In this case, I believe this exercise is well worth the effort.  This client relies heavily on their cost information to make decisions about profitability of jobs and how to modify work processes to improve profitability and to quote specific jobs.

In this case, we are working with the plant manager who is not as knowledgeable about cost accounting but very knowledgeable about work processes and types of cost bands that are associated with the products they are making.  As you can imagine, relatively small changes in operating expenses can have a big impact on product cost where the sample and total units produced on an annual production basis is small.  The owner and president of the company is less concerned with variance analysis and controlling operations with standard costs. Instead, he is more concerned about understanding the profitability of the jobs he has and inventory valuation for purposes of accurate monthly financial statements.

This client has been on both sides of the cost accounting spectrum. On one side, a very accurate and reliable information which allowed the management team to identify problem jobs and modify work flow and work practices to improve profitability with the accompanying accurate monthly financial statements.  To the other end of the range where they could not determine which jobs were making money and which jobs were losing money and as a result the company was subjected to radical fluctuations in their monthly financial statements.  These swings were mostly because of highly inaccurate inventories in part caused by unreliable job costing information.  To the owner’s credit, he realized that accurate and timely job costing information is a valuable part of controlling operations and improving profitability in any manufacturing environment and has been willing to invest the resources that it takes to achieve that accuracy.

Although I am much in favor of annual reviews of cost systems, in the case of the manufacturer of this size, less frequently is acceptable; particularly if there aren’t any changes in the products or the costs being incurred to make those products. I anticipate this costing information to be valuable to the owner as he embarks on a new line of products which could very easily take up much of his capacity.  I know he has used his new rates to prepare quotes on these new product lines and is interested very much in how the overall profitability will compare.

As Mike outlines, process improvement programs can fail for a variety of reasons;
• “Management perceives that the cost of implementation exceeds the expectant results.
• Tools and programs are viewed as too complex and requiring extraordinary amounts of indirect labor hours.
• The manufacturer is told they must swallow the whole banana bunch (continuous improvement program) to achieve results rather then get incremental results.
• Smaller manufacturers are told they can use the same program used by Toyota or Caterpillar, no matter what shape their systems or resources are in.”

At RAD we only partner with manufacturing, wholesale and distribution organisations that can achieve real benefits from our approach to EFACS Enterprise Resource Planning software, services and support.
With frequent news headlines about others in the marketplace over-selling ERP packages, and the danger of lip service trumping practicality with regard to continuous improvement initiatives, we’re happy to stand apart.
Our software, services and support fit the needs of your enterprise, not the other way around, bolstered by consultants who know the demands of Scottish industry. By tailoring solutions to your company, with only the ERP modules you need to succeed, senior management and shop floor staff alike benefit from a clear picture of what kind of ROI they can expect.
In the Manufacturing.net article, Mike rails against ‘priesthoods of people who make systems more complex, harder to use, and more very expensive’. IT systems and, more specifically, Enterprise Resource Planning systems must serve the needs of the company and make things easier, more efficient and more cost-effective.
If you would like to discuss how RAD Software and the fully integrated EFACS ERP system can fulfil such a role, call us on 0141 776 4200, visit www.RAD.co.uk or write to info@RAD.co.uk and we’ll be happy to help.

According to the 2011 Next Generation Manufacturing Study, there are several factors that challenge small manufacturers in the United States this year. They are:

• Supply Chain Management – It’s necessary for manufacturers to develop and manage their supply chains and partnerships that provide flexibility, response time and delivery performance that beat out their competition. Almost all manufacturers recognize the importance of supply chain management and collaboration, but only 25% of small manufacturers are near or at world-class supply-chain management. On the other hand, 41% of large manufacturers are at the same level.
• Talent and Skills Development – Manufacturers near or at world-class status for this category are more likely to have talent and development programs, state-of-the-art business systems, employees equipped to excel in high performance teams and advanced methods to measure their human capital returns. Only 10% of small manufacturers have BOTH sufficient talent and skills-development programs. These programs drive world-class human capital management. 33% of large manufacturers have both of these programs in place.
•  Systems and Equipment – The tools and equipment that manufacturers use are naturally important for a company’s profitability. 41% of small manufacturers have business systems and equipment able to support their current requirements for global engagement. A majority of large manufacturers, 65%, have this capability.

In an era of global competition, organizations such as The University of Tennessee Center for Industrial Services are effective in assisting small manufacturers in their endeavors. The University of Tennessee CIS provides consulting solutions to help companies improve and grow. Our philosophy is to assess the company needs and provide only services that are value added. Our experienced consultants and recent technologies help small and mid-sized manufacturers accomplish their goals. To find a list of the University of Tennessee CIS’ services, click here.

The jobs, not the products, are starting to return to our shops in North America.

“American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning.”

“As costs in China rise and owners look closely at the hassles of using factories 12,000 miles and 12 time zones away, many small companies have decided manufacturing overseas isn’t worth the trouble.”

Our shops are seeing an increasing number of opportunities to manufacture products that were previously made in China.

Our consistent quality, agile ability to implement design changes, and faith in the raw materials to meet spec here in North America are helping our shops win this business back.

Freight costs continue to climb, and holding costs for the larger amounts of inventory needed to fill a  shipping container are also factors in the Make Here or Buy There decision.

The Boston Consulting Group predicted Cost Parity with China by U.S Manufacturers in 2015.
Many Precision Machining Shops are finding that they are competitive today.

Thanks to Bloomberg for the Article

http://www.barfblog.com/blog/153289/12/02/25/what-keeps-you-night-experts-share-their-worst-food-safety-nightmares

Top 5 food safety nightmares for food safety types:
1. Risk management and culture of food safety in small manufacturers
2. Supply chain management and gaps
3. New/upcoming regulations such as GFSI audits and FSMA
4. Physical plant security (and bioterrorism risk)
5. There was only four, but who does a top 4 list?
Food Safety Tech asked members of its advisory board what kept them awake at night, food–safety-wise.
David Acheson, MD, Leavitt Partners, has seen and dealt with all sorts of public health disasters related to food safety during his time at the U.S. Food and Drug administration. But his concern is not just those big disasters, but the lack of adequate controls and understanding of all the risks, especially among the smaller players.
“It’s not the big guys that worry me at night, but the medium guys, who don’t understand all the risks,” says Dr. Acheson, and he attributes this to ignorance rather than malignance.
While big growers and food manufacturers face trouble, they are able to confine it to one part of the company and have the resources—technical, people and money—to tackle those risks and manage them.
Small players need to mobilize resources as an industry to come together and address food safety concerns. For instance the pistachio industry, which suffered a Salmonella outbreak a few years ago, was hit with decreased sales. While the problem in one facility didn’t cause anyone to get sick, it created a widespread perception that pistachios will be tainted with Salmonella, so people stopped buying. But the whole industry—characterized by small suppliers—wanted to raise the bar and by being proactive about food safety, changed that trend.
In smaller companies, the culture of food safety and the perspective of the CEO have a great role to play. Is the culture to be reactive or preventive?
Acheson refers to instances when food safety managers have struggled to get traction with leadership when it comes to paying more attention to food safety initiatives: “Excuses for not doing something proactive can be ‘We have been doing it this way for years and never had any problems; or never had to face an FDA inspection, recalls etc.’”
Donald W. Schaffner at Rutgers University, recently returned from a training session with New Jersey farmers interested in entering the food business.
Probably because of the state of the economy, when companies downsize, or when people consider a change in career, many of them seem to think it can’t be too hard to get into food business.
“Take the instance of Whole Foods Market; they are trying to do the right thing by sourcing locally etc, which inherently means that they are buying from smaller entrepreneurs. And in most cases, such small farmers don’t have food safety systems in place,” points out Schaffner, who also serves as the Director of the Center for Advanced Food Technology.
Schaffner wants to see industry and regulators focusing on what can be done to support the mom-and-pop, smaller farmers and entrepreneurs to put in place safety systems.
Larry Epling, Divisional QA/Food Safety Manager – FPP at Perdue Farms, Inc. said that companies need to expand the scope beyond that of GFSI audits.
“Most of the companies now require GFSI audits. In some cases, we may have the audits in place, but this may not help address a scenario in which the supplier has switched ingredients, because something is cheaper and more easily available. Since it’s the same ingredient, it’s not a labeling issue, but it can still result in compromising the quality of the product, or worse, include hidden allergens that you were unaware of.”
Epling feels while the GFSI audits and requirements are good, the presence of multiple standard-setting organizations (such as SQF Institute and others), all of which mandate different processes and audits, can confuse the industry. He feels that as an industry, there is the need to better understand major suppliers, and not solely rely on third party audits.

http://www.foodsafetytech.com/FoodSafetyTech/News/What-Keeps-You-Up-at-Night-Experts-Share-Their-Wor-613.aspx

Olivia Chung

HONG KONG – A lending crisis is brewing in the eastern Chinese province of Zhezian, after more than 20 company bosses have fled in recent weeks, leaving millions of dollars in unpaid loans linked to unofficial lenders, many of whom who get their cash from ordinary families.

Three of the runaway company heads each left more than 1 billion yuan (US$156 million) in loans unpaid, according to Zhou Dewen, chairman of the Wenzhou SME (small and medium-sized enterprise) Development Association. Among the absconders are a few recognized industry leaders such as Hu Fulin, 47, founder and president of the Zhejiang Center Group, one of the mainland’s biggest spectacles makers.

Businessmen have been forced to turn to private lenders for help in the wake of tighter central government loan policies introduced late last year to fight inflation. The higher interest rates that are demanded by the underground lenders can become particularly onerous when the businesses do not run as well as expected.

Most of the company heads who have absconded were involved in manufacturing and had borrowed hundreds of millions of yuan from banks and private creditors. Wenzhou has about 360,000 small and medium-sized enterprises, producing a wide range of consumer goods – from shoes, cigarette lighters to spectacles – whose low cost has helped to make China the world’s workshop.

Last Wednesday, Hu called the company’s chief executive officer to say that he was unable to sustain the company any longer. He is now believed to be in the United States, according to the 21st Century Business Herald.

Hu’s company was up to 2 billion yuan in debt, including 1.2 billion yuan from private lenders that attracted interest rates of more than 20 million yuan a month, and 800 million yuan at interest of more than 5 million yuan month, 21st Century Business Herald reported, citing an unidentified source.

Zhejiang Center Group, founded in 1993, employs 3,000 people and produces 20 million pairs of glasses a year. Hu is also involved in the real estate and solar power industries. He owes a total of 10 million yuan in employees’ salary for their work in August and September.

Wenzhou businesswoman Zheng Zhuju was not so fleet-footed – she has been in police custody since the middle of this month on charges of running illegal business operations. Zheng, who owes 280 million yuan to private lenders and banks, had attempted to flee Wenzhou with hundreds of millions of yuan in cash, Shanghai Daily reported, citing local police.

Zheng, 49, ran a home appliance store chain and was the official licensee to sell products under the brand names of Siemens, Sony, LG and domestic brands Midea and Haier.

The difficulty of borrowing money from banks, allied to rising production and labor costs, is threatening the survival of many SMEs, prompting many to turn to private lending despite the high interest rates, said Zhou of the SME Development Association.

“Many SMEs have turned to private sources and even loan sharks, who charge up to 180% annual interest. However, most of the SMEs’ profit is less than 10%, so borrowing from loan sharks would amount to ‘attempted suicide’,” said Zhou.

Since the beginning of April, many SME owners have disappeared after failing to pay back money they’d borrowed from underground banks. Among them is Huang He, the chairman of Wenzhou Jiangnan Leather Co Ltd. Huang closed down his factory without warning in April, owing billions of yuan to workers and money lenders, a spokesman for the Longwan district economic development zone (EZD) in Wenzhou confirmed to Asia Times Online.

In July, Jubang Shoes Industry Co Ltd, run by Wang Hexia, unexpectedly ceased production, owing 100 million yuan to creditors, the EZD spokesman said. Just a month ago, Ye Jianle, boss of Wenzhou-based Zhejiang Tianshe Electronics Co, was also reported to have gone to ground after failing to pay 70 million yuan.

Wenzhou Shoes Material Co ceased production suddenly on August 29. There has been speculation in the mainland media that he is in trouble with an underwriting company.

“All those businessmen had been involved in borrowing money from underground banks and they failed to return the money on time given the increasing interest,” Xu Liangxi, deputy director of the Wenzhou Marketing Management Association, told Asia Times Online. “But the shame is such cashflow problems have suffocated the firms that have been in operation for 10 to 20 years.”

Read more…

It is not as though I don’t believe that every company out there doesn’t need good cost information because I think they all do, however, this is an area clearly where cost benefit has to be considered and the Cadillac of all systems may not be cost beneficial in a relatively simple manufacturing process or a relatively simple product line. A few years ago one of my smaller manufacturing clients was having difficulty figuring out how the product mix they were running month to month was impacting their overall month to month profitability.

This company had preconceived notions as to which of their jobs were profitable and which were not and actually more correctly which of their customer product lines were more profitable as to other customer lines that they perceived not to be profitable. There was a very limited number of customers, 5 or 6, and a limited number of products in each of the customer lines again about 5 or 6 products in each customer line. So the number of total products being produced was very small. In this case the client had very good inventory accounting and accounting procedures and their internal bookkeeper was very adept at matching revenues and expenses and therefore their general ledger was accurate and timely. With those facts we quickly realized that there was another alternative available to this company rather than a full blown cost analysis by product.

What we did in this case was to measure the changes in the products run by customer line using statistical analysis to conclude which product lines had what kind of effect on profitability. The conclusion we were looking for was to see if you produced more of one particular product during the period did it improve or make profitability worse for that period.

What we quickly concluded was that some customer product lines when they ran had a negative impact on profitability and some products had a positive impact on profitability and we could prove this mathematically by comparing many months of sales history using the statistical methods. When I presented the business owner these results he was adamant that this couldn’t be true. Why? Because some of his most perceived profitable customers were the ones creating the negative impact on monthly profitability! As I showed him how the process worked and explained how reliable the system was based on the facts that we had, he agreed to take another look.

What he concluded upon further analysis was that many of the products he thought were profitable actually were; however, they were being sold to customers collectively with products that were clearly not profitable and needed to be modified in some fashion. This owner then went to work with his shop technical team to change the operations and how costs were being incurred to produce those very unprofitable parts. The end result was he ended the year with the most profitable year the company had ever experienced. He did so not because he made the profitable jobs better but rather he made the loser jobs less of a loss. Many small manufacturers maintain good general ledger accounting but can’t afford the time or the money to put in place a comprehensive cost accounting system which will allow them to further analyze expenses. It is important that if you fall in this category, you try to identify another technique that might work for you and give you the kind of guidance it would take to improve the profitability of your company.

Made in America: the rebuilding of a Nation!

Welcome to my first installment of Made in America: the rebuilding of a Nation! This blog recognizes the contributions of the African heritage community of America that has consistently supported local labor forces all over America!

 While the country is in the midst of a backlash from consumers committed to purchasing products manufactured in America, many black owned businesses have always produced merchandise in their neighborhoods or local vicinity.

We did not have the resources for the large required productions. We made to order or produced in quantities of dozens to hundreds at a time. We may purchase some items from the Caribbean or Africa or other parts of the Diaspora, but the final product was cut, sewn, beaded, nailed, bonded or sculptured on the soil of the United States of America! It was made here!

The Launch!
This year I am proud to launch an exciting initiative!

BK-NY-USA: Made right here!

BK-NY-USA will identify designers and small businesses that make products in Brooklyn, NYState and other parts of the United States. The program will make its debut at the 40^th Anniversary of the International African Arts Festival at Commodore Barry Park in Brooklyn, NY starting Friday, July 1 through Monday, July  4^th , 2011. The outdoor event is a HUGE tourist attraction during the Independence Day holiday.

 There will be hundreds of booths filled with beautiful unique products made by talented and creative persons. Many of the products reflect the art and culture of the African heritage.

 Perfect combination! The fashion rage is all things African inspired! What better place to find the best in the culture and art than to come to people who have been creating great design all this time!

What’s new!

The general public is invited to “shop till they drop” the “made in America” brand at this colorful event that includes entertainment and fashion shows.

 Invitations will be extended to retail stores to meet these talented businesses and shop for merchandise for their clientele. 

This wholesale marketing campaign will match small biz to small biz at a grass-roots level! Gift shops, “Mom & Pops”, upscale boutiques buyers looking for great designs, culturally themed items and made in American find everything that they need at the International African Arts Festival!

Categories include at this time: Apparel, jewelry, handcrafts, home textiles and furnishings, stationery, bath& body/ aromatherapy and fine arts.

If you need to be “green” you’ll find recycled and reworked products; If you desire to financial contribute to an African collective you will not have to go far- just come shop at the International African Arts Festival!*

Buyers can register for free. Visit http://www.BK-NY-USA.com to register and for more information. Also contact BKNYUSA@yahoo.com

The carbon footprints are disappearing as we ship via UPS!

*Note: there are vendors from other countries with imported products. The consumer has the choice where she will shop and who she will support!

Cloud Computing and SME
I read an article in ComputerWeekly.com named Cloud Computing to explode SME market. Have a read and make your opinion. The article summarize opinions coming from 360 IT event that took place in London a week ago. I found few very interesting opinions about the role of cloud computing in SME market. I put few quotes below:

Cloud adoption could become more widespread in the small business sectorthan in larger organisations, said experts speaking at the 360IT event in London….”There are so many businesses already using Google services. Cloud services are the only way in the medium term for these businesses to access enterprise-class robustness and service. It will be huge,” he said. [Gregor Petri, adviser at CA Technologies.]….But Errol Rhoden, director at OEM Solutions, said security would remain an issueunless service providers do more to gain customers’ trust.

PLM Cloud Switch?
PLM was born for big companies to provide solutions to handle product development processes and lifecycle of design, engineering and manufacturing information. The complexity of this information is very high. For the last couple of years, I see a definite trend of software vendors to find alternative solutions for smaller companies. It comes in multiple forms – providing industry vertical practices, packaged out-of-the-box solutions and many others. Cloud (or OnDemand) business was considered problematic. Few companies experienced in PLM on the cloud and, in my view, didn’t find how to switch PLM into a cloud mainstream road. So, what changed now? In my view, small manufacturing companies will try to cut their IT costs by moving their infrastructure and computing assets to external cloud providers. PLM software vendors will be able to bundle PDM and PLM application into hosted IT stacks.

What is my conclusion? Small and medium manufacturers are experiencing tremendous pressure on how they optimize their information infrastructure and reduce IT costs. At the same time, they have an increased need to optimize their product development work. Massive movement of IT services to cloud can create a second chance for PLM software vendors to come with new type of solutions adopted to changed cloud environments. Just my thoughts…

Best, Oleg

From a survey of its members, the FSB estimates that 10% or 500,000 are planning to close for two weeks over the festive period.

The FSB says the main motivation for the move is to save money.

FSB official Stephen Alambritis said the firms were following the decisions of carmakers such as Land Rover.

‘Reduced bills’

“By closing down for the full two weeks, small firms are looking to save a bit of cash though reduced electricity and fuel bills,” he said.

“Obviously small retailers won’t be closing, but small manufacturers and self-employed workers such as electricians and plumbers, will be downing tools.”

The banking industry recently revised its guidelines for dealing with small firms to try to help them through the economic downturn.

Under the changes, banks will have to be more proactive in contacting firms they think might be in trouble.

The government also announced new measures to help small firms in the pre-Budget report, including the ability to spread tax bills, and increased access to loans.