Survey Tool Making Market German tool, pattern and mould makers need to build up business expertise
Germany — In order to ensure the competitiveness of German-speaking tool, pattern and mold making companies, the cooperative MARKTSPIEGEL WERKZEUGBAU conducts an anonymous company comparison across the industry. The initiators started in 2019 to systematically make the companies better with industry knowledge. This article presents the key figures report from February 2021.
For many tool, pattern, and mold makers in the industry, the economic situation does not look very rosy at the moment. Some are on the verge of insolvency, others have already filed for it with the district court. Dr Claus Hornig has been active as a management consultant in this industry for 16 years and is an expert in the analysis field of key business figures at MARKTSPIEGEL WERKZEUGBAU eG. According to his observation, most companies fail only because of minimal business management mistakes from the past. “Building good tools is no longer enough today. Much more is required - especially commercial competence,” Hornig emphasizes. “If things are going well in a company, it doesn't matter whether earnings are a little bigger or a little smaller. But now, many are faced with the limit of having any profit left at all. And that's where mastering the piano of cost and performance accounting comes in.”
With the MARKTSPIEGEL WERKZEUGBAU, tool, model, and mold manufacturers from German-speaking countries are analyzed annually based on a strictly anonymous data collection and evaluated according to their competitiveness. The initiators aim to make the results from the data analysis available to the industry, in turn, to derive trends in the sector from concrete key figures and create a valid basis for future decisions.
Business management skills are becoming increasingly important
At the end of the day, the goal is always for a business to be profitable. To achieve this, entrepreneurs must be able to understand and interpret business management figures. According to Hornig, one of the most important assessment criteria in business management is the profitability of a company. Per capita value added is a significant indicator of this. The data evaluations of the member companies from the 2019 financial year have shown that this value is currently around € 120,000 on average. According to Hornig, this is a good level in itself. However, a downward trend can be seen here, which is a cause for concern and an indication that price-quality has declined and is continuing to fall. Thus the value-added (also called gross profit) per employee is also decreasing in many companies.
Investment activity in companies is declining
For a company to remain successful in the long term, it must invest continuously. The ratio of investments made to depreciation on property, plant, and equipment describes companies' investment behavior very well. The re-investment ratio of the members at the MARKTSPIEGEL is, on average, around 160 %. The management consultant refers to this as an early warning indicator, as a decline in investment activity is discernible: “I advise anyone who wants to operate competitively and not let their machinery become outdated to take measures to become more profitable.” Hornig emphasizes that it is not a matter of running to the bank and building up debts. Instead, the goal should be to generate a large part of the investments from the company's profits.
The price has to be right
A substantial advantage, which results from the membership with the market mirror tool construction, is the realistic estimate of its holistic management. This includes knowledge of, for example, how appropriate the remuneration of the company's own workforce is. Here the expert team would like to announce a comparison figure for the average skilled worker hourly wage. This amounts to € 19,70 and does not consider regional differences. Hornig advises the entrepreneurs to draw a comparison and question whether one could increase the quality of the work with a better remuneration of qualified, skilled workers if necessary. Or whether an adjustment would be appropriate in the case of a significant overpayment that is not regionally justified.
The savings potential must be explored
Speaking of personnel — did you know that the share of indirect (unproductive) employees (excluding apprentices) in the total workforce in the industry evaluation at MARKTSPIEGEL averages 17.5 %? This key figure helps to assess the coherence of the overhead in a company. The result shows that nearly one-fifth of the workforce performs work that is not directly involved in manufacturing products or providing services (managers, supervisors, secretaries, etc.). “In times when the order situation is very good, companies tend to increase the number of unproductive employees,” Hornig explains. In his opinion, however, a proportion of between 10 and 15 % is recommendable. In his view, the current result is too high. For him, there is potential for savings in almost all of the companies in the market survey.
Wake-up call for immediate action
The industry expert is certain: “At the current time, it is not enough to simply wait and see and sit out the situation. Things will not get better on their own. What is needed now are entrepreneurs who start acting. This requires competencies that were not necessary for many in the past.” For Hornig, management consultants must not be a long-term solution. He appeals: “Companies need to bring commercial know-how in-house to be able to make upcoming decisions correctly from a business management perspective. The ability to make the right decisions in the company can make all the difference if the worst comes to the worst.”
This article was first published on Spotlightmetal