SCHAUMBURG, ILL. — Business is starting to look good again for North American mold makers.
In a post-recession economy — even one in a slow recovery — customers are ordering more tools, and asking for more complex tools. In the American Mold Builders Association's spring 2013 survey, 65 percent of toolmakers said their business was "good," and another 17 percent said business was "excellent." Only 1 percent reported their business as poor.
Businesses that were struggling for years are now back in the black. But consultant Laurie Harbour warns that the increased revenue for toolmakers is masking some long-term problems that are lurking in the background, ready to hit again the next time things slow down.
Harbour is interviewed in this video from the AMBA conference.
"If we get cocky about revenue growth and don't take the opportunity to restructure problems in operations, then the window to see real improvement is going to close," Harbour warned toolmakers at the AMBA's annual conference, held April 24-26 in Schaumburg. "Everybody's all excited again, but everybody's forgetting we could have some losses just as we did in the recent past."
Harbour, the president and CEO of Harbour Results Inc., specializes in benchmarking both financial and production performance of mold makers. Her company was hired by a North American automaker to visit and analyze 120 of its molding suppliers worldwide to help it understand its supply base.
The North American auto industry, in particular, has seen resurgence in the five years since General Motors Co. and Chrysler Group LLC went into bankruptcy for restructuring. North American auto production is predicted to hit more than 15 million vehicles in 2013 after dipping below 9 million in 2009.
Automakers have been busy refreshing existing models and bringing new vehicles on the market to stoke consumer interest, which means more business for North American shops, Harbour said, however, the complexity of those cars — and the molds for them — is also increasing.
A door panel that was a one-part piece, using one mold, in a 2006 model now uses six different tools for a 2013 model, she said. Rising labor costs in China and improved production in North America has meant that U.S. and Canadian companies have a better chance to compete for business.
That massive effort will end at some point, however, and that same increased demand, is leading to potential problems on the production floor. Harbour said she and her team have seen too many shops relying almost solely on overtime to keep up with the new demand. There are bottlenecks in production that are not solved because no one has time to schedule machine time.
"Operational excellence is the one area that you as shop owners can control, the one area where you can make the biggest difference," she said.
Well over half of the shops that Harbour has assessed continue to practice the "old school" style of mold making, in which one person is responsible for a tool throughout its time in house. Her company's studies show that only 50 percent of the production requirements for a mold requires a highly skilled journeyman toolmaker. Other work can be handled by workers with fewer years of experience.
Using just one person to take an entire tool through production means that the tool itself sits idle at times while the journeyman waits for parts or time on a specific machine.
Re-thinking production so that the tool passes through multiple hands — with journeymen toolmakers overseeing the most complex tasks — helps to speed production, decrease the number of hours a tool sits in the shop and also gives more experience to upcoming younger workers.
"This gives you more flexibility in labor, which is the biggest cost," Harbour pointed out.
The auto industry is cyclical, she noted, so mold makers who are rejoicing their increased revenue now from automakers and suppliers will be in trouble if they don't fix problems with their throughput on the shop floor.
And while rising costs in China — and Chinese interests in serving their own domestic production — have reduced some of the pressure on North American toolmakers, Harbour said automakers are looking at the next geographic regions for tooling.
Harbour Results has already assessed mold makers in South Korea for its automaker customer, she said, and is about to start a round of visits to shops in India, Malaysia, Vietnam and elsewhere in Southeast Asia.