Modern Machine Shop Online - Shop Management Forum

We are a tool shop struggling to keep up. I was simply wondering if anyone can give me any ideas on what to do in order to get my shop out of this slump.
I will noe describe my shop, so you can see our situation.
-we renovated a 1966 24,00sqft block building this summer. The renovations and the move cost roughly $50,000 and we funded it ourself
-we have 2 cnc mills, 3 manual mills, 1 cnc lathe, 1 manual lathe, 5 manual grinders, 1 wire edm, 1 edm, 2 cylindrical grinders, 1 hone, 1 sandblaster, 1 jig grinder
-we run 1st shift only
-we have 2 employess on both the cnc mills, 1 on the cnc lathe, 1 on the manual lathe, 1 on the grinders, and a part time guy on the edms and 1 inspector.
-our overhead staff includes: 1 shop foreman, 1 secretary, 1 human relations person, and 1 full time engineer.
-we have an mfg.com account and we have recieved 0 jobs from it
-we also do not have any sales force in place

Any feedback on how we can get on some solid footing(as far as more/profitable work goes)I would greatly appreciate to hear your opinions. Thank you for your time,
Andy Zemco

	Reply Date: 02/18/07 Author: Jennifer jennifer@landerinc.com Subject: Customers You didn't talk about about any major or minor customers?

Reply
Date: 02/20/07
Author: Andy Zemco
Subject: customers

Our biggest customer is not really a tool and die type customer. There is a local factory in town and we do all there maintance work, a lot of 1-2piece jobs. The worst part I about the work is that we are on 'call' ao the time but for the most part we don't get bothered too much on weekends. And they pay time and material and they never complain about our price and they pay on time.
Other than that we are just do general tool and die work from various sources.
We would like to see to more government/large volume/good paying work. We are not sure how to attract that work tho.
Any ideas?????????????

Reply
Date: 02/21/07
Author: John W Hill wiggies@pei.eastlink.ca
Subject: Finding work

Andy you do not need or would you want the high volume work because it doesn?t pay. The reason is simple, everybody else is after it and it drives the price down. It?s a bit like the ?Gunfight at OK coral, each person thinks he is the fastest gun and ends up in the dust. Similarly each shop thinks that they can machine faster than the other guy and ends up at the cleaners. I know shops that are running high volume work and they do not make money until into the 3rd shift and they are pounding the hell out of their machines to do it. Look around for the work that no one wants to do and become good at it. The ?one-off? and the complicated stuff is the work you should go after because no one wants it. You also have an advantage in that you have an engineer which a lot of shops your size don?t. Look into becoming an approved vendor. It requires a bit of work up front such as writing quality manuals and going through shop audits. You have the advantage of having an engineer who should be capable of getting all that done. I hope this helps you out a bit.

Reply
Date: 02/22/07
Author: Andy Zemco
Subject: more questions

John,
the biggest shop in town runs 24/7 making parts for Saturn, Delphi, Boeing, medical, more aerospace, and Panasonic. Many, many large volume jobs they are doing, how are they making it work??

Thank for the good discussion BUT i still have a few questions.
1) As you can tell by our equipment description above, we don't specialize in anything we have a little bit of everything. How do we market that in the manufacturing world?????
2) John mentioned an our engineer above. We brought him in the first of this year at $70,000ayear, to be a design and build engineer. We design parts for people, then we make them. The customers love our parts but they don't want to pay the engineering on them. Our engineering rate is $78 an hour(we figure this because he uses the same overhead as the machine shop does). Anybody know of any ways to figure enginnering overhead????

Reply
Date: 02/25/07
Author: John W Hill wiggies@pei.eastlink.ca
Subject: suggestions

Hello again Andy. You answered your own question. The company you mentioned has to work 24/7 to turn a profit because the profit per part is low. I have worked in these facilities doing mostly aircraft engine and airframe components. This company is an approved vendor for all the customers you mentioned and they pretty well dictate what the price per unit is going to be so that means you have to lean things up to bring the cost down. I would say that every machining center has tool changers, pallets, part probes and tool probes and when they do a changeover they use a SMED system. You can only ring so much out of the actual machining operation but where the cost saving really kicks in is changing from one job to another. Most of the setup work is done off the machine. It means working entirely differently from the average machine shop where one man is responsible for one machine and does the programming and the setup. With aircraft work batch quantities are never constant and delivery times are not constant either so you are really driving it. Have you talked to this company about fixture and tooling work? I worked for a shop once and all we did was make fixtures and tooling for big manufacturing shops. It was good work and we did well at it because no one wanted to do it. My suggestion is to put a package together which would include a capabilities list and a quality manual which you can do yourself with a computer and a digital camera. Then start going around knocking on doors. Another would be purchasing old machinery, restoring it and selling it. Another would be to take something that is used everyday, make improvements and market it. Lastly it is very hard to charge engineering fees as an item unless you are specifically requested as part of the quote package. Some companies will want a break down of all the components of a quote in which case you would you would enter it but in a lot of cases the customer may consider it overhead and part of the service you offer. I hope this may give you something to go on.

Reply
Date: 02/26/07
Author: Andy Zemco
Subject: true

While I do agree with what you said about them leaning things out and having to run 24/7 I disagree with what you said about not wanting that work. That shop owner drives to work everyday in a 2006 Escalade and he just bought his 19yr old son a 2007 Lexus for graduation. I'm stuck with 1 shift of one and two piece jobs and I drive a 2005 Chevy Colorado. Just really fustrating right now. We are working on ISO certification to get some gov't/big contract work.
More Suggestions???
Thanks again for all the info!!!!

	Reply Date: 02/28/07 Author: Subject: true It may be best not to look at what others have and resent it, but to consider what you would like and how best to obtain it. Do you know what the shop owner put at risk to get where he is now?

Reply
Date: 03/01/07
Author: Andy Zemco
Subject: respectable guy

I'm thinking you might think I am bitter towards that shop. I'm sorry if it came out that way but that is not the case. The owner started business in 1979 and worked long hours in the upstairs of an old two story building. I have great respect for him. He barely was able to get through high school and almost every teacher said he would amount to nothing(my dad was a few yearS ahead of him in school). However he knew what he wanted to do after school and chased after it. I have no bones about him buying his kids new cars, or his beautiful home, or his condo, because I do know where he has come from and that he has earned his money and he should spend it however he pleases. I have no gripes about that.
I'm just saying that I have been out of school for 10 years now and we haven't went anywhere. My dad started this company in 1976. It hasn't changed much my whole life. Another 10 years of this and we WILL have an auction sign hanging on the front door. We have equipment, good employees but man we just have not come across any work or projects that we can build and expand upon. Just really fustrated right now.
We talk to a lot of business cosultants and the first thing they ask us is: "what are you good at"???? Like I said earlier, we don't specialize in anything, anything in our shop other shops can do a little bit better. They tell us that is not marketable in this business and 30+ years of fustration really seems to support that. We are just not sure where to turn to.
With thanks,
Andy Zemco

Reply
Date: 03/15/07
Author: James_Engels@EngelsMachining.com
Subject: Buisness is not like it used to be.

My father died 4 years ago all of a sudden and my wife and I dove in and started learning. I had over 20 years in mfg and tooling. Almost 10 years alone in CNC. Been Mfg Mgr, Enginnering Mgr. VP, etc ...even IT director. Sales and estimating is a big driving force of any company. You need to put together a marketing package and find what advertising works for you. Most jobs come to us - but that doesn't stop us from trying to find them. Slow growth is the best. Also, you are who you hang around with - if your existing customers grow - so will you. Don't be afraid to admit mistakes and move on. Keep up the good fight and remember you only work for the banks, customers, vendors, and employees, and IRS now. - HaHa. Seriously though, brainstorm markets and services and products and get a website up and promote and slowly turn the buisness in a new more profitable direction. You can't do it overnight. Also - depending on your customer base and sales....you may have too much overhead today. Good Luck.

	Reply Date: 04/28/07 Author: Andy Zemco Subject: so basically your saying we have too much overhead? could you explain the direct-indirect ratio? what is it? I've never heard of it. Thanks so much for you help, Andy

Reply

Date: 03/03/07
Author:
Subject: customers

Andy, I can't imagine what your lack of enthusiasm for your own machine shop has for your employees. I agree, you need to decide what you want to do and go after that. If you walk into a new customer, you need to be able to solve their problem. With your attitude, it seems like you are just waiting for something good to drop in your lap and not seeking it out. Honestly, life is too short to spend your life doing something you don't enjoy. Have you ever thought of just going to work for someone else and collecting a paycheck at the end of the week? It's a lot less stressful.

Reply
Date: 03/12/07
Author: Andy
Subject: lack of support

We are honest with our guys. They know the situation we are in,,obviously they know with the paychacks they take home. I kinow they all have been offered better paying jobs with bigger shops in town yet some of them have been around since dad started the shop. We are honest with them and they are honest with us.
As far as sitting around waiting goes, we have done everything we can think of to turn our shop around. We are just confused about what to do. Like I said we are working towards ISO certification to see where that gets us. We are not sitting around waiting, we are just completley confused on what to do next.

Reply

Date: 03/15/07
Author: Chris
Subject: End User Perspective

I can share some perspective as an end user. We use several local shops we use for the type of work the we farm out, such as fixturing, tooling, etc. Over time, we have developed an understanding of what each shop is good at, and this is the type of work we give to them. We don't spend a lot of time looking for other shops to do work for us unless we have a new application that one of our existing shops can't help us with. I would tend to agree with some of the previous posts that you need to understand what you are good at now, what you want to be good at, and knock on some doors. Have a good package together that clearly illustrates your capabilities. Perhaps you should look for new(er) companies in your area that don't necessarily have those types of long-term relationships built up? Hope this helps.

Reply

Date: 03/15/07
Author: The Tool Man!
Subject: There is a lot to consider!

Andy, there is a lot to consider as to why you are not getting where you want to be.
For one, the above post are correct, you need to specialize in something. Whether its grinding, milling, polishing, EDM, Die design and build, jig and fixture, something. You have to think outside of the box. Also, where are you geographically? I have been in the same location for 25 years and things have changed a lot. There has been a lot of tool and die shops around our location that is gone, out of business. Not necessaraly because they were bad, but the local economy just went down the toilet and the manufacturing has almost dried up. I personally would not go into the tool and die business without a specialty to back me up. Business is tough enough as it is, but without something that you can call as your own specialtly and market to other companys, I would just not go there. Sorry.

Reply Date: 04/24/07 Author: George Williams geowilliams@vnet.net Subject: Too much support Andy, based on the description of your shop,my knee jerk is "why so many support people?". You couldn't possibly generate enough sales, with so few machinist, to cover the saleries of so much support. Get your direct to indirect ratio in balance.

Reply

Date: 04/30/07
Author:
Subject: Too much overhead

Yes that is exactly what I am saying.
I own a small machine shop in North Carolina.
My employees include myself,two full time support and one part time support people, and ten machinists.
Andy I can't imagine that your support staff is worked very hard.
Pick a direction for your company to grow.Eliminate non-value added work, Set your expectations high ,reward the people that preform. Get rid of the ones that don't.
Success shouldn't be detirmined by the type of work you choose (high volume production or prototype) but by the consolidated preformance of your team.
Good Luck

Reply
Date: 04/30/07
Author: Andy Zemco
Subject: shop direction

We are taking a look at design and build work. Seems to me there are not a lot of shops pursuing that type of work anymore. Our $70,000 a year engineer was needing some work so we looked into desihn and build. The jobs we have done so far have turned out ok except for the fact that companies don't want to pay for enginnering time. They love our parts and pay for them, but they will not pay for the enginnering time. I dont think the engineering time can simply be given away. Our engineer uses the same overhead as the rest of the shop.

What do you guys have to say about this?

Thank for all your guy's help and comments,
Andy

Reply
Date: 04/30/07
Author: Jerry jpiesch@frazmtn.com
Subject: engineering time

I add in my engineering time, but add it in to my total quotation; so somehwat the cost of my engineering time is hidden in a way. It works for me, never had any questions asked.
However, if they do ask, just be straight forward about it. Besides, wouldn't they have to go out and pay the price for someone to design it if they don't have there own engineers?

Reply
Date: 05/09/07
Author: tims tims@groundwater.net
Subject: Engineering time

As far as engineering time, unless the customer provides you with a print on what to build, he doesn't get a vote on the engineering time. Build it in to the price of the parts and if you get a repeat order down the road, the customer is already adjusted to the price with fat built in.

The engineer wage sounds fair if he is doing engineering work and not filling in the gaps in your system. Maybe look in to building your own products and get your money's worth out of your engineer.

What part of the country are you in?

	Reply Date: 05/10/07 Author: Andy Subject: new ideas we are located in Southern New York. We are still going after the design and build work. I think we are going to get rid of all our overhead except the secretary, myself, and our engineer. Then I want to bring in a sale person and go after mold repair work-rubber or plastics i don't care which. As always kepp up the suggestions!!!

Reply
Date: 10/23/07
Author: User1 ims_qro@hotmail.com
Subject: Don´t give up!

Andy, Unfortunately the guy from North Carolina didn´t gave you his email. I can see he knows about this business as many other guy out there, would be great if you could stay in touch with those kind of people. The other thing I want to tell you is: You attitude shows exactly where your company is...please Ask God what you need to do fix yourself and you will fix your company situation soon. God never fails... God Bless you !

Reply
Date: 10/24/07
Author:
Subject:

I think you need to get rid of your engineer and hire a salesman. I agree with the high production commments. We found it almost impossible to get any high production work that we actually make any money on. Plus you always have to worry about that job getting pulled and sent to China. We stick with small to medium quantity jobs that nobody else wants to do. Once you start getting a good customer base doing those kind of jobs, you will be surprised at how many bread and butter jobs they will give you as well. Stay up with technology and keep your employees trained. Always look to improve. Biggest thing that helped us survive is QUALITY. We are also honest with our customers and don't promise unreal deliveries that could never be made. Good luck, it is a tough business to be in these days but you can make it work.

Reply
Date: 10/25/07
Author:
Subject:

Your engineer should be counted as indirect labor and therefore added to your burden rate. This will be easy since you know his yearly salary. This way his time is spread throughout the entire shop and not just on specific jobs. One more thought, be sure to run at maximum capacity before adding new machinery. Get a second and maybe 3rd shift going. That is how you keep your overhead down and profit up.

Reply Date: 10/30/07 Author: Tresea bamagirl1721knox@gmail.com Subject: used machinery needed bender machine, punch/press machine, shear machine.

Reply

Date: 10/30/07
Author: Andy Zemco
Subject: UPDATE ON OUR SHOP!!!!!

First of all thanks to everyone for their replies!!!

Now for the shop updates that have taken place this summer:
-we got ride of our engineer and we have given up on the design and build feild of work. Our engineer was making $70,000 a year and had only brought in $20,000 worth of business for the year, so we canned that project.
-we lost both lathe operaters. The manual operater wasnt conforming to our LEAN/5-s implementation efforts and our cnc lathe operater quite.
-we hired an unexperienced person to run the cnc lathe. He is getting trained by one of the cnc mill operators.
-we also lost our human resources person as he decided to continue his education.

What do you guys think, and please as always, be honest!

Thanks!
Andy Zemco

Reply
Date: 11/01/07
Author: Rich S
Subject: On the right track!

Well, I think most of that will better your company. Getting rid of the engineer was the big one. Get your lathe operator TRAINED correctly and make him the best he can be. Small lot turning work is more abundent then milling work. One of the owners should hit the pavement and start trying to increase your customer base. It is brutal and you will get very frustrated but it needs to be done. There are a ton of job shops so you need to come up with something that seperates your company from everyone else. Quality and on-time delivery are two very good ones. Go to Caterpillar's website and fill out a supplier application form. Talk with Harley, Oshkosh Truck and John Deere etc. Get your foot in the door. Make sure you have supplier's set up for heat treat, plating, grinding and anything else you cannot do in-house. IF you can get a foot in the door, do everything you can do build a relationship with them and tell them you want to grow with them. If there are any shops around you that are closing shop, try to find out who they were doing work for and contact them.

This is just my 2 cents. I have been around this busines since I was 12 and have watched our shop grow to be very successful. Good luck and keep us posted.