Reconfiguration: A Strategy to Address Capacity Utilization

Capacity utilization is one of the four disruptive forces that have the potential to impact your business. According to the Federal Reserve System, capacity utilization for manufacturing remains below average. At 78.1 percent in August, capacity utilization for the industrial sector is 1.7 percentage points below its long-run average.

Rudi Tanck, Ryerson’s Heavy Equipment Manager, sees the reconfiguration strategy playing out in a few different ways for heavy equipment manufacturers.

One way is the routine assessment of facility layout. Some manufacturers are doing so with an eye on ensuring assets are in the most optimal configuration for their manufacturing needs. For example, arranging equipment on the floor based on multiple product lines that share the same assets. Such a simple tactic could prove to be an eye-opening exercise that uncovers efficiency gaps that are literally in plain sight.

This could also help best assess your equipment needs overall, balancing the benefits achieved with the costs associated with owning various pieces of equipment. For example, if your company doesn’t handle the volume of work to justify the investment of a tube laser, it might be best to begin outsourcing the process. 

In one such case, Tanck and his team worked closely with a company to explore alternatives for moving plasma-cutting to a nearby facility where laser cutting resulted in better fit up. This made the assembly process more efficient overall because the weldment goes together easier and more consistently. Typically, you want consistent gaps between parts when assembling and welding.

However, there are such instances when the idea of asset or process reconfiguration simply won’t suffice, and plant closures must occur. This calls for perhaps a different type of reconfiguration strategy—one that outsources certain procedures to partners altogether.

For example, Tanck points to an instance when one manufacturer decided to close a facility in one state, transferring the production to an adjacent state. At the original facility, the company had burned parts in-house. But this was no longer possible in the new facility as the parts exceeded the operational burning capacity at the new location.

By utilizing plate material that the customer had allocated for internal consumption, Ryerson was able to step in and help. The strategy involved burning the parts at a location within the Ryerson network and delivering them to the new facility. This is where having a partner with a broad network of processing centers and a wide logistical reach provides value.

The idea of reconfiguration is one that comes in many different forms. Finding one best fit for your business might ultimately prove be of great impact in the fight to best utilize capacity.