Most people get into the machine-shop business by working for somebody else. One day they get fed up, or they contact with someone who needs a part and think, "I can get a machine and make that myself." Presto, they're in the business. At the outset it's all about machining, not business. Maybe a family member or close friend is working with them. Then they add some employees. That's when the problems begin.

"It's no real trick to estimate, there are plenty of formulas to help you come up with an accurate measurement of how long it takes to make a part," says Jim Warren, owner of Sunset Manufacturing, a shop that specializes in high-precision parts for the aerospace industry. "The real challenge is, how do you get this information to the operator, so they know exactly what is expected of them and how they can hit those estimated times? And how do you get feedback from the operator, so you have accurate information on how your shop was able to perform?"

Warren is not only talking about measurement - he's also talking about motivation.

Making People Care

"If the machinists are just employees, you might get them the information on how long it should take, but how do you motivate them to hit that time? I knocked my head against the wall for years on this until it dawned on me… I'm going to make them partners with me in my manufacturing process. I'm going to give them a reason to work a little bit faster. Because if they work a little faster it's going to show up on the manufacturing bottom line. And I'm going to share that money with them."

Warren designed his own software program to make it happen. It's called PIP Plus. PIP stands for Pride in Performance. The system is part of an overall software package Warren developed called ShopWerks, which he sells and services through a company called ShopWerks Software. ShopWerks covers a whole gamut of machine-shop requirements, from quoting and estimating through cost accounting, calculating burden and profitability, material and inventory management, production scheduling, generating work instructions, and reporting on production, machine utilization, defect trends, delivery, and employee efficiency.

Bottom line? It's gone way up for Warren and his "partners" at Sunset.

"We've got 40 people, and could typically see as much as 800-1000 hours of job over-runs a month," Warren says. "When we put in the program, within a month-and-a-half we were down to not more than a 100 hours a month. Let's say the quote rate on most of your CNC equipment is $60 an hour. You take 1000 hours, you're talking $60,000 a month."

Making More Money

That's a lot of money to go around. Sunset machinists have received payments in addition to their regular salary of more than $500 per month through the new plan.

"This has given a great boost to employee morale," Warren says. "My employees really understand that they are in business with me, and that if they slack off, the check mailed to them on the 15th is not as good as it could be."

Warren makes sure they know. Along with each check is a personalized report that shows thins like incentive pay, performance on each metric, and what the bonus would be if they hit all the targets. The report also provides graphs that show trends for the individual, department and company.

Warren bases the payouts on individual and team performance. The metrics include things like actual time against estimate (for setup, production, knockdown), scrap, on-time delivery to the customer, time-card accuracy, and punctuality and attendance. Supervisors also get copies, to see where the problems are and fix them.

"The team-based metrics get the journeymen to help the new guys," Warren says. "If we measured everything on an individual basis, people might complain that someone else got an easier job, that kind of thing. We try to eliminate that and stress team effort."

Making It Easy

The Mechanists and operators enter the data at PC's.

"One thing I found out about mechanists is they don't like to read and they don't like paperwork," Warren says. "They just want to make parts. We place the computers in different areas of the shop. We try to get one computer for every four machines."

Machinists log in by swiping a magnetic card. This automatically opens up a timer screen and a drop-down window that identifies what they will be working on. The machinists click on Operations Details to get everything they need to know about the part, materials, and manufacturing process. They can print out the instructions and take them to the machine. When they're done with a particular sequence-or at lunch or quitting time-they swipe the card again, the timer pops up, they enter a parts count, and stop the time.

"The larger companies can waste more money," Warren says. "But the small guy can't. He has to be very efficient. If you can't measure the things that you are doing, you can't govern how much money you're going to make."

Software is crucial to that process.

"Machine-shop owners always think of software as an overhead expense," he says. "This is one of the biggest misconceptions that ever was. Software, if purchased effectively and logically, should save you a ton of money."

Reprinted with permission from the February 2000 issue of Machine Shop Guide