Ayn Rand is quoted as saying “We can ignore reality, but we cannot ignore the consequences of ignoring reality”. Every project has constraints. It is a fact that resources are not limited and a positive ROI is expected within a given timeframe. Every project that our team undertakes we seek to know immediately the goals and constraints are as they are fundamental to ensuring success. Within our manufacturing division this is no different. However, we have repeatedly witnessed within the industry a tendency to believe that boundaries exist where there are none and it creates a situation where strategic assets are not recognized or employed.

When we began Newcastle Manufacturing I wanted to know two things: what were the limits of our assets and what were the limitations of the team. These are two different constraints. We can’t internally go beyond our current equipment capabilities, but we can train ourselves beyond our current limits to fully utilize our equipment. It is a simple concept to understand: whatever part of a piece of equipment that is available but not used due to a lack of skill or rejection is not an asset, and it may be a very expensive unused portion both in terms of missed revenue and operating costs. It is an avoidable situation merely by taking stock of what is owned vs what is used, closing the gap and deciding to generate a return on the full use of the machine.

When a client walks into our shop they will not see wall-to-wall machinery, and that is by design. We have determined that we will purchase additional equipment when it is needed, but we have also decided that we will maximize what we have with the intelligent use of our assets, commercially available add-ons and increasing our knowledge base. This is the key to our agility and yields more return than an unnecessary increase in equipment. Additional output from more machines to cover inefficiencies only adds cost to us and our clients with no real benefit. Intentionally seeking optimization of our programs and machines, however, opens up additional time on our equipment, foregoing the need for additional assets and ongoing expenses.

The reality is that the major driver within the manufacturing sector is cost reduction with quality and speed. We no longer get to dictate the choosing of two by the client: fast, cheap or good – the customer base has stated they want all three or they will find another who can provide it. Simply by using the tools available to us we have accomplished this with many of our recent projects; in some cases we have been able to reduce machining times for single components by hours. As I write this blog entry I have beside my keyboard a widget for a customer that was estimated to take 2 hours and multiple operations by another shop; we have been able to produce it to spec in 26 minutes.

Are we among the most competitive or innovative in the industry? I would answer that by saying I believe that we are some of the most intentional ones and that alone generates very tangible results. We are deliberate about correctly identifying constraints and assets because that allows us to get a much clearer picture of reality. In doing so we are able to consistently deliver on time and at a lower price point.

Constraints are normal and should be expected. We should strive to understand where the boundaries truly are and take action to move our capabilities to the edge of those constraints. Expansion then can be easily identified as a true necessity to meet demand or growth strategies. But correct data must come first.

In the press release concerning our new division I stated that we find ourselves in the largest technological race since the cold war, and I believe that. But there is a cause that has enabled the advancement I am witnessing in almost every industry: a sea change in the technology and our thought processes concerning its application. What was futuristic is rapidly becoming present tense, and what was expectant we have now come to expect if not now, very soon.

From autonomous craft to anatomical parts, what we now have in our possession is a conclusion that,
whatever it is, it WILL be done. That it is possible. What makes this unique is that it isn’t a single rare
individual or corporation with a new widget – it is a thought process that has gained traction and
permeated our society. This attribute wasn’t present during the first decade of this century the way it is
now even though the ideas were present. And it is critical to project success.

In the 80’s and early 90’s drones were being experimented with and employed, but not widely used. Fast forward to today: the battlefield is now forever changed by the capability that has arisen with unmanned vehicles. 3D printing originated in the early 80’s and now has evolved from plastics to metals, with printing being combined with CNC milling, providing the ability to create extremely complicated single-piece parts. We now even have prosthetic limbs being connected to the human brain to enable amputees to feel once more. Nanotechnology is on the rise and will forever change medicine, especially as we gain further knowledge of DNA sequencing and cellular level activity.

In my opinion the single most important factor that these successes and the many others like them have in common is the knowledge that it is possible. Not just belief, but a knowledge that it can be done. Many advancements have occurred outside of corporations, by individuals with education and desire. Still more have advanced because of the backing that only corporations can provide. I recently saw a video of a company who is planning to create a functional steel bridge with 3D printing. This points the way to autonomous building of structures in cities and extreme environments – others have this in mind and will capitalize on this niche with an eye to bringing it mainstream. I recently oversaw the planning and implementation of a robotic welding system in a manufacturing plant that outperformed a much larger manual-based plant. Was the technology bleeding edge? No, but it firmly showed how big of an impact our current technology and process will continue to have upon our manufacturing industries and ultimately our personal lives.

As society proceeds further down this technological path it is critical to understand the manufacturing industry must move with the industry and equip itself appropriately with both knowledge and functionality in order to support the needs that are arising every day. At an organization level, this is the key to remaining relevant and profitable. The momentum behind the growth in technology is, if anything, attempting to pick up speed and capitalize upon the possibilities. The implications and opportunities are huge.

We are unashamed fans of data. We analyze, create metrics, look for trends, form forecasts and use the data of our clients’ organizations and their marketspace to show us the current and future operational landscape. In other words, we use the data to get rid of uncertainty.

Data is critical and most of the time underutilized or ignored. In this era it shouldn’t be and in fact to do so leaves one at a distinct competitive disadvantage. Although it is possible to drown in data there are a few data essentials that yield results and allow for ongoing fiscal maintenance and the initial stages of forecasting and strategy.

The first step in utilizing your data is assessing your accounting methodology and discipline. Is it solid? If it isn’t or you don’t know, fix it now. If your data is not reliable no decision you make will be solid, especially on lower-margin projects. Any data you publish to lending institutions or investors has the potential to be incorrect. To understand this is absolutely critical. Correcting the errors is not necessarily a large and painful process – we have performed this exercise in the past with clients quickly and timed it appropriately to take advantage of accounting periods. The important thing is getting it done.

The second stage is to analyze the financials for weaknesses. What are the books saying? What are the basic financial ratios stating? Perhaps most importantly, what does the statement of cash flows look like? Where are the money inflows coming from? The most immediate assessments on health and initial corrective actions are made here.

The next step is to analyze profitability by customer or product line. Rank them top to bottom based on profitability, using as much historical data as possible so that trends can be determined. What is causing the lower margin customers or products to be at the bottom of the list? Is it a high quantity project that offsets the lower margin because of the volume? If not, are there expenses that are pulling it down that need to be controlled? Is the sale price too low? Would dropping the customer open up capacity that could be utilized with another customer at a higher margin? Can the product line be outsourced more cheaply? Ensure that all overhead costs are applied to your work as well – allocating all costs across your work-related revenue streams will lower your margins, and it should. Not recognizing those expenses can cause confusion and operating losses where profitability appears to be.

These are the initial actions that are almost always high yield if the proper accounting data set has not been maintained or used; it must be remembered that correct accounting is foundational for all analyses, because it is the analysis that creates the backstory for each decision. To forego the due diligence in the accounting realm and jump to decision making is to set the stage for further issues that could have been prevented.

Each of these exercises should lead to further refinements. Most importantly, knowing these topics allows an organization to begin taking control of the business and create strategic advantages. Not the least of which is understanding the limits of profitability due to internal constraints and how to address those limitations.