December, 2015

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MA Announcements

New and Renewing Companies

Thank you to the following members who joined or renewed your membership in the past 30 days!

Analog Technologies 
Buhler 
Circuit Check 
Class C Components
Continental Machines
CorTalent
DS Manufacturing 
Emerson Process Management
Global Mark
Hockenberg Search
HRExpertiseBP
Hutchinson Manufacturing
Hypertherm
LAD Sales & Marketing
Mocon
Modern Molding 
Prospect Foundry
ProtoLabs Company 
Shippers Supply
Standard Iron & Wire Works 
Uptown Plumbing, Heating and Cooling
Vaddio



Inside Sales Representative Position

Manufacturers Alliance is looking for someone with passion and drive to join us as an Inside Sales Representative. Click here for information.



Gears & Gadgets

The next Gears & Gadgets event will be held January 19. For more information, contact Marni Hockenberg by email or 952-500-9542.



PGC Earns Recognition

Precision Gasket Company (PGC) has earned recognition as a John Deere "Partner-level Supplier," Deere & Company's highest supplier rating. Read more.



Job Transition Training & Education Now Available

Certifications offered by the Manufacturers Alliance may be paid for by a third-party such as a MN Workforce Center. Certifications start in January. Learn more.



Pathways to Prosperity Requests for Proposals

MN Department of Employment and Economic Development (DEED) is requesting proposals for 2016 Pathways to Prosperity (P2P) funding. Click here for information.



LinkedIn

Connect with over 2000 peers online through the Manufacturers Alliance LinkedIn group. Learn More.



New State Law Mandates Business Recycling

Effective Jan. 1, businesses in the 7-County Metro must recycle at least 3 materials. For more information, assistance, and grants, click here or contact Bjorn Olson (612) 334-3388 x108.



Upcoming Events

February 7th 2023 09:00 am
- The Role of the Leader Online

February 8th 2023 08:00 am
- Creating Process Maps

February 9th 2023 08:00 am
- Sustaining Lean Culture Through Leadership Changes

February 14th 2023 09:00 am
- Learning to Solve Problems Supervision Fundamentals Certification

February 15th 2023 09:00 am
- The Role of the Leader

February 16th 2023 08:00 am
- Conflict, Communication and Collaboration

February 21st 2023 08:00 am
- Learning to Solve Problems 6 Sigma Green Belt Certification

February 21st 2023 09:00 am
- Leadership Style & Versatility Online

February 22nd 2023 08:00 am
- Root Cause Analysis

February 22nd 2023 09:00 am
- Learning to Solve Problems Supervision Fundamentals Certification

Article Index

More in Store for Members in 2016
Article by: Kirby Sneen

Most of our 400-plus manufacturing member companies have had a successful and productive 2015.  


Reduce New Product Development Costs and Risks
Article by: Larry Micek

When you have a new product idea, how do you decide whether you do or don’t have a new product winner?


Six Ways to Keep Good Employees in a Tough Labor Market
Article by: Lynn Moline

It’s a seller’s market today when it comes to hiring.


Minnesota Firms Go To MEDICA
Article by: Don Keysser

MEDICA is the world's largest life science trade show, held annually in Dusseldorf, Germany. 


Are the Hidden Costs of MRO Hurting You More Than Your Prices?
Article by: Russ Weybright

Nobody likes to over pay. In manufacturing, this is especially true for non- bill-of-material items needed to run your shop, known to most as MRO.  


Sale/Leaseback – What Is It and Is It Right For You?
Article by: Mike Bowen

While most manufacturers are not necessarily in the business of owning real estate, you may own land and buildings to run your business and produce goods.


MN Economic Outlook
Article by: Dr. Ernest Goss

The November Minnesota Business Conditions Index slumped to 41.1 from October’s 42.7.


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More in Store for Members in 2016

Most of our 400-plus manufacturing member companies have had a successful and productive 2015.  

In response to their growing needs, we have and will continue to enhance our major value streams and member benefits:

  • Company Membership
  • Workshops & Certifications
  • Leaders Alliance Peer Group Membership

Company member benefits continue to improve. We expanded our Compensation and Benefits Survey to include “The Manufacturing Trends Report”. This addition will include insight on sustaining continuous improvement, Minnesota manufacturers expected revenue growth, and highly requested data – annual industry turnover rates. The Manufacturers Alliance will continue to invest in collecting and distributing data and trends on the health of Minnesota manufacturing.

Workshops and Certifications have also been enhanced. We have launched the well-received Supervision Fundamentals Certification, to help front line leaders minimize your company’s risk and maximize your team’s positive performance, communication, and cohesiveness. This new certification includes iterative learning via a series of experiential workshops, online knowledge retention exams, and practical application projects.

We are also expanding coaching services for those that are enrolled in Lean Leader Certification and would like a professional opinion on how to implement process improvements or strengthen leadership efforts and strategies.

We realize training may be a large expenditure for our members. To subsidize the investment, consider contacting us to learn more about a number of training grants available through the State of Minnesota. In addition, individuals in job-transition seeking new qualifications may now tap into state funding via a third party such as a MN Workforce Center, to pay for Certification.

Lastly, the Leaders Alliance peer groups continue to multiply. In 2015, we launched a new group focused on Strategy Implementation. Currently, this group is sharing best practices and personal lessons learned from applying the concepts of the entrepreneurial operating system.

With an eye towards manufacturing growth, we are planning to offer two new Leaders Alliance groups in 2016. Many of you first learned about our new Chief Revenue Officer peer group at our annual Mega Meeting. This group will be exclusive to individuals who are responsible for generating revenue to fund the business and grow the company. Titles may include: President, VP, or Sales Executives within small to mid-sized manufacturers. For upcoming details on our second new Leaders Alliance group, watch our website and weekly email announcements.

In closing, I am very much looking forward to recognizing those manufacturers that share information and continuous improvement experiences with fellow manufacturers at our 20th Annual Manufacturer of the Year Award Ceremony on Thursday, April 14, 2016.  Consider nominating a company and learning more about the awards here.

I am grateful to our staff, board of advisors, peer instructors, peer group facilitators, volunteers and members for the collaboration and inspiration to continuously grow and improve through the sharing of education and resources on a peer-to-peer basis.

Kirby Sneen is the Vice President of the Manufacturers Alliance - an association of over 400 manufacturers in the greater Twin City area. This industrial association specializes in sharing education and resources peer-to-peer. Kirby may be reached at (763) 557-8007, kirbys@mfrall.com, or www.linkedin.com/in/kirbysneen/

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Reduce New Product Development Costs and Risks

When you have a new product idea, how do you decide whether you do or don’t have a new product winner?

Here’s three proven, cost effective steps that help you spot a more likely winner and lower the risk of new product failure.

Step 1 - Determine What We’re Good At - SWOT Analysis
Do a thorough Strength, Weaknesses, Opportunity and Threat (SWOT) analysis to clarify what your capabilities are so that you can create a list of markets you might enter. 

Step 2 - Research Markets and Select Promising Markets to Pursue
Once you’ve got your list of markets, do the secondary market research. On-line information, multi-client market studies and consulting subject matter expertise are only a few of the secondary market research resources available. Analyzing information obtained through these resources is a cost effective way to assess potential markets.

Step 3 - Identify and Rank Unmet Market Segment Needs
This is the most important step. By market segment we mean a group of customers with common unmet needs. For your company this could be any number of customers as long as developing and deploying new products to this group meets your business growth goals. 

To implement this step we combine Anthony Ulwick’s1 methods of identifying outcomes with outcome metrics developed by Dan Adams2. Customers are interviewed to identify and rank outcomes they desire resulting in a Market Satisfaction Gap chart like the one shown here.

image
See Anthony Ulwick’s book, What Customers Want1 and Dan Adam’s book New Product Blueprinting2 for a complete discussion of outcome statements and market satisfaction gap metrics.

This market satisfaction gap chart is from a simulated business case for a fictitious company - DiversiSoy - interested in developing a particleboard binder. Outcomes label are listed on the vertical axis and market satisfaction gaps for each of these outcomes are listed in the red bars. These market satisfaction gaps are unmet customer needs and are potentially profitable targets for your new product. Market satisfaction gaps of 30% or greater tell you that there are not good alternatives for the outcome in question and you have identified an opportunity to fill an unmet need. As we all know, filling unmet needs is the key to profitable new products. 

The power of this technique is its simplicity. Identification of these outcomes, their measurement and ranking are obtained directly from potential customers. By implementing these three steps you’ve minimized guesswork and simplified the new product development go/no go decision.

If there are no market satisfaction scores 30% or higher, pursuing a product to satisfy these outcomes is considerably more risky. That’s because customers in this scenario are either appropriately served or even overserved by available products. You’ll be forced to lower prices to these customers which almost certainly will results in low profit margins. To be profitable, you’ll need to develop or locate a disruptive technology to create a profitable product. That is a significantly more difficult and risky new product development route to pursue. Pursuing unmet market needs is generally more straightforward and less risky.

If you don’t identify market satisfaction gaps of 30% or more the first time through these steps, keep working at it. By iterating through these first three steps, you’ll find the right market you are capable of serving profitably. As importantly, you won’t be guessing whether the product targets are fulfilling valuable unmet customer needs and waste valuable resources developing products.

Once customer needs are identified and measured, your business case should include a proposed product design with target performance metrics and competitive analysis of customers’ next best alternatives. 

Larry is President of Chembryonics with 35 years of business to business new product development leadership experience. If you’re interested in a copy of the simulated business mentioned in this article send Larry an email at: llcmicek@chembryonics.com.

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Six Ways to Keep Good Employees in a Tough Labor Market

It’s a seller’s market today when it comes to hiring.

According to the Bureau of Labor Statistics (BLS), there are 5.4 million job openings nationally, a number that’s been on the climb since 2012.

Here in Minnesota, the job opening count was around 90,000 as of October 15. Anecdotally, every company I’m familiar with is searching, if not struggling, to find employees.

But here’s the real eye-opener: The BLS also reports that for every five people hired, more than four people quit or are discharged. Based on that grim statistic, it seems that selection and retention should be strategic priorities for every company.

Smarter selection is a hot topic today and for good reason--the cost of failed hires is a drain on the bottom line. So getting the right people in the right seats to begin with is paramount. But the other half of the employment strategy equation is retention, and that seems to get less attention. That’s a shame, because every leader at every level of every company influences employee retention.

Retention has a great deal to do with employee perception of how employers valued them. Of course, one measure of value is compensation, and to be clear, pay must be fair. But money alone isn’t what keeps good people. (Anyway, do you really want employees who are there only for the money?) Still, employers often try to use raises and bonuses as retention strategies.

A far more effective retention strategy is to adopt these six practices that show employees you value them. The practices aren’t difficult to master, and every leader at every level can use them to improve the odds of keeping good people:

1. Listen to your employees.
Listening can start with taking a moment every day for one-on-one contact with every direct report. Show interest in employees as people. Ask about progress, challenges, concerns, and accomplishments. Invite their ideas and resist the impulse to quickly discount what they say. Instead, get in the habit of saying, “Tell me more.”

2. Tell employees how they’re doing.
We humans are hard wired to want to know how we’re doing, but we live in a feedback-starved society. Be extravagant with frequent and specific praise and recognition, and give people supportive constructive coaching.   
Image3. Share information.
There’s an old crude joke that employees feel like mushrooms—they’re kept in the dark and fed horse manure. The fact is, we all have an intrinsic need to feel like we’re part of something, and nothing supports that feeling like being “in the know.” Constantly tell employees the what, where, and most importantly the why about their assignments and the company and its products and services.

4. Have high expectations.
Steve Jobs never allowed a deadline to slip. Faced with employee arguments about why something wasn’t possible, he’d remind them that they were the most talented, innovative people anywhere and that there was no way they couldn’t make the deadline. The point is well taken: people tend to rise to high expectations and fall to low expectations. Leaders, usually unwittingly, communicate their belief in people, or lack thereof, through body language and tone of voice as well as via words. Confidence is hard to fake; the only solution is to truly believe in your employees’ abilities and potential.

5. Trust people with responsibility.
Allow people to do their jobs with minimal management intervention. Provide clear assignments, ample information, and all the tools available to do the job. Also delegate some authority along with responsibility. Management philosopher Deming warned managers to remove barriers to pride in work. What he meant was “give employees what they need to do their jobs and get out of the way.”

6. Give people chances to grow professionally.
Nearly everyone wants to be good at what they do, and most also want to learn, improve and grow. Do everything you can to give employees challenging, interesting work. Cross train people. Give them special projects. Send them to training and learning opportunities. Try to create job and career progression paths.

It’s challenging to hire good people these days, so it’s more important than ever to keep those you already have. Make leaders at all levels accountable for adopting these six practices and reap the beneficial impact on retention and the bottom line.

Lynn Moline is a consultant, trainer, coach, and speaker who helps companies achieve through effective leadership, planning, and decision making. Contact her at Lynn@molineassociates.com.

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Minnesota Firms Go To MEDICA

MEDICA is the world's largest life science trade show, held annually in Dusseldorf, Germany. 

Imagine nineteen conference halls, each the size of the Minneapolis Convention Center, and over 50,000 exhibitors and 200,000 attendees (and then imagine walking from one hall to another, repeatedly each day). MEDICA is a global gathering of the state-of-the art in medical technologies, manufacturing, bio-pharma, devices, components and research. It includes the largest global corporations, such as GE and Siemens, and the smallest early-stage companies struggling with their first products and with early revenues. 

Over 130,000 people, from 120 nations, attended MEDICA. 35% of the exhibitors were from the U.S., and as in previous years, Minnesota was well represented. Approximately 30 life science firms from Minnesota were exhibitors, and a number of others (including this consultant) were attendees. The State of Minnesota was also represented by the Minnesota Trade Office, Greater MSP and Life Science Alley.

Some of the themes highlighted by the exhibitors focused on the topics of: digitalization and miniaturization, networking and "wearables" (in networks with apps and mobile devices). It was also noted that there has been a significant increase in exporting of medical technologies; an increase in sales of 6.8% in worldwide exporting. Life science continues to be a dominant industry world-wide, led by the U.S., and followed by Japan and Germany, as well illustrated in the extraordinary gathering in Dusseldorf. Keep this in mind for 2016.

The MEDICA 2016 will occur Nov 14-17, 2016; the website is www.Medica-tradefair.com.

Don Keysser is the Managing Principal of Hannover Ltd., a firm that provides business financing consulting services, M&A services, and capital raising. He works primarily with small-medium size manufacturing and technology companies, and can be reached at don@hannoverconsulting.com, and 612-710-0995.

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Are the Hidden Costs of MRO Hurting You More Than Your Prices?

Nobody likes to over pay. In manufacturing, this is especially true for non- bill-of-material items needed to run your shop, known to most as MRO.  

Shop supplies, janitorial/chemical, maintenance, break room supplies, even office supplies, involve many small dollar transactions and a disproportionate amount of paperwork processing, when compared to your direct material. It is not unusual to have a 4 to 1 MRO to BOM-material transaction ratio. This leads to an important equation for MRO:

COA (total cost of acquiring) + COP (total cost of possessing) > PRICE paid

Simply put, your company’s efforts around purchasing and controlling these items are very expensive.    

Following are some examples of these hidden costs.

COA

  • PROCESSING. PO, requisition, invoice, receivers, discrepancy resolution are all costs of a traditional procurement process and they are estimated to be between $35 and $300 per order. How many MRO orders do you process per month? Multiply by $100 per order for an estimate of total processing dollar cost. How would you use these overhead employee hours and dollars if you could process MRO more cost effectively? Is there a strategic initiative you could start with this kind of time being available?
  • DELAYS. Can’t work without the tools and supplies to do the job, can’t have delays, so, someone goes and gets what’s needed. This leads to:
  • HEROISM. Every plant has a “hero.” The one who runs to Menard’s/Home Depot/Staples/Walmart to secure the missing “stuff,” gets some windshield time on a nice day, a cup of Holiday coffee and returns triumphant. An expense report is prepared, a check is cut, and it happens all over again tomorrow. What does this cycle cost you?  

COP

  • CASH. MRO is typically expensed at receipt, not tracked as inventory, so the cash tied up is unmanaged. Overbuying to get price breaks or to eliminate freight charges makes the problem worse and creates SPACE and SHRINKAGE problems.
  • SPACE. Excess MRO uses valuable floor space, inefficient clutter, or is stored in a location of its own, with its own management and overhead costs – see Labor.
  • LABOR. Crib attendants are critical to your operation and your production material flow. But, what is the value provided for MRO?  Mostly, they guard the stuff and re-order.
  • SHRINKAGE. Where does all that stuff go, anyway? Carelessness, hoarding, even theft, can account for excess usage of MRO items. Craigslist, makes theft in the workplace pay over and over. Home workshops can be well stocked at your expense. Multiple supplier/manual tracking processes fail to manage the accountability around MRO.

As you can see, PRICE is only one component of your MRO costs. Processing, delays, cash, space, labor, and shrinkage are significant and too often their combined costs exceed the price of the item you are purchasing.  

There are many processes that address some, but not all of these issues. Vendor managed inventory, P-cards, blanket orders, group purchasing organizations, all solve a portion of the problem, but leave other aspects untouched. Fortunately, by combining traditional approaches, such as leverage, with modern technology, there is a solution that allows you to have it all. Total Cost Solutions incorporates aggressive pricing negotiated with world class suppliers, cloud-based transactions that execute in seconds, and real time spend controls assuring purchases are within budget and properly accounted for- all in an easy to use web site. TCS will truly become your partner- understanding your spend and creating a cost-down strategy, with progress reviewed monthly. We understand true savings comes from an ongoing process, not just a market basket event.

Russ Weybright is the founder and managing partner of Total Cost Solutions (TCS), a company serving manufacturing businesses in the area of non-strategic procurement. Find out more about TCS at www.total-cost-solutions.com or call Russ directly at 952-237-3682.

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Sale/Leaseback – What Is It and Is It Right For You?

While most manufacturers are not necessarily in the business of owning real estate, you may own land and buildings to run your business and produce goods.

If you are looking for capital to grow your business, reducing your investment in non-essentials like real estate can free up cash for the investments that matter more to you – like equipment, people and expansion.

But, you still need a place to operate your business and moving is a hassle. That’s where a sale/leaseback transaction may come into play. In a sale/leaseback transaction, the owner/occupant sells its land and buildings to an investor while leasing back its space under terms agreed to in the real estate transaction.

There are several benefits for companies that dispose of their real estate and turn fixed assets into cash.

Compared to traditional mortgage financing, you can raise more capital through a sale/leaseback. By selling the property, you receive 100 percent of the property’s market value while conventional mortgage financing typically funds between 70-80 percent of the property’s value.

Since you’ll be entering into a long-term relationship with the investor that purchases your property, you’ll have tremendous ability to negotiate preferred lease terms. Usually, these are long-term leases of at least 10 years with built-in renewal and termination options. Some sellers even have an option to repurchase the property down the road. Ultimately, the goal on all sale/leaseback transactions is to determine a deal structure that best balances the company’s (seller’s) objectives with capital markets (investor) preferences.

Leasing your property rather than owning it can also lead to greater tax advantages. While the only deductions available to property owners are the interest expense and depreciation, lessees are able to write off their lease payments as a business expense.

Additionally, due to significantly improved market fundamentals and the current interest rate environment, industrial real estate is trading at record prices and in record time. Real estate investors are always looking to place cash into functional real estate investments that generate higher returns than most core investments like stocks or bonds. In order to maximize the value of your asset and achieve optimal market value, a sale/leaseback in today’s market may be worth exploring.

My team was very fortunate to have recently assisted Sportech, Inc. in Elk River, MN on two sale/leaseback transactions. Eric Stack, CFO, had the following to say about this investment vehicle and how it helped benefit his business: “Our sale/leaseback transaction allowed us to harvest equity tied up in real estate, a relatively low return asset, and reinvest it in Sportech’s growth strategies.”

While this all seems like a pretty good deal for you, what’s in it for the investor?

The buyer of your property can usually expect higher and more predictable returns on its investment compared to other loan arrangements. Buyers may also benefit from leveraging mortgage financing. At the end of the lease term, the buyer receives the benefit of any appreciation to the property’s value. Additionally, locking into a long-term lease with a reputable tenant provides the buyer with long-term, guaranteed cash flow at a favorable rate of return.

You may also be asking yourself “what is my building and land worth in a sale/leaseback transaction?” The answer – it depends. There are three primary factors investors look at when determining what they will pay for your real estate:

1. Corporate Tenant – Who is the seller (future tenant), what is their credit rating, net worth, debt to equity ratio and what is their revenue growth/trajectory and profitability?

2. Real Estate Fundamentals – What is the demand by the capital markets for the property type, capital markets trends, supply/demand conditions in space market, barriers to entry for new supply, replacement cost, sub-market desirability and position within broader market, access to transportation systems, visibility, ability to multi-tenant, functionality (clear height, loading, office build-out) and strategic importance of facility to company.

3. Sale/Leaseback Structure – Length of lease term, rent increases, responsibility for maintenance and structural repairs and renewal/termination rights.

In summary, a sale/leaseback might be right for you if:

  • You’re having trouble obtaining credit or the right credit terms to grow your business.
  • You need to recapitalize your business which creates a greater return for you than your real estate.
  • You envision that flexibility due to growth or contraction may be needed in your company’s future.
  • Estate planning if your real estate is owned individually and leased back to your company.
  • You’re planning a restructuring or bankruptcy.
Mike Bowen is a commercial real estate advisor with CBRE Brokerage Services–Industrial Specialty. He can help answer questions about sale/leasebacks, whether or not it may be right for your business or how you can go about exploring this investment option. Contact him at mike.bowen@cbre.com or 952-924-4885.

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MN Economic Outlook

The November Minnesota Business Conditions Index slumped to 41.1 from October’s 42.7.

Components of the index from the monthly survey of supply managers were new orders at 34.5, production or sales at 36.5, delivery lead time at 52.8, inventories at 39.5, and employment at 42.0. “U.S. Bureau of Labor Statistics data show that over the last 12 months, Minnesota lost 800 manufacturing jobs. Our surveys of supply managers in the state point to slight losses into the first quarter of 2016 as manufacturing exports slide even lower,” said Goss. 

Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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