People make the common mistake of thinking that if they have been doing something for a long time, occasionally making improvements along the way, they are doing it the best way possible. But the truth is, about 80% of truss and wall panel component manufacturing (CM) plants suffer from far too much lost productivity.
This waste can be seen in net profit results. As a percentage of sales, single-digit and low-teens net profit should be totally unacceptable during good times. And it is not just big things like equipment that make a big difference in efficiency and profitability.
When it comes to CM, lumberyard-owned operations consistently make lower net profits than independently owned operations. This has been confirmed by companies who have acquired both lumberyards and independents. Too often, lumberyard-owned CM plants feel they should shortchange their gross margins to achieve greater sales at the lumberyards. Yet, the CM plant can offer a company a lot more net profit as a percentage of total sales if it is operated more efficiently.
Regardless of whether they are independently owned or lumberyard-owned, here are six common causes of waste at CM plants:
1. Constant employee turnover. Not enough personnel leads to insufficient capacity and quality control issues.
2. Manufacturing equipment operating at less than capacity. Because of this, the need to purchase additional equipment, manufacturing floor space, and other capital investments is often wasted. Five-blade component saws typically operate at less than 50% of capacity. Regardless of automation, assembly tables typically operate at less than 65% capacity. (Email me and I will send you some simple tasks to illustrate the point.)
3. The lack of standardization and optimization in truss design. This leads to increased material costs that are equivalent to at least 2% of sales, and often as high as 6% to 8%, which is a hidden cost that far too many are overlooking. There are ways to automate the optimization and standardization processes to reduce design time, increase production capacity, and reduce manufacturing costs.
4. Too many designers for the work being done. This creates unnecessary costs. Instead, there are ways to reduce the amount of design time to increase the capacity and effectiveness of the existing design team.
5. Reliance on a single vendor. Going with one outfit for all of your equipment, software, and suggestions for improvement will not provide you with all of the information needed to perform the best you can. No matter the size of that vendor, no single company is best at every aspect of the CM process.
6. Overconfidence. The greatest hindrance can come from inside the company itself, from key personnel believing they have all of the best ideas. Just because someone has been doing his job for a very long time doesn’t mean he has all of the best ideas.
All professionals want to believe that they are unique and above average. But most companies contribute to the causes of waste explained here. The companies who have achieved the top 20% of productivity are using the best practices that have typically taken years of constant refinement and improvement. Good enough is never sufficient for them.
