PMI on Steady Increase

By Bruce Erickson

November 17, 2009

In October, the PMI or Purchasing Managers Index reported significant gains for the tenth straight month and for the third month over the 50% mark. A PMI over 50 indicated the economy is expanding while anything below the 50% mark indicates the economy is contracting. Since July, rates of growth in manufacturing have outpaced even the dramatic increases of the equity markets.

 

As indicated by the information below compliments of the Institute for Supply Management, although new orders have slowed since September, they are still growing. The only declines are inventories as wholesalers and retailers are still skittish about overstocking. Perhaps the most inspiring data point is employment which has transitioned form contracting to growing. Most of this is in temporary labor and contract labor at this point. But it is evident that as production grows, previous staffing models are going to be spread to thin resulting in new hires going into the new year.

MANUFACTURING AT A GLANCE OCTOBER 2009
Index	Series Index October	Series Index September	Percentage Point Change	Direction	Rate of Change	Trend* (Months)
PMI	55.7	52.6	+3.1	Growing	Faster	3
New Orders	58.5	60.8	-2.3	Growing	Slower	4
Production	63.3	55.7	+7.6	Growing	Faster	5
Employment	53.1	46.2	+6.9	Growing	From Contracting	1
Supplier Deliveries	56.9	58.0	-1.1	Slowing	Slower	5
Inventories	46.9	42.5	+4.4	Contracting	Slower	42
Customers' Inventories	38.5	39.0	-0.5	Too Low	Faster	7
Prices	65.0	63.5	+1.5	Increasing	Faster	4
Backlog of Orders	53.5	53.5	0.0	Growing	Same	3
Exports	55.5	55.0	+0.5	Growing	Faster	4
Imports	51.0	52.0	-1.0	Growing	Slower	2
OVERALL ECONOMY				Growing	Faster	6
Manufacturing Sector				Growing	Faster	3

Using Poka Yokes to Improve Data Gathering Techniques

By Bruce Erickson

11/17/2009

One of the most amusing terms to come out of my education in business was "poka yokes." The term is a Japanese term that loosely translated means idiot proofing. If you have ever filled out one of those internet forms and found yourself bounced back three times to correct information that wasn't formatted correctly, you have experienced a poka yoke. If you have ever assembled a piece of furniture where all the screws were so different that it was impossible to put the wrong screw in the wrong hole, you have experienced a poka yoke.

The term originated in the '80s with the Toyota production system. As the auto manufacturer continued to drive out waste in the production line, they discovered that by creating poko yokes along the production line, there were fewer errors. Today the technique is so widespread, that most people are unaware of them. So the question remains, how can poka yokes be applied to the purchasing function? Here is a list of six ideas to get started. If you think of others, please add them.

1. By creating a "vendor signup form" using either a web form or an email form, it is possible to route potential vendors through the form requiring critical data, like Tax ID number, before they can proceed to other screens. The result is data that can be filtered and retrieved more accurately.
   
2. When sending an excel spreadsheet to a supplier for them to fill in and return, first take the time to protect and lock the document. There is nothing more frustrating than getting your spreadsheet back after the supplier's estimator "improved" it. Also, add conditional formatting to key fields to disallow the wrong data type. This limits the supplier to the data you want to crunch. Just remember to indicate either on the form or in a comment the data type you are looking for.
   
3. Signing up vendors is a critical process. No one cares about the condition of the vendor files until something goes wrong. Then it can be a witch hunt to find out why the proof of insurance wasn't gathered. There are two poka yokes that work well. It all depends on personal taste.
   
   1. Low tech- In keeping with the KISS principal, take some time to develop the critical path to signing up a vendor and use that information to design a front cover for the vendor file. On the cover is a check off for each task or document necessary in the on-boarding process. Depending on the size of your firm, you may want to have two signoffs, the assembler and someone to review the file.
      
   2. High Tech- Many firms are using databases to manage their vendor information, Timberline being the most popular. There is no question that Timberline is a robust software package enabling the sharing of vendor information across departments. But because the system is so flexible, it is hardly goof proof. There are too many opportunities to miss pertinent information. In order to trap errors, each builder must develop their own system of fail safes.
      
4. Vendor insurance is one of those compulsory areas of homebuilding where no matter how good it is, it will never add a dollar to the bottom line. But managed improperly, poor insurance tracking can end up turning the profit of a company into a loss. A tracking system with alerts is an imperative step in reducing risks.
   
5. Bid requirements- the process of negotiating is seldom neat and orderly. With moving deadlines, changing specifications and fluctuating raw material costs, the final "deal" can end up with some key issues unaddressed. The quest for lowest price can blind purchasers to the obvious. One time, I got right down to inking the contract when I tried to confirm that the bidder had followed instructions and included sales tax in the bid. Of course, he hadn't. Clearly, there needs to be a final checklist prior to completing contract negotiations.
   
6. Billing- Nothing chaps the accounts payable staff more than trying to decipher invoices. There needs to be an apples to apples requirement between the purchase order and the invoice. Many firms are choosing to progress pay from the purchase eliminating the invoice altogether. Regardless of the method, it is the purchasing pro's responsibility to develop a system where invoices can be paid without research. The result is saved resources for both firms and improved cash flow for the vendor, a critical determinant of quality of service.
   

Regardless of whether you are tuning a purchasing function or any other function within the firm, taking some time to ask yourself "Can this process be goof proofed?" can take your firm from good to great. For example, Paul Hoernschemeyer, Director of Operations at TrueNorth Development recently mentioned a door installation poka yoke. By attaching the entry door to a sheet of plywood and squaring it prior to the install and removing the plywood after the install, the builder has experienced dramatically reduced callbacks for door adjustments. The solution doesn't have to be complex. It just has to do the goof proofing.

Diggerslist: A Benefit to Builders or Just another Craigslist?

By Bruce Erickson

11/03/2009

Got any extra 2x4s stashed in the rafters of your garage? What about that pile of left over cinder blocks? Up until now, getting rid of leftover construction materials wasn't worth the effort. But that is about to change. Recently, a new player showed up in the building materials sector under the name of Diggerslist. Created by co-founders Matt Knox and Johnnie Munger the site seeks to reduce the amount of construction materials going to landfills by creating a venue for builders, contractors and do-it-yourselfers to exchange the materials. So far, registration is free for both buyers and sellers. Like Craigslist, items are divided into several categories. The site also has the ability to post construction services and list projects being bid. This could turn out to be the best part of the website.

Currently, homeowners have been posting projects on Craigslist. Unfortunately, there are very few contractors who monitor Craigslist. Whereas, since Diggerslist was created just for contractors, the projects don't get lost in the noise. Registered users can sign up for alerts to be notified when the item they are looking for is posted. Contractors can also add a widget to their website that shows all the items they have listed on Diggerslist. The challenge for the administrators at Diggerslist is going to be what to do with all the non-construction related items that end up being listed. If left unchecked, they could lose their niche they are working so hard to create. For example, on the Raleigh site, there is currently a motorcycle and go cart listed.

Right now they operate in fifteen of the hottest markets in the US. There are plans to open new markets in the coming weeks. With around 4000 site visitors per day, the project is still in its infancy. But the potential and the need is there for this enterprise to grow. Similar to other social media, registered users can create connections to other users and even In addition, if you want instant access to new items being listed, you can follow them on Twitter.