Monthly Archives: December 2021

Best of Swarfcast: Finding Purpose in Your Work with Brent Robertson—EP 37

By Noah Graff and Lloyd Graff

Have you ever asked yourself what your purpose is when you go to work in the morning? Sometimes I wonder if I’m spending enough time making an important impact on the world, or if I’m too wrapped up in the mechanics of making deals on machine tools.

In this week’s podcast we interviewed Brent Robertson of Fathom. Brent is a business philosopher and consultant. His mission is help people discover what their purpose is, beyond just making money. He has found that if he can give people purpose in what they do, it inspires those they work with and their clients as well.

Listen to the podcast below the video.

Question: Is making money purpose enough for you?

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As The World Turns

By Lloyd Graff

What a year I’ve been blessed to experience. 

First big thing for me is that I am alive, not suffering from dementia except for occasionally forgetting Cubs players’ first names, and I’m still writing this blog most weeks, which a few people evidently still read. 

When you see your peers dying and failing, these are major things to be grateful for every single day. 

Enough personal thought. 

This has been a huge year in a lot of ways. From a business standpoint this has been the best year Graff-Pinkert has ever had. We paid off all our debts, gave the biggest raises, and the biggest bonuses, and still had leftovers. 

This is after an awful 2020 that seemed like the end of the line for our business, and was for many. How did this happen? 

First, I must admit we took advantage of the federal government’s Paycheck Protection Program loans, and it actually worked like it was supposed to for us. It gave us liquidity when we needed it, kept workers working, and came promptly. With government failures rampant, this was a program that worked brilliantly for smaller businesses.

COVID-19 has been a tragedy for millions of people, but from a business point of view it has been a great boon to many folks in the machining world. 2021 will be seen as the year when reshoring–bringing back work from China–became a reality and not a prediction. It happened because bigger firms finally saw the downside of dependence on China for the sake of a few pennies per part. 

When you are dependent on a container traveling thousands of miles with a possibility of a lot of bad things happening on the way, your company is fragile, which means your job as CEO is in jeopardy, which means that the company private jet might have different passengers soon. Suddenly China did not look nearly as attractive, and jobs finally came back to the United States and Mexico. 

Companies needed machine tools, and some of that business trickled down to our used machinery company. Also, the U.S. and the rest of the world began to live with COVID and its deviant variants.

The major professional sports franchises figured out how to maneuver around absences and quarantine. Zoom video conferencing became a lifesaver for businesses in a million different ways. 

****

From a political point of view, 2021 will be remembered as the year China began its long-term decline as a dominant world power, as we saw with Russia in the 1970s and ‘80s. 

China has had enormous vitality and growth for 25 years. The Communist regime provided economic freedom to allow the entrepreneurial and creative class to thrive as long as they stayed in line politically. But with the persecution in Tibet, the genocide and enslavement of the Uyghers, the jailing of protesters in Hong Kong, and President Xi consolidating power to become dictator for life, the failures we saw in Russia, Eastern Europe, and Venezula are visible. 

Some see China now reaching for world domination. I feel fortunate to be witnessing the beginning of its long-term decline. 

I wish you all a wonderful year ahead and look forward to an upbeat and hopeful 2022.

Question: What has been the highlight of your year?

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Best of Swarfcast: Citizen CNC Swiss Lathes with Marc Klecka—EP 109

By Noah Graff

oday’s show is the first episode of our new season about Swiss-Type CNC machining. Our guest is Marc Klecka, founder and president of Concentric Corporation, a prominent distributor of Citizen-Cincom CNC Swiss lathes in Cleveland, Ohio.

Scroll down to read more and listen to the podcast, or listen with Google Podcasts, Apple Podcasts or your favorite app.

 

Main Points

Marc talks about his company, Concentric, which has been distributing Citizen Swiss machines for 31 years and Miyano for 10 years (after Citizen acquired the company). (2:20)

Marc gives his “5-year-old explanation” of Swiss CNC Machining (sliding headstock machining). He says the original technology of “Swiss style machining” was developed in Switzerland over a hundred years ago for producing high precision watch components. He says what differentiates CNC Swiss machining from conventional CNC turning is that a CNC Swiss machine grips the part with a collet and also supports the part with a guide bushing. This eliminates the vibration that normally occurs when machining bar on a a conventional CNC lathe. (3:00)

Marc says a traditional Swiss part has a length to diameter ratio of 3 to 1 or more because that is the point where you start sacrificing the rigidity and accuracy on a conventional CNC lathe. He tells a story about a Citizen customer who produced a 10-foot part out of aluminum tubing. (4:40)

Marc talks about the importance of running ground bar stock on Swiss machines, particularly for running lights-out. However, he says that says in the 31-year history of Concentric, he estimates that only 30% of the material run (in Swiss mode) on the machines he has sold has been ground bar stock. He says it is a misconception that Swiss Style CNC machines are only good for running ground stock. (7:25)

Marc says that during 2020 Concentric’s business did ok, but the pandemic made it more difficult to sell machines because it was harder to have in person contact with customers. (11:00)


Marc says that there are lots of good brands of machine tools on the market, but he sees the support and service of local distributors as something that sets Citizen apart. He says that many years ago Marubeni Citizen made a point of having all of its local distributors become self-sufficient for servicing customers. He says that all the Citizen sales engineers also are applications engineers. He says it is important to have sales people who can get in the trenches with customers to solve their problems. (12:00)

Marc talks about Citizen’s proprietary LFV (low frequency vibration) technology, which is featured in many of the latest models. It enables operators to control the geometry of the chip coming off the machine using the machine’s CNC control. He says this capability is significant for manufacturers who want to do lightly attended or unattended machining. (17:20)

Marc talks about the significance of the medical sector for Citizen machines. He explains thread whirling for making long bone screws. He discusses a bone screw that was made on a Citizen featuring a laser that performed a cut on that part while still inside the machine (see video). (21:45)

Marc talks about diverse markets where he sees Citizens being used. He says during COVID-19 woodworking has become more popular and Citizen machines are making tools used for the art. Also, he says tattoos have become more popular during the pandemic and Citizen machines are making parts that go into the tattoo gun pens. He says demand continues to grow for parts for the electric car markets. (26:00)

Noah asks Marc tell him something he learned the week before. Marc jokes hat he learned it probably was not a great thing to break into the Capital building. He also said that he learned about the new LNS chip conveyors that are being put on some of the newest Citizen machines equipped with LFV technology. (31:00)

Question: Which Swiss machine do you prefer to use and why?

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Some Good Fiction for Christmas

By Lloyd Graff

When I think about it, which is not too often, I realize that people in business live in a fictional world.

Many of the numbers that bankers base their lending decisions on are backward-looking constructs that follow accounting rules that are almost meaningless in the actual functioning of a business. Inventory, depreciation, and earnings are meaningful yet meaningless artifacts in the real world that are supposed to show value. As most business owners will admit, with inventory lingering on their shelves, and capital equipment aging ungracefully on the shop floor, the values on the year-end report have little to do with their actual value.

On the other hand, an old lift truck or rumbling overhead crane, which might have no value on the books but are used everyday, may have tremendous importance in running a business. Inventory, which will likely never sell, may be carried on the books for a fortune, but probably should be scrapped. The bosses need to show value to justify their loans.

When I look at my own books at the end of the year, I have to ask my accountant, who plays by the dumb rules because he thinks he has to, to tell me what is really important. In other words, did we really make any money, not fictional money? 

In recent years, I have been involved in selling several viable businesses. Usually the crucial number for both buyer and seller is the previous year’s EBITDA,  which stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. 

I have come to learn that from an income generating point of view the term has limited meaning, but it is the number that the lender, who usually puts up all or most of the money to buy the business, considers to be the holy grail. For the buyer, it is the number he or she will use for depreciation, which will have an enormous effect on the future income taxes to be paid. 

The irony is that the parties in the deal know EBITDA is a fiction as far as predicting the future income-producing capability of the business. That will be determined by the people who will run the business. Are they good managers? Do they have people skills?

Are the people at the top creative? Can they retain their customers and find new ones? Are the key people ready to retire or walk away? If the boss is retiring, is that a good thing or the company’s death knell? 

Yet for buyer, seller, and lender, it is EBITDA that often makes or kills a deal and usually determines the pricing.

If accounting is useless for small businesses, I can only guess how phony it is for big public companies, yet stock prices are often dictated by price to earnings ratios. The earnings are affected by thousands of little lies in huge corporations. 

Maybe the fictions balance out over time. Or perhaps they multiply.

Question: What would you like me to write about next year?

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Why Manufacturing is Leaving China, with Andrew R. Thomas—EP 142

By Noah Graff

Our guest on today’s podcast is Dr. Andrew R. Thomas, best selling author and Associate Professor of Marketing and International business at the University of Akron.

Thomas says today reshoring is finally happening. After decades of sending manufacturing work to China, Western companies are finally realizing this strategy is often not the answer for generating better profits.

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

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Twitter: https://twitter.com/tmwswarfblog

Main Points

Why Manufacturing First Left the U.S.

Thomas challenges the claim that most Western companies sent manufacturing operations to China solely out of greed. Starting in the 1990s many U.S. manufacturers, particularly small and medium sized companies, were pushed to move operations to less expensive labor markets because of a change in the dynamics of the American business model. For 30 years, business schools and consultants preached to maximize efficiencies and focus on core competence. They prescribed the “Toyota model”—outsource what you don’t do well and focus on what you do best. 

In the 1980s and 1990s big box stores like Walmart signed large contracts with American manufacturer suppliers. At first, the suppliers prospered from having such large customers, but after a few years, the Walmarts began to squeeze them on price. The suppliers did not have negotiating power because they no longer had a diverse group of smaller customers to compete for their business. They were forced to seek cheaper labor overseas just to survive. For decades, reshoring did not even appear to be an option for Western companies.

The Pandemic and Labor Markets

Because of the supply chain problems brought about by COVID-19 and the country’s increasing wages, China is no longer the answer for many Western manufacturers to produce the cheapest parts. Thomas points out that manufacturing work is currently coming back to the West, but not exclusively to the United States. Much of the work leaving Asia will land in Latin America and Eastern and Central Europe. In those regions labor is cheaper and more abundant.

While the United States and Western Europe provided a safety net to businesses and unemployed workers in 2020 and 2021, poorer countries did not have the resources to do so. Thomas says in countries such as Panama, where he lives much of the time, the only government assistance people received was a modest stipend for food and necessities, and free rent. These desperate conditions have made people in poorer countries eager to work.

Andrew R. Thomas, Author and Associate Professor

American Legacy of Global Leadership

According to Thomas, since the United States was founded, Americans have always had the notion their country was special. They believed it was important to share their values and lead the world.

This identity was solidified in 1944, when 44 allied nations sent delegates to the Bretton Woods conference in New Hampshire. The conference set up a framework to regulate an international monetary system. It created the International Monetary Fund and the International Bank for Reconstruction and Development. It ultimately established a dominant economic position for the United States and the U.S. dollar.

More than just setting up an international economic framework, Thomas says Bretton Woods spawned a gentleman’s agreement between the United States and its allies based on four guaranties. 

—If a country allies itself with the United States, the U.S. will provide that country with military protection.

—The U.S. will provide countries with capital to rebuild post war economies. 

—The U.S. will encourage open trade.

—The U.S. will secure the world’s supply chain with its Navy.  

Much of these foundations are still present today despite claims of the last few U.S. presidents that they want to meddle less in international conflicts and focus more on the domestic economy.

Self-Reliance from New Energy Security

Thomas says one factor changing U.S. international trade is the current revolution in fracking technology. A trillion and a half dollars in private capital has been invested to build an infrastructure for fracking. For the first time in recent memory the U.S. has a choice to not be carbon dependent on foreign countries, which would give it considerable power.

It will be interesting to see how much the United States’ legacy as the world’s watchdog lives on, while its ability to focus its energy inward grows.

Question: Have you seen reshoring in your business?

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Bitcoins in Your Duffle Bag

By Lloyd Graff

A few years ago, I asked a  pawnbroker acquaintance if he would sell me a little certified high-quality gold. 

It was not an investment. I was not betting on the appreciation of the precious metal. It was strictly a “what-if” purchase, contemplating the possibility Risa and I would have to flee our home. Currency might rapidly erode in the event of an invasion, a tyrant, or a natural catastrophe, “but gold would always be accepted as valuable” we reasoned.

We had watched too many Holocaust documentaries, read too many books about refugees perhaps, but the images of gold sewn into duffle bag compartments enabling people to survive the worst, haunted us both, so we invested some of our savings in certified weight gold ingots.

Our pawn shop owner friend told us he’d sold gold fairly often for exactly the same reason to occasional clients like us. 

If it had been 2021 when I considered a “what-if metal,” I probably would have made a different choice. I would have bought Bitcoin.

So much has changed in the three years since we bought the gold. As an investment, Bitcoin has gone up close to ten times what it was worth then. Gold is up 20%. 

More and more places accept the digital currency today, probably more than do gold, and if you had to flee within minutes, all you would need to take is your cell phone and your passwords to access the Bitcoin.

Many people, often my age, are Bitcoin skeptics, but younger people are not. To them, digital money seems more rational than $100 bills, bank accounts, stocks, or corn silos. Gold in a suitcase, if you have to pass through a TSA line at an airport, sounds like lunacy in a national emergency.

At a family gathering during Thanksgiving, Bitcoin, and not the Bears or Cubs, was the primary topic of table conversation. Recently, when Mark Cuban was asked where he was putting his money these days, he said “digital currency and gaming” because that is what the kids are interested in, and he always likes to invest where young people are putting their money. 

Cuban is usually right.

***

Nobody has offered to buy a Citizen nor Star Swiss screw machine from us yet in Bitcoin, but it will probably happen next year.

The Chinese Communist leaders seem to be terribly afraid of Bitcoin, which means the leaders probably have a big stash of Bitcoin to go along with their Swiss bank accounts. For sure Putin owns Bitcoin.

Jamie Diamond and Warren Buffett say Bitcoin is phony. I wonder how much they have bought secretly. They may feel that legitimizing digital currency would harm their business interests.

I don’t know if Bitcoin and Ethereum and other wannabe Bitcoins will stand the test of time, but will gold save me if it seems like America is going to fall apart? If climate change really is an existential threat will anybody take gold in the great flood? 

Bitcoin? Maybe they will take it if you throw in one of those gold trinkets as a tip.

Question: Do you think Bitcoin is the real deal?

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Reflections on the Machining World in 2021 — EP 141

By Noah Graff

As the end of 2021 approaches, Lloyd and I spent this podcast reflecting on the last year. Though the pandemic continued for a second lap, a lot of companies in the machining business enjoyed a tremendous rebound. Thankfully for us, our used machinery business, Graff-Pinkert, did really well too, which we needed after a miserable 2020.

If you find time to listen to this episode, we hope you will enjoy our rambling. We like to think there are at least a few interesting parts of the conversation.

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

Find us on Social:

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Instagram: https://www.instagram.com/swarfcast/

LinkedIn: https://www.linkedin.com/company/todays-machining-world/

Twitter: https://twitter.com/tmwswarfblog

Main Points

My Mentor

When I introduced Lloyd at the start of the podcast, I referred to him as my dad, my boss, my mentor, and my partner. He responded by saying he considered me as mentor to him, which seemed a bit strange, as he has been selling used machines since before I was born and he’s one of the smartest people I know.

He told me that I have taught him about engaging customers on a deep level as well as negotiation principles from one of my favorite business books, Never Split the Difference

I told him that I’ve tried to learn from the way he envisions potential deals. He is skilled at knowing when to take a chance on imperfect equipment that other buyers shy away from.

A Good Year for Graff-Pinkert

I’m happy to say that 2021 was an excellent year for Graff-Pinkert, which we really needed because 2020 was so horrible. Interestingly, much of our best business was selling old cam multi-spindle screw machines—Acme-Gridley machines and a lot of Davenports sold to Mexico. Two or three years ago, nobody wanted these machines. We had a few nice ones that sat in our warehouse for years. But in 2021, were fortunate that while other dealers were hunting for the same popular modern CNC equipment, we were looking for different types of machines, machines that are often older than me, which many sellers were more than ready to part with. 

Stitch em up, Sew em up

A big trend we saw in 2021 was the huge production of medical and gun parts, sometimes even by the same companies. Those parts have huge demand right now, while the automotive sector remains cold. 

Personally, Lloyd and I are not “gun people.” But at the end of the day, we accept that guns are how our customers make a living. Some of our most important relationships happen to be with companies producing gun parts. 

Lloyd says in the machinery business he often grapples about which companies he feels comfortable doing business with. Graff-Pinkert does not sell machines to Russia nor many other countries where we feel the governments are unjust. Yet, ironically, we still sell machines to China despite the country’s human rights violations and current genocide of the Uyghurs. 

Onshoring 

Another milestone of 2021 is that there was finally real manufacturing work coming back from Asia to North America. The supply chain bottlenecks have meant that US companies can no longer feel secure they will get the materials and products they need. Ford Motor Company is even building its own chip making factory.

Lloyd recently bought stock in Ford Motor Company going into the new year. He says when Ford hired former Tesla visionary Doug Field, it was indicative that the company will succeed in selling electric F150 trucks in 2022, beating its American competitors in the electric truck race. Meanwhile, the European automotive companies seem inept at getting a viable electric car on the street.

Noah Graff and Lloyd Graff of Today’s Machining World

An Unvaccinated Machining Industry?

One thing we observed in 2021 is that despite the wide availability of COVID-19 vaccines in the US, a great number of people in the machining industry have preferred to stay unvaccinated. I’ve asked some of Graff-Pinkert’s unvaccinated customers why they’re not vaccinated, and I get a number of answers. Some people say they don’t want to take the vaccine because they feel the government is trying to take away their freedom, others say that the science is unproven. My opinion is that most people are strongly influenced by those with whom they spend the majority of their time. I live in the city of Chicago, and all of my friends and family are vaccinated. They would tell me I was nuts if I was not vaccinated. However, if all of the people I was closest to were unvaccinated, I suppose it’s possible I would follow their example. 

Nonetheless, I have my views. I know several unvaccinated people and I still like them, but their decision bothers me a lot because I believe they are putting me, my family, and the general population more at risk. 

Personal Stuff

Announcement! I’m ecstatic (and overwhelmed) to say that my wife, Stephanie, is pregnant with our first child, and she happens to be the biggest anti-anti-vaxxer I know! I digress. Becoming a future father after a long time of unsuccessful “trying” is by far the most important thing to happen in my life in a long time. 

Lloyd says he’s grateful to have celebrated the 13th anniversary of his near fatal heart attack in 2008. He’s also grateful to continue doing work he enjoys at a high level at the age of 76 along side me. We’re both thankful that we have a great family we love spending time with, who we finally visited in person this year.

I look forward to doing this podcast next year. I’m often desperately looking for new guests, so please contact me if you know of someone who would be good. FYI, I also happen to be picky about who I interview. Desperate but picky. The story of so many people’s lives.

Question: What is something you will remember from 2021?

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Pasta and Precision Parts, with Antonio Adiletta — EP 140

By Noah Graff

Pasta machines operate a lot like cam screw machines, Antonio Adiletta told me when I interviewed him for this week’s podcast.

Antonio is co-owner of Arcobaleno and GAM Precision in Lancaster, Pennsylvania. After growing up in Italy, Antonio moved to Canada and then eventually emigrated to the United States with his wife and business partner, Maja. He has manufactured, sold, and serviced fresh pasta making machines for 26 years, and for the last decade, he has simultaneously run a CNC machine shop.

Scroll down to read more and listen to the podcast. Or listen on your phone with Google Podcasts, Apple Podcasts, Spotify, or your favorite app.

Find us on Social:

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When Antonio started his career in manufacturing at a young age in Como, Italy, he apprenticed at a company that produced fresh pasta machines. For folks unfamiliar with fresh pasta, not all pasta comes as dry noodles in a box. Fresh pasta is soft and looks like dough. When restaurants boast that they serve “homemade pasta” they’re talking about fresh pasta. Often fresh pasta noodles are formed with an extrusion process, which is great for producing tubular shapes, like rigatoni, spaghetti, or penne. The other main method for producing fresh pasta noodles is the lamination process (rolled process), which is used for flat noodles like pappardelle and fettuccini. When I asked Antonio to tell me his favorite pasta noodle, he explained that choosing the right pasta depends on the marriage between the specific pasta noodle and the sauce. For tomato sauce, he likes spaghetti because of its thin diameter. For meat sauce, he says gnocchi or short rigatoni (mezze maniche) are ideal counterparts.

As an apprentice in Italy, Antonio set up and serviced industrial pasta machines weighing as much as 5,000 pounds. Often he worked on machines that made tortellini and ravioli because those machines required more fine tuning than those making simpler noodles. Decades later, when Antonio bought his machining company, GAM Precision, he realized that Brown & Sharpe screw machines operate using the same principles as tortellini machines. Like operating a Brown & Sharpe, in which a cam indexes the turret, in a tortellini machine a cam indexes the stuffing or moves the filling injector. 

Antonio and Maja Adiletta, owners of Arcobaleno and GAM Precision

Antonio eventually moved to Canada where the Italian pasta machine company that employed him had opened a distribution office. He worked there several years setting up and servicing machines. In 1995, he started his own company, which built industrial fresh pasta machines in-house. In 2002, Antonio and his wife moved their business to the United States. At first they continued to build their own line of machines. However, after a while, they decided that business model was too labor intensive, so they went back to distributing machines from a supplier in Italy.

In 2012, Antonio and Maja purchased GAM Precision to diversify their business. It seemed like a good fit because they already owned some CNC equipment and had experience in manufacturing. Within a decade, they have modernized GAM from a cam screw machine shop to a highly automated CNC job shop, featuring some of the most powerful Citizen Swiss CNCs on the market.

Pasta Extruder + Mixer from Arcobaleno

Antonio says in the United States Arcobaleno has no competitors who can match its service in the industrial pasta machine space. However, the pasta machine business is challenging because unlike precision parts customers, who consistently demand more product, pasta machine customers often don’t need to buy new machines for many years because they are so durable. This means the company has to constantly look for new customers. 

At the end of the interview, Antonio walked around his showroom to explain various industrial pasta machines in his product line. He also showed me some colorful consumer models sitting under a Christmas tree. He told me about the challenges of making gluten free pasta—“because the gluten is really like a glue, that holds it together.” We compared the lighter gnocchi made in southern Italy to that of northern Italy composed of a much higher ratio of potato to flour. He preached the importance of salting the water abundantly before cooking pasta—enough to make it taste like sea water. 

Antonio knows that it’s the little details that produce perfection.

Question: What’s your favorite pasta dish?

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