Growing in the face of uncertainty
A&E Custom Manufacturing makes the right moves to build its business and earns The FABRICATOR's 2013 Industry Award for those efforts
Having survived a bankruptcy in the 1990s and the Great Recession, A&E Custom Manufcturing isn't about to embark on an aggressive growth path just to chase more business. It wants to grow intelligently, balancing investment with real opportunity. With that in mind, the company has made some very wise decisions that has allowed it to grow in the face of ongoing uncertainty.
What’s hard to grow is easy to kill. Any gardener knows it first-hand. Nowadays metal fabricators can testify to that fact as well.
A&E Custom Manufacturing, Kansas City, Kan., has survived a bankruptcy in the early 1990s and two major recessions in the last 10 years. Such experiences have influenced the way it runs its business (as detailed in “Lessons learned lead to big bounce-back,” The FABRICATOR, January 2012, p. 50).
But this isn’t a tale of a company that sits on every last penny, waiting for a sure thing to come along before it makes any type of investment. Much like other metal fabricators that are dealing with the uncertainty that marks today’s economic climate, A&E Custom Manufacturing is focusing on intelligent growth—controlling costs to keep expenses less than revenues; enacting lean initiatives to free up space on the shop floor; investing in equipment that can increase productivity rates; and cross-training employees so they can react quickly to changes in customer demands. The company is certain about growth in the face of uncertain times.
Want proof? Starting in 2009, right after the Great Recession, A&E Custom Manufacturing began increasing its profitability on operations, measured as income as a percentage of sales. It climbed from 1.36 percent in 2009, 2.68 percent in 2010, 3.70 percent in 2011, to 6.67 percent in 2012. Over the last five years, the fabricator almost has doubled its revenues; it earned $9.1 million in sales for 2012.
The fab shop is learning to grow without putting the entire enterprise at risk. It is a great example of how conservative planning can coexist with respectable growth. A&E Custom Manufacturing is a company others can learn from (see Figure 1), and that’s the reason it is the recipient of The FABRICATOR’s 2013 Industry Award.
Like other shops, A&E is striving to become more efficient on the shop floor because it wants to be able to increase productivity. Five years ago, the motivation was to avoid hiring people only to let them go potentially a short time later because of an unforeseen hiccup in the economic recovery. Today the company simply can’t find the right employees to fill vacancies, so it must take creative steps to maintain current throughput levels.
John Jaixen, general manager, said the company is currently looking for second-shift welders and inventory personnel. The fabricator employs 72, which is up from about 65 a year ago.
“If we could find them, we probably could add four to five people,” Jaixen said.
The company is focused on keeping its production running as smoothly as possible—without increasing costs willy-nilly. Frankly, it’s a lesson that other, much larger institutions could stand to learn.
As an example, Steve Hasty, owner and president, pointed to his company’s campaign to identify the “cost of quality” for each job. This effort calls for measuring the costs associated with customer rejection of parts, rework needed on the shop floor, and scrapping of parts that don’t meet internal quality checks and then comparing that dollar figure to sales.
Hasty said each department on the shop floor is responsible for tracking quality costs and preparing a weekly report for management. This ratio has been 0.007 percent or less six of the last seven years. He credited the company’s ISO 9001:2008 program and quality personnel for helping to maintain the high levels of production quality.
Pulling together information and being able to use it to better a business is not an easy task, especially for a job shop where the jobs are many and complex. A&E was no longer simply a metal stamper processing jobs (see Figure 2) that called for a run of 50,000 pierced, formed, and cut-off parts; it was a processor of metal parts that often called for multiple bends, welds, or other value-added activities.
Running a blanket schedule, on which the shop floor personnel could see all jobs in the queue, for the past several years overwhelmed everyone with data. With more than 2,000 jobs per month coming in the door, it was easy to take the eye off jobs that were pressing. For example, if a job was recurring on a monthly basis, a press brake operator might choose to bend enough parts for three months, even if only one-third of them were needed for an immediate deadline. As a result, those parts just sat on the floor until they were needed.
That led management to begin feeding the shop floor with a three-day schedule. The shorter time frame allows everyone to focus on a smaller quantity of work and deal with a lot less data, according to Jaixen.
“It allows our managers and supervisors to look at that three-day window, know exactly how many hours there are in setup, and produce what was on the quote. They then can review the performance and stay on track,” he said. “We use flex time or overtime if they are running behind; or if they are getting ahead of the game, we might pull in something from the next bucket [three-day period].”
Hasty said that these improvements are related to a concept called “velocity scheduling.” When the job hits the floor, the goal is to get it out the door as quickly as possible.
The efforts to narrow that window between taking the order and shipping the product will be enhanced with the implementation of the latest version of the company’s enterprise resource planning software, Epicor® ERP version 9.05. The upgrade, which includes new inventory management and scheduling modules, went live at the end of December. This and a radio-frequency identification program for active jobs on the shop floor, expected to go live by the middle of 2013, will give management a more complete picture of inventory and WIP costs than it ever had before.
Clearing the Deck
The ERP “enhancement,” as company Controller Bill Goodman called it, further improves A&E’s ability to ensure that all raw material and ancillary sourced items, such as fasteners, are available to process upcoming orders. There is no need to have excess inventory lying around just in case it’s needed; the ERP system dictates what is needed, where it is needed, and when it is needed for the day’s schedule.
This is just one factor that helps to keep the aisles clear, so that the company can stay in its 44,600-square-foot facility, even as more jobs come its way.
“The lean manufacturing initiative has allowed us to stay in this facility and fully utilize the floor space,” Goodman said.
Jaixen said the company has spent a lot of time focusing on value stream mapping to figure out how jobs can progress through the shop with the least amount of handling. As the shop floor was organized in late 2012, raw material is delivered on the side of the building. Blanks can easily be shuttled to three nearby 4-kW Amada laser cutting machines with automated blank and cut sheet removal or the company’s new Amada EML 3610NT laser/punch combination machine with a 4-kW laser and a 58-station turret (see Figure 3). Coil stock is staged near stamping presses, which range in size from 38- to 350-ton capacity.
“The only things that don’t move around here are the lasers and the big punch presses,” Hasty said.
If the blanks need bending, they progress to press brakes, which sit right next to the laser cutting machines. In some instances, the press brake technicians also feed bent parts into a nearby hardware-insertion machine to minimize the need to send the product across the facility to what previously would have been a separate hardware-insertion cell.
Over the last year, the area between press brakes and the welding cells has opened up greatly as racks of WIP and raw material have been removed from that side of the factory. The focus on reducing inventory of all sorts has opened up plenty of excess space, according to Hasty, allowing the company to create a staging area for products heading to welding, which sits in the back of the shop, and value-added activity cells (see Figure 4). (The raw material inventory reduction has had a financial benefit as well: It’s freed up more cash. In the third quarter of 2012, the company’s raw materials inventory decreased by $146,208 from the previous quarter.)
From welding, the parts flow to the end of the line, where they are either placed in a small inventory cell for customers that are being supplied with just-in-time parts or shipped to a subcontractor for further processing or to the customer. In the end, material has progressed through the shop floor in a horseshoe-shaped pattern with as little against-the-grain movement as possible.
Relying on Automation
Actually, the steps taken to improve inventory and job tracking and reduce the clutter are pretty important as the company has invested in automation in recent years. Simply put, these machines are a necessity, and they can create a lot of product in a short amount of time, which could cause a WIP nightmare for an unprepared fabricating operation.
“We have been focusing on automation for cost-competitiveness in a worldwide market,” Goodman said.
This isn’t anything new to A&E. It has had laser cutting machines with automated blank feed and parts removal for seven years now.
However, it ramped up its investment in automation when faced with customer demands that required a new manufacturing approach. The most recent example is the new laser/punch combination machine (see Figure 5) installed in March 2012. The main motivator behind the purchase was the need to find a cost-effective way to produce the housings for a generator that was to be the showcase job for a large customer. The housings require several holes to be knocked out and special shapes to be laser-cut.
“We reduce our risk from losing orientation between the laser contour and the punching by doing it in one operation,” Jaixen said.
Additionally, the generator design was subject to frequent revisions as it was finding new markets beyond its military origins. The generator, which is able to provide electric, hydraulic, and pneumatic power all in one package and at the same time, has been adapted for use by the railroad industry and for farmers and ranchers. Design changes are even less of an issue when the part is processed on equipment capable of both laser cutting and punching.
Customer demands also led to the purchase of an Amada Astro 100NT robotic press brake (see Figure 6) late in 2012. An electric car manufacturer originally came to A&E requesting a quote on stampings for a family of parts. Realizing that the tool and die costs were going to be astronomical for a part order of 11,000 units per year, the company’s management team suggested fabricating those same parts. The piece price was going to rise, but the tooling costs were going to go way down.
The challenge was the complexity involved in bending. For example, one part had 14 bends in it.
That’s where the robotic press brake made so much sense. It automatically set up the tooling for the complicated bends and got to work bending immediately. In fact, the longest tool change on the automated press brake was four minutes, which happened to be for the part with 14 bends.
Well, that complicated job no longer exists as the interest in high-end electric cars subsided, but the robotic press brake remains an important fixture on A&E’s floor.
“That is a good example of where [the shop floor] might have let the Astro just sit and collect dust,” Jaixen said. “But we pressed hard to make sure that parts went on it. Our employees started to get buy-in once they saw the value of the quick setup time. They said that this really does work for repeat jobs [see Figure 7].”
In the welding area, the company’s Miller Perform- Arc™ welding cell (see Figure 8) has helped to reduce the bottleneck somewhat, specifically with heavy weldments and fuel tanks for the large generator job. The cell is arranged in such a way that when the robot with GMAW capability is laying a bead, the robotic welding operator is setting up the assembly in another fixture on the other side of the rotating cell.
Jaixen said quality has improved as well with the robotic welding cell. The fuel tanks, which occasionally failed leak tests when manually welded, have yet to fail such a test after being robotically welded.
Promoting the People
While the automated equipment is very good about pushing quality product quickly to the next downstream fabrication activity, people are a necessity when it comes to adapting to the ever-changing job mix that hits the floor at A&E. Nothing is as flexible as an employee who can handle multiple responsibilities.
“If they are capable, we can move them to a bottleneck in the value stream, and it helps to balance everything out. It keeps things moving forward,” Jaixen said.
That’s why the company has made such a commitment to cross-training, Hasty said. Representatives from OEM suppliers, outside training consultants, and internal experts routinely assist with cross-training and certifications.
Cross-training has required a mental shift for many in the company because a person is no longer tied to just one manufacturing activity, Hasty said. The bottom line is getting the product out the door as fast as possible, which means everyone needs to assist where they can.
“Sometimes you have an $18- or $20-per-hour guy doing $14- or $15-per-hour work. It’s about getting the orders to and through the shop quickly,” Hasty said.
“If you don’t have someone [at a particular fabricating cell], the product sits, waiting for an operator to get to it. So that job sits there for two extra shifts rather than having another body out there getting it done and out the door.”
The cross-training, according to Jaixen, also provides employees with a clear opportunity to step up and seek more responsibility, which involves more money as well in many cases. The employee becomes more valuable because he or she is learning to run multiple types of equipment and, as a result, can be used to fill in for others during their absences or assist with a departmental bottleneck on the shop floor. The company has a much more flexible workforce that can react to dramatic shifts in customer needs.
The benefits of cross-training don’t end there for the metal fabricator. Over the last three years, six employees have improved their skill sets to the point where they were able to assume supervisory roles in various departments.
“It really helps morale,” Jaixen said of the internal promotions. “When people see that employees get opportunities, they understand that is the way that we operate.”
Servicing the Customer
As A&E’s profits rose over the past five years, so did the satisfaction of its customers. These customer satisfaction levels have been tracked with an annual, online, anonymous survey since 2007, and Hasty said the results have consistently indicated high levels of satisfaction. The survey responses also provide invaluable feedback on how the fabricator can improve services.
For a specific example, Hasty pointed to the company’s No. 1 customer, which rates its suppliers monthly. The report from the fourth quarter of 2012 showed a satisfaction rate for the metal fabricator as “excellent” with a score of 98 percent. Continued growth has not damaged the fabricator’s ability to serve its customers.
“I don’t think the key to A&E is our pricing,” Hasty said. “We are easy to do business with. You have to have quality, delivery, and capability to do it, but you also have to be able to know your customer and help the customer get to where they are going. My guys are really good at that. They do what the customers need to have done.
“That’s the best thing that we do: Focus on the customer and what the customer’s needs are. Then do everything that we can to help them get there,” he added.
That vision won’t die easily—no matter what fiscal cliffs, busted economic bubbles, or market collapses stand in the company’s way.
Excellence by Association
Steve Hasty, owner and president, A&E Custom Manufacturing, is a big believer in reaching out to industry associations in an effort not only to support the manufacturing industry, but learn from other companies.
In fact, he credits his membership in one of the Fabricators & Manufacturers Association’s precision sheet metal user groups as being an integral part in transforming the company. He said that regular meetings with representatives from Atlas Manufacturing, Minneapolis; Clark Metal Products Co., Blairsville, Pa.; DeWys Manufacturing Inc., Marne, Mich.; Metcam Inc., Alpharetta, Ga.; and United Alloy Inc., Janesville, Wis., have provided plenty of ideas that have helped to boost production efficiency.
“A little new perspective being brought in isn’t a bad thing,” said John Jaixen, general manager of A&E.Company employees also serve on the National Tooling and Machining Association’s board of trustees’ budget and finance team and the local NTMA board.
You Can Be the Next Industry Award Winner
If you think your metal fabricating operation stands out from the competition, let the world know. Submit an entry for The FABRICATOR’s 2014 Industry Award. Companies are judged on three criteria:
Operational improvements that have led to increased production efficiency.
Company growth over the last 12 months.
Steps taken to promote a positive image of manufacturing and support charitable causes in the local community.
If you would like a notification when the online submission form is ready to begin accepting nominations, please send an e-mail to Dan Davis at email@example.com. The 2014 Industry Award winner will be featured in a cover story in The FABRICATOR and win complimentary registration, travel, and hotel accommodations for The FABRICATOR’s Leadership Summit in March 2014.
The FABRICATOR is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The FABRICATOR has served the industry since 1971.