The 5 reasons your Sheet Metal Shop is losing money

After Covid 19, market data show that 80% of businesses is making less money than before.

As a manager and owner in the Sheet Metal fabrication industry, you have certainly noticed more and more struggles in generating good, consistent profits for your business!

I am Andrea Dallan and as an entrepreneur and author I have been talking to hundreds of CEOs and executives, and through years of experience we can outline the five main reasons most sheet metal businesses are losing money right now and the risks connected to this.

Risk means both threat and opportunity: so in just two minutes I will also start to show you what the hidden opportunities are.

So: what are the 5 reasons the sheet metal shops are making significantly less money than they should?

1. Raw material costs rising and Supply Chain problems

Since 2020, the raw material costs have been rising and we are all conscious that this is a combination of speculation and supply chain problems, being over the 60% of steel produced in China, India and far away countries. These swings of the raw material prices cause in turn big problems in the evaluation of your sheet metal stock and warehouse, not to mention the difficulty in explaining the impact of these costs to your customers. So it apparently seems a problem with no solution at hand.

Nevertheless, this hides a big opportunity: consider that a big part of the sheet metal shops – and I bet your competitors as well – are still working from sheets through punching, laser cutting and bending. And in this process they are wasting huge quantities of steel: literally, hundreds of thousands of euros – when not millions are being wasted just because “we have always worked in this way”.

Instead, a lot of companies like Sukup Manufacturing, Captive Aire, Bito Lagertechnik and many more, have moved away from sheets and their production processes start now from coils: punching, laser cutting and forming directly from the coil generates straight away even more than 15% material savings, in some cases over 50%!

And in doing so, they are making their production a lot more effective and efficient and profitable. Want to know how? Just click the link at the end of this article, and request your free copy of my book “The Revolution of Efficiency”, where you can discover our industry’s best kept secrets, and re their interviews and case studies in great detail!

Now let’s move on.

2. Great Resignation and the struggle to find good workers

Covid has changed people’s approach to the workplace. A lot of companies have experienced resignation and the difficulty to find new workers, in all industry. The Sheet Metal Fabrication Industry has not been an exception. Finding people who still want – or really enjoy – the process of the transformation of Sheet Metal into beautiful finished products is more and more difficult.

So again: more and more companies are calling us to get freshly hired workers trained on operating machines, but young workers are also more demanding on their workplace: they want a comfortable and healthy environment – as it should be – but they also prefer supervising a machine or working on quality control, rather than the heavy and repetitive job of lifting and moving products around, or packaging the products. And if you find these workers, they often ask for more money than the office worker!

Therefore, both your productivity and profitability get reduced or destroyed. Now here also the problem hides an opportunity, which is in fact one of the most consistent trends in our industry in the past two years: automatizing the production, and moving from job-shop structures to production lines, that get you from the raw material right to the finished product, ready for the delivery. Now, depending on your product type, the technologies and the percentage of the process that can be automated can vary. For sure, you get to increase your profitability and scale your business by:

• Reducing the labor costs and no need for hiring
• You can automate even office works like the machine programming, through machines that can be operated with parametric programming
• Reducing the movement of material, less damaged materials and reduction of non-conformities
• And almost always increase your productivity multiple times

Moving from press brake to roll formers is one of the many ways by which you increase productivity and automation through just one investment. Many more examples are found in my book “The Revolution of Efficiency”.

3. Rising Cost of Energy

And what about the cost of Energy this year? From natural gas to electricity the costs have gone to the roof. The point is: what we had taken for granted as a cost that could impact less than 3% of our production, has went up to sometimes 10% and more! So the energy efficiency of machines and production plants have to be carefully considered. Take punch presses: today with the servo electric punching technology you can produce more, but use 70% less energy than the old fashioned hydraulic presses. If you could replicate this efficiency performance on all your production plant, how much saving will you be generating per year?

And this is true for all sheet metal forming machines: modern manufacturing technologies are not only using less energy per hour, but are also producing much more in the same unit of time, as we will see in the next point, so the benefits are literally squared!

4. Productivity – Time is MONEY

If you visit any sheet metal machinery exhibition, you will notice a lot of machines working from sheet. Is this because they are more efficient? Not at all.

In fact, sheet metal working machines working from sheet are the slowest and less efficient technologies that are available, but a large part of the industry keeps investing in the same type machines because “we have always worked in this way”.

I advise you just to read the case studies and the testimonials of my customers which I collected in my first book, that have made us this huge gift of sharing with us how much more profits they have made moving, for example from sheet fed punching and bending to coil punching and roll forming.

I’ll just give you this parameter: with roll forming, productivity is calculated in meters per minute, not in minutes per part! And we are speaking of technologies that can reach 120 or even 240 meters per minute! In these conditions, your problem will not be producing, but how fast you can package and sell the product! By the way, this is also the reason why productivity and automation quite often go hand in hand. More product in less units of time means, of course, more productivity and more money.

If you add to this the fact that you are reaching this goal using less raw material and less energy… well the conclusions are up to you. But I don’t ask you to trust my word: just go ahead and click the link here under, get a free copy of my book and read all the experiences first-hand from my customers, which me and my father have served in Dallan in over 45 years!

5. Quality and process control – Industry 4.0

Now let’s come to the last aspect that so many companies have looked from the wrong angle. Industry 4.0 has had a great hype in the last years, and yet a lot of my visionary customers have started to apply all of these concepts since 2004, almost 10 years before the terminology around 4.0 was invented by Boston Consulting.

Of course, because we assist our customers in building production lines, we had a great advantage as opposed to the producers of punching machines or press brake, that just knew how to produce and sell “stand alone” machines. The fact of supplying a production LINE, opens up a straightforward opportunity to:

• Integrate the machine to the Company ERP
• Collect the data on production and operators performance (what today a MES does)
• Teleservice on the equipment
• Quality control, Process control and adjustment

… and much more.
And we do this since 2004, not 2014. In any case, if you do it in the wrong way or with the wrong partner – or when it is just useless – it will make you lose money and a lot of time. If you do it right, you come to the point that you don’t even have to program the machines, because they receive the production data with an automatic workflow from your ERP, without the risk of wrong production data being entered manually by an operator. This is a huge improvement in terms of automation.

Alongside with Industry 4.0, I always include automatic quality control with vision systems on the final product: the combination of these two technologies is what has most impacted the work of some of our most visionary customers, and their case studies are also included in my book.

All these stories are a huge gift from some of my best customers, which I collected during the pandemic, and all this information I made available for you in form of a book which, according to our industry’s editors, “is imbued with the analysis and knowledge of a person who has spent a lifetime in the complex world of thin sheet metal processing”.

Andrea Dallan frames the conversation on the need to focus on four main factors when deciding the next significant purchase of fixed assets: efficiency, productivity, flexibility

and automation. It also includes a very informative section on formulas that can be used to take a more indepth look at these considerations. I enjoyed reading this book.” – Dan Davis – The Fabricator

This book is “The Revolution of Efficiency”.

Now I am happy to provide you 10 free copies every month: just register here and leave us your contact Data, and our team will get you a free copy in the shortest time!

Andrea Dallan
CEO – Dallan Spa