by Kelsey H | Jan 19, 2022 | Industry News, Process Improvement
All manufacturing companies can appreciate the need to meet the bottom line, but assembly manufacturers often feel this pressure more than others. Compared to others, assembly manufacturers tend to operate on particularly narrow profit margins. In fact, according to data from Sageworks, semiconductor and electronics assembly manufacturing is among the least profitable industries in the US.
Between the nature of working with a high volume of small parts and recent instability in the market, assembly manufacturing is up against several unique financial challenges. Follow along with us as we dive into the reasons behind the industry’s traditionally narrow margins, and a potential new avenue to add incremental yet valuable improvements.
High Fixed Costs
Because assembly manufacturing involves producing multiple small, detailed parts that make up larger products, each plant must be equipped with the necessary equipment for each part and each step of its production process. If the plant is going to produce multiple products, the initial investment can quickly become extremely costly, requiring millions in capital upfront. Though the investment is a fixed cost that won’t continue over time, it can cut into margins in the first few years as the plant gets up and running.
In addition to upfront capital, assembly companies also have to invest in research & development to ensure they’re producing the best products in the most effective manner. Without a commitment to R&D, the company risks falling behind competitors and losing out on market share as a result. However, developing improvements for every individual assembly part can make it an even more time-consuming and expensive process than it is for other manufacturing sectors.
Fluctuating Demand & Price Competition
Prior to 2020, demand for assembly components had been declining, which had already led to excessive inventory and tough price competition. As we discussed earlier, assembly manufacturing can be costly, and each individual part doesn’t generate a large profit on its own. Instead, manufacturers rely on selling a large volume to turn a profit. When the company is forced to sit on inventory it can’t sell or cut the already-low price of each part, it can substantially impact already-tight margins.
Now, as we continue to battle the COVID-19 pandemic, manufacturers have been dealing with capacity restrictions and understaffing. Those obstacles, combined with frequent shipping delays, have often resulted in global shortages of many products. At the same time, consumers have been rushing to purchase the goods they need to adjust to their ever-changing conditions. Suddenly, these manufacturers can’t keep up with the increased demand or get enough product on store shelves. These constant fluctuations in demand have made it particularly difficult to accurately plan production.
When up against such narrow margins and challenging circumstances, even incremental improvements to assembly processes make a significant impact and produce remarkable benefits over time. VirtECS can help assembly manufacturers optimize their production schedule to get the most out of each second of time used and every dollar spent. Those benefits will only compound with every finished product in the months and years to come. If you’re interested in learning more, one of our experts would love to talk to you about how VirtECS can specifically produce results for your assembly manufacturing plant.
by Kelsey H | Sep 20, 2021 | Planning & Scheduling, Process Improvement
According to a 2019 survey from EY (formerly Ernst & Young Global Limited), only 38% of manufacturers take a formal, strategized approach to allocating their capital. Unfortunately, that means nearly two-thirds of manufacturing companies may be leaving money on the table, missing out on opportunities for increased growth or making suboptimal investments.
You don’t have to have an endless budget to create innovative solutions for your manufacturing plant. In fact, we think it’s best to do more with less. When you use a tool to identify the most beneficial and strategic ways to allocate your capital, you can save funds up front while also continuing to provide value down the road. We’ll explore more of the potential long-term benefits of strategic capital allocation below.
Avoid Investments with Mediocre Results
In any business investment, there’s an expectation that the venture will financially benefit the company and eventually pay for itself. However, without a systematic approach to capital allocation, there is no guarantee your manufacturing plant will see the returns it needs.
An advanced planning tool can help you create a virtual model of your unique plant, allowing you to test different scenarios with new pieces of equipment or technology. By working through scenarios with various investment options, your organization can discover exactly which assets will underperform or fail to generate profit at the needed rate before making an ill-advised purchase and wasting valuable funds.
On the other hand, testing a wide range of investments may also uncover previously overlooked opportunities that will actually produce remarkable returns. With an advanced planning tool, schedulers can rapidly run through thousands of scenarios, a feat that would be impossible to accomplish manually. These capabilities help organizations find the most inexpensive route to their ideal outcome. Over time, the capital you saved by avoiding poor investments and choosing only advantageous purchases will grow exponentially.
Be Better Prepared for Potential Risks
All investments will inherently carry some form of risk. However, with advanced planning, you can be as prepared for the risks as possible and prepare for them appropriately. With a precise and accurate rendering of your plant’s schedule after the new investment, the organization can devise solutions to address issues or inefficiencies as they occur.
For example, say your plant is planning to purchase a new piece of equipment that may help speed up production, but is reliant on a certain raw material that is expensive or frequently in low supply. Once you know how those risks may affect the equipment’s capabilities, you can make plans to stock up on materials when the price is lower or have multiple suppliers on hand in the event of a product delay. Armed with this information, you can be better equipped to manage the risks and make the investment worthwhile.
Stay on the Cutting Edge
As you plan for the future, making strategic and systematic investments will ensure that you company stays on the cutting edge of innovation in the industry. This approach allows you to save capital for emerging enhancements, while avoiding trendy ventures that may not benefit your unique organization. Having the ability to make these crucial decisions will only become more important in the coming years as supply chains get restructured, raw material prices rise, and the manufacturing industry continues to change.
An advanced planning and scheduling tool is the key to identifying strategic manufacturing investments and allocating capital wisely. Our tool, VirtECS, has been perfected since 1993 to create virtual plant models that can accurately display a variety of different scenarios and corresponding production results. We frequently hear from our clients that they would never have been able to make as many beneficial changes to their plants without VirtECS. For more information on how VirtECS may help your organization, download our guide here.
by Kelsey H | Sep 7, 2021 | Industry News, Process Improvement
Microsoft Excel® has been a ubiquitous tool in planning and scheduling for many years. Excel is easy to learn, flexible, and typically already available as a corporate tool, making it a simple solution for many companies.
However, Excel also requires the user to manually input every change and check every constraint. Planners and schedulers that rely exclusively on Excel find that developing detailed plans and schedules can be tedious and time consuming, especially when frequent updates need to be made to reflect plant floor conditions. It’s incredibly easy to make costly mistakes using Excel – in fact, studies indicate nearly 90% of all spreadsheets contain at least one error. Excel also does not support standardization, so when the expert on a local tool leaves, it can be very difficult for others to maintain the existing sheet.
With many executives realizing the need for a more advanced capability to fit their unique planning and scheduling demands, some have started to look for suitable alternatives. Recently, the Wall Street Journal published an article exploring why executives at companies like Hackett Group, Inc. and Pure Cycle Corp. are looking for solutions to minimize their reliance on Excel.
Our advanced planning and scheduling tool, VirtECS, can both overcome Excel’s weaknesses as an alternative or work side-by-side with it as a helpful addition. VirtECS integrates well with Excel and can automatically import needed data that has been collected or maintained in Excel. This prevents data entry mistakes so that planners and schedulers can transition to VirtECS completely or leverage both tools. With VirtECS, you can reduce the amount of time spent optimizing your schedule, while also reducing costs and increasing revenue at the same time.
How Does VirtECS Compare to and Complement Excel?
When customers first adopt VirtECS, they quickly notice a reduction in the time required to develop their plant schedule. Manual changes that used to take hours to input in Excel are now performed automatically, allowing your schedule to respond to developing conditions within minutes. You can track all changes easily within VirtECS, making your company’s processes streamlined and more efficient.
VirtECS can also act as a complement to Excel by providing high-powered automation, mathematics, and data analysis. Because some of our customers still choose to leverage Excel in addition to VirtECS, we’ve also designed our tool to export all data and reports into a format compatible with Excel. Having data that works within both programs allows our customers to get the most use out of all their tools.
Most importantly, VirtECS is capable of searching over many possible schedules and will always select the best, most optimal option. When using Excel, typically only one or a few schedules are examined, resulting in higher costs or lower throughput. The superior schedules produced by VirtECS translate directly to the bottom line. VirtECS projects typically pay for themselves within months of operation through cost reduction and increase in production and resource utilization.
In addition to our advanced planning and scheduling tool, our customers also utilize VirtECS Symphony to give everyone at the plant access to the optimized schedule. VirtECS Symphony is a web-based module that promotes remote collaboration, allowing a more efficient flow of communication between shop floor execution and scheduling.
We would love to tell you more about why VirtECS is an ideal replacement or complement for Excel. To schedule a phone call or demonstration of VirtECS, please fill out our form here.
by Kelsey H | Jul 19, 2021 | Debottlenecking, Process Improvement
In our line of work, reducing bottlenecks is the name of the game. We know how important it is for successful plants to produce as much output as possible in the shortest amount of time. With this goal in mind, it can be difficult to sacrifice additional run time to keep up with maintenance tasks.
However, the consequences of postponing maintenance can be harsh and will eventually lead to even more bottlenecks in your process down the road. When equipment breaks down and employees don’t have all the tools they need to perform their jobs effectively, you may have to deal with decreased output and lost revenue. According to research from Aberdeen, every hour of unplanned equipment downtime costs manufacturers $260,000 on average. With just a few adjustments to your maintenance scheduling process, these bottlenecks (and the high costs associated with them) can be avoided.
Survey the Plant
Before you can deduce the best process for your maintenance activities, we suggest getting started by compiling a detailed survey of every asset within your plant. This process will help ensure all the equipment used for production is accounted for. Once you have your full list, identify the maintenance actions needed for each individual item. If you need help determining the recommended frequency and time spent on maintenance for a particular part, be sure to consult the manufacturer’s instructions. With a complete catalog of tasks to work from, your maintenance team will then be able to anticipate all the plant’s upcoming needs. At the same time, your operations team can begin to reconcile their daily or weekly output with the corresponding maintenance requirements.
Prioritize Activities
After your survey of assets and related maintenance tasks is completed, your maintenance team can get to work planning a strategic approach. In every plant, some resources will be more integral than others, so it can be helpful to prioritize each asset based on how critical they are to the production process. The most vital equipment may be necessary for long periods during the production cycle, but it also must be well-maintained to function effectively. The maintenance for these high-priority assets will require more thoughtful planning. On the other hand, less-critical pieces of equipment can be arranged into the rest of the maintenance schedule as needed and won’t require as much detailed attention.
Create an Optimized Plan
With every maintenance activity prioritized, you can begin fitting each action into your ongoing production schedule. Aim to start by scheduling the highest-priority tasks first, and look for times when those pieces of equipment will not be in use to minimize the disruption to the plant’s workflow. If there will still be maintenance outages needed, plan for these in advance to give production planners time to prepare and work around them.
Taking these steps toward a more optimized maintenance schedule is a huge improvement over continual outages for reactive maintenance. It may seem counterintuitive to plan downtime when equipment isn’t technically broken, but when you can’t anticipate which pieces of equipment will be down and when, it often causes substantial waste and more missed opportunities for revenue.
It’s also especially helpful to schedule maintenance using an advanced planning and scheduling tool, such as VirtECS. This tool allows you to plug different blocks of time for maintenance into your schedule and see how it will affect your total output in real time. VirtECS completes all these calculations to find the most optimal schedule in just minutes. VirtECS can also communicate the finalized schedule to every employee who needs it, from maintenance experts to engineers on the plant floor, to keep processes flowing smoothly. Find out more benefits of implementing VirtECS at your plant here.
by Kelsey H | Jun 17, 2021 | Process Improvement
Automation has been on many manufacturers’ minds for years, even before the start of the COVID-19 pandemic. However, once the coronavirus started spreading rapidly and causing serious disruptions to the manufacturing supply chain, interest in automated solutions skyrocketed even higher. According to a 2020 Honeywell survey, the pandemic has inspired 42% of manufacturers to plan to implement automation technology within the next year.
Organizations that prioritize adaptability have already started to turn toward automated technology. Automated systems have become more appealing than ever primarily because of their ability to weather disruptive situations while keeping production running efficiently. Manufacturers in any industry can use automation in a variety of ways to improve their processes and better serve existing employees. We’ll dive into the biggest benefits below.
Eliminate Waste
Product waste can cause some of the biggest headaches for manufacturing plants, for both environmental and financial reasons. There is such a high cost associated with waste, and because it provides no benefit to the plant (or the planet), eliminating waste has become a priority for many organizations. To combat this issue, some plants have started using automated technology to pinpoint areas producing the most waste. Last year, nanomaterial manufacturer Promethean Particles began logging data from their plant to train artificial intelligence programs to identify instances of increased waste in its processes. Utilizing this technology has significantly sped up their process of minimizing overall waste, which has been a long-time goal of theirs to help cut down unnecessary costs.
Identify & Prevent Defects
As we discussed in another recent article, mistakes happen from time to time at every manufacturing plant. Monitoring is essential to help catch more errors or defects earlier in the process. However, the pandemic highlighted the challenges plants face when they rely so heavily on in-person-only roles. That’s where remote monitoring technology and automated data collection come into play. Many companies have started to test these forms of monitoring which allow supervisors to work from their homes or offices. Newer forms of this technology even offer geolocation restrictions, which can limit the service to devices in specific locations to decrease security risks. Some monitoring services are also browser-based, making it easy for employees to access no matter which device they use.
Adapt to Changing Needs
As consumer demand quickly increases and decreases depending on uncontrollable outside factors (such as a pandemic), manufacturers have had to find ways to adjust their plant floors to account for these shifts. Some organizations have started utilizing automated methods to scale production up or down quickly to meet changing deadlines and stay flexible during uncertain economic conditions. In the automotive industry alone, manufacturers using augmented intelligence have helped their employees perform their jobs more efficiently, leading to a 40% increase in productivity.
It’s important to note that even though automation technology can be incredibly beneficial, human employees are still the critical elements needed to provide expertise and insights. Advanced technology can give us much-improved methods for data collection, but it simply can’t contribute the deeper knowledge that we rely on from experienced people. Your employees are the ones who will ultimately implement and operate these new systems, so technology solutions must be people-centric to be the most successful.
Advanced planning and scheduling software, such as VirtECS, is one tool manufacturers can use to improve their processes and easily adapt to disruptions. VirtECS works to optimize production by creating a detailed model of your plant and automatically performing calculations to find the most efficient schedule. Any time you introduce new equipment or experience changes in demand, the tool will quickly readjust and find the best schedule to use moving forward. If you’re interested in finding out how to implement VirtECS into your manufacturing facility, click here to download our whitepaper.
by Kelsey H | May 17, 2021 | Process Improvement, Supply Chain
Raw material costs are generally some of the largest expenses any organization incurs. It may seem like your plant has no control over the cost, and you’re simply at the mercy of your suppliers. After all, you certainly don’t want to sacrifice on quality for the sake of new, cheap materials that your customers won’t recognize.
However, manufacturers still have the ability to take back control of their raw materials. Over the years, we’ve uncovered a number of effective strategies for reducing supply costs that any manufacturer will be able to implement.
Negotiate with Suppliers
If you’re like most manufacturers, you may have a specific set of suppliers you work with on a regular basis to source the raw materials your plant needs. Over time, these partners have likely learned the ins and outs of your business, but prices and other terms may have remained stagnant since you first started working together. In many instances, though, there is room to reassess those agreements. Your supplier depends on your organization as a valuable customer, so they will likely be inclined to meet your requests (within reason). Requesting small changes, such as better financing terms, discounted shipping, or other perks can significantly lower your total costs over time.
In the event that your suppliers refuse to provide any additional benefits, it may be worth shopping around for alternative options. There’s no harm in looking, and a simple search may turn up a partner that can provide a better deal, faster shipping times, or other favorable improvements. Just be sure to do your research on the quality of their materials to ensure there will not be a noticeable difference that shows up in your products.
In any new supplier relationship, be sure to ask upfront if they can add in any discounts in return for a long-term agreement. Companies trying to earn your business are often very willing to provide extras that can create substantial savings for your business in the long run. You might also take this opportunity at the beginning of a partnership to create a plan to review the terms of your deal regularly so that that your agreement doesn’t become unfavorable down the road.
Buy in Bulk
If you have the space available at your facility and the cash to make larger purchases, buying raw materials in bulk can be a simple way to reduce expenses. Typically, the more materials you buy at once, the less each individual unit will cost. To take full advantage of these savings, consider whether there are specific times of year, such as an off-season or slower economic climate, when material costs will be lower. Purchasing a larger amount during these times can result in major savings on the products you know you will need in the future.
However, it’s important to note that you should only use this strategy for materials you know you will use during production well into the future. If it’s possible the material will be phased out or will sit around without being used, do not purchase bulk quantities of it. Buying larger quantities at once is only a good idea if you’re sure none of the supplies will go to waste.
Minimize Waste
Often times, manufacturers design their internal processes without considering the standardized formats that most vendors use. If your plant’s systems don’t align with the vendors who supply the materials you need, it can create a high degree of waste. To overcome this issue, consider whether you can modify your process to avoid scrapping any excess material. Using all of your raw supplies and minimizing related waste can start to reduce the $8 trillion of waste produced by manufacturers each year, according to Forbes.
If it’s not possible to change your internal procedures to account for the differences, you might be able to recycle the leftover material into a form you can still use in your existing process. Another approach would be adjusting designs to use less of the raw materials overall. The less total product you have to order, the more money your organization can save for other more beneficial uses.
Adjusting your production processes doesn’t have to be such a complicated and intimidating task. By using software that creates a virtual plant model, you can test out changes before you formally implement them. This strategy can help ensure you’re making the most beneficial modifications and relive some of the risks involved. VirtECS, our planning and scheduling optimization tool, has been used by many of the world’s leading manufacturers to provide solutions for their complex processes. If you’re interested in finding out how VirtECS can help optimize the processes at your plant, download our overview guide here.
