by Dave Quint

If you are in the business of manufacturing metal parts or products and you hired an expensive business consulting firm to analyze your current predicament of depressed business levels AND if the advise they gave you is what I’m going to tell you, which is: "increase your capacity in this down market" then there’s a good chance you would ask for your money back and say " The Boy is Crazy" BUT BE CAREFUL because trend setting thinking is inherently hard to recognize as a reality.

Is this you ? If you are a typical shop today then more than likely your backlog of work has shrunk from 12 months approximately 20 yrs ago to about 8 to 10 weeks approximately 5 years ago to just several weeks today ( or there abouts). Not only is the current backlog only several weeks but your fears are further compounded by the fact that you have no idea where the work is going to come from once you work your way through your current backlog of only two weeks. You realize there is more work out there to be had but its just a bunch of companies in such a hurry that they refuse to schedule in behind your current backlog. In an effort to appease your fears about only having a two week backlog you desperately try to distract and tempt them with cheap prices in hopes that the good deal will make them wait. So here goes your margins also. Uh oh, more anxiety and pessimism. Now you got shrinking margins to go along with your seemingly shrinking backlog. This current anxiety is causing today’s manufacturing decision-makers to not want to make additional investments in their businesses. The idea of spending money in seemingly down times seems alittle insane at face value, but in the world of ‘cause and effects’ not making necessary business investments is really a ‘cause’ disguised as an ‘effect’.

( Note:The focus of this discussion is to get modern day backlogs in their proper perspective because pricing and margins is a non-issue as far as it being something new to contend with. Pricing negotiations and all the other stuff that effects margins like manufacturing efficiencies, cost of production, supply and demand etc etc have been with us since the first manufactured part was sold to Moses for his ox cart.)

Is This Still You ? Some how, miraculously, your 2 week backlog turns into another two weeks as another guy in a hurry lands on your door step needing a quick turn around and so on creating a fairly steady 2 week backlog that somehow seems to last all year. At the end of the year you look back over the past 12 months and other than a lot of self imposed stress and pessimism over the short backlog and slightly smaller margins you conclude that the year could have been a whole lot worse than it seemed along the way

The Rational: If you have been in business for several years then perhaps you are too close to the screen to see the picture clearly so somehow try to forget what you already know and pretend you are just now TODAY deciding to get in the manufacturing business. You come to my office in your process to gather information about the industry and I say well Fred, if I step back and examine this business historically, here’s how it is evolving: 20 yrs ago, or so, it was not uncommon for a manufacturer to have a back log of 12-18 months. These backlog numbers have continued to shrink for a multitude of reasons, like exportation of the work to cheap labor countries, ‘JIT’ ( ‘Just in Time’ business mgmt theory) , a currently depressed economy, machinery technology and their corresponding efficiencies and ease of use, the national machining capacity utilization numbers etc.,(you’ve probably heard all these and a whole lot more) But America will always have some quantity of manufacturing and I propose that you can’t just sit tight and wish and hope for the statistics to roll back to the ‘good old days’ if you want to participate in manufacturing in America ‘Right Now’ in a growing and healthy way. You should step back and recognize that the current evolution of the industry is not really fundamentally different than the trend it has been making for 20 plus years and it is also parallel to everything else in our new society. Our new society is increasingly impatient and therefore wants everything ‘RIGHT NOW’ ( if its also cheaper than that’s even better), that’s why other industries are literally becoming ‘drive through’ for the consumer. This ‘Right Now ‘ demand of our society is not the only reason manufacturing is evolving the way it is but it is certainly the main reason. This is the irreversible expectation of our fast paced society so either join in or sit on the sidelines waiting for it to return to the ‘good old days’.

Back to Fred: Specifically Fred, for you as a Manufacturer today in America, you seem to only have 3 choices

1.) Quit waiting for the backlogs to go backwards to the old days and recognize that if you can’t turn the part or product around quickly then this work will pass you buy. It’s easy for Fred to conclude that to perform in this capacity you must have sufficient readily available machining capacity. He also concludes that the only difference between being busy and having a growing manufacturing business with a 6 month backlog verses the same thing with a perpetual and unending 2 week backlog is the self-imposed mental anxiety and stress created by clinging to a hope of returning to the old days. Summary of choice 1: Expand your capacity so you can add customers to your 2 week window of opportunity.

2.) To avoid the anxiety associated with the dilemma of waiting for the old days to return verses the mental discomfort of expanding your capacity with ever shortening backlogs your only solution is to go find another industry. BUT remember the QUICK QUICK demands being put on manufactures is not unique to the manufacturing industry. Our fast paced evolving society will demand this of all industries, except perhaps wine making. Summary of Choice 2: Go Find Another Industry.

3.) Or you can choose to WAIT for things to return to the good old backlog days where you have more piece of mind. While you’re doing this your business will surely be shriveling up under your feet because there is an age old truth in this business which says " if you are not striving to go forward then you will automatically go backward because ‘status quo’ is not a viable goal. In otherwords, in a foot race you can’t come in second place by trying to come in second place. The guy who always finishes in second place was trying to come in first place. Summary of Choice 3: Wait Around for the ‘Good ol Days to Return’ and go out of business in the process.

I propose that even if the economy starts rebounding in a strong way that the backlogs of the good old days are still history.

If the job shops or OEM shops go out too long on deliveries in a robust economy then the OEM’s will just add capacity or look for more capacity somewhere in the world because our society will continue to scream " I need it now!". If you want your business to grow then you better figure out how to give it to ‘em now. This is an irreversible given.

Wake up and get on board ! The 12-month backlog, which was prevalent 20 yrs ago, seems ridiculous today. The 8-10 week backlog from 5 years ago would seem like a dream come true for a nervous capital equipment buyer today and in 20 years or less you’re current 2-3 week backlog will seem hard to fathom because your customer relations might go something like this: Your customer will solicit you in his truck. The first time you see him he will bring his solar powered part transportation vehicle with its anti-gravity resonator (his truck), his sample part (or conceptual equivalent) and his money. The scanner on your machine will scan his part, compute all the dimensional coordinates in a blink, cut the material blanks in a blink, and then your ultra fast laser will turn and rotate parts in a blink for complete material removal, put the parts in a reusable biodegradable container which you hand to your customer as he touches the ‘OK’ button on your credit card sized pocket computer which then scans the iris of his eye for authorization verification to automatically debit his bank account for the agreed amount into your account. The whole process took 20 minutes and you say to your customer afterwards, " Boy, remember when this process used to take 2 weeks, Wow ! How did we ever survive back then? "

Fred sees the picture loud and clear and says" so if you can’t turn the parts around right away then the customer goes somewhere else, right ?" Dave, "Yep". Fred then concludes "so if you admit that the 2 week turn around is the new norm then to grow your business and beat your competitors you must maximize your ability to harvest 2 week opportunities, so it seems obvious that the only way to do this is through a combination of more machines and fast and efficient machines." Fred is new to the business so not only will he get rich but he won’t have any anxiety about the 2 week backlog because he doesn’t know any better. The solution to growing his business seems simple, so long, as his competitors sit on the fence waiting for the good old days to return.

Winston Churchill would look down on us and say " while you guys are being busy fearing the fear of going out of business, you seem to be letting all these customers who are in hurry for your services get away. "

Don’t let Fred put you out of business. Visit this website or call us at 513-771-2111 and add spindles now so that the next customer in a hurry doesn’t get away from you and end up giving Fred all his money !

Obviously, I have oversimplified the ‘cause and effects’ of the American manufacturer inorder to make my point, BUT if you don’t recognize my point then even Fred, a rookie in your business, can tell you what your business fate is going to be.

Warning: Waiting to make a decision until the situation becomes obvious is good for your piece of mind but bad for your wallet. This is because when its obvious to you then so will it be obvious to enough other people that it will insure that you are near the end of the line for the low hanging fruit.

The next article will talk about another new American business expectation, called Integration, which of course, is the new trend where OEMs want their suppliers to provide finished assemblies, not just a singular part. You guessed it ! If you want to be a player then you must expand your capabilities. Same theme again: Status Quo equals certain death. Either grow or die !

Best Regards, Dave Quint President of Great American Equipment Company.