Being lean pays in a recession

I spoke with a stamper last week who found one of the few areas for growth in this economy: takeover work. Jim Schwartz, general manager of marketing at Eagle Wings Industries, Rantoul, Ill., recently implemented magnetic die clamping, a technology that has allowed the company to take on new work in a hurry, reducing press retooling time to a matter of days. We"ll cover how the company does it in a future print edition of The FABRICATOR, but the surge in takeover work implies a larger trend. Companies that adapt quickly win; those that don"t lose and, as we"re seeing, sometimes shutter their doors.

Nothing can sugar-coat the manufacturing news this week. Thousands are being given pink slips. Caterpillar alone is laying off 20,000. What started as a bubble in the financial sector has burst throughout the entire global economy. The manufacturing downturn this time is not about losing jobs to cheap labor, as it was earlier this decade. It"s about losing manufacturing jobs because consumer demand, both in the U.S. and around the globe, is plummeting. Though it doesn"t give much solace to companies that don"t make it, those that do survive may come out stronger on the other side, with more efficiencies and fewer competitors.

The thought of fewer competitors made me recall a conversation I had last year with Brian Maskell, president of Cherry Hill, N.J.-based BMA Inc., a consultancy that specializes in a concept called lean accounting. Boiled down and oversimplified, lean accounting helps bring together both manufacturing and accounting practices under the lean umbrella, so both manufacturing and finance people are on the same page. He focused on the fact that the basic tenet of lean is to shorten the time between taking an order and receiving cash for it after delivering the product. In lean companies, huge amounts of inventory don"t sit on accounting statements as future income. Instead, real incomecashis what matters.

A lean company identifies and eliminates waste and, in so doing, increases its capacity to produce. This allows fewer people and resources to bring in more revenue. The trick is finding more revenue-producing work to fill up that freed capacity. In the past, lean manufacturing has been a tough sell because it"s about doing more with less. If we do more with less, the employee thought, what if we can"t bring in more work to do? What does that do to my job security?

Today"s recession may be providing the answer. Lean Company A continually provides more value to customers. If Company B doesn"t eventually provide more value, Company A ultimately will take on Company B"s work. In a downturn like the one we are in today, in fact, Company B may shutter because it doesn"t have enough work to keep its doors open, but the work it did have doesn"t go away. It"s the lean, agile Company A that can retool, change direction on a dime, and take over that new work quickly.