Page 34 - MetalForming December 2011

Best Practices
an average collection period of 59 days. Smaller companies also experienced lower employee turnover—20 percent, compared to larger companies at 25 percent (Fig. 2).
Larger companies scored higher in safety, inventory turnover, equipment under preventive maintenance and profitability. Relating to safety, larger companies averaged approximately five accidental injuries per 100 employees per year, compared to seven for smaller companies. Larger com- panies turned inventory 10 times/yr., three more than the seven inventory turns/yr. for smaller companies. Finally, while smaller companies had only 82 percent of their equip- ment under an active preventive-maintenance plan, larger companies covered closer to 90 percent (Fig. 3).
Fig. 3
Quality Metrics
In terms of quality, smaller companies outperformed larger ones in the number of rejects, on-time delivery rates, and total cost of quality. Larger companies did better at internal scrap rate, average days late to customers, and sup- plier on-time delivery rates of raw materials.
Specifically, with respect to on-time delivery rates to cus- tomers, small companies averaged 95 percent, while the larger companies averaged 92 percent. Relating to total cost of quality, smaller companies spent more efficiently, with an average spend of 2 percent of sales, while larger companies averaged closer to 3 percent of total sales (Fig. 4).
Fig. 4
Productivity Metrics
Companies with fewer than 100 employees outperformed larger companies in three of the four selected metrics relat- ed to productivity: capacity utilization, sales per employee, and value added per employee. Meanwhile, larger compa-
Fig. 5
nies performed slightly better in one metric—value added per labor hour worked.
With respect to capacity utilization for key machines, smaller companies averaged 20 percent while larger com- panies averaged 18 percent. Performance in the areas of sales and value added per employee was relatively close, with smaller companies outper-
forming larger ones in these metrics, $185,000 to $178,000 and $96,000 to $94,000, respectively. Large companies had a slightly higher value added per labor hour worked of $55 compared to $54 for small- er companies.
The Bottom Line–Profits
Percent Capacity Utilization-Key Machines 18%
20% <100 Employees >100 Employees
Value-Added per Employee
$94,000
$96,000 <100 Employees >100 Employees
Sales per Employee
<100 Employees
$178,000 $185,000
>100 Employees
Value-Added per Labor Hour Worked
$55
<100 Employees
>100 Employees
$54
Total Inventory Turnover
Percent Equipment Under Preventive Maintenance
7
<100 Employees >100 Employees
<100 Employees
>100 Employees
10
90% 82%
Earnings Before Interest and Taxes (EBIT) 3%
–0.5%
<100 Employees >100 Employees
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
7%
4%
<100 Employees >100 Employees
32 MetalForming/December 2011
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While smaller compa-
nies did outperform the
larger ones in several oper-
ating metrics, larger com-
panies averaged higher profits, which is the one metric where everyone would like to be considered best-in-class.
For EBIT, companies with fewer than 100 employees had an average of -0.50 percent, compared to an average of 3 per- cent for larger companies. A similar result was seen with EBITDA, where companies with more than 100 employees averaged 7 percent, compared to an average of 4 percent by smaller companies.
So, based on this data, being bigger appears to be an advantage, at least as it relates to the bottom line. However, size alone does not guarantee higher profits. MF
Percent Orders Delivered On Time
<100 Employees >100 Employees
92% 95%
Total Quality Costs
<100 Employees
3%
2%
>100 Employees
Fig. 6
Turns per Year
Equipment Covered