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The ISM (Institute of Supply Management) reported the results of its semi-annual survey of members that manufacturing is forecasted to grow by 5.7% in 2010.  That tells us that the US economy is on the way back to recovery.

I participated in a webinar offered by one of the industrial distribution publications.  An industry consultant provided the results of a survey he conducted of the industrial distribution channel.  It indicated that most companies dealt with the effects of the 2009 recession by making steep cuts in their staffs and inventory levels to maintain cash flow.  He questioned whether they would be ready for a rebound in US manufacturing in 2010.  

There is no doubt that this last year has been a real challenge for all of us.  A wise man once told me that “there is a beginning and end to everything.”  The US economy is vibrant and will emerge from this recession.  We all need to examine whether our supply chain is ready to support us.

The December 2009 annual survey of the Industrial Supply Management (ISM) identified “supply chain optimization” as a major priority for purchasing managers for 2010.  The manufacturing purchasing executives identified a number of strategies including:

Vendor managed inventory (VMI) to improve inventory/asset management

• Supplier consolidation
• Improved information systems
• Lean manufacturing
• Overall Cost reduction

The respondents are positive about 2010 business conditions in most segments of US manufacturing with the exception of capital spending. 

During the recession, some organizations “in-sourced” some of their activities to retain staff members.  As business conditions improve, out sourcing will return as a viable cost reduction strategy.

Vendor Managed Inventory (VMI) is a process that is increasing in usage in our manufacturing sector.  It consists of a supplier assuming full responsibility for maintaining adequate inventory of material at the customer’s location.  This can be in a central storage location or at the point of production.  The latter reduces one of the major causes of waste (MUDA), additional transportation and handling.

The goals of VMI include maintaining consistent product availability and reducing inventory in the supply chain.  The end result is a reduction in overall cost.

It is very important to clarify the expectations for both parties and to foster communication of the goals and performance metrics.  The customer’s responsibility is to alert the supplier to changes in demand as well as engineering changes that affect the products in the program.

Technology provides the opportunity to implement VMI cost effectively.  Electronic ordering and bar code scanning are among the tools that can be used.

You are probably familiar with the Pareto Principle commonly known as the 80/20 rule.  Simply stated, 20% of any measurable statistic yields 80% of the overall results.  For example, 20% of your customers generate 80% of your revenues. 

Given the degree of concentration on virtually any area of your life, it is critical that you focus your attention on the “vital few” that matter.  This is where you will achieve the most benefit.  We are constantly being challenged to maintain this focus.

Falcon Metal’s core competency is in managing Class C production components; they are the large number of low value items that remain critical to meeting your production plans.  The Falcon Bar Code Inventory System (FBIS) provides a cost effective solution in managing C production components.

MUDA is the Japanese term for waste.  It can be defined as “anything that does not add value to your product or service”.  There are 8 commonly defined types of MUDA:

 1.  Overproduction

2.  Defective products or poor services

3.  Inventory

4.  Motion

5.  Waiting

6.  Underutilized people

7.  Transportation and handling

8.  Extra processing steps

There are some types of MUDA that can be quickly eliminated.  Others require reviewing and changing processes.  Involving those that do the work is critical to achieve lasting improvements.

You have heard time and again that we operate in a Global Economy.  Our competition is no longer local.  With the advances in communications and transportation, our major competition could be literally around the globe.  The companies that survive will need to be viewed as “World Class”.

Lean principles emanate from the famed Toyota Motor System that was developed over 40 years ago.  The system starts with identifying customer needs.  Based on numerous surveys, customers require the highest quality with the shortest lead time and the lowest delivered cost.

Lean can be defined as “a continuous improvement strategy for identifying and eliminating non-value added activities (waste) with the involvement of all employees”.  A key question to ask when viewing an activity “Is the customer willing to pay for this?”  If you answer no, you have identified waste that needs to be eliminated.

The lean concept was first implemented in manufacturing but has been expanded to all types of industries.  There are a number of “tools” that can be used to help achieve your goals.  We will discuss them in further posts.

The Charlotte Business Journal annually runs a contest to determine the Best Places to Work in Charlotte (BPTWC). Falcon has participated and received an award each year we have participated. We just received the 2009 award at a luncheon on November 4th.

I have been asked by several people how we are able to annually achieve this honor. The simple answer is to have a well defined corporate culture, mission and plans. Falcon is an “Open Book” company. We share all news and results, good and bad, with our staff.

The most critical decision we make is in staffing. Once we have the right people in place and they understand our purpose and direction, we “get out of their way” so they can serve our customers. There are different views of the benefits of employee retention. We work very hard to have the right people in place and develop the compensation and benefit programs to retain them. If someone leaves us voluntarily or otherwise, we consider it a failure.

In 1979, Bruce Roberts was the sales manager for a specialty fastener manufacturer in Northern New Jersey. Most of his customers were fastener distributors. Bruce studied what were the factors that made some of his customers successful.

He decided to take what he had learned and put it to use in starting up his own distributorship. Bruce and his wife Nancy decided to relocate to the South to start a business. They chose Charlotte based on discussions with some sales representatives in the area.

Bruce and Nancy studied Raptors, birds of prey. The Peregrine Falcon is the swiftest animal in the world. Bruce chose the name Falcon Metal Corporation to represent the level of customer service and responsiveness.

You are probably aware that 90% of businesses fail in their first year of operation. Of those that make it, 90% of them don’t make it beyond 5 years.

Falcon Metal is celebrating its 30^th anniversary. On October 16^th we hosted a number of our valued customers and friends in celebration of this achievement. Bob Olson, a consultant that has worked with Falcon’s staff, had an overview of Lean Manufacturing. Central Piedmont Community College had some staff members present to discuss the programs that they offer for organizations.

We were surprised to receive recognition awards from two of our major customers as well as an industry networking group. A good time was had by all.

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