The Vast Majority of Component Plants Have Too Much Lost Productivity

Issue #11243 - October 2019 | Page #28

By Todd Drummond

People make the common mistake of thinking that if they have been doing something for a long time, occasionally have made improvements over the years, and they are working hard and consistently, then they are doing it the best way possible. But the truth is, approximately 80% of truss and wall panel component manufacturing (CM) suffer from far too much lost productivity. This loss of productivity can be defined as a cost and as a waste (the Lean Manufacturing Japanese term for it is muda). This waste is exhibiting itself in the net profit results. As a percentage of sales, single-digit and low teens net profit should be totally unacceptable during good times. It is not just the big things, like equipment, that make a big difference in efficiency and profitability.

During the BCMC show, many attendees are seeking some type of improvement, but too many are focused on new equipment and do not put enough emphasis on process improvement. The Japanese reference process improvement as “good change” (kaizen), which most companies who embrace lean manufacturing practices refer to as continuous improvement.

Recently, a former lumberyard CEO of 17 lumberyard locations explained to me that his two CM plants had made up only 10% of their sales yet contributed 30% of his net profits. The larger company failed during the downturn, so they lost all of their lumberyards, and now they only have a single CM, which is very profitable again. They are in an area of the country that was among the first to experience the devastating ’08 crash. This situation gave him a unique perspective of having a CM operated by a lumberyard versus independently owned. Since that time, their one operating CM plant has reestablished itself, and they have no intentions of getting back into the lumberyard business. Over the last three years, they have increased their capacity by 40% and their total net profits by a considerable amount because they improved their processes and made a modest equipment investment following my advisement. He stated to me that, looking back during their time when they had all of the lumberyards, their CM plants had seemed to be functioning so well that they gave it very little thought. Now he understands they were not anywhere near as good as they could have been and he wishes they gave it more focus. He added that he is delighted they hired my services to get them on a much more profitable path.

When it comes to CM, lumberyard-owned operations consistently make lower net profits than independently-owned operations. This has been confirmed by many people within the industry, especially by companies who acquired both lumberyard and independents. Too often, lumberyard-owned CMs feel they should shortchange the CM’s gross margins in order to achieve greater sales at the lumberyards. Yet, as stated previously, the CM can offer a company a lot more net profit as a percentage of total sales if it is operated more efficiently.

Regardless of independent or lumberyard-owned, these are some of the areas I found to be the consistent areas of needless waste in approximately 80% of component companies.

Personnel issues of constant turnover and not enough personnel is all too common, which leads to having insufficient capacity and quality control issues.
All manufacturing equipment, regardless of automation, operating at less than capacity is another all too common issue. Therefore, the need to purchase additional equipment, manufacturing floor space, and other capital investments is wasted because the sales are hiding too many sins.

- Five blade component saws are typically operating at less than 50% of capacity.
- Regardless of automation, assembly tables are typically operating at less than 65% capacity.
- If you think I am exaggerating about saws and tables efficiencies, send me an email and I will give you some simple tasks to prove these statements.
The lack of standardization and optimization in truss designing leads to increased material costs equivalent to at least 2% of sales, and often as high as 6 to 8% of sales which is a hidden cost that far too many are overlooking. There are ways to automate the design optimization and standardization processes to reduce design time, increase production capacity, and reduce manufacturing costs.
Too many designers for the work being done creates unnecessary costs. Instead, there are ways to reduce the amount of design time to increase the capacity and effectiveness of the existing design team. One example is using “Sum+It,” a truss estimation application for quoting truss projects which is 5 to 10 times faster than using truss design software. (https://sum-it.ca/)
Reliance on a single vendor for equipment, software, and suggestions of improvement will not provide component operations with all of the information needed to perform the best they possibly could be doing. No matter the vendor size, no single vendor is best at every aspect of the CM process.
And, by far, the greatest hindrance is overconfidence of key personnel within the company believing they have all of the best ideas. A truly confident person is willing to be challenged by an outsider’s perspective and suggestions. Just because someone has been doing their job for a very long time, that does not mean they have all of the best ideas.

All of the issues in this list can and should be addressed. However, #6 which pertains to the overconfidence of key personnel is the most significant and most challenging to overcome. Issues #1 through #5 are very common, and they are areas where I help all of my clients with each consultation. Once you understand how much more productive each area can be, it is a simple matter of explaining how with follow-through by the key personnel. Overcoming large egos is another matter altogether. You simply cannot convince someone of another method when they are unwilling to listen because they feel threated by their own seemingly knowledgeable expert opinion. I like to explain to everyone that my expert knowledge is challenged and expanded by every consultation. Every consultation offers an opportunity to learn something new that I may not have thought about or known before. Once I gain something new, I add that new idea to my training seminars and disseminate it to my existing clients.

Everyone wants to believe that they are somehow unique and above average. But the fact is, most companies fall well within the described wasteful areas I have explained in this article. The companies who have achieved the top 20% of productivity are using the best practices that have typically taken years of constant refinement and improvement. Good enough is never sufficient within those companies.

When you want more than hype, TDC is your best source for learning about the very best and latest practices to keep your company competitive. TDC has proven real-world expertise that goes far beyond what many expect and has provided consulting services for well over a hundred clients. Whether you are a new or longtime operation, save your company a great deal of time and money by getting professional lean manufacturing help and training to improve all of your processes, not just in manufacturing. TDC uses proven and practical lean manufacturing best practices combined with industrial engineering principles that include refined time standard man-minutes for truss manufacturing. So, before you buy equipment, get TDC’s advice! TDC does not receive referral fees from any equipment or plate vendors, and you can trust TDC for unbiased vendor and equipment recommendations shaped only by customer experiences. Please don’t take my word about TDC’s services though. Read the public testimonials many current and past clients with decades of expertise and experience have been willing to give: https://todd-drummond.com/testimonials/.