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

  1. #21
    Hdpg is offline Stainless
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    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.

  2. #22
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    Street,
    One guy by himself at night is not good. Some business insurance companies really cringe when there's only one man around. The guy slips, falls, and bleeds to death, gets wrapped up in a machine, or steals stuff, etc.

  3. #23
    barbter is offline Stainless
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    Street,
    I love the photo no3 on the grinding section of your web site!

    As Tonytn said, it's all in the figures.
    No 1 is listen to the customer and see what increase he wants. This largely dictates how you have to respond.
    BUT even if it's a small ramp up or even no ramp up at all, it sounds like you know you can up production by being (and I hate the name) leaner. Set-up reduction, running spindles more efficiantly etc etc blah blah. You're smart enough and already know this.
    Short term bottlenecks can be handled by a temporary additional pair of hands, but you can't beat doing the job with the right equipment the right way.
    Labour is dead money - if you can afford to invest and the whole business will benefit, this gets my vote every time.
    Midaco manual pallet changer isn't big bucks, and having used them since 1997, I think they're one of the best money makers you can buy.
    What about purchasing 25 extra tool holders (BT) so the tools for that job can be left setup?
    Small money for a couple of hours saving each time the job comes up.
    HTH

  4. #24
    Unka' George is offline Aluminum
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    There are lots of good observations in the replies.

    While a detailed ROI analysis of the alternatives can be very helpful, this also is highly subjective in that the assumptions about volume, cost of capital, etc. needed for the ROI analysis are highly subjective.

    One thing to remember is that the society/culture/economy in which your machining operation is currently embedded is considerably different than the one in which your Father started his machining career and formed most of his opinions and “rules of thumb.” The assumptions and “rules of thumb” that served very well at that time may no longer be applicable. For example, with changes in the employment laws such as workman’s compensation, unemployment, and medical benefits it may no longer be economical to attempt to “manpower” production bottlenecks.

    Another problem is that the economy is in a continuing rapid state of flux and while some trends seem to be emerging, these are by no means sure things. One example is the likelihood of rampant inflation. Thus the assumptions and “rules of thumb” that currently are valid and helpful may be counter-productive in 5 years.

    As another responder noted it could be helpful to closely/critically analyze the bottleneck operation(s) for possible tooling/methods/programming improvements.

    One item that is frequently overlooked is the actual utilization rate [i.e. cutting time] of the existing equipment. A cheap/easy fix can be the addition of a strobe light triggered by the end of machine cycle to make sure the operator is aware its time for the next part. I have seen some shops that added a klaxon horn alarm with a 2-minute delay after the strobe light was activated. Depending on your controller this can be done entirely in the program except for the physical strobe light, horn, and relays.

    IMNSHO -- Assuming that you are able to upgrade your equipment, without incurring debt or severely dissipating your working capital, it appears that the least expensive and least risky solution to your production bottleneck is to expand your equipment rather than attempting a “manpower” solution.

    An “oh by the way” is do you have the required/qualified personnel to operate the proposed new equipment or can you get them? Do you have the necessary computer software and someone that knows how to use it? How about the tooling/fixturing? In many cases the purchase and installation of a new machine is the easy/cheap part of a production upgrade.

  5. #25
    Tonytn36 is offline Diamond
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    My statement is simply, does the $60,000 in machine investment return $60,000 or more in productivity improvements and cost reductions (of all kinds) over a year? The reason is in order to justify that capital expense, you must eliminate the $60,000 employee you would need to add. My experience with what you are trying to do says it will most likely ROI out satisfactorily.
    In any sound business, you'll want to maximize the usage of existing capital equipment and personnel resources prior to adding additional personnel or equipment.
    If you are running 50% efficient and you simply add personnel, now you are still 50% efficient, but your overhead costs just increased substantially, meaning much less profit margin. You want to get the overall efficiency up into the 80-90% range before looking at expansion. If it takes capital investment in such things as 4th indexers, etc to reach that 80-90% goal, the investment is normally very worth it, since your margins on the jobs will increase, due to overhead costs being divided out over more parts in the same amount of time period.

  6. #26
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    Tony,

    You are the man. I think that is the best answer. Spend some bucks to make the project as efficient as possible, then if you maximize efficiency and still find yourself coming up short, at that point it's time to look for another employee to run your efficient operation. Proper summation?

    Edit: Also, in your above post you're calculating ROI over a period of one year. Is that a typical time frame in production environments?

  7. #27
    Tonytn36 is offline Diamond
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    That is a proper summation.

    We typically use 2 years for an ROI, however, in this situation where you are going to have to add an employee, the ROI would be over 1 year because of the expense of the employee. All a 2 year ROI would say in this instance is your payback is 6 months instead of a year (if investment was still $60k). Just a different way of saying it.

  8. #28
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    Great, thanks for your help. Always appreciate your insight.

  9. #29
    Tonytn36 is offline Diamond
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    Your welcome.

    Just remember, you need to do the calculations for your particular situation, parts, profit margin, throughput and costing to see if it makes sense financially.
    Whenever you increase efficiency, it will be reflected in lower direct costs to produce parts, which will improve margin.

    Also, remember that only the _increase in margin_ should be used in your calculation, not the entire margin, as that is the actual cost savings for that portion of the calculation.

    As far as this situation as you've related it, it automatically ROI's out if you can increase production rates to a level that satisfies customer demand without adding personnel. This is a "cost avoidance" ROI. You are avoiding the cost of the extra employee.

    ROI's typically fall into 4 categories:
    1. Cost Avoidance (Personnel, equipment updates, etc)
    2. Productivity Increase (throughput)
    3. Customer Demand (production volume, new products)
    4. Safety/Environmental (self explanatory)

  10. #30
    converterking is offline Aluminum
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    Will you be making the 10 strut mechanical diodes?

  11. #31
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    question is, can you get a machine that can do allthe milling and turning in one op and run unattended via magazine barloader..... charge the same and save the ops. However you'll have to run your own numbers for how much each op costs. Sometimes the swiss style/ live tool lathes with y axis really do pay off well. It depends how big your parts are though.

    eta - in this economy taking on a new machine payment that goes for XX years compared to an employee - if things don't go as planned its easier to unload the employee - sounds cold but true. The bank will be there for their check whether the customer comes thru or not.

  12. #32
    CalG is offline Titanium
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    tooling is fiscally justified, Emplyees are good for society.

    It's all all about us and them

  13. #33
    Perry Harrington is offline Titanium
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    Hardinge has been clearing out machines for stupid cheap prices lately. A 2 pallet horizontal was $80k, less than half of list. A GS200MSY machine is $99k. They still have the GS200 as of last week. That's a crazy price for it.

  14. #34
    StreetSpeed's Avatar
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    Quote Originally Posted by converterking View Post
    Will you be making the 10 strut mechanical diodes?
    We do indeed make the 10 strut versions.

  15. #35
    Joe788 is online now Titanium
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    I vote for buying a multitasking machine that will finish the parts in as few handlings as possible. A $150,000 machine costs less than another $15/hr guy, and it still only costs $3,000/month whether you work it 40 hours a week, or 168.

  16. #36
    Doug is online now Diamond
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    Quote Originally Posted by Tonytn36 View Post
    Your welcome.

    Just remember, you need to do the calculations for your particular situation, parts, profit margin, throughput and costing to see if it makes sense financially.
    Whenever you increase efficiency, it will be reflected in lower direct costs to produce parts, which will improve margin.

    Also, remember that only the _increase in margin_ should be used in your calculation, not the entire margin, as that is the actual cost savings for that portion of the calculation.

    As far as this situation as you've related it, it automatically ROI's out if you can increase production rates to a level that satisfies customer demand without adding personnel. This is a "cost avoidance" ROI. You are avoiding the cost of the extra employee.

    ROI's typically fall into 4 categories:
    1. Cost Avoidance (Personnel, equipment updates, etc)
    2. Productivity Increase (throughput)
    3. Customer Demand (production volume, new products)
    4. Safety/Environmental (self explanatory)
    Tony,

    Okay, so what assumptions does one have to make to do a ROI analysis? Is the outcome of the analysis primarily based on those assumptions? Can three of us look at the situation and all come up with the same conclusion considering we all have different life experiences and outlooks?

    I watch the financial news on CNBC every weekday morning. They do a fairly good job of presenting divergent views on the economy by interviewing a wide variety of "experts". Those experts basically all have the same data from which to run their numbers. For whatever reason there never seems to be a single agreed upon prediction. In a sense, you might say they're doing a ROI analysis, and all coming up with different conclusions.

    What I'm trying to say is the numbers don't always tell the story. I firmly believe most business decisions are made by gut feelings and the numbers analysis comes after the fact to justify the already made decision.

    Street' obviously wants to go the new machine route to prove he can make wise decisions (that's admirable). An ROI analysis will bolster his decision. Dad doesn't want to go that route. I wish we knew his reasoning.

  17. #37
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    I'm going to flat out agree with you on upgrading. Plain and simple increasing efficiency pays over the long term. Hiring another man is just a short term solution. Also once the upgrading is paid for its paid for and starts being cost free.

  18. #38
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    Quote Originally Posted by AlexBanich View Post
    I'm going to flat out agree with you on upgrading. Plain and simple increasing efficiency pays over the long term. Hiring another man is just a short term solution. Also once the upgrading is paid for its paid for and starts being cost free.
    I think this is the key... Manpower needs to be paid for over and over, where the upgrade is pretty much a one time expense minus normal maintenance.

  19. #39
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    Forgive me - but I did the "read the last 2 paragraphs" is all. This thread was WAY too advanced for me to take on right now. However - what I would doo and what you would doo are possibly two diff approaches. That doesn't make either one of us right or wrong.

    With only those two paragraphs under my belt I will tell you that I spend my $ towards [semi] automated equipment.


    and it won't take sick days,
    I'm sorry, I thought that you were an experienced machinist / ass plant manager?

    Your definately showing some green in THAT statement! And I will also tell you that the fancier and more automated equipment that you git - the more sick days they will have!


    ---------

    Think Snow Eh!
    Ox

  20. #40
    Tonytn36 is offline Diamond
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    Quote Originally Posted by Doug View Post
    Tony,

    Okay, so what assumptions does one have to make to do a ROI analysis? Is the outcome of the analysis primarily based on those assumptions? Can three of us look at the situation and all come up with the same conclusion considering we all have different life experiences and outlooks?
    First, you try to NOT ASSUME. You want your ROI based on as solid of facts and numbers as you can get. -- Can't figure what the cycle time savings will be with a 4th?....have your MTB put one on a machine and run your program and give you a time. That time should be good within 2%-5% of what it will be on the machine in your shop.
    Want to know what your loading time will be?....Mock up a fixture and have your guys load and unload the thing and see what the time is.

    ALWAYS Use conservative numbers in the ROI.

    If the ROI is done properly, there is but one set of numbers to consider, no matter who does it. Sure, there might be a 5% point difference in person 1's estimate vs. person 2's, but if 5% on one or two of the many values included in an ROI of this type makes the difference in whether the ROI works out or not, then the ROI isn't a go anyway.


    Quote Originally Posted by Doug View Post
    Street' obviously wants to go the new machine route to prove he can make wise decisions (that's admirable). An ROI analysis will bolster his decision. Dad doesn't want to go that route. I wish we knew his reasoning.
    Maybe I misread, but I don't recall seeing where he wanted to buy a new machine. He's just wanting to invest in / upgrade his current process to make it more efficient and not have to hire more help....but maybe I'm wrong.

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