Bill Polk: Tremendous opportunity ahead in automation software
In my last column I cited reasons why U.S. manufacturers should be looking to our own shores when analyzing their value chain networks. Some of them included currency fluctuations, fuel volatility, and supply chain risk associated with manufacturing in remote, low-cost labor countries. As companies realign their manufacturing strategies in response to the catalyst of plummeting global demand, o...
In my last column I cited reasons why U.S. manufacturers should be looking to our own shores when analyzing their value chain networks. Some of them included currency fluctuations, fuel volatility, and supply chain risk associated with manufacturing in remote, low-cost labor countries.
As companies realign their manufacturing strategies in response to the catalyst of plummeting global demand, one area they must focus on is how well their strategic automation vendors and providers can support and enable agility and flexibility. They must be able to help increase the liquidity of hard assets.
Major vendors like Siemens, Rockwell Automation, ABB, GE Fanuc, Honeywell, Invensys, and Emerson have long provided hardware, software and services to manufacturing companies to automate and control processes, integrate systems within and across factories, standardize production across the enterprise and, hopefully, align with supply chain strategies.
Although they don't—but should—enjoy the same mindshare as the large enterprise vendors like Oracle and SAP, they are the backbone of manufacturing and they power, control, and automate complex factories and enterprises. Where they have been weak, and where they must improve in order to thrive—or in some cases survive—is in their ability to accelerate and streamline manufacturing flexibility.
In the 1950's the financial ownership of factories rarely changed hands, so manufacturing strategies were set and assets deployed in a static, inflexible fashion. Stability trumped agility. Manufacturing enterprises were the most illiquid of all corporate assets. Today the only constant manufacturing executives can count on is change itself.
The average plant now changes ownership every five to 10 years—some even more frequently. Mergers and acquisitions are a familiar part of today's business landscape. More than 33,000 deals were consummated each year between 2005 and 2007. Globally, a deal is completed approximately every 3-1/2 minutes. The flip side of M&A activity is that companies often end up with unwanted or non-core assets and businesses that they must then streamline or shed.
The situation is exacerbated by the current economy, as well as manufacturing outsourcing trends. Companies across the globe are selling, idling, and shuttering facilities as they respond to plunging demand. Chrysler Corporation recently shut down all North American operations for more than a month. Ford's February sales were down nearly 50 percent from last year, forcing closures. Global chemical leaders like Dow and BASF are selling or idling 30 percent of their worldwide capacity.
From an outsourcing perspective, a recent AMR study showed that contract manufacturing is rapidly growing. Between now and 2011, the percentage of U.S. companies that have 50 percent or more of their manufacturing output produced by contract manufacturers is projected to double.
This should all add up to a tremendous opportunity for the automation vendors. But some of them must re-platform or reposition their solution sets to respond in a flexible, agile manner to the constantly changing manufacturing landscapes. Winners will be vendors that can extend their information integration from the shop floor to the top floor, including alignment with supply chain strategies.
In doing so they will help companies simplify their complex conglomeration of manufacturing capabilities, resulting in the most profitable product supply network. Top manufacturing companies don't view their property, plants, and equipment as illiquid assets; neither should their strategic automation vendors.
Bill Polk is a director with Boston-based AMR Research. He has more than 15 years of management experience in the manufacturing, supply chain software, and IT operations industries. He can be reached at email@example.com .
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Annual Salary Survey
Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.
There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.
But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.
Read more: 2015 Salary Survey