Financial Intelligence – It’s Not Just for the CFO

October 21, 2015 by Josh

Here at Setpoint, we often tout our open-book-finance style of management. To us, open-book-finance means that key financial data is shared with each employee on a weekly basis. Sharing this information with employees isn’t a revolutionary idea per se but training employees to understand the information is. In order for Setpoint employees to maximize our contribution to the company, it is important that we understand how our jobs impact income, cash flow, expenses, losses, etc. So how do Setpoint employees learn to be financially intelligent?

Our CFO, Joe Knight, owns a separate business called the Business Literacy Institute. He travels the globe training Fortune 500 companies and their employees on the art of finance and accounting. Recently he took time to provide training to all project and department managers at Setpoint. The training consisted of 4 sessions. The first 3 sessions were dedicated to the 3 financial statements – the income statement, statement of cash flows and the balance sheet. The final session focused on principles of time value of money and return on investment. While finance is an important (and riveting) subject in its own right, what did the training do to make Setpoint better?

First, it helped everyone understand that their decisions affect our bottom line. But it went deeper than that. It helped everyone understand that their decisions and contributions affect cash flow, receivables, payables, inventory, COGS, expenses, etc. For example if the sales department doesn’t require sufficient down payments on new projects, we choke our cash flow and we may have to finance the project until we finish the job. If our procurement group doesn’t stage their orders correctly, our payables may outrun our receivables. If a project manager doesn’t manage his project efficiently we may make less per hour than we bid. Any of these examples can (and sometimes do) happen at Setpoint and they hinder our ability to run efficiently. The key for our employees is to understand that they are equipped with the knowledge that their actions impact the company.

The important take-away from this blog post is not the idea that you should only hire accountants or finance majors to work for your company. The important take-away is that every employee needs to understand how their job directly impacts the financial statements.

So what if your CFO doesn’t have a side business training Fortune 500 companies in matters of finance and accounting? That’s OK. Have someone in your organization, who understands your financials, train your people. Get your employees to understand your numbers and you will have a more financially intelligent company.

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Lean Ammunition Manufacturing Part II

March 11, 2015 by MarkC

Today’s brass case factories operate on the principles of traditional mass production techniques, developed in the early 1900’s.  In an effort to maximize efficiencies, machines are grouped in common departments, turned up to run as fast as possible and large inventories are used to buffer inconsistencies.  Machines are difficult to set up and adjust.  Specialized technicians are required to make changeovers, sometimes taking several days.  High inventory levels drive slow process speed, with as much as 4 Months inventory from beginning to end.  It’s impossible to stop production if a defect is discovered; it’s easier to add 100% inspection at the end of the process.  Lastly, today’s ammunition plants are loud and earplugs are required everywhere on the shop floor. It’s impossible to have an understandable conversation.

Setpoint has designed a brass case U shaped cell (shown below) that positions the operator on the inside and available to service all machines.  All tooling and equipment needed to produce a brass case, from first draw to final anneal, are positioned around the U.

Setpoint Case Line

Starting with first draw, brass cases are sequentially processed through each machine until the case is completed.  It is designed to hold 15-30 minute buffers between each machine and takes approximately 4 hours to complete a case from beginning to end.  Including 4 anneal and 5 individual wash operations.

Quality is monitored using statistical process control (SPC) sampling plans at an inspection table in the middle of the cell.  Adjustments are a snap with servo linear actuators.  When a machine requires an adjustment – the operator simply enters an offset on the touch screen and the dimension is adjusted without stopping the machine.  Capabilities of 6 sigma or better are common with this servo actuated technology.

Each machine is designed with versatility in mind.   The cell offers optional calibers between .223 through .338 Lapua.   Quick-change concepts have been incorporated, similar to the early days of Toyota.  Each machine is capable of 30 minute or less changeover from one caliber to another.

An intriguing aspect for the cell is lack of loud noise, having employees engaged in the continuous improvement process is mandatory in any lean organization.  Conversations are possible inside the cell without yelling through earplugs.

Labor content is low.  The inside operator tends all machines and conducts SPC inspections.  An outside operator monitors hardness testing, chemistries and minor machine maintenance.  Status lights (Andon) are on each machine providing quick operator feedback when machines need attention.  It’s also important to note that overhead support for the cell is significantly less than traditional manufacturing layouts.  This is because a connecting process using a cell requires less production control, less process/quality engineering and less production supervision.

As with the auto industry in the 1980’s, it’s time for a lean revolution in the brass case ammunition world.  Improved quality, low inventories, agile/versatile capacity, lower operating costs, lower overhead costs, clean processes and a quiet production environment are a few of the benefits.  Join the revolution, call Setpoint Systems at (866) 532-6856, or check us out online at www.setpointusa.com.

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Lean Ammunition Manufacturing Part I

February 4, 2015 by MarkC

Mid-way through my high school years my dad bought a new 1974 Chevy Vega.  It was his attempt to buy a small fuel efficient vehicle.  For my brother and me it was an imaginary sports car.  It was a fun car; however it was disappointing to find out that at 40,000 miles it was ready for the scrapyard.  It was an era when auto makers were more interested in selling cars then providing quality.  In the end, our Vega’s aluminum bore – 4 cylinder engine burned more oil than gas, doors sagged, the clutch slipped, wheel bearings whined, and many interior components stopped working all together.  Fact is, it was not uncommon for cars of that period to reach the end of their life before 100,000 miles.

The Vega, and other cars of the day, was a product of a highly refined mass production system.  From its inception by Henry Ford in the early 1900’s, mass production served the auto industry and consumer well.  Low manufacturing costs made it possible for nearly every household in America to own a car.  The downside was not every household owned a high quality, reliable car.

At the end of WWII Toyota lacked the required capital to support the growing post war car market.  One unique problem was their shortage of stamping presses in the body works group.  At that time automakers typically had dedicated presses with a single die, avoiding complex changeovers.   Toyota’s lack of capital prohibited this investment.   Toyota leaders focused their efforts, during the fifties, on developing basic single minute exchange of die (SMED) techniques used today.  They were able to reduce changeover times for a high tonnage press from days to minutes.  Fast changeovers quickly lead to releasing small lots.  Small lots meant low inventory and low inventory brought about the early discovery of defects, making it possible for Toyota to establish their “stop the line” policy when defects are discovered.  In essence, lean operated on the tenants of simplicity, elimination of waste and continuous improvement.

From 1950 to 1979, consumers added quality and reliability to their car buying checklists when buying small, fuel efficient cars.  By 1980, shortly after the Vega went out of production, 25% of the global market shifted from American to Japanese automakers.   American automakers were compelled to change or die, and “Lean Manufacturing” was the catalyst.   Ultimately lean offered a dramatic quality improvement.   A revolution in America soon began as auto makers quickly embraced lean manufacturing techniques.

Today the ammunition industry is ready for a similar revolution.

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Happy Holidays from Setpoint

December 19, 2014 by Nick

Happy Holidays 2015

Setpoint Systems would like to wish you and your families a safe and happy holiday.  To our customers, thank you for your continued support.

This Holiday season we are going to have a little contest with our Santa model. How to enter is simple, like us on Facebook and post an awesome photo of your assembled Santa by midnight, December 31st for a chance to win a brand new Apple iPad Air 2.  The winner will be the most creative picture of Santa, and humor will go a long way in helping.  Below you will find links to our Santa model in two different sizes.

Little Santa Download (124 KB)

Big Santa Download (120 KB)

Good luck and we are excited to see how creative you can be.

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Modular Design Provides Versatility

October 8, 2014 by Nick

Several months ago, we talked about the modular H-frame press we developed that allows a dial table to index parts through it.  In our ammunition case manufacturing line, we need to perform high tonnage pressing processes on small brass tubes to create a primer pocket and stamp the head and we need to automatically feed the brass tubes through the press.  Because of the need for extreme consistency in each part we knew a C-frame press would not work due to deformities caused by deflection.  Our pocket and head machine is up and running so we thought we would show you our modular H-frame press in action so you can see  just how they work.

Our pocket and head machine uses two linear actuators powered by a servo motor that provide 20 tons of force each.  Setpoint’s modular press frame allows a dial table to index parts through the press giving us the speed and ease of feeding that is typical of a C-frame press, without the deformities caused by deflection under the heavy load required to press and stamp the brass case.  The result is a case line that produces match grade quality brass every time, no more inspecting for quality level.

Our press is not only for ammunition case manufacturing.  Setpoint is able to utilize this press for any manufacturing application that requires quick feeding, high tonnage pressing and precision made parts.

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Ammo Priming Machine Video has landed

August 29, 2014 by Nick

Watch this video for a quick overview of our ammo priming machine, from feeding primers and cases to seating the primers into the cases.  Not shown in the video is optional equipment to crimp and waterproof the primer to produce mil-spec cases that are ready to receive powder and a bullet in our loading machine.  Learn more about Setpoint’s ammunition manufacturing equipment.

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How to Gain Approval from Senior Management

July 3, 2014 by Clark

You have identified several issues within your operations.  You feel that if fixed, your company will benefit greatly by eliminating these issues; how do you now go about soliciting senior management for funding approval to pay for the solution that you feel will solve the issues you have identified?

All senior management will bias their decision to fund a project based on a financial analysis of the opportunity.  In other words, “is there a ROI or Return on the Investment?” Understanding how to present a financial analysis to senior management therefore is very important.  You might be thinking “I don’t have the proper training in financial analysis to present a solid case for funding my project.”  This is where Setpoint can help; we have developed an online ROI calculator (Return On Investment) to assist you in putting together a high level financial summary that will ultimately be required by your Sr. Management, to fund your potential project.

You may not be a financial wizard; but, everything you do can be quantified in monetary terms.  Here is a road map that you can follow in your quest to gather this information.  It all begins with your company’s pain or in the discovery of “what do you have to much of or not enough of?“  For instance, you have too much scrap, too much labor, not enough equipment utilization, not enough throughput, or you can ask yourself what are the current issues facing your business, whether it is management dictated or issues that you have identified yourself.  Start by listing all of the issues you have identified, then prioritize each of them by importance to solve, and assign each one a monetary value.  You could say your scrap rate is 5% and that equates to 25,000 parts per month.  If each part scrapped costs $.50, you just valued the scrap being produced at $12,500/month.  Do this same analysis with each of your issues.

Once you have established what all of the issues are, you can then make a correlation between what your current business situation looks like now, and then you need to decide what you want it to be once all the issues are solved.  You may not be able to solve all of the issues you identified right away but start with those issues that pose the largest potential gain for your company if solved.    For example, if you currently have 10 operators and you believe you can get it down to 6, or if your throughput is 60 ppm and you believe you can get it up to 90 ppm, there will be a benefit to your company that can be calculated if you can indeed achieve this level of improvement or change.  After making it through your list of pains and you have quantified what it is now and what you would like it to be, that the differences will now need to be converted into a monetary value to get your annual benefit.  If the improvements are related to a project with a specific time frame, you can multiply the annual benefits x the number of years the benefits should be realized. Below is an example project to give you an idea of how to complete this analysis.

Annual Benefit Calculations

 

Now that you have your annual benefit calculated, you will need to know your estimated cost of your project, the number of years your new equipment will be used and your annual minimum interest rate or what interest rate you need in order to make the investment, sometimes this is referred to as the hurdle rate.  For our example we will assume the cost of the solutions or the new equipment is $4.5 million.  We have determined that will use this new equipment for 5 years and the minimum interest rate is 7%.  With your annual benefit calculated, an estimate of the cost, years in production and interest rate, it’s time to go to our ROI calculator and plug in the numbers to find out if your project is worth pursuing.  Below is a screenshot of our ROI calculator for the above example project.

Return On Investment Calculator

 

From our inputs we are given three important numbers that will sell your CFO on your project; the Net Present Value (NPV), Payback – in years, and Internal Rate of Return (IRR).  We will briefly explain each number and why it is important.  Because a dollar earned in the future won’t be worth as much as one earned today, the NPV method provides a value for your project in today’s dollars minus the initial cost of the project.  When interpreting the NPV, if the number is greater than zero, it should be accepted.  For our example project, our NPV came back at $17,349,952.14; compared to the investment of $4.5 million this project should be an easy sell.

The payback method is the simplest way to evaluate the return of a project; basically, it tells you how many years it will take to get the return on your money or investment. For this method, the payback period must be shorter than the life of the project.  In our example, we are estimating an equipment life of five years and our payback period is under one year (0.84 years), you should definitely feel confident in presenting this project to senior management.  We find that most companies require an ROI period to be less than or equal to 2 years.  Some very aggressive companies actually won’t invest in capital equipment unless the ROI is one year or less.

The final metric shown in the ROI calculator is IRR, which calculates the actual return provided by the projected cash flows.  The IRR can then be compared with the company’s hurdle rate.  When considering the IRR of your project you want it to be greater than your company’s hurdle rate, otherwise the project doesn’t make sense financially.  In our example, the IRR was calculated at 115.84%, which is greater than the 7% hurdle rate, making this project a good one to pursue.

Next time you have identified some issues in your operations and need funds for a project to correct these issues, remember to calculate the ROI to see if pursuing the project makes sense before spending a bunch of time and effort on something that will not ultimately get funded for lack of an acceptable ROI.  As long as your return is positive you will have the financial evidence and confidence to present your project to senior management and sell them on your project.

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History of Setpoint Ammunition Manufacturing Equipment

May 28, 2014 by Nick

Ammo Case Forming MachineIn the early 1940s, mass-production ammunition manufacturing systems were complex assembly lines of crank presses, leather-belt driven lathes, batch processing, and loose tolerances. Quality was literally “inspected into the product” by humans sorting through all the finished cartridges, gauging and measuring to determine if a given part was “within spec” and then discarding the ones that fell outside of the established ranges. Sixty five years later, by 2007, this antiquated manufacturing process…….was exactly the same.

In 2008 the US Army commissioned Setpoint Systems to look at the entire process of case manufacturing from a whole new perspective. Utilizing lean manufacturing principles and over 20 years of automation experience, Setpoint Systems developed an automated case manufacturing system that has finally ushered the ancient art of case forming into the 21st century. By combining key principles of renowned lean manufacturing principles with our extensive automation experience in aerospace, automotive, and medical industries, Setpoint Systems has now set the bar to an unprecedented level for precision case manufacturing. And not only are the cases that come out of the Setpoint system more precise and consistent, they’re cheaper to make too. And the benefits don’t stop there.

By design, the case line equipment is able to produce parts at whatever rate of demand that the market currently dictates. This allows you to quickly eliminate all those nasty hidden inventory costs and the space required to store it. Think of it as “Just In Time Ammo”.

The Setpoint case forming system is controlled with industrial Programmable Logic Controllers (PLCs), consequently, modifications to processing parameters such as changing pocket depth, head diameter, and/or Case Cell Electrical Paneloverall length (OAL) of the cases can be achieved with mere computer key strokes rather than specialty tools, skilled labor, and a week of down time. Sounds more like a true 21st century process now, doesn’t it?

By integrating all the case forming processes into one machine, a whole litany of product inspections are also able to be integrated into the process. This eliminates the need for human inspections after the processes are complete, and consequently provides a level of quality assurance never before realized in the industry. Because these automated inspections are completed in real-time, during the process, the chance of passing inferior parts downstream is virtually eliminated. Setpoint’s proprietary in-process tracking logic ensures that every part meets or exceeds quality standards after each step of the process, and that non-conforming material is immediately recognized and properly dispositioned out of the system. The end result is a higher level of quality and consistency and therefore, more cost effective manufacturing.

Benefits of Setpoint Ammunition Manufacturing Equipment

 

Throughout the engineering and design process, Setpoint thoroughly examined every step of the legacy case forming process. Each individual sub-process was completely dissected and examined in great detail. The team was looking for ways to improve on the existing methods, as well as ways to integrate all of the processes together in a single-part flow process. The results of this effort were all of the aforementioned process enhancements, as well as a dramatic decrease in the amount of space required for a case line system.
Some of the specific improvements of the Setpoint case forming system worth noting are:

  • Reduced scrap production
  • Reduced labor requirementsFinished Brass Cases
  • Reduced inventory expensesFinished Brass Cases
  • Increase in product quality
  • 70% reduction in floor space requirements
  • Increased equipment up time
  • Increased flexibility in production and planning
  • 3 washes eliminated
  • 97% reduction of manual transportation
  • In-process automated quality inspection

 

Setpoint has taken lessons learned from the LCAAP project and refined each process for our second generation case manufacturing equipment, to consistently manufacture brass cartridge cases to an even higher quality standard than current Mil-Std.  In addition to case manufacturing, Setpoint has taken the time to understand and refine the process for taking the finished case to fully loaded ammunition in the development of the ammo primer and ammo loader.  Now you can set up your ammunition production from start to finish with Setpoint.

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Ammo Loader Video is Here

April 10, 2014 by Nick

Here is the first look at the Setpoint Ammo Loader machine.  Watch this video for a quick overview of the loader, from the feeding of each individual component to the quick caliber changeover capability.  Read more about Setpoint’s ammunition manufacturing equipment.

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Tie Rod Frame vs. C-Frame

April 9, 2014 by Nick

Winner: Tie Rod Frame

Tie Rod Press with Dial TableIn the past, the C-frame press design made it easier to feed in product or change dies. The downside of the C-frame is deflection – where the frame will bend outward under the pressure of the load – which
will cause deformities in your part, and ultimately lead to inconsistent and erroneous parts. In our ammunition case manufacturing equipment we need absolute precision and a lot of force. So we needed a better solution.

The result is the development of a modular H-frame frame press. The H-frame consists of blocks, tie-rods and spacers. With this press we are able to achieve .001 shut height accuracy with 20 ton’s force; and due to it’s modular design we are able to mount the press to an automated dial table and index parts through it.  Now, with the ability to run parts through an H-frame press we can produce precision parts with high tonnage and minimal deflection in an automated application.

 

 

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