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  Manufacturing Insights   |   March, 2013
Small Manufacturers Grow by Opening the Door to Automation
by Thomas R. Cutler

Seventy-four percent of manufacturing and distribution professionals are considering automation for their operations according to a new report evaluating attitudes towards automation. From cost savings to improved efficiencies and accuracy automation investments for manufacturing and distribution facilities is on the rise.

The Automation Alliance of Material Handling Industry of America (MHIA) released a series of Automation Reports titled Operational Performance and Investment Plans In Warehousing, Distribution and Manufacturing. The study looks at investments in the immediate future.

Cost savings, improved efficiencies and accuracy and speed are the most important operational factors driving automation investments. Nowhere is this impact more vital than for small and mid-sized manufacturers. Order accuracy is also an important performance indicator in evaluating performance, followed by on-time delivery and order fill rates.

The most important factors impacting operations over the next year are customer demand levels (79%), customer requirements and mandates (70%), operational excellence goals (66%), internal cost constraints (63%) and new product requirements (46%). Those are followed closely by sustainability (44%) and government regulations (39%).

MHIA is an international trade association that has represented this industry since 1945. MHIA members include material handling equipment and systems manufacturers, integrators, consultants, publishers, and third party logistics providers. Member companies come from all areas of material handling and various parts of the world, making MHIA a strong national and international representative for the material handling industry. Much of the work of the industry is done within its product-specific sections, councils and affiliates. The association also sponsors trade events, such as ProMat and MODEX, to showcase the products and services of its member companies and to educate industry professionals on the productivity solutions provided through material handling and logistics.

One Manufacturer and the Door to Automation

American Garage Door Supply, Inc. is a commercial and residential exterior door system manufacturer and reseller, based in Bemidji, Minnesota. The company currently manufactures and distributes: garage doors, garage door parts, garage door openers, opener controls, rolling steel and roll-up doors, cold storage doors and parts, weatherseals and brush seals, truck doors and parts, traffic doors, dock equipment, infrared heaters, air curtains, and much more.

The company uses standard aluminum door configurations that are modified to meet particular needs of the customer. They manufacture door systems, incorporating parts from outside vendors, and also sell component parts direct to customers, sometimes drop shipping from vendors. They have a large catalogue business as well as custom design business. They maintain a separate installation business for jobs more local to their headquarters in Minnesota.

The automation of the company required updating their technology solutions.

The company previously used Peachtree and an integrated POS system called Keystrokes; the challenges facing the company were serious and a better solution was required. Poor financial reporting was a serious issue because it took ten months to close the books for the calendar year. The company ran several sub-systems to handle the various aspects of the business; this created real difficulty in learning the systems and keeping them up to date.

Poor costing also drove the need for more effective automation technology solutions. The former system was restricted to average or FIFO cost, which did not help price products in an inflationary environment. The small manufacturer was not able to maintain decent margins, coming in at 25-30% gross margin, instead the target of 35%+ gross margin.

Frequently, small manufacturers cannot trust the data from inventory and accounting systems. Too often this means firms are plagued by returns, cash flow is impacted, and missed shipments means angry customers.

Manufacturers need cost-effective technology and automation solutions which allow them to track part numbers to finished items. The software system solution for this firm was QuickBooks and MISys Manufacturing.

MISys extended a monthly rental plan for the software which enabled them to implement the system while cash flow was lean. Once they had saved enough cash, they purchased the software system. The manufacturer established the infrastructure to track inventory costs, due dates, item numbers in one manufacturing system without having a network of small sub-systems.

MISys helped American Garage Door Supply establish a standard Bill of Material and modified that bill for specific manufacturing orders, making it easy to service customers post-sale when they had a question on the product. The Woodstock, Vermont-based MISys also helped to automate and organize the inventory on the shop floor by location so that it could easily be found by the people in manufacturing.

The Dramatic Results for Small Manufacturers

Kevin Baumgartner, President of American Garage Door Supply, shared some of the astonishing results from this automation process including, reconciling the books in a matter of days, rather than many months. Baumgartner also noted, "We are able to maintain a margin of 40% now, grow sales, adding large, national accounts that would not have been possible without a system that could help improve the delivery and quality."

The company reduced shop floor labor from 16 people down to 5 even with the same volume of business and cash flow has improved. There are no more returns which means customers are happy.

"If you want a plant to grow, you have to put it in a bigger pot. MISys was the bigger pot for us, and we have grown and expanded in part because of it," encouraged Baumgartner.

Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc., ( Cutler is the founder of the Manufacturing Media Consortium including more than 4000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler is a member of the Society of Professional Journalists, Online News Association, American Society of Business Publication Editors, and Committee of Concerned Journalists, as well as author of more than 500 feature articles annually regarding the manufacturing sector. Cutler can be contacted at See More Details.

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