While attending IMTS in September, it was nice to meet fellow machine shop owners and managers, many of whom expressed optimism and reported a robust year for their businesses. That was good to hear, considering our market is in the midst of a downturn and requires aggressive management to persevere.
Similar managerial efforts have been required during my tenure at a shop, but the ramifications of our market, combined with an unstable global economy, are widespread. Many competing shops are gone, and many manufacturing-related businesses across the board have been impacted. The good news is we’re tougher and wiser and we've learned to embrace the positive factors that present themselves in times of turmoil. Following are some interesting examples, for better or worse.
With conditions requiring a leaner workforce, we’ve learned it’s possible to have too many employees, even when you think you’re swamped with work. There always seems to be justification to add one more person. But when you scrutinize workers’ duties, the shop operations are commonly not running as efficiently as you hoped or assumed. This is partly because there are many workplace distractions, with personal electronic devices being the biggest culprits. They can waste an hour or more of each workday—your workday. When you add up the number of hours wasted over the course of a month or year, it becomes apparent you don’t always need more employees, you urgently need them to stay on task.
Also, it goes without saying that some customers’ net-90 terms aren’t conducive to the survival of a hard-working machine shop. Rejecting these terms and getting these customers to pay more quickly took some effort on our part. Most of these late-pays finally approved net-45 terms or better, including some who accepted a small discount for net-10 terms or cash payments.
The most aggravating customer dictate of 2016 came to us from a large, publicly traded energy company. While the company actually pays on time, the CEO issued a policy that stated international suppliers receive top priority for all outsourcing, regardless of their history. The company will only source domestically if international suppliers can’t or won’t. And to add insult to injury, the policy forbids write-ups for international suppliers because of nonconformance or other discrepancies that a domestic supplier would be accountable for.
Losing a competitive bid is one thing, but it is very disheartening when a CEO mandates that lower-quality parts, late deliveries and nonconformance be swept under the rug for the sake of quick savings. For years, we’ve made this company a priority—and for what?
Thankfully, this foolish model doesn’t satisfy many of the energy company’s needs and we still get some work. Our employees deserve an apples-to-apples competition.
In spite of the frustration such occurrences create, they have helped make us better and smarter about running our business. As I’ve taught my kids, sometimes you have to make lemonade out of lemons. This year has been the biggest test of that theory in my business life. However, our employees, CTE readers and my family have kept me motivated to fight on. Our shop is still in business, so perhaps we’re doing something right.