance survey found 93.4 percent of all waste food manufacturers generate gets repurposed and doesn’t end up in a landfill, that’s still, by the organization’s estimation, 53 lbs. of waste for every $1,000 of revenue. The goal of food and beverage manufacturers should not focus on what to do with the “inevitability” of waste, but rather, what inefficient processes brought on this excess.

Circling back to fresher dietary trends, enhanced logistics and warehousing working in collaboration with marketing and communications teams have the power to sync up all corners of the supply chain. A coordinated effort that adequately records items and transports them to distribution in a timely fashion need not rely on additives.

To accomplish this acceleration, food and beverage manufacturers may need to employ software capable of communication point-of-sale data along the whole of the supply chain to better organize shipping volumes. Intelligent forecasting makes or breaks food and beverage processing. Electronics manufacturers who overstock items only account for the wasted shelf space. Their televisions don’t have expiration dates. Additionally, harder data crunching can align production with a more realistic picture of customer demand, cutting down food waste at the source.

packaging waste

The ways a manufacturer packages its products contributes greatly to efficiency.

Potential for packaging
Packages for foodstuffs are more than just a way to protect products and sell one brand over another. These cans and cardboard boxes have the ability to help eliminate wasteful practices or exacerbate them, depending on whether a manufacturer knows how to employ them properly. Perhaps no other segment of the food and beverage industry understands this issue better than baked goods and snack manufacturers, producing to-go sizes, family packs, and everything in between. The complexity of a varied approach to food and beverage packaging requires manufacturers to consider several factors before reconfiguring their strategies.

First and foremost, diversifying portion sizes to reach a wider consumer market can be both profitable and complex. Before manufacturers undergo such a colossal change to their production line, supervisors should test equipment for variables like losses due to changeover. After all, workers must shut down machines during changeovers, recalibrate them, and reload them with new packaging materials. At the end of the day, these minutes of downtime add up. Offering alternative packaging options like single-serving portions increases the amount of changeover necessary to complete an order, which in turn increases the resources expended on each order, including labor costs. Manufacturers need to cut to the chase – does this selection of packaging choices add valuable profitability to their operations, or does it detract from an otherwise efficient process?

In addition to changeover, the nature of the packaging itself can muddle food plant operations. According to a Packaging Machinery Manufacturers Institute study, versatility in packaging impacts 31 percent of bakery and snack manufacturers who seek to produce variety packs in the near future. As the organization pointed out, these larger items contain more than a single flavor or style of product, meaning they have to be “touched twice.” This factor alone compounds complications in manufacturing operations by tacking on additional steps to production. Again, if variety packs don’t show a reasonably high level of ROI for the effort put into selling them in stores, manufacturers may want to reconsider their production entirely or integrate new technology to mitigate their impact on internal processes.

Finding solutions to help mitigate wasteful actions might appear daunting, but in reality, doing so has the potential to add value across many disparate operations within a food or beverage processing plant. Companies retain resources instead of expending them unnecessarily. Moreover, when managers study plant procedures to uncover wasteful practices underpinning processes, they may find new, easy-to-fix areas to unkink or slim down manufacturing, optimizing long-term operations.

Home remodeling can serve utilitarian purposes as well as personal aesthetics. Because of this, market success for businesses that produce kitchen cabinets, bathroom fixtures, doors, and windows is highly contingent on consumer trends. Let’s examine a few recent consumer developments that could affect cabinetry production.

Is housewares rightly hesitant to dive into millennial marketing?
Strong growth in the housewares sector typically aligns with growth in the housing market. After all, if people buy homes they’re more likely to spend on appliances and fixtures. According to the Kitchen Cabinet Manufacturers Association, cabinetry has seen steady sales increases over the last two years, 8.5 percent since 2014. KCMA cites a recovering housing market as a remarkable catalyst for those gains.

That said, some naysayers will point out low home buying on behalf of millennials as grounds to be wary. After all, if population estimates from the U.S. Census Bureau hold true, millennials surpassed baby boomers in size in 2016, making them the largest and perhaps most lucrative consumer opportunity for businesses. However, as home buying rates continue to stay low among younger consumers, how can manufacturers in the housewares sector expect to justify innovation tailored toward the next generation?

The truth is, everyone loves a bargain – increasing operational efficiency at your facility could ultimately benefit unit pricing in a way that’s beneficial to distributors (and thus customers) without impacting profit margins. An excellent method for innovating that will pair well with this idea is investment into simple, perhaps unfinished, contemporary designs made from eco-conscious materials like recycled particle board or low-VOC finishes and adhesives. Going au naturale also reduces processing requirements for manufacturers.

Productivity gains through equipment require training and proactive maintenance
Although housewares continues to see sales growth – even though market factors could, at any time, pull the decorative Oriental rug out from under its manufacturers – businesses should not invest in productivity-centered capital-intensive assets without first allotting proper consideration for processes which bolster equipment reliability. With so much riding on customer service these days, unforeseen complications could do a number on a business’s ability to meet expectations.

Paul Downs, founder of Paul Downs Cabinetmakers, shared his cautionary tale regarding asset management with The New York Times back in 2011. His lesson bears repeating. Downs was able to integrate a high-capacity splicer and veneer-gluing machine onto his production line and increase monthly sales by about 42 percent, but only after learning how to overcome complex setup issues and convincing operators of their importance, which took considerable time and effort. But in the end, it was obviously worth it.

No investment happens in a vacuum, an integration may be a much higher hurdle than sticker price. So, cabinetmakers thinking about redirecting their recent windfall toward new assets, establish an asset management and implementation plan first, lest your purchase get the better of you.

cabinet

New cabinet styles could disrupt materials procurement for cabinetmakers.

Mismatched cabinetry could impact portfolio and materials
Uniform cabinetry is passe. According to the Woodworking Network, many homeowners shopping for cabinetry today express interest in mixing different styles of cabinets in their kitchens. Different materials, wood species/products, stains, even colors – everything is fair game, and from a manufacturing perspective, such boundless variety could have a noteworthy impact on not only production, but inventory management.

With every product portfolio expansion, manufacturers can expect additional time spent on changeovers unless facility supervisors drill best practices:

Furthermore, with more customers picking and choosing their own cabinet styles product by product, manufacturers ought to anticipate a slight leveling between materials needed to produce top sellers and more exotic offerings. Theoretically, this model for change follows the same course as other home remodeling trends like “accent walls” in the paint industry. As more consumers follow the fold and spice up plain-colored rooms with a splash of color on one wall, hardware stores stocking paint will see customers reach for smaller cans of neutral paints and more colorful options that hadn’t sold well in the past. Thus, demand shifts.

But while many paint producers have passed the challenge onto their distributors by way of in-store paint mixing stations, cabinetry cannot – especially when customers aren’t just mixing colors, but base materials. Popular cabinetry woods like oak and cherry may see slight reductions in demand while other less popular materials receive slight boosts. It’s up to manufacturers to consult inventory specialists to see how procurement should respond, not just to wood, but to bonding and curing agents as well.

Cabinet manufacturers, as well as other housewares segments, should always consider how the latest interior design trends might impact their operations down the road and work to preempt adverse effects to customer service and line efficiency.