June 9, 2014
For many fabricators in this year’s FAB 40, smart use of information has become the bedrock of high-product-mix metal fabrication. As that bedrock becomes stronger, fabricators may continue to grow even larger.
Job shops and contract manufacturers make up the very foundation of manufacturing, the relatively invisible but incredibly numerous plankton supporting the whales of Blue Chip manufacturing, the GEs and Caterpillars of the world.
Plankton still dominate this business; far more job shops and contract fabricators make less than $10 million a year than those making more. That’s in part because this is a regional business, with fab shops supporting OEMs and other customers within a several hundred-mile radius. Exceptions abound, but for the most part, it just makes sense for high-mix, low-volume suppliers to be physically close to customers.
Supporting a highly local customer base, a metal fabricator can grow only so large. Sure, a shop can grow quickly on the backs of a few large customers, but that’s a risky business. It destroys what makes custom metal fabrication attractive as a business model, one with diverse revenue streams spread across various industries.
Of course, this diversity creates a highly variable environment. Even the smallest shops can run thousands of different part numbers with unpredictable demand cycles, and those parts flow through machines that are shared resources. All this would seem to make a capacity planning and scheduling nightmare immensely difficult if not impossible to scale up.
But as this year’s FAB 40 shows, fabricators have become pretty successful at scaling up and keeping a diverse customer base at the same time. From a purely financial perspective this seems natural. If a fabricator has multiple plants with similar capabilities, it can shift or spread work among those plants to meet capacity demands. More plants spread a fabricator’s geographic footprint, and ever-increasing capacity allows the company to spread into even more markets, providing a steady stream of work to talented employees. A big drop in, say, the mining equipment business doesn’t cause layoffs and severe slow times on the floor, because other work is there to pick up the slack.
This sounds great, theoretically. But how does a large company handle all the details, the tens of thousands of part numbers, all those machine setups, and all that variety? In the pages that follow, you’ll notice a trend: intelligent use and clear transfer of information. The goal: All parties involved in the business—customers, managers, and shop floor technicians—should have the right information at the right time. Software helps, but so can the business structure. A few fabricators on this year’s list have found ways to structure their business to better define value streams and product mixes.
Some of the largest fabricators are leveraging data to plan and to schedule. It’s not just about machine uptime, but how long it takes to manufacture a quality part or subassembly from raw stock to the shipping dock. It’s about how accurately a business can plan for future business and which potential customers to prospect.
For many fabricators in this year’s FAB 40, smart use of information has become the bedrock of high-product-mix metal fabrication. As that bedrock becomes stronger, fabricators may continue to grow even larger, more diverse, and more secure.
Click here to view this year's FAB 40 list of top metal fabricators.
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