Equipment investment and hanging fruit

Several weeks ago I visited Ometek Inc., a contract manufacturer near the Columbus, Ohio, airport. After reading the manufacturing news this week, I started thinking about the company’s bending department. Here’s why.

This week the business world learned what it pretty much already knew. The Institute for Supply Management reported that manufacturing continues to grow, but that growth is slowing a bit. Still, the fabricated metal products sector reported significant growth; only the apparel industry grew by more.

Two quotes from survey respondents give a decent snapshot of where things stand:

"Our business is softening due to seasonal considerations. Overall, our situation is much better than 2009."

"Customers seem to be pulling back on orders. I suspect that they are trying to reduce their inventory for the approaching year-end."

The first quote is from the machinery sector, the second from transportation equipment. The verdict: Things are better than they were--not great, but better.

Then on Monday the Commerce Department reported significant gains in capital spending. In August, capital goods spending (excluding military goods and planes) rose 5.1 percent, more than many expected. Admittedly, the news was tempered by a slowdown in new orders (down one-half percent) and shipments (down 0.6 percent).  But gains in capital spending do show companies are making investments for the future.



James O’Sullivan, global chief economist at MF Global Ltd. in New York, had this to say to Bloomberg: “The trend in business investment is still quite solid. Business investment is still one of the stronger parts of the economy. There is certainly no collapse here, though we are seeing a fading from the contribution from inventories and certainly the trend in manufacturing output has slowed.”

Visiting Ometek several weeks ago, I saw one press brake operator make one bend, then hand  the part to another worker who completed it at an adjacent brake. The bending area had an innovative configuration, with all press brakes arranged in a rectangle and tooling and work-in-process in the center. Everything entered and exited in one place to clear the aisle and allow for optimal part flow. Tools and WIP were a few steps away, and the brakes were grouped close enough so their operators could hand off parts to each other with little difficulty.

One press brake was different, though.

Purchased this year, the hybrid electric-hydraulic machine has a hydraulic tool-clamp rail holding precision-ground, common-shut-height tooling set up in a staged fashion. A gooseneck is next to an acute punch, which is next to another kind of tool, and so on. One operator bends an entire part in one setup. In other words, one operator can produce the work of two or more. Moreover, all bending is programmed and simulated offline.

“Everything will be updated. It’s tough to do in these times, but it’s also important to do during these times,” said Paul Siders, Ometek’s vice president of manufacturing. “It’s even more important than it used to be.”

You could look at these bending area improvements as low-, medium-, and high-hanging fruit. The low-hanging fruit requires little or no equipment investment. At Ometek, low-hanging fruit includes rearranging press brakes for more efficient part flow.

Medium-hanging fruit would be that new tooling investment; high-hanging fruit would be the new press brake and associated software. The investment doubled worker productivity. The machine didn’t replace ancient clutch-driven mechanical brakes, either. The older machines were of 1980s and early 1990s vintage--still modern and fast, but nowhere near as flexible as the 2010 machine.

Perhaps what we’re seeing today is an industry that’s had time to stop, think about, and implement the low-hanging fruit: rearranging machines, negotiating with metals suppliers for better deals, streamlining part flow and front-end processes, and so on. Now some shops are getting ahead of the economic recovery curve and investing in that medium- and high-hanging fruit: those new machines. If one new press brake can double one’s productivity, just imagine what will happen during the next few years if capital spending continues to increase.