Veteran Role Model

It is easy to recite the “Remember Me” lines, “You can shed tears that he is gone, or you can smile because he lived.” Reflecting on the impact a recently passed veteran has had on me, it is difficult to fight those sad emotions.

Two weeks before veterans day, Lt. Cmdr. Donald Thompson passed away at 98 years old.  A Navy aviator in World War II, he lived a remarkable life. As has been reported in many places, he fully lived life to the end.  I previously shared his war experience in the Battle of the Atlantic, and on this centennial of the Armistice of World War I, it would be easy to focus on the period of his military service.  For Don, like all veterans, their military contributions to the country are a portion of who they are. My experience with Don, as my neighbor since I was two years old, was of the whole person, and how has had been an enduring role model.

Reflecting back on our interaction, outside of our family, Don has had the most influence on my parents and me in ways that have profoundly shaped our lives for the better.

Professionalism

Without question, he is the first person I knew that was a professional.  Not as a point of status, he wore a suit to work when most everyone I recognized wore a factory uniform. At the time, he was a couple years removed from managing customer service at Lyon Metal Products.  Our family was modest, both my parents worked hourly jobs at the office furniture manufacturer in town, and came from modest backgrounds of our extended families. As a child, I certainly did not recognize this in any measurable way, but looking back, his professional manner and the subtle differences of being a leader, as opposed to being led, came through in his interactions.

When I was in fifth grade I interviewed him about working. It was a sizeable report for a ten year old, but I only recall one question I asked.  Why did he go to work at Merchants Bank after he retired from his career at Lyon Metal Products? His reasoning, “I still have a lot of suits to wear out.”  Though a nod to his dry sense of humor, it reflected his nature as a customer facing professional. And where better to do that than at a bank.

Charisma

A natural friendly, extravert, everyone that came in contact with Don liked him.  The volume of people at his funeral and the number of glowing stories on facebook reflect the caring, personal way in which he connected with people. In these outpourings, I an see that my family and I are not the only ones with which he connected, seemingly effortlessly.

As an introvert, I would gravitate to his wife, Doris, and her quiet nature, but was transfixed by the ease at which Don connected with others.  He made friends and lasting connections in every aspect and endeavor of his life. This seemed impossible for a shy kid that did not want to introduce himself to anyone.  I have strived for that continually, and know the impact of openness and a smile can have on others.

Caring Unconditionally

It is a disservice to quantify such things and the most difficult to put into words. I can say confidently that Don and Doris were the first people, outside of my family, that loved me unconditionally.  They may have deeply cared for other people as well, and I hope that there are many others who had the gifts of life with them that I have. It would be too easy to say that they were like grandparents. I do not want that analogy to oversimplify their effect with a stereotypical idealisation, or to marginalize the relationship of my family.

Whether it was a swim meet or a Cub Scouts event, Don would periodically attend my activities.  This type of caring and interest in others cannot be understated. Learning that there were people interested in my life was significant.  It was a safety net. I knew my parents cared and would support me. Having someone outside of the nuclear family provided an added dimension of confidence.  Although they were childhood events, the particulars of which are long gone, this interest and personal caring created confidence. Pursuing the unknown and trying new things is in part from his unconditional love and support through those formative years of my life.

Giving

During his full time work career and part time jobs after retirement, he always maintained charitable efforts.  Throughout his adult life, he was a Shriner, supporting their causes. For many years he also volunteered at the nearby hospital and raked up over fourteen hundred hours of service.  His giving was my early motivation of helping others. This example has continually motivated me to be involved and give back to others in areas where I can.

Adventure

Although we were only neighbors for four years, Don and Doris’ connection to us endured the rest of their lives. After moving, the frequency of visits with them became more spaced out, measured in months instead of days.  When we would stop to see them, there were always stories of trips they had been on and where they were planning to go on vacation. Don drove them everywhere, they hit almost all 48 states during their 66 years of marriage. Doris also shared with us her love of visiting Bavaria.

Absent their vacation adventures, my only concept of travel was going to see my grandma in Florida.  The concept of going on vacation, in what seemed a far off place, was unimaginable. The stories and trinkets they brought back made these places attainable.  I embraced their stories of adventure. The idea of travel is difficult for some. I think about the twelve countries and twenty-eight states I have visited in my professional career.  Though those experiences are not vacation, Don and Doris’s influence has made embracing the unknown destination my default mindset.

Growth Mindset

Don had a growth mindset well before it had a label.  He was always trying new things. In his seventies he got on the internet, complete with a Compuserve email address. He spent the decade as an octogenarian working part time in customer service at Home Depot (because he was a people person!), and being an early adopter of a smartphone.  In his nineties, he started using facebook (because why not), flew a T-6 Navy trainer aircraft (it was liking riding a bike, he proclaimed) and went skydiving (how did a doctor clear him to do that?).

The growth mindset was ingrained in who he was and remarkable to see from a front row seat. My effort of writing in the last couple of years is definitely a result of his influence, as a creative outlet and tackling a new domain. I hope to maintain such endeavors and continue to be relentless in learning like him.

Closing

We are fortunate to have veterans whose sacrifices in the past, along with those active duty service people enduring today, have made this present possible for us.  I am so fortunate the relationship I had with Lt. Cmdr. Don Thompson and the positive after service impact he had on me, as well as all those he touched in his civilian life. Reflecting back, there is no doubt he has significantly contributed to the life I have today.

 

Thank you Formtek!

Time files. The twelve years here have gone quickly. Strangely, I can reflect back to different periods of time, and they don’t seem long past. The last few months have been a personal struggle; reflecting on what I could do and how I could stay with this organization forever, then posit that if I am going to make a change, for my family’s interest, the time is now. The tug of staying here with this wonderful team has been a steady force, making this decision all the more difficult. Some of you have told me that making a move like this is brave. This is a good company made up of great people, and there is some risk in trading this for unknown challenges. For those that see this change as bravery and am happy for the new future ahead, thank you, your sincere feelings will fuel me through the uncertainty.

I have struggled to come up with what to say, and how I may thank everyone here. I could go around and thank everyone for something, and that is a reflection of the healthy team we have here. Instead, to emphasize the magnitude of their significance, I want to focus on a few.

The thanks start and end with Brian.  He knows this, as I have told him many times.  He is the one that hired me and that pushed for me when Joe didn’t want me because I was too young. Brian selflessly stepped aside so I could be the sales manager and he stayed with the organization. Without his short-term sacrifice, I would have not not had the growth and opportunities that I do today.

It is also important for me to thank Bruce and Darren. They have been extremely supportive of my development.  A lot of the things I have worked on or crazy back to back travel itineraries were not assignments from them, but instead was my pursuit of opportunities that I saw for the business.  I have benefited tremendously from being provided that latitude and hope that these development efforts will be beneficial for the organization for years after I am gone.

The last one I want to single out is Paul. He and I have traveled a lot of places, in search of sales, as well as setting up and tearing down numerous trade shows. For the past 10 years, we have spoken, skyped or texted almost every single day. I consider Paul a true friend, and my future will not be the same without this daily interaction.

I could not think of how best to sum up all the moments and experiences that have occurred over the years. Recently I read The Tao of Pooh, and I came across a passage the seemed like a perfect fit to describe my time at Formtek:

“The honey doesn’t taste so good once it is being eaten; the goal doesn’t mean so much once it is reached; the reward is not so rewarding once it has been given. If we add up all the rewards in our lives, we won’t have very much. But if we add up the spaces between the rewards, we’ll come up with quite a bit. And if we add up the rewards and the spaces, then we’ll have everything–every minute of the time that we spent.  What if we could enjoy it?”

I have enjoyed my time at Formtek. Not only the high points of our success, the rewards, but the process and path to those successes, the time in between. I can say that I came in to work here, striving for success and how we could be our best.
I leave here fondly thinking of Formtek.

Good luck, all the best, and thank you very much!

Section 232 Steel Tariff Developments

Encouraging 232 Developments

As I have been very critical of the seemingly overreaching Section 232 action on Steel, I read some encouraging news that is important to share. According do the US Trade Representative, the Section 232 tariffs are being delayed for countries currently negotiating exemptions. As reported by the American Metal Market, those temporarily exempted countries include the European Union, Argentina, Australia, Brazil and South Korea.

These currently exempted countries, along with Canada and Mexico, account for greater than 50% of our steel imported to the US annually, and in-kind more than 15% of our overall steel consumption. Noticeably absent from this list is Japan, which is a source of high tech steels used in a variety of industries.

In discussions with market participants, I have recently heard of 35% price increases from distributors on various grades of steel, and a datapoint of 25% increase on tool steel that is made in Germany. With this latest news, what will distributors do? Will they scale back those announced price increases, as their savvy customers know the origin of the material they buy?

In the meantime, and even if steelmakers and steel distributors do not scale back on these price increases, those in the steel industry are experiencing high margins, at a level we have not seen in years.

Scrap has been the primary driver of steel prices in the US for decades.  Year to date, the price of steel is up 30% but the price of steel scrap is up less than 10%.  So what is driving the price increases?

  • Tax Increases? No
  • Wages? No
  • Natural Gas?  No
  • Electricity? No

Its difficult to point the price increases to anything other than the Section 232 hype machine, on top of the protectionist agenda that has been raising steel prices since November 2016.Steel pricing is up 3 times more than steel scrap so far in 2018

How do you push back on these price increases?  It is time to be opportunistic.  There is certainly a steel distributor somewhere, who is will to move their inventory at a more modest price increase than those who are aggressively going to the 25-35% price increase range described above.  Go back to your vendor and talk through the increases and the rationale above, regarding the origin of the material.  If they are a good vendor and a real partner, they should come to the table and find some compromise on these price increases.  After all, this is why we develop relationships with vendors and not just treat them like a number to be replaced as soon as there is a lower price elsewhere.

Where Are the Women in Manufacturing

How do we get women passionate for science into manufacturing

Last week, diving deep into the speculative end of the Section 232 Steel tariff pool, and prepping for a trip to China, I neglected to keep tabs on a couple job postings that we have listed.  Since the beginning of the year, we have been looking for someone with a technical background to develop a mid-level sales position.  Getting back to them now, and looking through all the candidates, it struck me, where are the women in manufacturing?

In the roughly two months of receiving resumes, there have been a wide range of applicants, both qualified and not, but through it all, zero female candidates.  No gender diversity, across LinkedIn, alumni job boards, local classifieds and recruiters.  Seeing this, I am both perplexed and concerned:  is this female candidate void a mirror, reflecting our deficiency, or a window to see the larger issue in the industry?

Or maybe it is both and the fact is that we have a long way to go.  It feels like support for STEM is everywhere.  For the last several years, coaching high schoolers, there were many girls I worked with who were good students with an interest in math and science and a work ethic I admired.  I would hire any of them to work in this role, but besides not being old enough to work in manufacturing, they also have no interest.  It seems that all the support of students in STEM is only the beginning.  We also have to connect and inspire girls to the opportunities in manufacturing and other technical industries.

Eighteen years ago when I was entering university to study mechanical engineering, it was generally accepted that females studying engineering were rare.  At the time, roughly 1/3 of the engineering student population were female and that fraction was generous, I do not recall a class as an undergraduate or a teaching assistant where 1/3 of the students were women.

Fast forward to now, and despite a decade of intense STEM support across the country, alumni relations informed me the rate of female enrollment is unchanged from when I was in college. WHAT?!  How is that possible?  I realize it is a midsize school, and there may be some big-name programs elsewhere that can tout growth of female enrollment, but this is not an isolated problem. How are there not more females interested in engineering?  If the broad topic of engineering is not gaining interest, then the subset of manufacturing does not have a chance!

My view is distorted by my spheres of influence.  Working with manufacturing companies every day and participating in a technical advisory at the local community college, I am almost constantly surrounded by like-minded people who support STEM and increasing opportunities in our industry. Plus, I infer the connection between STEM and technical careers, but that may be a leap for others outside of technical industries. As a high school coach, on the other hand, with many student’s parents being doctors, lawyers, business owners, and entrepreneurs, the fact that I worked in manufacturing was overlooked in favor of the more altruistic label as a volunteer youth athletics, so there is certainly some negative bias to overcome.

And even if we succeed in encouraging teenagers to pursue these technical careers, there are several years before they will be in the workforce.  What about filling the immediate roles that are available? How do we motivate and attract women to this industry and careers?  The point above, regarding my influences and connections, is that I do not have the answers.

A few years ago we hired a sales person that came from selling wholesale beauty products to salons.  When she was going to college for fashion, did she think one day she would be helping maintenance workers troubleshoot hydraulic components and selling them replacement parts?  Doubtful.  And you know what, she is awesome at it!  How did we get her?  Pure luck.  Human resources or I cannot claim any special insight.  This is not to pat ourselves on the back. Being lucky is not going to solve the gender imbalance in manufacturing.

So what do we do?  To paraphrase Sheryl Sandberg, how do we overcome them not doing something where they do not see themselves? I can think of several great women leaders in manufacturing that I have had an opportunity to work with, but the reality is, on the scale that the industry needs, there are not enough of them that can serve as role models for students.  Women in Manufacturing is a great organization and I hope they can build even more momentum to encourage their peers to be a force in this industry.

And how else can we grow manufacturing? Take a chance!  Reach across and embrace candidates from other industries. Manufacturing can be taught and if someone has the interest and willingness to learn and apply themselves, there is no doubt the employee and business will benefit. With the impending retail apocalypse, how many experienced store managers and key holders could kick butt given a chance in manufacturing?  Probably thousands.  Let’s figure out how to attract them, and ambitious individuals from other areas, to the opportunities in manufacturing.

Section 232 Steel Tariffs – How to Respond

On heels of the Commerce Departments Section 232 Report, the Trump Administration indicated they will impose aluminum and steel tariffs on those imported materials: 25% on Steel and 10% on aluminum.  As written about previously, there are several concerns about the basis of the section 232 report and its assumptions of how steel is a national security concern.  With the steel tariffs imminent, it is time to move from critiquing the report to considering what effects this may have on business and in the market. What situations could this protectionist move cause? How will interest rates affect consumers of steel? How will steel sourcing change the trucking market.

Inventory

Inventory costs will increase, a concern for manufacturers that fund their inventory through revolving credit. This will decrease how much inventory they can effectively carry or it will impede them from using their credit line for other needs, such as unplanned maintenance.  With the Federal Reserve expected to increase interest rates three times this year, that will amplify the inventory challenge for manufacturers by making it more expensive to service their credit facilities.

Challenge:  Cost Increases

Response:  ???

Raise Prices?

When input costs increase, particularly raw materials, there are a few options in response.  Manufacturers could raise prices. In an expanding market, it is possible to do so with minimal concern of losing market share. But in a tight market, and in the current environment, where customers could search for another vendor, who may have a lower price as they are working off older, less expensive inventory, there is a potential to lose business.

Product Redesign

The challenge can be put to engineering to redesign products to decrease the requirement of expensive materials. Is the material cost impact enough that a product can be redesigned to use non-metallic material?  For example, with the cost of steel going up and oil remaining steady, could a manufactured sheet metal component be replaced by molded plastic? This has already occurred in consumer products, such as Honda’s polymer lawn mower deck.

Lean Lean Lean

Manufacturing operations may review how to reduce the non-material costs of production.  This is typically thought of as reducing labor, which can be accomplished by re-evaluating the manufacturing process and adopting automation.  Depending on the industry and whether the manufacturer is an OEM or a subcontractor will change whether selling price can be adjusted, product redesigned or changes in the manufacturing process.  

The Capital Question

One solution is increasing automation. Those well-capitalized manufacturing companies can invest in more automation to reduce the labor component of their manufactured product cost. Hopefully, the employee can be redeployed on some other function in the business, and based on the shortage of technical workers, this should be realistic.  

In an environment where raw material costs and interest rates are increasing, the investment in automation is limited to those that can pay cash for capital expenditures or are able to service an increased debt load.  The option of investing in capital equipment is limited to those with sufficient, unused cash in the bank, as increased material cost and stagnant prices reduce cash flow.

Choices:  Inaction and Investment

For those companies manufacturing who have used the last 8 years to right the balance sheet and build a rainy day fund, this is a time to separate themselves from illiquid competitors. The question then becomes strategy:

  1. Do you keep prices down, absorb the cost increase and wait out competitors, who cannot do so, in an effort to gain market share?
  2. Do you take this as a challenge to make that next step in automation, to decrease the labor cost of the product being manufactured?

The biggest concern I see is these market challenges causing a greater dichotomy among manufacturers of steel products.  As mentioned in the previous review of the Section 232, right after the Commerce Department’s announcement, a local midwest distributor took the opportunity send out 15% price increases on steel material.  Manufacturers can invest in automation, to reduce labor, as a way to counteract that material cost increase. For those manufacturers that have not been able to pay down debt and do not have the flexibility to invest in automation, the gap will expand between them and their market’s leaders.

What will Section 232 Action on Steel do to US Manufacturing?

A product manufactured from steel

“Steel prices make up only a fraction of the retail cost of a car or truck.  In other industries, such as canned beverages and food, “it’s even more trivial… a fraction of 1 cent,” stated Commerce Secretary Wilbur Ross to address the Section 232 report for Steel and Aluminum.

That’s great; rising steel prices will have a limited effect on the cost basis for the end manufacturer of complex products like automobiles (or appliances), but what about the fabricators and manufacturers who provide the components to those end products? Manufacturing suppliers will most certainly get squeezed as they buy more expensive raw material and are unable to pass on that increased cost to the automakers.

16 times more employed in manufacturing than the steel industryAnd why does that matter? The manufacturers of metal components employ 16 times more people than the 140,000 American steelworkers.  Notwithstanding Section 232 action triggering a trade ware on the international stage, close to home it is difficult to disconnect such a move from having a negative effect on small and medium manufacturers.

An op-ed piece in the Wall Street Journal recently, put a thoughtful perspective on the concern threat of 232 action costing American jobs.  As a point of reference, if we look to the Section 201 action taken during the second Bush administration, the temporary import relief to steel industry through tariffs, had a negative impact, raising costs and resulting in job losses.  At that time, I recall a Tier 1 automotive supplier telling me they lost a long-term contract, at a Big 3 automaker, for a steel dashboard support component. The Big 3 buyer’s new source, overseas, had a price for the complete part that was less than the domestic supplier’s raw material cost.  Due to situations like this across the country, it is estimated that roughly 200,000 jobs were lost in American steel-consuming industries due to that section 201 relief.  For comparison, there were roughly 187,500 people employed in the US steel industries.  Sadly, many were sacrificed to protect jobs of the few.

More manufacturing jobs

Why overreach and protect the primary industries like steel and aluminum?  Its hard to set aside the deep pockets to lobby for those two industries, compared to the much larger and less organized small and medium business manufacturers.  And perception? Fortunately, steel is a defined, census tracked industry.  So let us look at a little Q&A to debunk some populist fodder of our threats and benefits.

Diverse sources of Steel that is used in the United States

Question 1:  How much steel is China sending to the US?

Answer:  Not much. 2.2% of total steel imports are from China, which is less than 1% of total US consumption. Surprisingly, Russia, which the US has numerous sanctions against, supplies 3x more steel to the US than China.

Question 2:  What percentage of steel used in the US is domestic or foreign made?

Answer:  Roughly 70% is domestic and 30% is imported.

Question 3:  What is the current capacity utilization rate of the US steelmaking industry?

Answer:  75.9% as of February 19, 2018, up 0.8%-points from the previous week.

The US is at roughly 76% capacity utilization of steel

It is easy to look at the statistics and think, “Oh, we are at 75% utilization capacity and 70% of the steel we consume is domestic, so if we increase to 100% capacity, then we will only need to import 5% of our needs. Math!”

Nooooooooooooooooo…It is not that simple.  Steel is a catch-all term, of which there are many types: carbon, alloy, electrical, among others. On top of that, those types come in many forms: ingots, bar, plate, and coil.  The capacity available in the US is not being utilized for various reasons, particularly efficiency and need.  There are other mills that produce those same products as the idled facilities, but much more productively, so those mills are profitable at a lower steel price.  Once steel prices rise, through tariffs or supply-demand dynamics, then the less productive mills can get in the game.  That would displace some imports, but not all.  At idled mills, there are some products and grades of steel that are not in demand.  As higher grades of materials are specified in industries, such as the latest generation of ultra-high strength steels (UHSS) in automotive applications, or Grade 80 material for metal roofing and construction, it has left mild or commercial quality (CQ) steel capacity less needed. There is not enough capacity of the sophisticated alloys available domestically, and there is too much capacity of common materials. Thus, effectively utilizing 100% of domestic steel capacity is not possible.  We could not build enough ‘bridges to nowhere’ to utilize some of the idled capacity.

What is happening now?  This week, a metals buyer told me their primary steel supplier informed 15% price increases were coming. This announcement was four days after the section 232 report’s release. How much does 15% matter?  In high volume, competitive industries like construction or tubing, material costs make up 70-90% of the selling price of the product.  Will those manufacturers pass on the material cost?  To make money they will have to raise prices and they may lose some orders in the short term while cheaper inventory at competitors gets absorbed in the market.

And what else will happen?  Imports of finished products will go up, which will hurt the manufacturers of value-added products.  Like the automotive example with the dashboard support component, supply chain experts will resource overseas as they will be able to find finished products that are less expensive than their domestic vendors raw material cost. It took the Commerce Department 10 months to submit their Section 232 report on the steel and aluminum industry.  How long would it take them to identify all the industries that consume these materials, who will be hurt by finished goods imports displacing their products in the market?

With history as an indication, we would be foolish to ignore the effects of Section 201 action to protect the steel industry in the early 2000s. A move by the government to proceed with Section 232 protection, whether it is through tariffs, quotas or minim prices, will be a detriment to competitiveness and employment in the broader American manufacturing landscape.

 

Sources:

https://tradingeconomics.com/united-states/steel-production

https://www.census.gov/foreign-trade/Press-Release/2017pr/02/steel/index.html

http://www.steel.org/about-aisi/statistics.aspx

https://www.wsj.com/articles/how-to-punish-american-workers-1519078840

 

Book Review:  A More Beautiful Question

Look for the questions, not the answer to the puzzle

If you want to open your mind, value growth, or are curious about generating change and coming up with big ideas, then this book is one to consider.  The book jumps in posing a number of thought-provoking questions, to prime the reader for the book’s intent. This hook was compelling to me and at only 272 pages, I was surprised how quickly it read.

two book cover versions for A More Beautiful QuestionThe book frames a number of commonly recognized products and how they were developed by asking radical questions:  Pandora, Cracker Jack’s, Salesforce, as well as the blade prosthetic foot, among others. The book offers up research and practical ways to generate questions.  Do you want to tackle some tough questions? Then start with a few easy questions and progress to more difficult.  Answering the easy questions helps open up your mind to tackling big ideas.  ‘Big ideas’ is also a recurring theme throughout the book, as well as accessible strategies. One story shared a Questioners tactic: after creating a technology sabbath on Saturdays, she began saving questions to contemplate during this undistracted time.

After reading the book, my takeaway is that the author does an excellent job of transcending the purpose of questioning.  A More Beautiful Question can be a guide for question thinking if you are a leader of an organization, a parent, or a thought worker.  The ideas presented open up anyone to tackle question thinking, be it business challenges or personal obstacles.  And the tools outlined apply at any scale, again, from, “How can I do this better,” to “What is our organization’s purpose in this world.”

Despite the book’s grand title, the message presented is clear, relatable and applicable to anyone who wants to break out of the answer routine and start thinking about questions whether

Further thoughts for Leaders

One of the realities posed by the author is business types.  He shares that old line businesses, particularly in the US and western Europe, many of which were created after World War II and then run by those from World War II, were built on an organizational structure where leaders have answers and there is little room for questions. These environments will have the most opportunity, and challenge, for adapting the question mindset.

Having recently read The Multigenerational Sales Team by Warren Shiver and David Szen, A More Beautiful Question raised questions in my mind about the generational impact of being open to questions.  Certainly, the book mentioned questioning as being a cultural taboo, in Asian countries for example, asking questions makes one appear they are not knowledgeable, so The Multigenerational Sales Teamthe idea of questioning is discouraged.  Recognizing this limitation, companies have brought in consultants for the explicit purpose of asking, seemingly obvious, questions, because the organization is unable to ask those questions of themselves.

From a generational standpoint, the book raised concerns to me about the ability to gain traction with question thinking across generations.  Millenials, and certainly Gen Z, having grown up with the ability to type Google a question whenever they want, are most comfortable with the questioning method.  But what about Gen X?  Prone to offering up rebuttals, would that discourage the questioning process?  What about Baby Boomers and Traditionalists? They have existed in a top-down, hierarchical business world, where questions are the exclusive domain of the novice, and not asking questions is [incorrectly] linked to higher knowledge status.

It is an oversimplification and disservice to take this generational point too far. Every generation is made up of many individuals with varying levels at which they identify with their generation’s norms, across a continuous spectrum.  As the leader of an organization, the generational consideration is a warning for how the embrace of question thinking can be approached.

And that’s what makes this book great.  The author touches on other factors which contribute to openness for asking questions.  For example, Silicon Valley is an incubator for asking questions and coming up with new, big ideas.  Montessori schools and similar question-centric education systems are a breeding ground for question thinking.  Even, being well traveled and having a broad, liberal arts, education, helps to ask questions.  Having diverse interests and reading a wide range of topics, helps to generate questions.  Writing, particularly journalism, is a great way to provoke the more beautiful question, which is particularly true for the author, Warren Berger, which is what started this journey for him.

Note:  Cover Image from David Stern

Communities Left Behind and the Rise of Populism

http://1.bp.blogspot.com/-6UU12_lM720/VERVtVUJb-I/AAAAAAAAAUU/fwAswBKgbf8/s1600/Youngstown_Sheet%26Tube_Abandoned.jpg

It is always a fun going to a new pool, where I have not coached or visited in many years:  see what changes have occurred, new starting blocks, different lane lines, and to check out the record board.  It is a peak into history at some places and in others, a way to connect with high performing student-athletes perhaps All-Americans or Olympians, who may have competed there in the past.

This evening coaching a high school swim meet, before warm-ups I found myself staring at the record board for longer than I care to realize. I had not been to this pool before and the high school is in an area where there are two Big Three auto plants in the community.  What most captured my attention, looking at the pool’s scoreboard, it seems to be an analogy of middle America, particularly here in the Midwest Rust Belt.  This place, the pool like the community, was booming and peaked in the mid-60s when the Ford engine plant and the GM plant in the next town over employed more than 10,000 people.

How do we measure progress and identify those communities that have been left behind
This Scoreboard is Updated as of 12-2016

This town and the school have been in steady decline since 1980, until 2010. The plants that counted employees in the thousands now count in the hundreds.  That shrink inevitably caused a declining tax base. To remain economically feasible for the community, this school district was forced to merge with the neighboring town in 2011.

I took a picture of the scoreboard because it is, in a way, an illustration of this decline. I go to a lot of pools and nowhere are the peak performances so centered in the distant past like this place.  For those unfamiliar with swimming record boards, the second and fourth columns are the record setter, listed as first initial, last name, high school name, and year the record was set (two digits).  There has been a huge increase in swimming technology and performance in the last decade, which has catapulted performances and records everywhere, the full breadth of that topic is a series of posts in its own right.  Looking at the dates on the record board (centered in the 1970s) makes me think this community, with its primarily low technology, outmoded jobs, was left behind. 

As I look at it I think, is this the type of decline that the populist voter experienced, this left behind feel, whether it is due to insufficient opportunities or their jobs being replaced by automation or exported to some low-cost country?  Are these the communities that incited and excited the new presidency.  Where the populist idea ‘making things great again’ resonates. The reality is the average American, regardless of sex or race, is better off today than they were in 1965, but the average American white male with only a high school diploma is much worse off. Those are the ones that strived for and passed down the jobs at the Big Three plants, only to have those well paying, low barrier occupations replaced by automation, outsourced to a supplier, or eliminated completely.  

I grew up in a community like this, so the experience and this visual illustration really hit me. The experience and visit tonight generated conflicting emotions of interest, nostalgia, and empathy. Like most issues, the real answers here are complex and prone to heated debate.

Youngstown Sheet & Tube Company image from http://postindustrialrustbelt.blogspot.com/2014/10/rust-belt.html

What Are We Going Through

An edited version of this article, THE NEW MANUFACTURING LANDSCAPE, appeared in the September 2009 issue of FF Journal


The recession of the last 18 months and its causes have been well documented.  The decrease is spending and capital availability has cascaded throughout manufacturing, resulting in layoffs, rolling shutdowns, and factory liquidations.  The cutbacks have created a range of challenges for those of us in manufacturing and manufacturing services.  Spread thin, limited internal personnel, a lack of cross training, outsourcing and furloughs have caused an uncertain landscape for employees.

Outsourcing

Since the 1980s, layoffs of production, engineering and support personnel have been a common action to reduce costs during declines in business activity.  These layoffs, along with retirements, have wittled away the manufacturing base in the United States to the point it is today.  For many companies, with the pool of direct labor stripped to its core of personnel required to conduct business, other avenues have been pursued to cut costs.  With the decreased business activity, it has created an environment for manufacturers to take the chance and outsource administrative activities, such as human resources, purchasing, and even accounting.  As automotive and appliance manufacturers have done over the last several decades; small and medium producers are testing the waters with local outsourcing of component and production activities that may be done by job shops.  Though these outsourcing activities may be a necessary step for businesses to survive this economic climate, it presents new challenges.  For example, the outsourcing to local job shops may reduce the need for some on-hand inventory, but the manufacturer is no longer in control of the lead times or the opportunity to fill rush orders, which are more common as everyone has shed inventory to meet demand.  This can be frustrating for customers and manufacturers alike:  eventhough no one is ‘busy,’ ie., at or near full production, leadtimes for manufacturered items are nearly unchanged, or longer than usual.

In-Sourcing

Several years ago, because of the overwhelming cost savings touted by offshoring components, for some manufacturers it was automatic to try this.  As offshore costs have approached parity with local capabilities, in-sourcing has become an admirable way for manufacturers to maintain a level of self-reliance and insure work for their remaining core of employees.  In-sourcing has presented complications, though.  For example, a manufacturer of scaffolding brought back their production of planks.  Upon assembly they found their planks and fasteners, still offshored, no longer fit together per their print.  Since they had purchased this fabricated subassembly for years, it had changed from the original specifications but went unnoticed because the deviated subassembly still fit within the overall system. Because the supply of offshored planks could not be instantly turned on, it was necessary to retool their plank.  Additionally, a manufacturer of vacuums found their quality problems increased when they insourced production because they no longer had technical personnel familiar with the critical assembly of their equipment.

Cross Training

The recession and layoffs have pushed a lot of companies to no longer have backups in their workforce, there is one person to do each job or there are a handful of personnel that are doing all the various disciplines that are now required on a smaller scale.  This has emphasized the need for cross training core personnel; on a given day it may require an engineer to design a component, purchase the materials, and schedule the production.  It’s as if small business structure is being projected onto larger businesses.

Productivity?

Since this recession has proliferated the use of furloughs to meet business demand, it has caused a delay in opportunities.  For the companies with liquidity to pursue capital projects, the possibility of purchasing new equipment or automation to increase productivity or in-house capabilties, the rolling layoffs impede the justification process.  For example, a company furloughing on a four week rotation, the week off and week of catching up can cause the process of justifying a capital project by two or three fold, when considering the time required to coordinate technical personnel with outside vendors, review quotations and successive revisions.

Taking Risks (expanding in a down economy)

Developing technologies and new industries are a common sources for increasing economic activity or ‘green shoots,’ as has become the common buzzword lately.  Even as some companies pursue the opportunities to create or expand their business to pursue these new opportunities, they are finding substantial roadblocks, particularly fiancial.  Major banks and financing companies have restricted leasing to any LLC without several years of credit history or businesses of any kind that are less than a year old.  It’s also disheartening that banks are resistant to finance capital equipment, even when the suppliers are willing to back the loans to some rate.  For example, a small business that was not eligible for equipment financing because the banks no longer considered their debt ratio acceptable.  The business was eventually able to lease the equipment, a used model financed directly by the manufacturer, at a 12% interest rate.

Inventory & Maintenance

As demand decreased, manufactruers have been forced to lower minimum order sizes.  A few tubing manufacturers have been forced decrease their minimum production run from 100,000 feet to 30,000 feet to maintain orders.  This adjustment to demand has caused the manufacturers to changeover tooling every single shift.  These lower production quantities have resulted in more changeover time for products, higher scrap rate and more wear and tear on equipment.  In the short term, manufacturers have met the maintenance needs of these demands by using parts from one of their mothballed production lines to keep the other one(s) running.  When happens when the economy picks back up?  Will the mothballed and scavenged equipment be operable to bring back online?

Flexible Employment

Where is manufacturing going?  What will it look like when things rebound.  Several manufacturers have commented that they will never have the number of employees they did before.  They have found their ability to do more with less.  A portion of our current unemployment rate are baby boomers who are still willing and able to work as well as people only a few years out of school that were fulfilling entry level roles.  It seems that we are coming to a new era of freelance employment.  Industry veterans, who may have been pushed out earlier than they desired, may be available on a a consulting basis.  Additional personnel may fit into the puzzle as temporary employees, to fulfill fluctuations in business demand, since companies may choose to stick with their core of compotent, cross trained personnel.