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Need to ramp up production: New machine or new employee?

StreetSpeed

Hot Rolled
Joined
Oct 15, 2008
Location
NY
Dudes,

*A bit longwinded. If you wanna get to the point skip to the last 2 paragraphs.*

One of our customers is an after market racing transmission supplier. It's one of a only a couple customers which I would consider that we do 'production' for. Bout' 3000, S7 mechanical diodes a year, made up of 2 parts, of which we make about 140 of each a month.

They want to have a meeting with us to talk about ramping up production. It would probably not be vastly different numbers, but slightly more, and I HOPE to be on a set delivery schedule throughout the year. Right now we have POs open for the next few months, but the time between them always varies, so we can't really schedule any machines since we never know when we REALLY need to do them. My father and I are on two different ends of the spectrum about how to handle the situation. My view is to consider upgrading our equipment to get the operations done faster than we do. These parts are rarely on time, and it's usually because of bottlenecks in the flow, and operations that take juuuuust long enough so that someone can walk away to do something else, then the machine sits idle for a minute or more. If we had faster indexers in the mill, (for 2 ops) ,some kind of manual pallet changer (for an op that we run 15 pieces at a time), tool probes and touch off probes in our 10,000 rpm spindle, etc, we would drastically cut cycle times and setup times and get parts through the machines faster.

He wants to simply hire another guy on second shift, and man the machines through the night. Essentially I want to upgrade to finish everything on one shift, he wants to hire someone to do it all in 2.

Here's the crux of my question, and it may be black and white: If you need to spend $60,000 to upgrade equipment, or $60,000 to hire an employee (benefits, salary, etc) then what makes more sense in the long run? To me it's the equipment. You're in and you're out, you have the stuff, you can use it everywhere, and it won't take sick days, show up late, and need to be paid hourly for the rest of it's tenure. We have plenty of cash lieing around for such purchases.

At first my idea was to find a nice used 2 spindle, 2 turret lathe to turn the parts in one setup, and throw a Robodrill somewhere with an indexer to rip through the milling ops, but that's a much larger outlay of cash for a (smaller) customer in the quirky automotive industry. Even though we'd use both all the time, it would be a hard sell to my dad. I think some upgrades to the mills and running the lathe with a little more gusto could net the same affect (for this customer) for much less money. What say you Captains of Industry?

Edit: You can see some of the parts on our not-quite-finished Website by following the url: http://amt-machine.com/auto.html
 
In this economy, there's a lot of nice cheap late model equipment out there. I'd opt for the equipment.
Hire a guy for night shift? Well right there you'll need two guys to work late. Big liabilty for one person working alone in the shop. Plus, you'll go through 3-4 guys before you find one that works out.
 
Another option would be to sub this work out or other work that would open up capacity. Do you do business with any machine shops that you trust the quality? Many have open machine time.

Regards,
Needshave
 
I'm absolutely with you on upgrading the process first, add the hours later once the process is refined for maximum productivity. If things changed and the now-optimized machine and tooling sat still, you'd still have a machine the next day when a PO rolled in. If you spent the money on a person and business fell off, you'd be paying increased unemployment insurance premiums for something you no longer have.

BTW, those parts are a great example of an application where a mill-turn center would give you tremendous productivity in the fewest ops and fewest pieces of capital equipment.

P.S. - I saw that Kondo grinder in the photos on your website. I ran one of those when I worked at Norton Company (pre-St. Gobain) and while it wasn't as versatile as the Okuma GP44/n they had, it was really quite good. The importer/dealer for us was Carl Citron Inc of New Jersey. Haven't seen many of those, but they are really good machines.
 
Another option would be to sub this work out or other work that would open up capacity. Do you do business with any machine shops that you trust the quality? Many have open machine time.

Regards,
Needshave


I dislike that idea. While it works and does happen, its middle man stuff. Ur not the client or the producer and u get paid.
 
Upgrade the equipment. The upgrades you are planning will benefit more than just this job, while the guy on second shift only helps with this one job. Plus a one person night shift can be a total PITA unless you find the perfect guy and even then it is problematic from a safety and liability perspective. The downside to upgrading the equipment is that the money is spent whether you continue to have the work or not. With the night shift guy, as soon as the work leaves you can let the person go.
 
Mark,
Based on the information given, I'd be leaning more towards your dad's option. IMO, it is extremely risky to bring in a piece of capital equipment for a single customer, unless the customer is willing to enter a contract with you.

Reason being, if that work disappears one day, you can immediately shed the nighttime employee and rid yourself of the payroll liability. It's a lot more difficult to get rid of a machine...you may eat a lot of money.

Personally, if you're talking about going from a single shift operation to a 1st and 2nd shift operation, I'd go for it. It is fairly easy...we already do it 2-3 days a week. However, I would rather buy the equipment than go to 24 hour operations.
 
Get a horizontal and you can probably take a day off, sell a machine and pay yourself with recycling money :)

Seriously, once its up and running its crazy what comes off of them. Right now i am lucky to fill a 40gallon barrel of chips up off of one vertical in a shift. I filled up a 4'x4'x4' box in one shift + one run (while i was home) with the horizontal. PLUS you can do quite a bit of opps per setup if you do your fixtures correctly. Right now i am setting up to run a part that would usually be 2 opps then the 4th axis indexes 7 times. I am doing it in 2 opps on the horizontal.

Right now you can get a nice horizontal cheaper than a new vertical. A horizontal and a robodrill is going to be a killer combo for me..
 
you may want to do a careful time and motion analysis with a complete break down of every step. Like you mentioned, some rearrangement and doing secondaries off the main machine might do it. One man second shifts are not for anything that needs watching, your rates go down and scrap goes up. Exceptions are fully automatic ops like injection molders. I once sold an electric fork lift to a shop about a week later they called me up, motor burned out! hmm, Luckily I had a junker to swap the otherwise, 2500 dollar motor from. A while later one of their employees told me that he heard it got burned out when second shift employees were playing fork lift football.
 
What is you True Capacity?

It's a tough question. It all depends on how you look at "Capacity".

A capital equipment purchase is a fixed cost. You have to make that payment either way. Like others stated here there is some ROI you can look into, but hiring someone else is moreso a "Variable" cost. You can send them home or lay them off if you need to and don't have that cost.

I will assume that you must have the "means" to purchase more equipment right now, but one thing I always considered when thinking about things like this is your spindle time capacity is 24/7. If you work 10 hour days, that equipment is not being utilized 14 hours a day. By hiring a person to work an off-shift, you are gaining capacity in spindle time right there with your current equipment.

There seems to be 2 lines of thought in this field. 10 hour days with 10 spindle time or 24 hour spindle time potential. I am a 24 hour spindle time person.

I just think if you have the equipment, I would expand the hours on the machine I have first then worry about buying more later. You can always schedule hours differently, but it's hard to make a monthly payment when there is no work. (In the event that things slow down.)

My 2 cents.

Mike in MN

http://www.cncbasics.com
http://www.cncbasicsforum.com
http://www.mastercamforum.com
http://www.mastercamblog.com
 
David N:

We have a part time second shifter 3 nights a week, and he's the only one. What liability do you speak of? We had a full time night guy for about 7 years and never even gave it any thought?

Komrade Shave (Pardon the Sarcasm):
I've been perfecting these parts for about 6 years now, and my job is to increase sales and profitablilty, not spread the wealth. Plus they're more involved then they look, and there aren't any shops around I'd be comfrotable subbing to, and i'm sure my customer wouldn't like it either.

PixMan:
It is a nice machine. Oddly, I think we bought THAT machine when a customer said "We need 5000 of these things a year!" $100,000 on the grinder (or whatever) and we never saw the guy again. I'm sure that's why my dad's a little gun shy. That was years ago, but he learned that lesson and hasn't forgotten it. So now that buying some equipment for one customer IS viable, he's still reluctant to do it. a mill turn would be sweet, but at $250,000 to get in the door, that's not gonna happen anytime soon ;)


Justin:
Note that I'm not really considering the "buy two machines" option. I'm talking fast indexer, touch probe, manual pallet changer, and really that would speed things up significantly. I can use all that stuff on other jobs (cept' the indexer, which needs to stay fixed at a specfic angle). But I do see your point.

Seekins:
I'd enjoy a horizontal very much, but we are mainly a protoype outfit. If I see an order for 8 parts I get excited. I have very little use for a horizontal most of the time, definitely not enough to justify the purchase. I'm working on bringing in more production stuff though...

Charger:
The voice of reason. I see your angle and it makes sense.

Doug:
Son is 27ish ;) Dad is retiring in a couple years. I've been working here since I was 10, and while I don't know it all (and think basically everyone working here has been doing this longer than I've been alive), I can assure you no one is concerned about my dad retiring and having me man the ship. I've implemented quite a few big changes around here with good results, but I WOULD like to be the impetus of purchasing some equipment and implementing a more profitable manufacturing plan while my dad is still at the helm, so everyone else can see that I know what I'm doing (including myself!) This is a minor stepping stone, as we're talking about a multi-million dollar order coming together in the spring, and I'd be responsible for purchasing some very expensive equipment, so I can get my feet wet here and make sure I'm not an idiot. And before anyone says it, while I have a degree from some big school in business management, I spend 90% of my time making stuff around here, as does my dad. I'm not coming in talking about 'creating synergies' with my degree never having actually worked in the shop. Exactly the opposite.



Like I said, we'll see what happens when we meet with the compnay. It's not like this is hugely profitable for us anyway. I think we do about $150,000 worth of business with them a year (5% of our sales last year), and while it's not chump change, we gotta work for that money fo sho'.
 
I'll second the "do the hard ROI numbers" with the observation that you need to fully consider the entire set of costs and ROIs.

Which various people alluded to - 2nd shift raise liability costs or not? If you hire and later fire - big hassle with the state, or not?

If you add probes, indexers, other smallish improvements - really useful elsewhere, or not?

Getting to the reality of those questions will allow computing real numbers which will have strong influence on any business person.

Of course, assigning probabilities to events is very hard....
 
Another way to look at this is to consider your long range objectives for the business.

> Do you want to grow the business and end up with 10, 20, or more employees?

> Do you like it best when it's just you and whatever occasional labor is absolutely needed?

Having just a few employees is a no-man's land. Unless one of the family is and will continue to handle all this, you have all the legal and regulational hassles of a larger business once you add that first employee -- at least if you don't plan on doing under the "radar." For that reason, you'd really want to grow to a size where you can afford to have someone looking after all that stuff. If growth is your goal, and this is an opportunity to come roaring out of the recession, you might want to consider adding the employee. You'll never have a better time to find and add someone really good.

If you want to keep things pretty much to yourself, then the more productive equipment makes sense.
 
Another thing to consider are the "what ifs"

"what if" the client for whom you'd purchase the additional hardware spirals down the large porcelain floor-mounted bowl and leaves you stuck with a large machine payment? Expensive hardware sitting idle makes unemployment payments look like the lesser of evils.

However, additional in-house capacity is a good thing (to my thinking), and "what if" you market your company aggressively to gain new work that takes advantage of the new capacity?

Personally, I'm in your camp - I like hardware, it doesn't give me half the headaches that managing another human being gives me.
 
Pete:

We already have 11 employees. I do wish to grow at a manageable rate, but we're not Paw and Son in the basement making parts either. Adding another employee is a non-issue, logistically.

Racer Al:

Again, I'm not talking "large machine payment." I'm talking a couple of items with which we'll pay cash and use on other jobs. If the company just fades into oblivion (and also of note, during this "recession" their sales hardly faltered at all. This is pro-level stuff we're making, and those guys are gonna buy parts no matter what) then I can always use the stuff else where.
 
There's a lot of intertwined variables in play here. Just as a second shift move could be disastrous because of unpredictable labor issues, a big machine payment with no PO's coming in against it can drag everything down.

That said, a quality two-spindle twin-turret lathe with multiple live tool capability could go far to improve productivity (lowering cost per part) than the bigger unknown variable of a second shift. A machine that can take live tools at every or every-other station of two 12-station turrets can really make parts fast. Reducing the number of work station moves and setup reduces the opportunities for scrapping parts. You don't have to run out and buy live tool holders all at once, just build the "library" slowly. Moreover, it allows new products to be made because you can now do some long-part "balanced" turning without buying a swiss machine.

I once supervised 40 people spread out over 3 shifts. I heard "rumors" and showed up at 4:00AM one day, only to find 4 of the 7 people (including the shift supervisor) all working on a snowmobile. The other 3 weren't exactly setting any production records either. That shift was gone fast, and overall productivity shot up.
 
Pete:

We already have 11 employees. I do wish to grow at a manageable rate, but we're not Paw and Son in the basement making parts either. Adding another employee is a non-issue, logistically.

Racer Al:

Again, I'm not talking "large machine payment." I'm talking a couple of items with which we'll pay cash and use on other jobs. If the company just fades into oblivion (and also of note, during this "recession" their sales hardly faltered at all. This is pro-level stuff we're making, and those guys are gonna buy parts no matter what) then I can always use the stuff else where.

OK so you've 11 employees and are going to pay cash for machinery.


SO-OOOOO

I'd buy machinery, it's a one off payment, so not a constant drain like a paycheck would be.

If the new machines aren't working, they're not costing - cash flow.

I assume you already have good reliable employees, would you get another of the same calibre?......... IME unless you know the guy personally it's a gamble.

From what you say it appears your existing crew could run more parts if they'd the machinery.

More machinery could make different parts while the existing machinery could cope with present or reduced quantities of existing parts.

I don't know the details of your tax system, but if you've 11 staff, you should be making a profit, which I assume is taxable, so can new machines be offset against that liability?
 
I have gone through this scenario over the past three years starting with redesigning and upgrading fixturing which took productivity on some parts up five fold and on most parts at least two fold. This was followed by the purchase of three more machines and a replication of the fixturing to use on the new machines. Finally an extra employee was needed to keep everything humming.

My vote is to upgrade procedures; fixtures, tooling, programming, etc., wherever needed to get the best productivity out of existing machines and personnel. Then when it becomes necessary start adding machines. This way you are more likely to maximize the utilization of all the machines old and new and all employees, exsiting and new.
 








 
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