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10 Strategies for Managing the Feast or Famine Job Shop

Mar 24, 2014   //   by Bob Warfield   //   Blog, Business, CNC Projects, Manufacturing, Software, Techniques  //  3 Comments

WomenPressWorkMany, if not most job shops experience the “feast or famine” nature of the business.  They’ll be so busy for some weeks they can barely stand it.  Then suddenly they’ll be idle for a few weeks and wondering how to pay the staff.  It’s tough to run a business like that, and to a certain extent, it is the nature of the beast.  But there are some things that can be done, and this article presents some strategies to help deal with a Feast or Famine Job Shop.

1.  Use the Down Time for Training and Maintenance

Just because the shop isn’t crushed under the workload of a bunch of urgent jobs is no reason not to keep busy.  Now is the time for training and maintenance which are sorely neglected during the busy times.  Put together some checklists on the maintenance and get them done.  Lube, adjust, and test the machinery.  Improve the organization of the shop.  Get it to be squeaky clean and ready for the next rush job.  And get some training going.  You can come up with something to train for an hour of every day and if it is slack time, you weren’t going to use that hour otherwise.  Training makes your team more competitive.  There’s a ton of free training available too.  Check out the “Cookbook” menu at the top of every CNCCookbook page for a start.  Buy some training manuals and take the crew through them.  Get your most experienced and valuable players to do a presentation or two for the rest to pass along the knowledge.

2.  Build in a “Rainy Day” Margin in Your Rates

Make sure that your rates during the busy times are high enough to carry you through the idle times without undue stress.  Doing so means having a budget and understanding what reasonable assumptions are for the idle times.  Obviously you can’t budget for endless idle time nor predict events like the Great Recession of 2008.  Focus on understanding the normal trends of your business.  How much idle time did you have last year and are this year’s rates sufficient to cover a similar assumption?

3.  Keep Your Monthly Nut as Low as Possible

Keep your monthly expenses as low as possible so that the idle times will hurt less and the times when you’re feasting will be more profitable.  Avoid high rents and debt.  Try to finance Capital Investments like new machinery with specific jobs.  In other words, make sure there is enough margin in the job that calls for the new machine to substantially pay for it so any financing required will be less.  If you know new machinery is in your future (isn’t it always at some point?), try to build up a slush fund to help pay for it so again, financing is less.  If you can combine the slush fund with a specific high margin job that’ll pay for it, you may have most of the new machine’s taken care of up front.

Consider also that unused labor can be invested.  Rather than buying everything new, see what you can rehabilitate during idle hours.  I know shops that buy used machines and refurbish them during the off-times.  A lot of great machinery is out there and just needs a little touching up.  If you shop has the ability to do this and enough down time to make it happen, it might be worth investigating.  It doesn’t make sense, however, to be refurbishing machines if you could be making parts for paying customers, so manage that time carefully.

4. Use the Down Time to Improve Your Customer Relationships

Work with your customers to figure out how to get more steady work.  What can you do to make them happier?  What would it take to get more smaller jobs that are not urgent and can be used as space fillers?  Are there any long term lower volume jobs where that they need to keep going continuously instead of in big batches?  If the relationship is handled well (beware high pressure sales tactics or too much discounting that makes you seem desperate), you customers will feel good about the discussion and may be able to come up with some ideas that help.

To put it another way, you want to be focused on serving customers, not projects.  If your firm is well known and appreciated for being cost effective, easy to do business with, and high quality, many customers will go out of their way to help you to succeed and get more of their business.

Here’s another idea for Customer Relationship follow-up:  Go visit them and take a machinist, not just a sales person.  I’ve been through a number of multi-million dollar sales cycles with the world’s largest companies selling them Enterprise Software.  They always appreciated seeing a non-sales person in the form of the guys actually producing the product they were buying.  There were always helpful things they wanted to talk about and there were always things I wanted to learn from them so our products would be better suited to their needs.  Customers love this kind of back and forth.  It makes them feel like they’re more than just a paycheck going into your pocket.  This is also a perfect time to ask the Customer to play some “What If” games.  They’re afraid to do that with Sales because they often don’t think Sales has much technical know how.  But if you can get the Customer to talk about their Biggest Problems, their hopes, and their desires, you may come up with a solution your firm can provide them.  Those are great deals to get because when you solve their problem instead of having them come to you to implement their solution, they’re much less likely to put that out for bidding because YOU are the expert that solved the problem.

5.  Bid on Some Lower Margin But Longer Term Jobs to Even the Mix

I know a shop that keeps a fleet of older refurbished Hardinge CNC gang lathes.  The machines cost them almost nothing because they bought a bunch of them and refurbished them during down time.  This shop uses them to bid on lower margin jobs that go on for months.  With bar pullers, the Hardinges are fast, competitive, and automatic.  Every now and then a new bar is loaded and the parts are offloaded.  Mostly, the machines just sit back in the dark recesses of the shop and produce a steady income.  They’ve got capacity from other machines and from any of the Hardinges not on long term runs to do other higher margin work of the moment.

6.  Use the Down Time for Upgrades that Make You More Competitive

There’s always something you could upgrade that might make you more competitive.  Getting the upgrade done and working at peak efficiency is not something you’ll have time for during peak business load.  Off-peak is the right time to tackle these jobs.  Maybe its some better fixturing–you can put together a set of vacuum fixtures pretty easily in your down time.  Maybe you want to palletize all your workholding with fixture plates on the machines.  Is this the time to add touchsetters or probing to your machines?  Or should you invest in offline toolsetting and get good at operating that way?  BTW, we have an article that talks about about which one of the two will be best based on whether you need to optimize your setup time or your cycle time.

Maybe the task is organizational–everything in its place and a place for everything.  Do you have all the right stuff with each machine so it is ready to hand for the operator and no time is wasted chasing down an Allen Wrench or some other thing?  Do you have a “kit” all made up for repeating jobs that is stored away with all the right stuff so that when that job shows up again you can be making parts lickety split?

Maybe the right upgrade is software.  Have you optimized your feeds and speeds properly?  I have customers telling me our G-Wizard Calculator paid for nearly 100x just during the trial period by upping feeds and speeds while improving tool life.  How often do you take the g-code for a job to the machine only to find it alarms out or worse crashes or ruins the part?  Do you need to invest in some G-Code Simulation software to head that problem off as soon as the g-code comes out of your CADCAM?  How about your Costing and Estimating?  Our CADCAM Estimator uses the same Feeds and Speeds engine as G-Wizard Calculator.  If your Estimates aren’t using the same feeds and speeds as what you will use to make the parts, they’re not accurate and you’re probably leaving money on the table somewhere.

7.  Differentiate Your Shop With a New Vertical or Specialty

The highest margin business is differentiated business.  If you are the only game in town for a vertical market or specialty, you can command higher margins.  Brainstorming to come up with new differentiated ideas and getting them up and running is a good investment for your less busy times.

8.  Get Sales and Customers on Board With Staggering Jobs

Is Sales aware of the feast and famine cycle?  Do they know exactly where the famines are?  Do they have some incentive to try to stagger the jobs to smooth over the famines?  It need not be a big incentive and sometimes just telling them it is much appreciated will make the difference.  You can choose to do the same with Customers, but it needs to be handled carefully.  You don’t want a customer that smells blood from a famine time and wants to only give you business there at steep discounts.  Mention that this is a time when you have a SMALL amount of additional capacity (not a famine!) and can afford a little better rate if they can give you work during that time.  See if they have some jobs that don’t need to be fixed to a rigid schedule that they would like to float into these slack times in exchange for better rates.

9.  Carry Some Inventory Risk and Spread the Timing of the Manufacturing

Speaking of floating jobs into slack times, another strategy is to explore taking some inventory risk for the customer.  Tell them you’ll manufacture in large batches according to the schedule that is most cost efficient for your shop.  You’ll give them a lower rate on the larger quantities and you’ll house the inventory.  They can make smaller “just-in-time” orders against that inventory.  It’s customary to charge them for holding the inventory as well.  Many customers will like this approach as it lets them spread their costs so they match demand better.  The trick is to make sure the agreement won’t leave you holding the bag on parts that they can decide they will never take delivery of.  Each batch you manufacture needs a “deliver by” date that specifies when the customer is liable to pay for that entire batch.

This approach will allow you to manage exactly when you make the parts to fill slack time and increase your margins.

10.  Use the Down Time to Start a Product Business

The Internet has made it possible for anyone with a good idea and a means of manufacturing it to start a successful product business.  The secret is sites like Kickstarter and Etsy that simplify much of the marketing.  Come up with a good idea, launch a Kickstarter for it, and you might make $100,000 in sales or more.  That’s pretty good money and the cost of a “middle man” like Kickstarter is often much less than making products for someone else, so the business can have very good margins.  Use your downtime to research what sells, brainstorm some product ideas, launch, manufacture, and then fulfill the orders.  You have a lot of control over your timing.  I know a shop that seems to launch a new Kickstarter almost every quarter.  If you’ve got that many good product ideas, you can fill a lot of downtime with productive work.

 

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10 Strategies for Managing the Feast or Famine Job Shop
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3 Comments

  • Mike Bond and I have used Kickstarter alot, it works great 🙂 – Bob I emailed you a shop tour video, did you get it?

  • I did, Brad, but haven’t had a chance to view it yet.

  • I have a design office and go through the same things.

    Yes I call slow points Molasses mode.
    I have a sales cycle and if I note a lack of invoices have gone out then it is time to advertise and call more.

    Having a quick short call list of my clients helps. I grab it and give each of them a call to see how it is going. As they say 80% of your work comes from 30% of your clients.

    I take down time to work on Advertising and marketing.
    Revise my website etc make brochures, etc.

    Keeping a good portfolio of images of nice parts that I have done.
    I keep categories of the different types of work and try to find more of those types of clients and collect my best examples of work for each like Mold design, Casting design, Precision Machine part design, Product development etc.

    Also going to events like SME local chapter events where the clients are and one can hand out a card helps. I have not really gotten work from attending trade shows. But attending seminars with like minded people helps me gain clients.

    Regards
    Rick Marmei
    http://axis-design.org

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