By Roger Landman, Head of Product Management at SYSPRO
The fabricated metals industry inherently runs on very narrow margins due to factors like fluctuating material costs, direct and indirect labour and overhead expenses. Global raw material costs are often dictated by the London Metal Exchange (LME), the largest exchange for options and futures contracts for base metals, which includes steel, aluminium, zinc, lead, copper and nickel.
Besides the volatility of external global factors, the industry is also expected to meet specific, made-to-order, customer demands. With all of these factors at play, it comes as no surprise that the industry is so heavily reliant on specific raw materials suppliers, manufacturing processes, labour and outbound logistics requirements.
With ongoing supply chain disruptions, competitive advantage is being lost. According to the recent SYSPRO survey entitled ‘Realigning the links of the disconnected supply chain’, 82 percent of fabricated metal businesses have experienced supply chain and material handling disruptions, further eating into diminishing margins and ultimately customer service.
Despite these challenges, only 12 percent of businesses have systems that support in servicing external customers. To build resiliency, metal fabricators should consider the right technology solutions to improve operational efficiencies, enhance external collaboration and meet unique customer demands.
- Maintaining a consistent supply of raw materials
For decades, China has been a leading supplier of raw materials to the fabricated metals industry, partly due to its competitive pricing to match low industry margins. Russia has also been a top producer of materials such as aluminium, steel and nickel. But raw materials don’t just stop at metals. Gasses such as Oxygen and Argon are also essential in the welding of carbon steel and some high alloy steels. Carbon Dioxide is one of the gasses often used to improve the welding process and increase productivity rates and on a larger scale by using it as a shield gas in MIG welding, where the gas protects the weld against oxidation.
With ongoing challenges like global lockdowns, global sanctions and other unavoidable disasters, distribution of these materials has also been severely delayed. To overcome these challenges and instil a proactive approach to changing customer demands, end-to-end visibility across the supply chain combined with data insights is key. The challenge though, may lie in the slow adoption of data analytics tools. According to the SYSPRO research survey, in response to ongoing disruptions, only 12 percent of metal fabrication manufacturers invested in data analytics to interpret the data that they were collecting and identify any real-time shifts. This will need to change if the industry wishes to remain agile.
2. Remaining competitive with speedy quotes
The fabricated metals industry is very competitive and focused on custom requirements, that a key business differentiator is the speed and accuracy at which quotes are produced. Here attention to detail and collaboration is key. Without a proper understanding of raw material delays or inbound costs, the quote will not be accurate and businesses may face the risk of losing money.
Costs should be tracked throughout the manufacturing process with a centralised ERP system. While disparate systems are fine to use, they should be integrated into the ERP system or may carry the real risk of inaccurate information, resulting in misalignment and inaccurate costs. This will also affect real-time decision making.
3. Building efficiencies with the right skills
The skills deficit is a challenge faced across the manufacturing sector, but the fabricated metals industry particularly, requires very specialised skills from welding to engineering estimation. The role of Human resources is to ensure that these skills and knowledge are never lost, and while Industry 4.0 is introducing a new wave of automated technologies, the requirement for these skills is still clearly still vital. As an example, you can programme a CAD drawing into a CNC machine to ensure a high precision, custom metal fabrication order; however, the job still requires human experience in cutting speed or the flow rate on the coolant.
To preserve those skills, knowledge should be captured and stored for future generations in digital form. A good ERP provider should support the business wanting to offer training programmes to bridge the skills gap.
Besides the development and preservation of the right skills, it is also vital that businesses manage human resources effectively. For example, you would want the most skilled worker to focus on the highest valued and most critical jobs, rather than focus on looking for parts. Once again, the newer technologies can also be used to monitor labour efficiencies to ensure maximum output and balance resource workload against skill set. The same applied for any of the resources like plant e.g. specialised cutting equipment or factory machines like forklifts. Any of the resources can become a bottleneck and affect production throughput. MOM (Manufacturing Operations Management) as part of your ERP solution is a useful set of software tools for viewing end-to-end manufacturing processes including quality, labour and machine productivity. With MOM, a manufacturer can monitor the allocation of any of the key resources and adjust workload accordingly.
4. Construct custom capabilities
From design to delivery, the modern-day end customer requires value, quality and customisation. For metal fabricators, this may entail custom welding and assembly techniques along with a digitalised quality control programme. To allow for personalised customer orders, a product configurator integrated with your ERP solution is required.
With a product configurator, manufacturers are able to gain competitive advantage by giving the customer the ability to design the exact customised product that they require. As the product is not mass produced in China and the ability for on-the-fly configuration of complex products for estimates, quotations, orders, bill of materials, and jobs.
Metal fabricators are aware of the ability for an ERP system to make their businesses more agile, efficient and profitable. An ERP system ensures easy integration to your CAD design package to maximise design to quote/estimation time as well as delivery time. Additionally, ERP provides a systematic and automated process to predict and control stock levels, based on desired customer service levels, and a cost optimisation calculation. All the while providing real-time data insights across the supply chain to identify and respond to changes. The end result is competitive advantage and improved margins and of course, long term sustainability.