The downstream metals industry is constantly changing. From the Internet of Things and cybersecurity to labor challenges and automation, fabricators and end users have plenty to consider when it comes to managing a business.
During last month’s FMA Annual Meeting, metal fabricators, toll processors and equipment manufacturers from across the country gathered in Scottsdale, Ariz., to consider these and other issues. The specter of the then-pending Section 232 tariffs hung over the entire conference, with economists and industry insiders offering their two cents.
The following Q&A features highlights from one conference session, titled “World Cafe Conversations.” The panel discussion included Edwin Stanley, vice president of sales and finance at GH Metal Solutions; John Axelberg, president and CEO at General Stamping and Metalworks; Donald Kammerzell, CEO at K-zell Metals Inc.; and Lori Tapani, co-president and owner of Wyoming Machine Inc.
What are the one or two big things that you’re working on right now?
Edwin Stanley: This probably isn’t a surprise but it’s labor and adding capacity; trying to keep pace. Most of our customers are OEMs. Their business is ramping, and they need us to stay with them.
The labor has been a real challenge. It’s not correct to say we can’t find people, because we can find people. We just can’t find enough good people. Of course, getting them trained and up to speed is a challenge. I’m sure most every¬body else faces those same things.
John Axelberg: Employee attraction and training are at the top of the list because we’re experiencing some significant growth. What we’re realizing is the faster we can convert inexperienced, new employees to the productive machine operators, the quicker we can bring capacity online and be able to respond to the needs of the customers.
The other thing is more effectively leveraging our automation. One of the things that I missed when we started adding more automation is that it requires a lot of engineering and technical expertise. We need to carry a surplus in that area in order to get things done quickly, and so that’s a big focus for us this year.
Donald Kammerzell: Training people. We’re going to have a training within the industry group come in and teach us how to train our workers and train our supervisors. The best supervisors I usually find are skilled workers, but they lack the supervision skills. As I hire and move people up into new positions, I need to be sure that they can be competent in supervision. So, we’re looking at that as a program.
Another big thing we’re trying to do, we’re going to launch an initiative to do our costing by asset so that we know how much revenue we’re producing by an individual machine and compare that to floor space and see whether that’s something we should have.
Lori Tapani: Probably my No. 1 is the onboarding of new employees. We historically have had really low turnover and it just so happened that in the last 12 months we had several retirements in key areas. So, it really brings to light all the things you can do to improve your company, to bring people on and bring them up to speed.
The second thing that we’re working on right now is the implementation of a new scheduling system that enhances our ability to really identify where our bottlenecks are. That software solution is helping us to identify where we need to cross train people and when to move people around through¬out the day to really have a flexible workforce.
What is the biggest external force affecting your business?
LT: One of the things that’s at the forefront of my mind is consolidation of the customer base. That’s an external force for us that you just have to navigate through. It can be disappointing sometimes, if someone who buys from your original customer makes a decision not to work with you anymore. We always try to go and visit the new company in their area and provide as much information as we can about our capabilities and our past performance.
DK: The tariffs. That’s probably the major external force. But right now, my biggest external force is that we have a lot of incompetent competition that can’t recognize what true costing is. It’s just frustrating to lose a contract to somebody that you know doesn’t have the tooling for it but tells the customer, “Oh yeah, we can have the tools here in two weeks, and we’ll have parts for you in three,” when there’s no way in the world that can happen.
JA: For the most part, we all face the same headwinds and enjoy the same tailwinds when they come along. Obviously, the situation with the steel market is going to make a difference. But knowing the customers we serve as well as we do, our focus is still always on that relationship and how can we become better at what we do as the context of the industry changes. I don’t see a particular headwind that’s going to be harder on us than it is on anyone else. We’re just focused on the things that we can control.
ES: I don’t know if labor problems are an external force, but it’s certainly been difficult for us. But, also what Don said: pricing. I don’t know if it’s necessarily predatory pricing. In some cases, they might be trying to get their foot in the door, but a lot of times it is the same thing Don said. We call it unsophisticated pricing. They don’t really understand the cost; they’re just doing whatever it takes pricing wise to get the business. But, it does make it challenging. In general, I believe that does push the price points down for everybody and it’s hard to get them back to prior levels.
Do you spend the time to educate these competitors?
JA: I think that’s kind of the role of FMA and events like this.
LT: We too have had competitors with unsophisticated strategies for pricing jobs. A significant customer several years ago, we lost some of our work because of that. It was one of those things where we’re progressive, we’re continually improving, we work closely with our customer and we just couldn’t achieve the pricing they were offered. Our customer ultimately went to the competitor, and within a four-month period, all of that work came back to us and more because the person who priced it could not meet the requirements that our customer had. When something like that happens and you’ve held true to your integrity and you come back to your customer, that actually builds our relationship with them and it makes it stronger.
ES: I believe it’s more about educating the customer. It’s hard to have a conversation with a competitor because obviously he doesn’t think you’re in it for his best interests.
What are your companies doing in the cybersecurity area to stay safe?
LT: Because of our size, we’re not really big enough to have a full-time IT staff. We work with an outside firm that specializes in data security and does all of our backups. Because, quite honestly, with everything you have going on in operating a business day to day, I know that there’s no way that I could adequately keep up with that.
DK: We have looked at that pretty seriously. This last week our website got attacked by Russia. Why? I don’t know. For about six hours, we had 30,000 or 40,000 attempts to get through our firewall, which slowed down our internal processes. We have a Cisco router that we can turn IP addresses off, so we blocked the entire country of Russia. We really found that you need to have multiple layers. We have firewall protection; we have software inside both for firewall and for endpoint protection. Ransomware issues are a giant thing, so we have daily backups, weekly backups inside and monthly backups off site to try and take care of that. So, we spend a lot of time and effort trying to deal with cybersecurity.
JA: Several years ago, we outsourced the technology side to a consulting firm because we realized there’s just no way we’re ever going to have an in-house person who can stay on the leading edge when it comes to security. So, we have a full-time consultant on our site managing our network. I don’t spend a lot of time worrying about protecting the company. I think we’re doing probably the best we can. When you look at the institutions that do get hacked, a little fab shop in South Bend, Ind., is probably never going to have the resources that some of these big banks have. So, if it happens, it happens. We focus probably as much on recovery as on prevention.
ES: One of the benefits of being part of a large organization is I don’t have to worry about that. Corporate’s got a big IT staff, and they take care of that pretty well as far as I can tell. And the training they send out that we’re all required to do has actually been good. It’s taught me to be more careful about what to click on and what not to click on.
Do you look at your ratio of employees to robots, and where do you think we’ll be five years from now?
DK: We’ve got two robots and 15 employees that are actually productive. My guess is that in the next five to10 years that ratio will switch. You’re going to end up having almost entirely automation. If you look at what’s happening in Europe, I think that’s the only way you’re going to be able to move forward.
JA: As automation becomes more ubiquitous on the shop floor, it’s not really going to be replacing labor. That’s one of the things we’ve learned. You do have to have some people driving the automation. It’s not a 1:1 or a 1:2 replacement. We see the workforce changing, but we’re going to have a lot more programmers, more engineers supporting the automation.
ES: We have a total of seven robots and 410 people. Obviously, that’s a growth initiative for us. But it’s a real challenge because it takes a different individual, I believe, to do that well.