National Association of Manufacturers: Past and Future

We’ve been moving more towards a service based economy than manufacturing, but manufacturing isn’t dead by any means. Granted, we are mostly a service based economy already but services are taking a stronger focus. NAM or the National Association of Manufacturers is a testament to that notion. Since the day the association was founded in 1895, their mission has always been to give a voice for the manufacturers in the United States, specifically in legislative and governing bodies that could either positively or negatively impact its members. But they do often interact with the media and public from a public relations standpoint, so they should be considered stakeholder groups in these discussions.

They have driven a lot of synergy between industries in this country, pushing innovation, job creation, and the technology that has kept the United States a major player in a globalized economy. Moreover, what I like is that the association publishes findings from all of its members. For example, there have been certain anomalies in manufacturing processes that are industry wide. Members have the benefit of recognizing this as a problem and can work together to solve it. Quality is certainly one of the key benefits of American manufacturing, and it isn’t going away any time soon. This is one of our tools to influence consumer opinions about what we produce here, and to foster at least a certain sentiment against products that are only manufactured in China. Obviously, we can’t produce everything in the U.S because of the resources necessary to build certain things aren’t regional. Many of the components for electronics require materials found in Taiwan, India, and other East Asian countries. So although we have to sometimes import raw materials to the U.S for our work in progress inventories, the finished goods will still be finalized here, and with the hopes of exporting it. NAM has always supported the exporting of goods from our companies. We know that diversifying your customer base will allow you to generate revenue beyond the confines of the U.S and Canada market place, and beyond the benefits of NAFTA. Many of the members of NAM have seen a spike in exports.

The International Trade Administration and the U.S Department of Commerce released data showing the goods and services from the U.S, and the numbers are enlightening. Given recent announcements of the S&P lowering the U.S credit rating, both the Dow Jones Industrial and other indexes took a fall, obviously over worries of how this would impact growth and our GDP. I have yet to see any reflection of this hasty action in the Federal Funds Rate, but if that is raised, it could hinder a certain level of both private and government investment. However, the numbers have already spoken, as these recent events are only speculative. Exports are up 4.6 percent in March 2011 reaching a record $172.7 billion since the beginning of February. Keep in mind this is from small to medium sized firms. Finished goods accounted for $124.9 billion which leaves $47.7 billion for services rendered during the same base period. The ITA and U.S Department of Commerce also reported that narrowing our focus to February and March alone, $7.7 billion of goods and services were exported, surpassing expectations and surpassing anything done in history. I think this information is enough to curb the concern over today, and that perhaps some companies, such as small and medium sized firms, are no longer afraid of globalized environment.

As previously mentioned, we’ll need to keep an eye on the Federal Funds Rate or FFR. This is the primary interest rate that the central banks give to lend, and so its adjustment trickles down to the smallest of banks and across every type of financing imaginable. The Export-Import Bank of the United States, requests for export financing started increasing in October of 2010, when the bank processed over 1,700 applications for financing, resulting in more than $2.4 billion in export financing. For smaller enterprise during the period of October 2010 and January 2011, financing rose to $1.5 billion, up $100 million the same time the previous year. If the Federal Funds Rate were to increase, we would want to watch the applications for exportation loans, because this would be a direct cause and effect relationship. If the number loan applications go down over a given period, so the amount of exports in the following months will also be lower. But to affirm the notion of things moving in the right direction, applications would only be so high if businesses were optimistic about growth and were seeking creative solutions to expand their operations. Coming out of the recession starts with the mindset that future periods are going to yield growth and profits, and executive orders follow suit. Because the bank is an independent federal agency, the financing they provide can include export-credit insurance, which helps ease the pain of exporting goods or services. This includes dealing with trade regulations of the European Union and others, where there are added taxes and fees to protect domestic firms. This is still available and will remain available even if the U.S credit rating takes a little bit of a plunge. One of the primary things that I would be worried about is the fluctuation in currency. Even over a period of 30 days, which is a normal payment cycle, we can easily assess a loss during currency conversion. This is something that any company faces, but those larger corporations may have the resources to better predict currency values during certain periods. On June 7^th of 2010, the U.S Dollar was $.83 per Euro, but as of today, the U.S Dollar has fallen down to $.67 per Euro. This is a 20% change in just the last year and the trend continues downward.

JC Gibbons joins the NAM

This month has been a very exciting one at JC Gibbons Manufacturing Inc. We are happy to announce that we have joined the North American Manufacturer's Association or NAM. We are very proud to be a company that makes American products and supplies American jobs. We are already proud members of the Precision Machined Parts Association or PMPA. Both organizations do their best to represent American manufacturing in front of the United States senate and congress. Our contributions and inclusion will help strengthen American pride!

Evaluating Precision Machining Suppliers

Finding the right precision machining company to manufacture your finished products can be a daunting task. Therefore, when evaluating manufacturers for precision CNC machining, screw machining, tooling, or any additional type of manufacturing, it is imperative to give weight to multiple criterion. With that in mind, there are a few do’s and don’ts to live by, or at least to make an honest effort to consider when making a final decision.

Do Not Focus on Pricing

Many companies give precedence to price, which is reasonable to a point. Price centricity is focused on the existing budget and how much cash you can outlay towards the transaction. The problem is that this method is based on one condition of sale, and not the grand scheme of the project. For example, by relying on price alone, many manufacturers have resorted to off shoring their production to countries in Asia, like China or Taiwan. The short answer why companies do so is because of the very low direct labor costs that keep total expenses down. Many companies find out later that moving overseas is far more costly than the original ticket price. Fellows Inc. is one great example of losing big by off shoring. The company shifted production to China through a joint venture with Shinri. There was a change of hands at Shinri that equated to a major shift in managerial philosophy, and Shinri attempted to take over complete control of Fellows’s Chinese operation. Shinri demanded price increases and full equitable control, which was a contractual violation of the joint venture terms, not to mention illegal. After Fellowes approached the Chinese government for help in resolving the matter, little help was offered. In short, Fellowes accrued $100 million dollars in sunk costs.

With international shipping costs and the lag in delivery time from China, companies must often order parts 6 months in advance of final assembly in the United States. Parts from Asia are ‘sometimes’ plagued with quality issues or product engineering issues because of the communication disconnect with controlling entities in the United States. When you receive a product that does not meet quality standards, you have lost 6 months of lead time and the initial cash investment. If you practice a JIT or demand pull system, or just want control of your product, then keeping to domestic suppliers is highly suggested. When you think about the price, think beyond the invoice – think about potential losses and the opportunity cost of not having the parts produced locally or at the quality standards that you need. Moreover, think about the under cutters that will try to gain your business.

Under cutters are generally new companies that are trying to make a name in the industry. They often resort to entrance based pricing strategy to both spark long term relationships with new customers and take clients away from other suppliers. Often times these companies respond to quote requests with dollar values that are too good to be true, sometimes even below their own costs which is just bad for business. This results in corner cutting during the manufacturing process, less than desirable customer service, and low quality machined parts. Not that a new company cannot offer you great service or a low price, but you should evaluate their standing in the industry and the quality measures that they have in place. The premise here is similar to looking at a firm’s credit history when deciding to do business with a supplier. We can research a company’s standing by evaluating their industry associations and quality process controls. I’ll start off by looking at a few reputable manufacturing associations and the benefits of being a member.

Do: Look at Manufacturing Associations

In order to evaluate a machining service provider you should always check their credibility in the marketplace. One method of doing so is to cross reference the company’s name with industry associations, and by reviewing their website. Often their associations are listed right on the home page or in the ‘about’ section. It also does not hurt to ask the companies what associations they are members of if you don’t immediately find them listed.

NAM

One noteworthy association is NAM or National Association of Manufacturers. The National Association of Manufacturers is the superlative US manufacturers association, which is also the nation’s largest industrial trade association. Their membership is comprised of over 11,000 members of varying company sizes and from all 50 U.S states. An association with NAM ensures that companies are actively participating in their industry. Additionally, NAM provides industry information that addresses the manufacturing problems that many manufacturers face. The premise here is that when you’re educated about your own process, you can ultimately improve it. This usually results in a healthier bottom line, and generally, the company may be able to compete more on price, which assumes a direct correlation between efficiency and price point.

PMPA

Another noteworthy association is the PMPA or Precision Machined Products Association. Unlike NAM who is far spread among many industries, the PMPA is focused more on precision machining, but don’t let that fool you. The PMPA is an international trade association that represents the precision machined products industry well. The association was originally founded as the National Screw Machine Products Association in 1933 but the name was later changed. Their strategic focus is evaluating the latest technology, assessing interests in government regulations, performance benchmarking, and evidence based data collection industry wide. Their member base of 2,654 consists mostly of manufacturers located in North America, but many of these firms are global and hold subsidiaries or export across borders. Many of their members provide precision CNC machining; turning and milling services, rotary transfer, and screw machine products. The majority of these companies have a diversified portfolio of industries served, such as automotive components, aerospace, heavy truck, oil, medical devices, appliances, construction equipment, and much more. Additionally, with green technologies such as wind turbines emerging and dotting the landscape, many companies have penetrated that market as well.

Other Associations

There are hundreds, even thousands of industry associations. It would be extremely difficult to list all of them here. Although NAM and PMPA are prominent, it is important to determine the specific industry your potential supplier is a part of, and to identify the respective associations that they should be a part of.

Do: Evaluate Quality Systems

One of the most heavily weighted criteria in the assessment suppliers should be the quality of the finished product. There are many quality systems that companies employ to ensure that you receive the highest quality machined parts. I’ll discuss the major practices here, but it is important to ask the suppliers about what they do to ensure a quality product.

Six Sigma and Beyond

If you believed Six Sigma was born from Toyota or the automotive industry in general, your assumption is false. Motorola, a well know telecommunications company, pioneered the practice all the way back in 1986. The objective of Six Sigma is to improve the quality of outputs by isolating defective parts and correcting the processes that creates them. This removes process variability which makes it easier for managers to target cost reduction and profit increasing opportunities. The term Six Sigma is derived from statistics. If you’re familiar with the bell shaped curve and standard deviation, then you should have a good grasp of what sigma represents. If not, I’d suggest doing a little additional reading or statistics homework to be enlightened. In short, a measurement in sigma (1-6) indicates the quality yield (the percentage of non-defective parts) of a manufacturing process. A process designated as being Six Sigma is one that has achieved a 99.99966% efficiency rating. This means that the process is expected to produce 99.99966% of parts without defects. Not unlike Lean manufacturing where a product team is deployed, there are usually teams of people that are designated to execute Six Sigma initiatives. These individuals are often referred to as black belts, green belts, and so on, where the degree of training and certification defines the belt type. There are many SPC (statistical process control) activities that a firm could engage in. Additionally, initiatives such as 5S and Lean manufacturing are now a common place. Be sure to ask each precision cnc machining shop, screw machine products manufacturer, or other type supplier what types of controls they use to ensure a quality product.

Manufacturers Urge Senators to Support McConnell Amendment to Restrain EPA

Washington, DC, 03/16/11 -  National Association of Manufacturers (NAM) Senior Vice President for Policy and Government Relations Aric Newhouse issued the following statement today on Senate Minority Leader McConnell’s (R-KY) amendment to the Small Business Bill:  
“Manufacturers continue to believe the Environmental Protection Agency’s (EPA) ove regulation of greenhouse gas emissions (GHG) on stationary sources will put high -paying manufacturing jobs at risk and prevent further economic recovery. We urge senators to pass this important amendment to prevent continued uncertainty, likely job losses, rising energy prices and additional administrative costs on manufacturers.

Manufacturers support a comprehensive federal climate policy within a framework that will cause no economic harm, while granting sufficient time to deploy low-carbon technologies, such as carbon capture and sequestration, renewable energy and a renewed and large-scale deployment of nuclear power plants. We encourage Congress to have a substantive and realistic debate regarding GHG regulation before the EPA implements costly protocols on emissions from stationary sources, which will include manufacturing facilities.
If left unchecked, these EPA regulations will only discourage any long-term investments necessary to grow jobs and expedite economic recovery, placing America at a disadvantage in the global marketplace.”

Source: NAM

Manufacturers Urge Senators to Support McConnell Amendment to Restrain EPA

Washington, DC, 03/16/11 -  National Association of Manufacturers (NAM) Senior Vice President for Policy and Government Relations Aric Newhouse issued the following statement today on Senate Minority Leader McConnell’s (R-KY) amendment to the Small Business Bill:  
“Manufacturers continue to believe the Environmental Protection Agency’s (EPA) overregulation of greenhouse gas emissions (GHG) on stationary sources will put high -paying manufacturing jobs at risk and prevent further economic recovery. We urge senators to pass this important amendment to prevent continued uncertainty, likely job losses, rising energy prices and additional administrative costs on manufacturers.

Manufacturers support a comprehensive federal climate policy within a framework that will cause no economic harm, while granting sufficient time to deploy low-carbon technologies, such as carbon capture and sequestration, renewable energy and a renewed and large-scale deployment of nuclear power plants. We encourage Congress to have a substantive and realistic debate regarding GHG regulation before the EPA implements costly protocols on emissions from stationary sources, which will include manufacturing facilities.
If left unchecked, these EPA regulations will only discourage any long-term investments necessary to grow jobs and expedite economic recovery, placing America at a disadvantage in the global marketplace.”

Source: NAM, Michael Frohlich