APPLIED PROCESS’S POSTHAVEN

DIS Marketing Conducts Casting Design Training

The Ductile Iron Society will conduct a “Design with Ductile Iron” seminar on Tuesday, October 28th, 2014 (9:00AM – 3:00PM) at the Decatur Conference Center & Hotel in Decatur, IL.  Check out more information here.

There is certain to be some very good information presented, so be sure to get there!

Ag market

There are reports in places like Farm Equipment Magazine about layoffs and such at the major ag producers.  These make sense and were fairly predictable based on IRS changes late in 2013 affecting the ability to write off large pieces of equipment.  In short, farmers cannot write off massive purchases very easily anymore, so they logically are extending the time they use existing combines and big tractors.  For casting producers this means fewer castings for such equipment lines.

However, good weather means record crops.  That logically means more castings for consumable castings – after all, you still need to harvest those crops.

Same thing in light vehicles

Heavy Duty Trucking magazine reports:

“A separate report shows new car, light-truck and SUV sales are expected to drop 0.7% in August compared to the same time a year ago, hitting a total of 1.49 million units, according to publishers of the vehicle price guide Kelley Blue Book.  Although sales are down from a raw volume perspective, they remain up slightly after adjusting for the difference in selling days in August 2014 versus August 2013.”

Now, most high-volume automotive foundries I know are jammed with work, and if they are not busy then they have other problems.  I myself think we will see a leveling off in 2015.

Truck orders up, freight still high

Aging fleets look to finally be refreshed.  This article from HDT.com states:

“Orders for heavy and medium duty trucks were on the rise for the second month in a row in July, according to ACT Research's latest State of The Industry report… The report found that 30,103 Class 8 trucks were ordered in July and year to date orders are 33% higher than in 2013.”

HDT.com also reminds us that freight rates are still high.  These are signs of a growing economy and signs of potential opportunity for Metalcasters.

Ag is a Mixed Bag

There has been a lot of reports of sever slowdowns in the Agricultural Equipment sector.  These stories impact Metalcasters greatly.  From what you blogger hears and sees, the impact is greatest on pieces of large equipment (combines, etc.).  Other types of equipment seem to be doing fine, and now and then we are seeing news like this story:

“CNH Industrial N.V. is investing $24 million to expand production in Burlington, Iowa, with the addition of the company's crawler dozer production line.”

This is all part and parcel of what your blogger thinks to be a soft landing in the Ag sector.

Things That Need to be Taught to Humans #7

The protocol of “Opening Doors” has been neglected for a long time (at least by me).  When approaching a door, and especially an airlock enclosure in cold-weather places, you should exhibit some courtesy.  I want to extend my thanks to Andrew from Pittsburgh, who referred me to the Art of Manliness website where I received a needed refresher course.  The piece starts this way:

 “There are two ways to mess up etiquette. One is too ignore it altogether. The other is to over-think it and overdo it, and thus make it weird and awkward. So keep that in mind as you read these guidelines; the most important thing to remember is simply to be natural and to use common sense! It’s definitely not too complicated; these guidelines are simply designed to allow you to be smooth …”

 Read the whole thing please.  Andrew will get a free lunch for his support.

Joe from Pittsburgh

Joe is a bright young engineer who designs railroad equipment.  He looks great with his AP notebook (made in USA!).  Joe will also get a free lunch to recognize his good taste in stationary.  Remember, you can send me a photo of yourself with your AP gear for use on this blog and get a free lunch as well! 

New AP University T-shirts

Boy, are these handsome!  Many thaks to our friends are Dotson Iron Castings, Urick Ductile Solutions, Farrar Corporation, and Lethbridge Iron Works for making these shirts possible.

Last week saw the implementation of the first-ever Special Edition of AP University.  It was conducted in coordination with Dotson Iron Castings exclusively for Oshkosh Corporation.  We talked about steel and cast iron and ductility and casting conversions and lightweighting and ADI and patterns and castings and other things that are good and beneficial to mankind.  A great time was had by all.  

Oshkosh Corporation is of course a global company facing the challenges characteristic of such a position.  I hope we at AP uplifted the work of the attendees in rising to those challenges.  The AP folks certainly learned a lot from the event! 

Many thanks to Matt Schindle of Dotson and Rex Harrison of Oshkosh for all they did to make this possible.

Attendees at AP University can always get up close and personal with the molding process.  In this video an intern at Joyworks Studio makes a nobake mold as part of the instructional program for component designers.  

In this photo we have a tree of castings that shook out of the mold just a few minutes before.  Hot stuff!!

Events like this remind me of the appeal of metalcasting.  The metalcasting industry offers a unique forum for people to be both technical and creative in their daily work.  

If you are interested in training like this then let me know!

Readers of this blog know how I feel about the Black Swan by Nassim Nicholas Taleb.  Those of you who are new should know that Amazon’s blurb explains the idea well in just a few words:

“A black swan is an event, positive or negative, that is deemed improbable yet causes massive consequences.”

The classic example is an earthquake or tidal wave.  If you build your plant to survive a 500-year tsunami, then GREAT!  Except that the next tsunami might be a 10,000-year tsunami.  Then you have trouble.

This brings us to this article in Automotive News.  I hate long quotes in a blog, but I cannot resist:

To protect itself from production bottlenecks caused by unforeseen disasters, Toyota Motor Corp. has asked 400 North American suppliers to identify any key parts that are produced by just one factory.

The automaker has also asked the 400 to develop backup production plans in case a single-source factory shuts down unexpectedly. 

Bob Young, Toyota's North American purchasing chief, says he wants to identify all "pinch points" that could occur if a key plant is disabled by fire, flood, earthquake or other disasters.

"We're assuming they'll be able to salvage the tooling" from the stricken plant, Young said during an interview at the Toyota Technical Center here, near Ann Arbor. "We're asking suppliers what they would do and how much time would they need" to re-launch production.

Some suppliers might maintain reserve stocks of components. Others might obtain certification to produce parts in a second factory, if necessary.

But there are limits to Toyota's disaster planning. The automaker will not ask suppliers to reserve production capacity for emergency use. "We are not willing to pay them for that capacity," Young said. "It would be very expensive."

I give Toyota’s Bob Young full marks for candor and straight talk.  I like him already, and I have never even met him.  None of this changes the fact that long-supply chains pose inherent risks.

I visited a fellow who bought large quantities of large steel castings from Asia for many years without ever having experienced a scrap issue or a late shipment.  I told him his achievements were indeed impressive, and that he doesn’t need me with such a smooth-operating supply base.  He continued his story, explaining that he wanted to locate a domestic source in case of “civil unrest” in the source country.  He didn’t want to actually BUY from a domestic source … he just wanted the source teed up and ready to take the phone call.  Egad.

 So here are the takeaways for a casting salesperson:

1.     You should have a ready answer when your customer challenges you on what will happen you have a fire or a natural disaster.

2.     Hopefully you have two plants with similar equipment (Like AP!  Yay!). 

3.     If not, you should be ready to explain why you have never had an interruption in “x” years.

4.     This line of questioning means that asking about your foreign competitor’s plans is fair game.

5.     This also means that your domestic location and short supply chain are opportunities to emphasize real and quantifiable value.

Thanks for reading!!!

Sand - Ouch!

The North American Energy Boom is a good thing, but there is cause for concern in the casting industry.  The Wall Street Journal has published a piece on the subject.   The graphic below shows the forecast demand for sand.  Yikes!

When I was on the Penn State FEF Advisory Board I attended a talk given by a very knowledgeable person in that industry.  It was explained that the frackers want the same properties as the foundries.  It was also explained that one does not simply open a sand mine overnight (nor does one simply walk into Mordor, for that matter).

But this is not some casting industry committee ... this is the Wall Street Journal.  If I were a casting salesperson I would have answers in case the topic came up from buyers who want to know their longer-term price outlook.  I would also be prepared to ask if they have the same concerns about offshore sources about their various inputs (they really, really should). 

Things That Need to be Taught to Humans #6

Unless you have golfed together before, nobody cares about your golf game.  

Absolutely nobody cares about your fantasy league.  

Not hatin', just sayin'.

Sorry, not too much on castings today... but I hope you can get into these topics.

Really? 

I love Bloomberg Businessweek magazine because it provides some outstanding food for thought, packaged nicely.  On July 24 there was a graphic (below) about The Great Shrinking Workforce.  The accompanying verbiage was:

“In 2007, 66 percent of American adults were either working or looking for work. This year that number dropped to 63 percent. The White House’s Council of Economic Advisers estimates that about two-thirds of this decline comes from baby boomers retiring and the recession. The rest? It’s not completely clear.”

Where to begin to parse such a thing?  As Inigo Montoya would say, “Let me explain.  No, there is too much – let me sum up.”

The graphic shows what many of us already know: People are not working! 

The White House’s Council of Economic Advisers is “not completely clear” on what is causing this besides the retirement of the boomers.  Let me enlighten them: Too many have given up finding work or have been reduced to part-time because of overall economic uncertainty, some of which is government-related.   

Specifically, nobody hires full-time people … or starts a family … or opens a factory … or buys a house … or makes any big decision when they don’t know what’s coming next.  Decision makers simply cannot answer questions like these:

Will another state open up land to fracking development?  What will that do to my job?

Will sequester legislation hold?  What will that do to my company?

Will the stock market crash again due to excess liquidity?  What will the dollar be worth in five years?

What will happen to support for ethanol?  Will climate change flood my cottage on the oceanfront?

Should I train the employees in my body shop to make repairs on aluminum auto bodies?

You do not need to be an economist to know these things.  You just have to be awake.  Just look at the chart below that I compiled from the CDC.  Births drop off in 2008, right when the recession hit.  

Iron Metallurgy basics

Here are a couple of metallurgical tidbits for you.  I was going through some old trade journals when I leafed through the August 2007 issue of modern casting magazine.  That issue had two back-to-basics-type articles by the AFS’s 5-L committee on Liquid Metal Processing (that committee’s functions are now covered by the 5-P committee). 

The first article was written by the late Fred Linebarger (great person, great engineer).  It discussed nodularity testing.  The second is about chill-wedge testing which is a low-cost test that can be very useful in the gray iron casting process.  These are topics that should be intimate to anyone buying and selling ductile iron or ADI castings.  I can’t quite locate these articles on the modern casting website but I will follow up with them to see if a link is available.

Some Vision in Rail

The July issue of Progressive Railroading has a piece by Greg Grissom of GREX (I have not met Greg).  In the PDF version it is page 17.  Greg discusses some big-picture ideas, one of which is likely interesting to readers of this blog:

 “Visionary people in R&D focused railroad and supplier companies will continue to drive the industry forward.  All-time high levels of capital spending by Class I railroads, coupled with the technology advances fueled by many research partnerships (for example AAR, FRA, Volpe, universities and supplier R&D), will continue to improve safety and drive down the track-caused accident rate as seen over the last decade. Supplier R&D investment combined with strong railroad partnerships continue to support the ongoing challenges of increased capacity and increased safety, and allows for more efficient resource allocation. Railroads have guided suppliers to be sure technology developments maintain a focus on minimizing track time, combining technology offerings on common inspection platforms and employing useful data reporting. This two-way communication fuels innovation and streamlines development for the next solution.”

The rail industry use a lot of castings.  I hope casting suppliers take it upon themselves to meet the challenge of such collaborations.  To do so, suppliers have to do more than be “order-takers” – they have to do the legwork that allows for growth in the casting market – they need to be “order-makers.”

More Rail

The same magazine features this piece confirming what I heard anecdotally, and which should be common knowledge for casting salespeople.  Specifically, car builds and especially tank car builds are still very strong from the North American energy boom:

“In the first quarter (of 2014), rail-car orders totaled 24,050 units … Although tank-car order activity continues to dominate the freight-car environment, officials at Economic Planning Associates Inc. (EPA) say they are “enthused” by the strong recent growth in demand for mid-sized and small-cube covered hoppers, as well as the high level of backlogs for hi-cube equipment. Demand for tank cars, covered hoppers still strong, EPA says.”

Freight rates stay high

Heavy Duty Trucking magazine offer the monthly North American Spot Freight Index.  That journal states the following, suggesting a strengthening economy still fraught with uncertainty:

“Several factors appear to have contributed to record-high volume and rates on the spot truckload market this year, including disruptive weather, an improved economy, and seasonal fluctuations of freight and capacity, said DAT. As a result, shippers have increasingly relied on third-party logistics providers to meet the needs caused by the growing volume of exception freight.”

Branding … not very American style (with bonus Godfather reference)

There is a nice short article in the Economist about artisan food producers and their geographic branding efforts.  In short, “The EU is demanding protection for 145 food names, including feta, asiago, Gorgonzola, munster and fontina. … Americans are unimpressed. They see all this as an attempt to erect trade barriers and raise prices by reclaiming words that have long since passed into general use.”

America is a competitive economy and we respect branding … but we have limits.  Attitudes in other countries are markedly different, where provenance matters a great deal more in branding.  As for your blogger, I really like certain things, and if the provenance of a specific good wine involves a chateau with 100-year old vines tended by blind, tattooed monks, then GREAT!  Otherwise, it’s what is in the glass that still matters most.

That said, on manufactured goods “Made in USA” still carries an awful lot of cachet with your humble blogger (see post from July 17), and usually for some very good reasons.  That’s provenance, is it not?  I guess you can count me as a hypocrite … but then again, Senator … we are both a part of the same hypocrisy (52 seconds into this clip, pardon the language).

One more plug for ADI article in Farm Equipment Magazine

The July/August issue of this excellent publication is online now and can be seen here.  The piece on Austempered Ductile Iron (ADI) is here, with a few comments from yours truly.  Subscribe today!

I stated in that article “Salespeople who understand how castings are being used to reduce the complexity of farm machinery …”.  Specifically, I was driving at the fact that anecdotal evidence shows that more designers are seeking out castings for improved dimensional repeatability over weldments.  Now, I have no numerical evidence to prove this as a systematic condition, but I will be looking for answers either way.  The fact remains that multiple current and former casting conversions were made based on this criteria, like this award-winning example from Dotson Iron Castings.

Skilled labor in the media

Advertising Age discusses a comprehensive campaign to recruit labor to the construction industry.  A lot of this article applies to the cast metals industry as well as other manufacturing.  The article states:

“Trying to shake its image as dirty, backbreaking labor and attract younger workers, the industry—from construction firms and trade groups to equipment manufacturers and machinery makers—is marketing itself as a place to use advanced math, science and technical skills. ... There's a good reason why the industry, now going into its busy season, needs to rework its pitch: 74% of construction firms report they are having trouble finding carpenters, electricians, plumbers and welders, according to a 2013 survey by industry trade group Associated General Contractors of America.  ... "Construction work is somewhat different from what it was… There is much more use of laser and GPS-guided equipment, building-information modeling and other things that require computer skills and use of technology that was not common before the recession."

 The takeaways for the cast metals industry:

1. There is a shortage of welders and machinists (but you knew that because you read this blog), which means more opportunities to sell castings

2. Other industries are committed to seeking ways to reach the job candidates they need by breaking up negative misconceptions ... which is what casting salespeople need to do when dealing with customers who have not seen the seismic changes in our industry over the past 20 years. 

Lightweighting and free lunch

We all like a free lunch.  But there is no such thing.  See this from the Automotive Fleet News (hat tip to John Keough):

Ford's U.S. dealers began ordering the 2015 F-150 today after receiving pricing for the light-duty pickup that will increase due to the increased use of aluminum in the body.  Prices will increase over the 2014 model by at least $395 and as much as $3,615 depending on the model, according to a Reuters report confirmed by a Ford spokesman.

Who knew?  We all want things.  But someone has to pay. I hope all of that added cost is made up in improved fuel mileage, but that is a blog post for another day.

 Only in Pittsburgh

I very recently wrote “From a marketing standpoint I have always thought that “authenticity” always including a level of over-engineering.  More specifically, using something for a purpose other than that for which it was designed ... I acknowledge that the relationship is not perfect - nobody wears welding helmets on the dance floor.”  This notion is already outdated. 

I was at a concert last night in downtown Pittsburgh (Offspring and Pennywise – buy your tickets now, punkers).  I saw a guy in a Rancid t-shirt wearing green steel mill pants like these, probably from his dad’s dresser drawer.  It was absolutely outstanding because I honestly don’t think he was trying … it just happened.  That is the key – he wasn’t trying.  Yinz can still drive in the Valley (that’s the Monongahela River Valley) and see some millhunk gardening in his green pants.  You would not even bat an eye.  That’s real, and that’s very cool.

Simon Dumenco in Advertising Age touches on this ever so lightly, hoping that advertisers would cease using “authenticity” as a buzzword.  I’ll start now.

The casting market in a roundabout way

I love this skit from Monty Python about the man who says things in a roundabout way. Believe it or not I have been guilty of this. Unfortunately, when looking at casting markets sometimes you have to look at things in a roundabout way as well.

The American Association of Railroads (AAR) sends out news releases like this one. This is interesting for multiple reasons. First, you can look at the Weekly Railroad Traffic report the strength of the overall economy (Yikes! Motor Vehicles and Parts!). This report validates what we see elsewhere, which is that the economy is producing more in 2014 than in 2013. Except for coal. And we knew that. A growing economy is good for casting producers, even if we are dissatisfied with the pace of growth. Second, more parts being carried by rail means more railroad castings will need replaced sooner instead of later. That’s good for makers of steel and iron castings.

Similarly, news from the world of heavy trucks further illustrates this trend. Truck Tonnage dipped a bit in June but is still trending up. The same conclusions apply.

On the flipside we have this piece from Farm Equipment Magazine. Farm Equipment is still moving slowly, especially big-ticket stuff like combines (a small bird says combines will pick up again in early 2015). I think this is not so much from regular market conditions but rather from late 2013 tax legislation that we have discussed in this space before.

Castings in Tourism

Ok, I am a nerd for castings. I love this part from a steamship engine that wrecked off of Virginia Beach in 1904. The old-time foundry workers knew their stuff.

I also love this “black steel fish pan” on display at the Smithsonian. Notice that the handle is welded on. This is easy and appropriate because it is steel. 

My own Lodge Cast Iron 12” skillet is made in one piece because it is gray cast iron. If you do not already have one, get one. They are made in USA, of course. Henry Lodge is President and COO of Lodge Manufacturing Co. and he is a really nice person. I had the honor to give a presentation at the AFS Southeast Regional Conference in Birmingham a few years ago. I spoke with Mr. Lodge after my talk and he was very gracious. I am sure he does not remember me, but I certainly remember the impression he made.

Things That Need to be Taught to Humans #5

I waited tables and tended bar for years and years so I offer these specific suggestions to humans in those trades:

1. Nobody wants to wait for the check. Ever. Just drop it off politely when it looks like things are winding down.

2. When someone asks “what’s good on the menu?” the correct thing to do is answer them. Nobody wants to hear “everything is good!” –they want guidance on limiting choices. You can always say something like “I like the pastrami but the Reuben is the top seller.” In Milwaukee once I was actually told “I don’t know … I am a vegetarian and I do not eat here.” Double yikes!

ADI in the news

As expected the July/August 2014 issue of Farm Equipment Magazine has an article on ADI.  There is some good material there if you are into casting sales.  For example, the article discusses Pequea Machine’s experience:

Pequea also made the transition from forecasting production to lean manufacturing where the company fills orders as needed instead of anticipating what they would sell. (Jim Westlake, Pequea’s engineering manager), says “We’re a small shortline company and we weren’t necessarily getting the same attention the big manufacturers could demand from their overseas suppliers.  With our casting suppliers being local, our supply chain improved dramatically and we have better control of our production and inventory.”

The question of “length of supply chain” is worthy one to explore.  This example is further evidence of the reshoring happening nationwide.  There is more good material in that article, and you should by all means get a copy.

Marketing and Sourcing and Authenticity

I do Marketing at Applied Process, and I am first to acknowledge that the folks at Levi Strauss know more than I do (or at least they have a big fat staff of MBAs on the job).  That doesn’t mean they cannot make mistakes.  This is why you should see this article in the Economist magazine.

From a marketing standpoint I have always thought that “authenticity” always including a level of over-engineering.  More specifically, using something for a purpose other than that for which it was designed. 

For example, motorcycles are cool because the original bikers of the 1950’s used army surplus Harleys.  Leather jackets are cool because they are worn by pilots and bikers and others who need some functionality.  Sunglasses are cool because you need them to protect your eyes.  I acknowledge that the relationship is not perfect - nobody wears welding helmets on the dance floor.

The easiest example is that blue jeans are cool because they are the folk clothing of America, worn by gold rush miners and cowboys.  They are distinctly American.  And as such the sourcing of this product matters more than one might think to some people.

Back to the Economist.  Levi’s is having some marketing troubles.  The article states:

One answer would be to redouble its bet on tradition by emphasising Levi’s American roots, shifting production back home and moving upmarket. That seems to have helped another Californian rock’n’roll legend, Fender, which moved production of some guitars back to its home state after a soul-destroying spell in the clutches of a media giant, CBS. But that is not Levi’s plan. It is loth to raise prices, which would cede the middle of the jeans market to rivals like Wrangler. Instead, it is taking almost the opposite tack: a new marketing strategy shifts the brand away from rust-belt edginess and toward a cheerier mainstream.

What a shame.  If you cannot market “Made in USA” with blue jeans then you need a new job.