Monthly Archives: July 2010

Purchasing Politics

By Lloyd Graff

On Thursday, I had the opportunity to spend several hours with Mitch Liss of Edsal Manufacturing, a major producer of steel shelving and office furniture with sales of $200 million, based in Chicago. Mitch gave Noah and I an insider’s view of purchasing politics by big box retailers and huge catalog sellers.

He said that within massive organizations like Wal-Mart or Grainger you find two distinct parties influencing purchasing decisions, the buyers and the global (strategic) sourcing groups.

The shelving buyers who work closely with the sourcing people have the responsibility of making the final call about what product makes it to the sales floor or catalog and how much is ordered. The sourcing guys are charged with scouring the world to find cheaper shelves. Their salary and bonuses are dependent on increasing the amount of dollars sourced, primarily from China.

The purchasing guys have little interest in where the product ultimately comes from, as long as it sells well. This drives a guy like Mitch Liss crazy because every rack and shelf he makes is a sitting target for the strategic sourcing dudes.

What bugs Liss is that the incentives are rigged to favor foreign placement of orders even though he usually offers an equal or lower final price to the reseller.

His biggest irritation is with Costco, who he’s been trying to sell to for eight years without success. He says he can sell a better product for less money than the Chinese currently supply, but the buyers refuse to allow him to be seriously considered head to head against the competition. Evidently, for the Costco buyers, the idea that an American firm based in Chicago can undersell the Chinese is so ridiculous that Edsal cannot even demonstrate its products side by side at Costco headquarters in Washington state. Interesting how Costco has remained blind to the fact that Edsal sells millions of dollars of products to Home Depot, Lowe’s, Menard’s, Grainger and McMaster-Carr.

I would think that an American company would at least get a fair look by a firm that sells most of its goods in this country.

Question: Do you think there should be an inspection fee or tax on every shipping container that arrives in the U.S.?

Mitchell Liss of Edsal

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When Incentives Blow Up

By Lloyd Graff

Texas City Explosion 2005

As the details gradually emerge from the BP oil spill it becomes more and more clear that management in London had incentivized the troops in the field to skimp on maintenance to enhance the company’s bottom line. There probably is a connection between the BP refinery explosion at Texas City back in 2005 and the Deepwater catastrophe in the Gulf. It appears to me that London had incentivized its employees to emphasize the short-term bottom line and ignore the future consequences.

With the U.S. productivity statistics showing incredible improvement in efficiency month after month, it prompts the question whether productivity incentives are always good long-term.

In the machining game, there is a danger in setting productivity targets that invite people to game the system. If one machine operator or shift is competing with another the temptation for sabotage in the plant is real. When teams compete against norms and other teams, the peer pressure within teams can become destructive to the enterprise. In a coal mine, when tonnage means everything, safety is often neglected, which may culminate in tragedy.

Sales incentives which are based on monthly or quarterly results often end up with employees gaming the system.

I’m interested in your experience with incentives.

How do you make incentives work for the business rather than undermine it?

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Should You Trust Your Gut or Your Doc?

By Lloyd Graff

What do you do when your doctor tells you to do something that you doubt is necessary?

I just endured a kidney scan and a cystoscope because I had a few extra blood cells in a urine test. The nurse called me several weeks after the initial test at a six-month appointment and told me that I needed to come back because my test wasn’t “normal.” OK, I’ll spend an afternoon going into the city to pee in a cup. But then the urologist says, “Lloyd, I want you to do a kidney scan and a bladder scope. There is a one in 100 chance there’s anything, but you are the age…”

So what do you do? Tell the doc who has treated you for 20 years, cut into your body and saved your life once, that he’s overreacting or milking the system? The doctor is God, right? Doing nothing could be a catastrophic mistake. Didn’t I miss the signals before my heart attack two years ago?

So I took all the tests. Everything was cool. I’ve got the nasty aftereffects of the scope and I feel like a chump, a dumb sheep who lamely colored between the lines of American medicine.

Question: What do you do these days when you feel fine, but the medical practitioner tells you to worry or take a drug? What do you trust—your gut or your doc?

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What is the Tea Party?

For the September 2010 issue of Today’s Machining World I did a short interview with Jim Chiodo, a Tea Party leader in Holland Michigan (I also quoted him in Tuesday’s Swarfblog).

According to Chiodo there are a lot of misconceptions about what the Tea Party actually is. He suggested I ask the following questions to readers to find out what they think the term “Tea Party” means.

1. Are you a member of the Tea Party?

2. What do you think the Tea Party represents?

3. If you think you know what it represents, what is your source of info?

Can’t wait to hear your answers.

Photo Source Michigantaxes.com

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Life’s Work–Life’s Pleasure

By Lloyd Graff

Tony Maglica of Mag Instrument Inc. at Work

I just spent a week doing the most inefficient, labor-intensive, stupidly expensive, appallingly large carbon footprint use of my time I can think of. I schlepped to California and knocked on doors. It was one of the most satisfying weeks I’ve spent in 10 years. Every face-to-face call I made was productive. Each client and potential client I met with spent more time with me and was more open than I could’ve anticipated. I realized that old school active listening face-to-face was still magical.

Two of the clients I visited were Tony Maglica and Ray Fish, who continue to defy the odds and conventional business wisdom as they build their companies in ridiculously expensive Los Angeles. Tony is 80 years old and runs Mag Instrument. Inc., the manufacturer of the Maglite® Flashlight,out of an immaculate million square foot complex in Ontario, 30 miles southeast of L.A. Ray is 76 and runs Electro-Adapter, making aircraft wiring hardware out of a functional 100,000 square foot plant in Chatsworth in the San Fernando Valley.

Both men work a dozen hours a day turning aluminum and other metals into countless perfect assemblies and finished products. Are they doing it for the money? Of course there are. And of course they aren’t. Tony could’ve sold out for centimillions I’m sure, and Ray hardly needs a tag day, but the daily challenges continue to light their fires.

Both guys still love to buy machinery. They live for the bargains on cam equipment that their peers would call obsolete. Tony recently bought a batch of Davenport screw machines and Ray picked up ten B60 single spindle turret automatics and made five good ones out of them. He still has the extra carcasses laying around for useful scavenging. Tony Maglica’s passion for unloved machinery brought him to the bankrupt assets of German Rotary transfer machine maker, Eubama, which he picked up from the ash heap. Tony has long admired the small Eubama trunnion, and he’s relishing the challenge of tweaking the design and making the key components in California and then shipping them to Germany for assembly.

Ray Fish was crowing to me about getting a steal on a Haas SL-20 lathe in a San Diego machine shop auction. The machine had 300 hours on the spindle. He had also just lowballed a dealer on a GT 75 Omniturn, even though he needs three of them right now. Ray knows what he wants, but the fun for him is buying it at garage sale prices.

When I spend time with manufacturing lifers like Tony Maglica and Ray Fish, I think of the aphorism, “Nobody says on their deathbed ‘I wish I’d spent more time at the office.'” I think these guys would laugh out loud at that common wisdom.

Question: On your deathbed do you think you will wish you had spent less time at the office?

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The Intersection Of Art and Connecting Mechanics

By Robert Strauss

Fernando Orellana’s father was a civil engineer and Fernando, when he was growing up, liked art. There seemed little to connect them.
“But I saw my father tinkering when he came home, doing this and that. I watched, but with no particular interest,” said Orellana. “Then someone connected the dots for me. What my dad was doing was no less art than what I did. The idea is that he was being creative and trying to figure things out. That is art.”

What finally dawned on Orellana is what has become an exciting mini-trend in modern art, the connection of mechanics, technology and art, primarily sculpture. Since it is primarily robotics-based, it is called ArtBots, and its advocates are positively evangelical about it.

“The definition of robotics is not firm and, frankly, the definition of art isn’t firm either,” said Douglas Irving Repetto, whose day job is as the Director of Research at the Columbia University Computer Music Center, but whose lifeblood is as the guru of the ArtBot movement. He has been the curator of several significant ArtBot exhibitions, the most recent one this summer at the Klein Art Gallery in the University City Science Center, a research facility just off the campuses of the University of Pennsylvania and Drexel University. “It is a diverse and wide open field and full of open questions. The primary one is, ‘What does it mean for a non-human system to be creative?’ Each artist is asking different questions when he or she enters the world of robotics. There is a sense now that there is a lot here, and that we don’t really know the answers yet.”

Read full article here >

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Should Obama go to IMTS

By Lloyd Graff

I received the email announcement entitled “AMT and NAM Announce Historic Partnership.” I didn’t know whether to laugh or yawn because of my gut cynicism about Washington based organizations. But then I thought about the financial regulation bill, which is the current obsession of D.C. politicians. Apparently the massive compromise bill is being written by a collaboration of Washington lobbyists and staffers.

Most of the lobbyists are former staffers and many of the staffers are former lobbyists, so you need a scorecard to know the players.

American manufacturing certainly needs an all-star team to advocate and trade for the interests of metal cutters and benders around the country.

The disconnect between the alphabet groups on K Street in D.C. and the contract shops of Dayton and Duluth has become a gulf. But behind my cynicism I’m hoping that our Washington advocates actually know the difference between carbide and high speed steel, and can cut through the red tape and blather in the Capitol. That would be historic.

The post 4th of July work week is a good time to celebrate the value of passionate and precise political advocacy. The Declaration of Independence was written by Thomas Jefferson, but his pure prose was edited and rewritten before it made the final scroll.

The reporters and public relations flacks will Red Bull it through windy John Engler’s National Association of Manufacturers (NAM) speech at the International Manufacturing Technology Show (IMTS), but Bonnie Gurney of the Association for Manufacturing Technology (AMT) says they will stream IMTS interviews with real people to members of Congress, which may actually penetrate the Capitol Hill haze.

Question: Should Obama attend IMTS?

The Capitol Building in Washington DC (Photo from US Southern Command)

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Machining Industry Scuttlebutt

By Lloyd Graff

Tesla Motors went public this week. The company’s all electric roadster has not been a resounding success financially or mechanically, but has been a publicity magnet. Elon Musk, one of the company’s founders has an amazing track record as an entrepreneur. He has Toyota money behind him now and the modern Nummi factory in the Bay Area to make the new versions of Tesla cars. Tesla chose not to participate in the X Prize competition to produce a production-capable 100-mile-per-gallon car, but the company could still be a big big winner over the next 10 years.

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Prices for nice CNC machinery at auction show some firmness in the market. On June 29, James Murphy Auctioneers sold a 2007 NV5000 A1B40, 20” x 50” table for $135,000. The machine had a Lyndex Nikken 5th axis trunnion. A 2005 NV5000A140 Mori 23 x 30 table brought $102,000. The sale of New Concepts in Redmond, Washington, also had a Mori DuraCenter 2005, which sold for $67,000 and a Doosan 3016, 2006 which fetched $25,000. A Zeiss CMM Contoura G2 2006 fetched $61,000.

On the same day Thompson Auction Co. sold Sherman Tool near Dayton. Two Hurco VMX 30 machines new in 2004 sold for $40,000 each, while a little Okuma ES-6 new in 2007 brought $35,000 and a 1998 Okuma Cadet with a 16” chuck brought $45,000.

Last week at a Winternitz sale near Duluth, Minnesota, a 2008 240-C Doosan 3-axis lathe sold for $49,000.

I would describe these prices as reasonably strong, particularly for the Hurcos. On the other hand a couple sales in Michigan, MetaVision in Traverse City and a Hilco and Maynards Auction in Detroit, were softer for machines that ran mostly automotive related stuff. Dealers bought the bulk of the equipment, and at Metavision a lot of older cam equipment went straight to the scrap yards.

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Statistics from the Precision Machined Products Association indicate that business amongst its member companies has made a full V–shaped recovery over the last 18 months. After business dropped by a third during the worst of the recession in the spring of 2009, it regained the base level of sales in May of 2010. The ascent of automotive business to the still not so lofty level of 11.5 million units and the rebuilding of paltry inventories everywhere have fueled the resurgence. Weak home sales, tepid employment growth and a depressing stock market have eroded confidence in June, but as the BP mess slips from the news and the stats show the world wasn’t coming to an end confidence will come back.

Question: Do you believe Wall Street insiders are manipulating the market to make President Obama look bad?

Telsa Roadster charging (Photo from Treehugger)

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