Process controls offer opportunity

The past twelve months have brought positive margin gains for 15 out of 19 industries in the PLANT ENGINEERING factory equipment and tools market basket. In fact, margin grades improved significantly for six. The air and gas compressor manufacturing was the most dramatic. Its margin grade moved from F-minus one year ago, when manufacturing margins sat at a record-low level, to a passing B grade...

12/01/2005


The past twelve months have brought positive margin gains for 15 out of 19 industries in the PLANT ENGINEERING factory equipment and tools market basket. In fact, margin grades improved significantly for six. The air and gas compressor manufacturing was the most dramatic. Its margin grade moved from F-minus one year ago, when manufacturing margins sat at a record-low level, to a passing B grade this past September.

The best bet these days can be found in industrial process controls and equipment. Over the last 12 months, average prices for process variable instruments have increased nearly 3%. At the same time, the cost of making a typical unit of industry output has gone up only 2%, which has left a sizeable bottom-line windfall.

From a long-run point of view, the process controls and equipment industry is in good shape with margins estimated to be at a 10-year high now. Suppliers currently spend $40.92 to make $100 of market-valued output. That's $2.71 below the industry's average spending over the last five years. As a result, the typical supplier can afford to discount tags by 6.3% and still earn a five-year average return on manufacturing costs. A price cut of 3.8% moves margins to year-ago levels.

Several others pose good negotiation opportunities as well. To return margins to year ago levels, suppliers of cranes, hoists and monorails can cut tags 7.3%. Manufacturers of power and specialty transformers can discount 6.9%. Speed changers, drives and gears producers enjoy the ability to reduce prices by 4.8%. Finally, air and gas compressors can lower prices 3.6%.

The PLANT ENGINEERING manufacturing cost index for equipment and tools fell 0.2% in the third quarter of 2006. That was the first quarterly drop since May 2002. Prices for equipment and tools, meanwhile, increased 0.4%.

Price/cost/demand roundup

Factory Equipment & Tools Average Product Prices (1) % Change During 12 Months Ending Direct Manufacturing Costs (2) and Margins Grade Growth in U.S. End Markets (3) % Change During 12 Months Ending
Industry 3 months ago Current month Costs are Grade 3 months ago Current month
(1) Average product price changes are calculated from the producer price index for each 6-digit NAICS (North American Industry Classification System) industry from the U.S. Bureau of Labor Statistics.
(2) Analyses of each industry's direct manufacturing cost changes are from Thinking Cap Solutions Inc.'s proprietary Leveraged Metric Intelligence (LMIQ) economic model. The "grade" indicates that recent price/cost changes have produced record high (A+) margins to average margins (C) to record low (F-) margins for the average producer in an industry. Grades of A to A+ mean plant engineers may be able to strike a better bargain with suppliers and better control plant costs.
(3) Growth in U.S. end markets data are estimates of output for the domestic end markets which purchase a given industry's products.
All data prepared and presented by Thinking Cap Solutions, Inc., Port Angeles, WA (e-mail: ebaatz@ice-alert.com).
Hand & edge tools (except saws)3.273.60stableD3.023.04
Saw blades & handsaws1.221.68fallingF3.503.36
Metal hardware4.083.85stableD3.473.35
Mechanical power transmission equip.6.435.96stableC11.9810.19
Conveyors & conveying equipment6.675.55stableD6.556.30
Cranes, hoists & monorail systems13.7115.96stableB3.944.23
Industrial trucks (forklifts) & stackers4.264.62stableD3.032.95
Metal cutting machine tools3.053.76stableC6.506.40
Cutting & machine tool accessories2.563.21risingD8.017.52
Power-driven handtools1.261.11stableF-4.424.89
Welding & soldering equipment8.768.89stableC5.805.81
Pumps & pumping equipment5.135.70stableB4.894.50
Air & gas compressors4.985.75stableB6.376.42
Speed changers, drives & gears5.625.43stableB11.9810.19
Power & specialty transformers7.729.69stableC3.423.68
Motors & generators5.045.49risingC6.055.92
Industrial process controls & equip.2.912.98stableA+12.7712.68
Fluid registering & counting devices2.402.48risingC2.953.54
Instruments for electrical testing0.600.71stableB7.738.97





The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
A new approach to the Skills Gap; Community colleges may hold the key for manufacturing; 2017 Engineering Leaders Under 40
Doubling down on digital manufacturing; Data driving predictive maintenance; Electric motors and generators; Rewarding operational improvement
2017 Lubrication Guide; Software tools; Microgrids and energy strategies; Use robots effectively
The cloud, mobility, and remote operations; SCADA and contextual mobility; Custom UPS empowering a secure pipeline
Infrastructure for natural gas expansion; Artificial lift methods; Disruptive technology and fugitive gas emissions
Mobility as the means to offshore innovation; Preventing another Deepwater Horizon; ROVs as subsea robots; SCADA and the radio spectrum
Power system design for high-performance buildings; mitigating arc flash hazards
Research team developing Tesla coil designs; Implementing wireless process sensing
Commissioning electrical systems; Designing emergency and standby generator systems; Paralleling switchgear generator systems

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

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Featured articles highlight technologies that enable the Industrial Internet of Things, IIoT-related products and strategies to get data more easily to the user.
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Maintenance Manager; California Oils Corp.
Associate, Electrical Engineering; Wood Harbinger
Control Systems Engineer; Robert Bosch Corp.
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me