Warren Buffet once said, “Only when the tide goes out do you discover who’s been swimming naked.” The current high level of business curtailments and closures, along with record layoffs, tends to confirm that many companies have been operating very marginally. It shouldn’t come as any surprise, I guess. As long as revenues were growing, companies could meet cost and debt obligations. But with a brief interruption or slowdown of income, a lot of operations found themselves in big trouble. Whatever happened to saving for a rainy day?

I started my first job in 1972. Shortly thereafter, we had a period of high gasoline prices and inflation. My company wasn’t making any money; it was being squeezed by increasingly higher costs and flat revenue. Later, in 1980, we suffered through the Carter years-nice guy, but not our best president. Inflation was rampant, and all of us worried about layoffs during that downturn. It was a difficult time, worrying about my job on the one hand and wondering when things would turn around on the other.

Our recession this time is quite different, as it seems to be the culmination of many factors gone wrong. We have suffered through perhaps our worst administration, one that was able to make the wrong decision at nearly every turn. We are running astounding deficits, and the new administration is planning to spend us out of the recession. I don’t know when things are going to get better, but I do know one thing-they will get better. What you do in your overall operation might ensure that your company is able to hang on until business recovers.

Now's the Time

Energy prices have fallen nicely lately due to decreased demand, but I doubt that this will be the case when the recovery arrives. Plants that have spent some of their profits on energy savings, yield improvements and training will be well-positioned to enjoy the recovery. Marginal operations that have not invested properly will be left behind when business picks up.

While business is miserable now, if you can afford it, this is a great time to invest in energy efficiency. Suppliers are very hungry for business, and you surely have some downtime capability for installation. Not only will these kinds of projects save your operation money right away, but when fuel prices bounce back to $10+/MCF, you will be able to earn more money without sending all of your profits to the gas company. Steps you can take include:

• Load your kiln better! Increase the ware:furniture ratio as much as possible. Decrease the kiln car weight.
• Invest in fuel-saving systems. Pulse firing systems have demonstrated savings of up to 45% with better control and higher yields. If you are using something else, you are probably wasting money.
• Implement a heat recovery project. Even simple heat recovery projects can save money. One of my clients has done numerous in-house projects, ranging from mild heating of combustion air to simple recuperators that heat plant water and casting slip. If you can’t afford an outside company to engineer and install a large-scale heat exchange system, consider some smaller projects that you can execute with your existing staff.
• Train your people to look for savings. In survival, it’s everyone’s job to save money. Using all of your people to look for opportunities only makes good sense.

The business cycle will eliminate the companies that have been marginally operated for the past several years. Those who survive will do very well in the recovery. I hope that your company is one of the survivors!

Any views or opinions expressed in this column are those of the author and do not represent those of Ceramic Industry, its staff, Editorial Advisory Board or BNP Media.

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