Hey Fabricators... What's limiting your profitability?

As seen in Shop Floor Lasers Magazine

You’re chugging along OK; keeping your head above the water… but if you’re like a lot of fabricators, manufacturers, or metal service centers you’re likely leaving money on the table… maybe a lot of it. No business is entirely leak-proof; a few extra hours of machine time here, some excessive scrap, a couple of lost bids – it all adds up. 

I spoke with industry veterans Scott Lindley (US National Sales Manager, Alpha Lazer) and Brad Stropes (COO, SecturaSOFT) to gain their perspective on where companies like yours may be able to plug the leaks and maximize profitability.  Here is part 1 of that interview...

What are the typical areas where you see the biggest room for improvement in a fabrication business? The low hanging fruit that bumps you in the head as you travel around from shop to shop?

Lindley: On the fab side it’s essentially old equipment, outdated processes, or outsourcing. I visit many shops where they’re using an old plasma table, punch turret or CO2 laser, believing it’s a more efficient or cost-effective process since it’s paid for. The reality is often that the old equipment is holding them back. Fiber laser technology for instance is now far more efficient than CO2 lasers. The previous notion that punch turrets are more efficient than lasers is no longer true. Routers used to be the best way to cut aluminum for boats, considering plasma tables and CO2 lasers couldn’t provide the cut quality. Fiber lasers are now an extremely good option for cutting aluminum, providing 3, 4, up to 7 times the cutting speed, with significantly tighter part spacing, and no hassle of tabbing parts in or worrying about the vacuum table. And the maintenance and energy cost of old machinery can easily eat any savings gained by having the machine paid for.

I often see companies that have purchased new equipment though and completely ignored the upstream and downstream processes. It doesn’t do much good to buy a more efficient machine that can cut parts 3 times as fast if you can’t keep up with the machine. Software plays a huge role in process improvement, allowing you to feed the machine more efficiently.  And then of course outsourcing is another big one. A shop outsourcing $400,000 a year for profile cutting is likely paying about $115,000 for someone else to cut their parts, and often having issues meeting production schedules, quality standards and paying extra to ship parts and materials.    

There are a number of fixed costs in running a fabrication business - labor, insurance, capital improvements, inventory, taxes, and more.  But when it comes to technology, would you say that the problem is generally under or over investing?

Stropes: From my perspective, the biggest obstacle for fabricators is winning business and being sure that job will be profitable. In sales and profitability, the top shops deliver 45% better results than all others. This is all due to their ability to quote much quicker, win more contracts, set standards and decrease estimating to delivery time.  Keeping your pipeline filled by decreasing estimating time is the biggest key to get parts to your machines. Too many continue to rely on manually-driven methods such as Excel, spreadsheets, or the experience of their most senior salesperson.  Automated quoting technology is available, affordable, and should be leveraged.

Scott, would you agree?

Lindley: Today’s modern fab shops, job shops and metal service centers incorporate a wide variety of machinery and software. But not every fabricator needs the most expensive and sophisticated systems. For some, less is more and careful consideration should be given before making a substantial equipment investment.  For example, today the gap has been closed between fiber lasers in terms of machine quality, cutting speed and part quality. What remains significant, however, is the cost and support. Unnecessarily overpaying for fabrication machinery adds years to recoup one’s investment. The most important thing though is to ensure that no matter what you do invest, you don’t get nailed after the fact by extraneous support costs, held hostage by the machine manufacture for replacement parts at a huge markup, or hit with long delays in getting support.

Scott, can you expand on what you mentioned about costs associated with machinery?

Lindley: Once you buy a machine, your costs are locked in. The machine will cut parts at a fixed speed, consume a given amount of electricity, need maintenance, and require set secondary processes. So, if you’re looking for ways to squeeze a bit more profitability from your company, look at these old machines. Imagine saving 50% on electricity or cutting your maintenance costs by two thirds. What if you no longer needed use micro joints to hold parts in place, and your operator didn’t need grind off the tabs? Imagine if you could cut twice as many parts in half the time, with less equipment running more efficiently? It sounds crazy, but it’s not unrealistic.

A growing number of fabricators are replacing multiple machines on the shop floor with a single fiber laser.  Because of their functionality and versatility, today’s fiber lasers are replacing CO2 lasers, plasma tables, routers, and punch machines. Consider the savings realized by consolidating the costs of running multiple machines and multiple shifts.  In a recent benchmark study I did for a local manufacturer running 5 punch turrets, two shifts, I looked at 3 days of production on 1 machine, cut from 77 sheets of anodized aluminum. I was able to nest all 2012 parts onto 62 sheets and cut the 48 hours of production parts in 5 hours. The fiber laser provided a 20% material savings and a 90% labor savings. Those numbers are hard to ignore.