In depth: Partnerships as a growth opportunity

Doug Woods joined the Association for Manufacturing Technology (AMT) as its president in April 2009. Prior to that, he held a number of executive positions at several machine tool companies, including president and CEO of Liberty Precision Industries, and president of Parlec Inc. Woods was AMT’s chairman of the board of directors in 2005-06 and served on its board of directors from 2000-08.

PE: Everyone seems to feel the worst of the 2009 recession is behind us. In what ways has 2011 met or exceeded the expectations for your organization?

Woods: 2011 is currently up over 108% from 2010 order levels for our industry… and that is on top of a very good order year in 2010, which was 85% up over the 2009! At this point, 2011 is ahead of many of our 2010 forecasts and most signs point toward continued growth albeit at a slightly slower pace which should be expected as growth levels approach there more normal pre-recession rates.

PE: Where are the warning signs? What still needs to be done?

Woods: Areas of on-going concern are, of course, consumer confidence which has shown little improvement in the last 40 months. This has primarily been driven by the challenges in the real estate markets, but confidence would also increase if there was improvement in the unemployment numbers, improvement in the global financial situation, a significant reduction in oil and gas prices, and more certainty with regards to tax and regulatory policy.

PE: What are the near-term and long-term goals for energy management for your association’s members, and how are you working with them to achieve those goals?

Woods: Sustainability is making it to the top of everybody’s short list. For many years, the manufacturing technology industry has unknowingly been leading its own sustainability campaign. From a tactical view, smart, efficient design is actually a sustainable design with little waste and attention to function. It uses materials wisely or it eliminates processes that might not be sustainable or environmentally beneficial. Most often, it is a very efficient design that offers economic savings to the user.

In design of everything from a straightforward vertical machining center to complex multitasking technology or even additive processes, considerations are paid not only to energy savings but to overall efficiency, and fitness for use. Many of our members have adopted design for sustainability processes that help them achieve measurable improvements. For example, this process might include informed material selection and material reduction, which results in a lower carbon footprint.

For example, one of AMT’s affiliate members, the Laboratory for Manufacturing and Sustainability (LMAS) at the University of California – Berkeley, and its Sustainable Manufacturing Partnership (SMP) has formed a consortium of leading companies and research labs striving to find green manufacturing solutions to enable a sustainable future. Their basic objective is to provide a channel for the transition of basic research on green/sustainable manufacturing for industry and government to use to find green manufacturing solutions to enable a sustainable future with verifiable economic benefits.

For manufacturing technology specifically, the SMP has two active initiatives. The Green Machine Tools program addresses the improvement of machine tool performance by analysis at different levels of machine tool design and usage. Process Monitoring for Energy Efficient Machine Tools is a second initiative that studies relevant sensor technologies and includes the development of mapping relationship between sensor outputs and process mechanics.

PE: You talk with successful manufacturing operations all the time. What characteristics do they have in common?

Woods: Many of the successful businesses we see in our industry have diversified their customer base, created new sales opportunities in growing international markets, implemented new manufacturing technology equipment to increase productivity and focused on strengthening their balance sheet.

PE: What are the biggest internal obstacles to a successful manufacturing operation? What are the biggest external obstacles?

Woods: The biggest internal obstacle seems to be consistently finding skilled labor in all key areas of engineering, applications, manufacturing, and programming. There have been years of neglect in the education channels on the manufacturing front. Many of those unemployed today were not given the types of on-going training they needed to keep up with their changing workplaces. Now, manufacturers can’t find workers and workers can’t find jobs.

Externally, the on-going credit constraints left over from the recession and new financial regulations have severely limited the availability of funds to expand business. This has slowed growth as companies are forced to fuel growth from internal cash flow.

Also, the on-going uncertainty created by “threatened” tax increases to address the mounting National debt is forcing many businesses to keep their “powder dry” and wait to see what happens before committing large dollars to new hires or additional capital expansion.

PE: What’s your outlook for 2012?

Woods: We continue to be optimistic. We at AMT watch closely the key indicators for our industry and our customers’ markets.

We look at the manufacturing technology order outlook and the outlook for our industry’s customers’ market — the durables manufacturing market.

Our members report continued strong project levels by manufacturing companies to improve productivity in their factories and we’re seeing a very healthy demand still in place as we move into 2012.

Two indicators we follow are the Purchasing Managers’ (PMI) and capacity utilization (CU) indices. A PMI greater than 50 suggests an expanding economy and orders for manufacturing technology products are usually on a year-on-year growth rate — even if the growth is from a larger negative rate to a smaller negative rate. The PMI registered 55.3%, an increase of 1.8% points from May, indicating expansion in the manufacturing sector for the 23rd consecutive month. New orders and production were both modestly up from last month, and employment showed continued strength with an increase of 1.7 percentage points to 59.9%.

The capacity utilization rates of the two markets are subtly different at this point. The CU rate shows a slow change indicator for manufacturing technology with recovery to full health by May 2011, but currently a growing indicator for customer markets.

This is all good news for manufacturing, but there is little doubt that America’s future rests on our ability to innovate. Business leaders from a range of manufacturing industries share the conviction that innovation is the driver of sustained economic growth, competitiveness and a higher standard of living; and a vital manufacturing sector is obviously a critical element of the innovation process. American products are still sought after around the world because of our ability to harness emerging technologies to create superior products and services.

We are encouraged by the recent news of the Obama Administration’s support of two manufacturing-focused initiatives.

The launch of its Advanced Manufacturing Partnership tells us the U.S. government is finally realizing the important role manufacturing technology plays in national security and sustained economic growth.

The Advanced Manufacturing Partnership in a national effort to bring industry, universities and the federal government together to invest in emerging technologies that create manufacturing jobs and boost global competitiveness, particularly in industries critical to national security.

The $500 million plan uses existing funds and future appropriations from various federal agencies to boost innovation in manufacturing technologies such as small, high-powered batteries, advanced composites, metal fabrication, bio-manufacturing and alternative engineering. The goal is to enhance defense-critical industries; build U.S. leadership in next-generation robotics; increase energy efficiency in manufacturing; and develop technologies to help improve manufacturing efficiency.

President Obama is also endorsing a manufacturing skills credentialing system to boost manufacturing jobs growth as part of his Skills for America’s Future initiative launched last year. Skills for America’s Future is an effort to improve industry partnerships with community colleges to ensure that America’s community college students are gaining the skills and knowledge they need to be successful in the today’s manufacturing facilities. The factory floor today is very different from what it used to be, and we need workers who are up to the job.

For more than two years, AMT has emphasized the crucial role of public-private collaboration between industry, government and schools in meeting the demands of the new manufacturing workplace. The Manufacturing Extension Partnerships should be an integral part of this collaboration as the ideal conduit between the stakeholders.

Return to 2011 Mid-Year Report: Grading on the curve.

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