Big Tariffs - Forcing [Some] Manufacturers to Improve Quality
Manufacturing leaders are about to see an improvement in quality and in their bottom line. Effective June 10th, the U.S. will impose a 5% tariff tag on all goods coming out of Mexico - unless Mexico agrees to secure its southern border. The penalty doesn't stop there, as the U.S. plans to tack an additional 5% each month for four months if Mexico refuses to take action to prevent their country from being used as a highway for illegal immigrants to enter the U.S. That's a staggering 25% accumulation of tariffs on goods if Mexico doesn't comply at all. In the event a 25% tariff tag exists, it will devastate suppliers and some manufacturers reading this. Failing to improve your Overall Equipment Effectiveness may take your company out of the competition. Permanently.
Think this is an isolated situation? Check out our previous blog covering the opportunities manufacturers have from the ongoing Tariff Wars between the U.S. and China:
Manufacturers in the agricultural, automotive, and medical device industries must be proactive as their fresh produce, cars, machines, fuel, and med device parts come out of Mexico. Tariff tags on these products will shift supplier behavior and strategies which will directly affect the availability and selling price to manufacturers. A strategic, proactive countermeasure for manufacturers is to lower manufacturing costs. But, how? Improve your OEE (Overall Equipment Effectiveness) to save money and resources while improving quality. OEE rates your current manufacturing process based on three criteria, Availability of your workers, Performance of your machines, and the Quality of your final products. Improve your OEE score and you may combat the incoming tariffs. Worst case - You improve your quality. Awesome case - You improve your quality and your company has record growth over the next few years
Your OEE Matters
One of the biggest threats of increased tariffs are suppliers delivering lower quality materials. This will directly lower your current OEE and risks hurting your bottom line and your brand reputation. Lower quality from suppliers can mean lower quality of your environment, more waste and lower quality of your end products.
Lower quality raw materials directly leads to more waste, returns and unplanned downtime. This is a snowball effect culminating in reduced throughput and units produced.
The manufacturers who are proactive and take action now will be able to stave off the risk of lower quality from suppliers by maintaining and improving the other factors that drive OEE. Once suppliers get back to delivering the expected quality at a reasonable cost, your organization will be in place to reap huge returns and profits.
What can you do?
To calculate your OEE, all you need are your Availability, Performance, and Quality values. Not sure how to determine your OEE score and increase your OEE? Many companies have tooled up with IoT, IIoT and analytics solutions, but still don't have a clear view into their operating environment. We make it easy for you. Many believe the tariff wars are a trend that is here to stay, at least for a while. Only the top leaders will take the necessary action keep their business profitable and realize huge gains throughout the next few years. We agree. So strongly, in fact, that we built a tool to make OEE easy. Connect our cloud-based tool to your existing data to
- Access our easy to read dashboard with details about each component and machine.
- Identify areas of inefficiencies in your processes to help you make better and faster decisions.
Contact us at Simtelligent for a virtual demo on achieving a measurable increase on your OEE.