Why is the Automation market declining?

J

Thread Starter

Jim Pinto

Automation Listers : Industrial automation markets are declining and have been for a few years. As a result, all the majors are all scrambling, looking for new markets, mergers and consolidation as a means to survive. My recent articles on this subject have stirred up a lot of discussion. I have had several related e-mails about the points I raised. I'd like to particularly thank Doug Jensen, <[email protected]> Chief Scientist, Information Technologies Directorate, The MITRE Corp., whose recent e-discussions stimulated a Q&A format and renewed thinking in my latest article : "Why is Industrial Automation Declining?" Why are industrial markets not growing? Why are margins shrinking? Is the decline temporary? Is the malaise worldwide? I hope this article helps to answer these questions. You can review this article on the web at : http://www.jimpinto.com/writings/iadecline.html I'll appreciate comments and suggestions. Cheers: jim ----------/ Jim Pinto email : [email protected] web: www.JimPinto.com San Diego, CA., USA ----------/
 
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Michael Griffin

At 11:55 11/09/00 -0400, Jim Pinto wrote:
>Industrial automation markets are declining and have been
>for a few years. As a result, all the majors are all scrambling,
>looking for new markets, mergers and consolidation
<clip>
I read your article. I wasn't aware that these companies were in such dire straits. However, I have a few disagreements with some of your explanations.

You wrote:

>Q: Your articles don't explicitly address the actual reasons why "the
>industrial automation market has shrinking margins, a flat worldwide market
>and no organic growth". And why "older core businesses continue to shrink
>and lose money."
<clip>
You follow this with another question, and then procede to explain it as follows:

>1.Fewer new process plants and factories are being built in the US. <clip>
The question asked why a *worldwide* market would show no growth. Theories which center on one country or region cannot explain this.

>2.Falling prices: older control systems were based on custom technology;
>today they are commercially available products, protocols, operating
>systems and software. <clip>
This is part of the explanation. If prices are falling, then volume can grow without revenue growing. However, it it worth noting that the prices of "custom technology" are also falling, not just those using "commercially available" (I believe you mean third party) products. PLCs are as proprietary as you can get, and their prices have fallen dramatically in the past few years. Today's Micro-PLCs can do the same job (or more) as their larger equivalents of a few years ago, yet they sell for far less.


>3.Most IA equipment is quite reliable and tends to be under-utilized.
>Steel plants and oil and gas refineries are often not refurbished <clip>

This is simply saying that the process industry market is cyclical, it doesn't indicate a long term decline (if this is what you are trying to suggest). To this you should add the Asian economic problems (from which they are now recovering) which put a crimp in the growth of certain basic industries. However, the question was about "industrial automation" in general, not just process industries. General theories cannot be constructed from narrow samples.


>4.It's clear that an oil-refinery should be built near the oil-resources.
>Similarly, steel plants should be near the source of raw materials.

Actually, this is by no means clear at all. If this were the case, we would expect to see the main growth in the steel industry to be in Canada and Australia, where major iron and coal resources are located, not in the far east which has been importing these resources.
The main growth in steel demand has been in the developing world. The steel industry has been locating where its customers are. Chemical
industries have been doing the same, but influenced to some extent by the desire of oil producing regions to use their control of supplies to capture more of the downstream business for themselves.


>5.US development costs are high. The third-world countries (India, China,
>Far East) have good skills at a much lower cost. IA products (software &
>hardware) are being developed (and copied) elsewhere.
Also
>6.US overheads are high, by comparison. <clip>

OK, but I thought we were talking about *worldwide* markets, not just US markets. Problems for US companies do not automatically translate into problems for everyone else.


>Q: R&D generates growth. So, why have the IA majors cut R&D?
>A: When growth slows, R&D is often the shortsighted part of the first cut.
>But, it goes beyond that. From a pragmatic IA marketing standpoint, it
>seems that there is too much technology chasing too few real needs. <clip>

This is perhaps a little closer to the mark. There has been a lot of *useless* technology developed. That is technology has been developed which doesn't solve the problems which customers need to have solved. The industrial automation industry will suffer until these bad investments are liquidated over time.

>new IA technology that increases shop floor throughput by 10% is
>simply doomed to failure.

New general purpose IA technology which by itself increased shop floor thoughput by 10% would be a spectacular improvement in any application I am familiar with. I can't recall seeing a single instance of where application of new IA technology (as opposed to proper application of existing technology) has generated improvements of that magnitude. Unfortunately, improving a production process significantly is seldom as easy as installing a new PLC or drive and turning the speed up.
Most new IA technology has simply allowed us to do what we have already been doing cheaper and easier than ever before. The item which has
made the most difference to the sort of machines I am familiar with is the low cost operator interface panel (display screen and keypad). This has gone from being a luxury to a standard feature. The main benefit is to provide far better diagnostic information to the operator making trouble shooting problems much quicker. I would be surprised to see even this gain us 10
percent throughput though.


>Faster computers and better software do not seem to yield improved
>productivity in a steel mill or a polyethylene plant.

To put this a little more directly, demand for much of the industrial automation market is relatively inelastic. Lower prices and
higher performance may make it more economic to include a higher level of control system content, but it will never by itself generate whole new
demands. It *may* occasionally create some additional demand by making certain projects technically or economically practical, but this market is small. Overall demand (at least in the industries I am familiar with) is driven by the need to control a machine whose existance is largely justified by other considerations.


>Q: If R&D is cut, where will innovation come from?
>A: It is difficult, if not impossible, to generate real innovation midst
>the bureaucracy of a large company. The only way to get it seems to be
>by buying smaller companies. This is true is other businesses too -
>CISCO, HP, EMC and others in the Internet & telecom equipment arena
>have grown significantly through acquisition.

These companies may have grown by aquisitions, but the aquisitions did not create the demand or the technology. The internet business is a bad analogy anyway. Much of what is going on there (in terms of aquisitions) is
driven by the ability of a small number of companies to buy other companies with inflated stock. Also beware of the supposed market capitalisation of some of the more spectacular internet companies. Their figures are typically
based on narrow trading of comparatively small floats. There is at least as much creative accounting and financing going on in the internet world as there is creative technology.


>Q: So, how can industrial automation companies grow? It seems to me that
>the real impetus for change in the IA world has shifted from the factory
>floor (productivity and throughput) to enterprise integration. <clip>
>A: Growth-orientated IA companies are indeed expanding beyond the
>traditional boundaries, to generate new growth through
>enterprise-integration. <clip> "sensor to boardroom" <clip>

This strikes me as the technology area where industrial automation companies are most lacking. It is something of genuine benefit to customers which can generate new sales based on its own merits. It also strikes me as the one in which these companies show the least understanding of what people need.
There has been a lot of talk about "putting valves on the internet", but I don't think people want to web-browse around between valves. They want systems which can gather the overwhelming amount of information which can be
generated by dozens or hundreds of machines and boil it down to something useful they can act on. There are a lot of pieces which need to be in place for this to happen, and not many of them currently exist in a useful form.


**********************
Michael Griffin
London, Ont. Canada
[email protected]
**********************
 
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SILVESTRI Marco - Computes

I've found your article very interesting, so I'd like to ask you a question:
In this article, you don't say anything about robotics: also robotics industries are all scrambling?

I live in Italy (that is considerable back US in technology world race) and - hey - here seem to me that manufacturing industries are starting to
introduce robotics, also due to lack of workers.

Thank you for your answering.

Marco Silvestri
 
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you wrote:

> Most new IA technology has simply allowed us to do what we have already been doing cheaper and easier than ever before.

I have to disagree pretty strongly with that statement: not only are companies able to produce MORE than we used to, we are also able to do it with fewer personnel, which suggests a more dramatic improvement in throughput than might be obvious.

Yes, we are able to do things cheaper and easier, but I have yet to hear of a company who isn't able to produce more now, with fewer workers, than they used to. Now, I will agree that a SINGLE automation project is unlikely to produce anything close to a 10% increase, but I think Jim's thought may have been more toward the larger picture: the effect of Industrial Automation in general.
 
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Al Pawlowski

If the Automation market is declining and not being knowledgeable about economics, I wonder if newer IA products are simply too good at enhancing industrial productivity (that holy grail).

Seems reasonable that IA device purchases should decrease if the increase in industrial product demand is less than the increase in productivity provided per new IA device.

Then, to increase profit, IA device manufacturers need to increase margin per device. This could be done by increasing unit prices or decreasing manufacturing costs. Maybe today it is harder to decrease manufacturing costs than gaining price setting ability through increased market share. Could this be a part of the drive behind the increased IA consolidations?

Maybe manufacturers could increase demand by investing in less wealthy populations vs increased R & D (productivity enhancing technology). Say specially low pricing for water treatment plant products in third world countries. Could that be part of the Japanese thinking in regards to apparently high investment in third world infrastructure projects?

Another thought. Could increases in productivity via new technology be part of the drive behind the increasing distrust of tecnology in today's general population, a built-in, unconscious negative feedback mechanism?

Hey, don't blast me too hard if you think this post is wasting your time. Hope I don't do that too often. Maybe the Louisiana heat is affecting my brain today.
 
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Davis Gentry

--- Michael Griffin <[email protected]> wrote:

> >new IA technology that increases shop floor
throughput by 10% is simply doomed to failure.
> >
>New general purpose IA technology which by itself
increased shop floor thoughput by 10% would be a
spectacular improvement in any application
> I am familiar with. I can't recall seeing a single
instance of where application of new IA technology (as
opposed to proper application of
> existing technology) has generated improvements of that magnitude.

Our newest motion control board, due to changes in
firmware and addition of lookahead, allows
improvements in complex motion (cutting, grinding,
robotics) on the order of 4-5x (in terms os time
required to finish complex task) using the exact same hardware otherwise. We also usually see large improvements in production on older machines
retrofitted with our previous generation cards as
well, though perhaps not to that magnitude. We're
certainly seeing growth - but we're not process
control, either.

Davis Gentry
Applications Engineer
Delta Tau Data Systems
Eastern Office
Richmond, Virginia
 
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John Coppini

Here's my opinion:

1. The industry is overcrowded; there are too many manufacturers. Just look at any magazine like "Control Engineering". Dozens and dozens of boring ads hawking the same, tired equipment. You only need so many sensors, controllers, PLCs, HMIs, etc., etc., etc.

2. The majority of companys treat their employees like a disposable commodity. They hire fresh, naive graduates and fire them when the personnel start making too much money compared to what can be gotten straight out of school. The result is a severe degradation of engineering expertise based on experience and hard-won, hands-on education. Many projects become R&D projects when they should simply be design projects that are based on past project experience ---- problem is the past experience has been fired or has wised-up and quit to go to greener pastures or more professional lines of work. After all, when you see all of your associates treated like highly educated migrant workers, one gets the message. Particularly, given the new class of scab migrant worker: the H1B.

So, can anyone tell me where I am wrong?
 
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Surely this is also a regional thing?

Generically, smaller production facilities are yielding to larger production facilities as smaller concerns close down or are brought up, whilst larger companies consolidate. This means we have less industrial controls, but those controls are more productive.

But location is a prime factor. For example high exchange rates have essentially sounded the death bell for much industry in the UK and US, who are becoming ever more service economies. Other areas of the world are becoming more industrialised.

Areas were industry is being increased are frequently the recipients of technology transplants, that is, a factory receives a ready made production line that has been developed elsewhere. In order to do this you need global suppliers, i.e. big ones, hence another nail in
the coffin of small businesses.

In the global marketplace the number of companies and the number of production facilities are shrinking, fewer and bigger. This is the global economy folks.
 
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Matthew da Silva

I didn't read the article because it has a leading title, but I'll respond to Marco Silvestri's intelligent comments.

In the semiconductor markets also automation is growing (which is the opposite of declining ;)

I agree that primary processing of fuels should be close to the source. It's happening in the refining industry where you have floating refineries and storage vessels. Such vessels are the prototypes for off-world (cf Armageddon, Alien etc.) processing of raw materials which will happen in the future.

Steel is different because the product is subject to much more manufacturing after the refining process. Alumina, however, _IS_ refined close to its source because the yield per pound is so low.

Robotics are also booming, and automation for non-traditional markets such as food processing and handling, are also not declining AFAIK. In countries such as italy and Spain I think that you'll find a lot of growth in food processing. In fact, a company in the Basque part of northern Spain has developed its own smart valve positioner. There's also a new valve positioner been developed by Gemu (mainly sanitary control valves for semiconductor and pharmaceuticals). Another small company in Denmark -- traditionally important for oil production, the same town is also home to a Bettis positioner factory -- has introduced its own design valve positioner.
Finally, Neles just bought StoneL valve switch maker; it's clear where they are aiming.

With so many new products for automation of processing operations, I see potential for a lot of growth.

Maybe those companies are simply aiming at the wrong industries, and expect profits in identical places and identical volumes as during the 70s and 80s when computers were a novelty.

Best,

Matthew Yamatake Tokyo
http://www.yamatake.co.jp
 
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Michael Griffin

<clip>
>>New general purpose IA technology which by itself increased shop floor
>>thoughput by 10% would be a spectacular improvement
<clip>
AND

>> Most new IA technology has simply allowed us to do what
>we have already been doing cheaper and easier than ever before. <
<clip>

I've had a few replies to these points both on and off list. I don't want to flog this issue to death as it wasn't the main gist of the
discussion. I do want to make it clear what new technology can or cannot do for us.

I didn't say that it was *impossible* to get improvements simply by applying new technology, rather I said:

1) A 10 percent improvement in "shop floor throughput" would actually be a very significant improvement. Note I am not referring to an improvement in some narrowly defined characteristic. Rather I mean 10 percent more parts coming out the end of the machine or production line. This is the only realistic measure of "shop floor throughput".

2) This is very hard to actually achieve by by applying *new technology* from a typical industrial automation company (e.g. AB, Siemens,
Omron etc.) to an existing production process.

3) It is rare enough that I've never actually seen it done (although I have heard people say they have done it). Note I am not saying it is impossible, rather it is just so uncommon that I have not yet seen it. I have seen (and made) improvements of more than 10 percent in machine (and line) throughput, but not due simply to applying new industrial automation
technology to an existing process. When making comparisons, we must make sure we distinguish between improvements due to new characteristics of
technology, and improvements due to better *application* of technology (existing or new).

4) Most new (i.e. within the last 5 years) industrial automation technology has concentrated on making things cheaper and easier to use. I am not saying that this is bad - cheaper and easier to use is a good thing and
well worth having. However, a faster PLC will not make a typical machine run significantly faster.


The point is though that it is wrong to blame slow sales on "new IA technology that" (only) "increases shop floor throughput by 10%". Most custumers would welcome 10 percent improvements that can be bought off the shelf.
Opportunities for such easy gains are really rather rare and so will not generate significant new sales except in certain specialised applications. Several gentlemen have written to me to state that high end motion control is one such exception. There may be others as well.

Overall demand for most products will be dictated by factors outside the control of the industrial automation companies. I stated in my previous letter that "demand for much of the industrial automation market is relatively inelastic" because the demand for products for new machine applications is dictated by demand for the machines they will be incorporated in. I believe I have demonstrated above that it is difficult to generate significant new demand for retrofit applications based on performance improvements.

Inelastic demand has two sides to it. The one side is that higher prices do not have a strong effect on demand. This is nice if you have
enough of a hold on the market to make these price increases stick. The other side of the coin though is that falling prices are not necessarily
compensated for by increases in sales volumes.

What companies do need new technology for is to maintain their competative position relative to one another. If new technology has made products "cheaper and easier to use", then this will be an important selling point when choosing between similar products.
If a company cuts back drastically on R&D, the likely result is there will be no immediate result (except an improvement in profitability). Eventually though, there will be a steady erosion of sales as customers gradually switch to cheaper and easier to use alternatives.


**********************
Michael Griffin
London, Ont. Canada
[email protected]
**********************
 
I am pleased with the response to my "Automation in Decline" article! It seems to have struck a chord - hopefully the right one....

Michael Griffin brought up several comments and suggestions:

>The question asked why a *worldwide* market would show no growth.
>Theories which center on one country or region cannot explain this.

<jim>
Yes, I recognize that my information is centered around the US market - because that's still the largest market (and it's flat) and the source of a lot of world-exports. The three primary regions of the world are North America, Europe and Far East. In a relatively brief article (length limitations for publication, both in print and on the web) it is difficult to be comprehensive.

<Michael>
> If prices are falling, then volume can grow without revenue growing.
> However, it it worth noting that the prices of "custom technology"
>are also falling, not just those using "commercially available"
>(I believe you mean third party) products. PLCs are as proprietary as
>you can get, and their prices have fallen dramatically in the past
>few
years.
>Today's Micro-PLCs can do the same job (or more) as their larger
equivalents
>of a few years ago, yet they sell for far less.

<jim>
Unfortunately, volume is NOT growing with the price reductions - so sales (price x volume) is - in some cases - declining. PLC price/volume is a good example.

<Michael>
>the question was about "industrial automation" in general,
>not just process industries. General theories cannot be constructed
>from narrow samples.

<jim>
I WAS trying to address industrial automation, not just the process industries. I WAS implying a long-term decline in automation (the knowledge is becoming a commodity) with a comparison to
agriculture and farming.

<Michael>
>><clip>4.It's clear that an oil-refinery should be built near the
oil-resources.
>>Similarly, steel plants should be near the source of raw
>>materials.<clip>
>This is by no means clear at all. If this were the case, we would
>expect
to
>see the main growth in the steel industry to be in Canada and
>Australia, where major iron and coal resources are located, not in
>the far east which has been importing these resources. The main
>growth in steel demand has been in the developing world. The steel
>industry has been locating where it's customers are. Chemical
>industries have been doing the same, but influenced to some extent by
>the desire of oil producing regions to use their control of supplies
>to capture
>more of the downstream business for themselves.

<jim>
Excellent marketing comments, Michael! Good example of the growing segments.

<Michael>

>><clip>5.US development costs are high. The third-world countries
>>(India,
China,
>>Far East) have good skills at a much lower cost. IA products
>>(software & hardware) are being developed (and copied) elsewhere.
>>6.US overheads are high, by comparison. <clip>
>I thought we were talking about *worldwide* markets, not
>just US markets. Problems for US companies do not automatically
>translate into problems for everyone else.

<jim>
There we go again, the US/world problem. I'm afraid that - since it is the largest market, and exports a significant amount - the US does affect what happens in the rest of the world.

<Michael>
>><clip>When growth slows, R&D is often the shortsighted part of the
>>first
cut.
>>But, it goes beyond that. From a pragmatic IA marketing standpoint,
>>it seems that there is too much technology chasing too few real
>>needs.
<clip>
>There has been a lot of *useless* technology developed.
>That is technology has been developed which doesn't solve the
>problems
> which customers need to have solved. The industrial automation
> industry
>will suffer until these bad investments are liquidated over time.

<jim>
Amen !

<Michael>
> New general purpose IA technology which by itself increased shop
>floor thoughput by 10% would be a spectacular improvement in any
application
>Most new IA technology has simply allowed us to do what we have
>already been doing cheaper and easier than ever before.

<jim>
I was using 10% as an example, saying that even 10% would not be sufficient reason to change. "New technology" (like keyboards) that become standard features do not generate growth and profit for the suppliers, because they quickly become "commodities" (low priced and competitive).

<Michael>
> I don't think people want to web-browse around between valves. They
> want
>systems which can gather the overwhelming amount of information which
>can
be
>generated by dozens or hundreds of machines and boil it down to
>something useful they can act on. There are a lot of pieces which
>need to be in
place
>for this to happen, and not many of them currently exist in a useful
>form.

<jim>
Amen !

Michael, thank you for your practical insights !

For those who have not seen the original article :
"Why is Industrial Automation Declining?"
which stirred all these interesting and useful comments and responses, click your browser on :
http://www.jimpinto.com/writings/iadecline.html

Cheers:
jim
----------/
Jim Pinto
email : [email protected]
web: www.JimPinto.com
San Diego, CA., USA
----------/
 
Marco Silvestri asked :

>Are robotics industries also all scrambling?

Jim Pinto responds :

The objective of robotics is to develop machines that reduce human labor - first of all boring, time-consuming and dirty labor, but also achieving a level of quality not attainable manually.

Robotics - as a clearly identifiable segment - has had good penetration in the automotive business (assembly, paint-shops, etc.) It is a segment of industrial automation that is continuing to grow, with some penetration occurring outside automotive.

Look at "Robotics and Advanced Manufacturing Market Growth" which refers to the North American Robotics Industries Association:
http://www.crsrobotics.com/markets/index.html?mkt_trends_fs.html

I recognize that a lot of my references are related primarily to the US, but that's still the largest market, and that's where most of my
information comes from.

Cheers:
jim
----------/
Jim Pinto
email : [email protected]
web: www.JimPinto.com
San Diego, CA., USA
----------/
 
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> When making comparisons, we must make
> sure we distinguish between improvements due to new characteristics of
> technology, and improvements due to better *application* of technology
> (existing or new).

This brings up an interesting question. How do we distinguish between a new technology and a better application of an old technology? Say I
improve throughput by replacing a single PLC that's trying to control too much with several autonomous PLCs (of the same make and model), each
dedicated to a portion of the task and coordinating activity between them. Have I better applied my old PLC technology, or have I applied a new distributed control technology? If I replace an ancient piece of software with a better-designed one - even one written in the same
language, but using more modern design methodologies or algorithms - have I just used my existing Intel PC and 'C' compiler technology
better, or have I applied the new software technology of object-orientation?

--
Greg Goodman
Chiron Consulting
[email protected] -- http://www.swbell.net/chironsw -- (713) 869-6876
 
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Ralph Mackiewicz

> Another thought. Could increases in productivity via new technology be
> part = of the drive behind the increasing distrust of tecnology in
> today's general = population, a built-in, unconscious negative
> feedback mechanism?

About this I have 2 comments: 1) I don't know that there is in fact a "real" increase in the distrust of technology among the general
population. I think that there is an "appearance" of mistrust based on the generally poor and ignorant coverage that the mass media provides on technology issues. 2) The poor and ignorant mass media coverage will eventually feed some mistrust (self-fulfilling prophecy) but as technology becomes more pervasive and people experience the benefits, the mistrust will be displaced onto the mass media that fed them the bad info (where it belongs).

Regarding the decline in the IA market: It seems inevitable. As mainstream technology advances (Ethernet, PCs, etc.) the price/performance of it will overcome the disadvantages of using
mainstream technology in IA applications (packaging, environmental, etc.). The big guys essentially live off the fact that there are
applications for IA technology not served by the mainstream technology.

And you don't even have to examine globalization issues to see the decline in the IA market (although those factors are very significant). 10 years ago nearly every system we did had a PLC in it bought from a big IA company. Now, hardly any use PLCs. And the stuff going in now is not bought from the big vendor anymore because they
are not competitive with the new equipment that is getting bought. While my company is not large enough to have any macro effects on the market, if you add it up over the thousands of integrators in the market who are in a similar position it makes a difference...a big
difference.

Productivity improvements can negatively affect the IA market in another way. One of the major values that the large control vendors deliver is improved productivity for implementing systems. If
productivity continues to increase substantially, the value of the productivity savings declines proportionally. The counter to this is reduced prices (lower margins) to try and maintain the proportional savings.

I'm not convinced that moving into enterprise integration will successfully stem the decline at these companies. Their existing products give them little or no advantage in this market. One
advantage they currently have is a strong sales force. However, this advantage will fade away quickly as the large companies inevitably abuse their existing sales force as the market declines and margins collapse. They could close off access to the systems/products that they produce so that customers wanting enterprise integration will be
forced to go to them. But I doubt that this strategy will work anymore because it will alienate the customer base.

Is there a winning strategy to survive as a big iron IA vendor with high-growth and large margins? Would any strategy short of
abandonment/liquidation have saved a typewriter supplier? At some point it becomes like beating a dead horse: its not going to move no matter how hard you hit it.

Regards,
Ralph Mackiewicz

SISCO, Inc.
6605 19-1/2 Mile Road
Sterling Heights, MI 48314-1408 USA
T: +810-254-0020 F: +810-254-0053
mailto:[email protected] http://www.sisconet.com
 
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Anthony Kerstens

>..... Would any strategy short of
> abandonment/liquidation have saved a typewriter supplier? At some
> point it becomes like beating a dead horse: its not going to move no
> matter how hard you hit it.

I agree, but while people are beating dead horses, I certainly plan to be looking towards other ways of earning an income. After all, when
the automobile took over as transportation, did blacksmiths continue making horseshoes?

People should stop worrying about the stability of the market and concern themselves with what they are going to do when the next wave comes around. Who cares if a manufacturer goes under (aside from the employees).

Where and when that wave comes I don't know. Whatever it is, it will still have a wire attached to it, and it will need to be programmed or configured. That's what matters.

Anthony Kerstens P.Eng.
 
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Michel A. Levesque, ing.

The article from Jim Pinto really gets you thinking.
So here are my thoughts on this:

I believe that the global market is not declining.
Maybe if one looks at just the major market (NA), but not the entire worldwide industry. If the entire industry is on the decline then why are we (list members) not out looking for other jobs?
The industry as a whole may be sagging, but the long term trend is up. We saw the same happen when the relays came out, or even when plastics were the future (anyone remember The Graduate).
At one point every market reaches a certain level of technology saturation...until the next big thing happens. The automation market is just shifting its scope to developing countries
(that is why they are called "developing"). We are being very close minded if we think only of the NA automation market. Europe and Asia are close to if not already technology saturated.
So what is left: developing countries.

Another juicy item from Jim is the level of R&D funding. R&D, those two words usually spread fear in the hearts of accountants everywhere. In a technology driven market such as automation, manufacturing companies who are not putting at least 10% back into R&D are doomed to fail. We are an automation integrator and we cannot fall below 20%. If we do, we will be eaten alive by our competitors. To be able to invest the 10%
without throwing it away on useless technology means that the marketing and acceptance of a product (or technology) are critical. How can the smaller innovative companies deal against mega-worldwide corporations with marketing and sales clout coming out of their goo-goos? We see this all the time, the big boys buying up the
smaller boys with good products...and the big boys call this R&D!? We need developments in artificial intelligents, photonics, etc.!
To blazes with the old stuff, where is the new "next big thing"? I just hope the manufacturers and developers are smart enough to see the merits of R&D in the long term and not just those pesky
quarterly profit margins. If the industry is declining, the failure to find the next big thing is the main reason for this decline.

Jim mentioned that geography plays a part, I agree... but to say that conversion plants (refineries, sawmills, etc.) must be close to the raw materials is short-sited. A conversion process must acquire raw materials cheaply,
convert them, then send these higher priced commodities to their own customers. What costs more to ship? Raw materials or finished commodities. In many cases the output from a plant
is costlier to ship than the input. From this we can see that a plant is better off closer to its customers than to the raw materials. Sure some industries have the reverse in terms of costs,
but by and large it is more efficient to be close to your customers. Which puts us back to the developing countries as the next market.

So where does this leave us? Simple, if the world's biggest automation market (NA) is drying up, change the market. Go on to greener pastures.
Everybody says they are on the global economy bandwagon...Well folks, it's time to seperate the men from the boys. Either go global, or stay local. But, if you stay local the market will dry up as the technology saturation progresses...until the next big thing.


Michel A. Levesque eng., mcp
Directeur Bureau Montreal
AIA Inc.
[email protected]
 
J
I do not know about the Automation market as a whole, but with the de-regulation of the electric energy market and the explosion of power plants being built, my observation is: (1) more work than people; (2) longer delivery times when ordering equipment. This would lead me to think
that things are expanding in this segment of the automation market.
 
M

Michael Griffin

At 11:33 13/09/00 -0500, Greg Goodman wrote:
<clip>
>How do we distinguish between a
>new technology and a better application of an old technology?
>If I replace an ancient piece of
>software with a better-designed one - even one written in the same
>language, but using more modern design methodologies or algorithms -
>have I just used my existing Intel PC and 'C' compiler technology
>better, or have I applied the new software technology of
>object-orientation?

The question is, could you have done the same thing just as effectively with products that were available 5 years ago? The discussion
concerned *new technology* from traditional industrial automation suppliers, not something you created yourself.
For example, I have increased machine throughput by more than 10 percent just by re-writing the control program to reduce software overhead. I didn't apply any *new technology*, I just carefully applied good, well known software techniques to the problem.

>Say I
>improve throughput by replacing a single PLC that's trying to control
>too much with several autonomous PLCs (of the same make and model), each
>dedicated to a portion of the task and coordinating activity between
>them. Have I better applied my old PLC technology, or have I applied a
>new distributed control technology?
<clip>
As another example, we have recently conducted a retro-fit which did something similar to that. We wanted to improve the reliability and
maintainability of certain machines, and the most practical way to implement the changes was to replace the original central PLC with several micro-PLCs installed in what had been the terminal boxes on the machines.
We reduced cycle time by about 15% (this was a side effect though, rather than the true intention of the project). This was *not* a benefit of new technology, even though the new PLCs were newer models than the original. We could have accomplished the same thing with hardware of the same era that the original was constructed with. Without dwelling on the details, it can be said the new hardware was in many ways a "lower tech" solution than the original.
The new hardware made this project *easier and cheaper* by being so compact that we could fit them in the existing terminal boxes. However, we could still have accomplished it somehow with older hardware.

I would define a gain as being due to a *new technology* if the improvement would have been impossible without hardware or software which
has recently become available. This was not the case in either of the previous examples.


**********************
Michael Griffin
London, Ont. Canada
[email protected]
**********************
 
G
> 1. The industry is overcrowded; there are too many manufacturers.
> Just look at any magazine like "Control Engineering". Dozens and
> dozens of boring ads hawking the same, tired equipment. You only
> need so many sensors, controllers, PLCs, HMIs, etc., etc., etc.

> So, can anyone tell me where I am wrong?

I don't think you're wrong.

But then, I'd have thought that a couple dozen different models of automobile would pretty much satisfy every identifiable consumer requirement. Ditto all the other commodity "durable" components that fill the marketplace: VCRs, camcorders, televisions, the umpty-thousand
different PC's and laptops from major manufacturers, mail-order houses, and corner chop-shops... There are a lot of these things around because they offer lots of trade-offs. Some are feature-rich and cost more while others cater to the "don't make me pay for more buttons than i'm
going to use" crowd; some are built to last and cost more while some are bought for an 8-year-old's bedroom where the additional cost isn't
justified because the additional robustness won't actually improve its survivability..." People have lots of reasons for making the choices they do; technical merit is just one of them. Even suitability to the task isn't always the most important one. Is there *any* technical
justification for a Humvee in a city? (Well, okay, Srbenica is a city. I limit the example to large, well-paved civilian-occupied cities not
currently at war.)

My technical prejudices would have me believe that engineers choose products to solve technical problems, based on clear-sighted evaluations of the technical merits and the price/performance characteristics of a component or solution, and the support and service offered by the seller. If this is, in fact, the case, then the wide variety of offerings are apparently justified by a broad range of requirements.

If this is not the case, and engineers are buying components and solutions based on political considerations, personal experience with a
particular vendor, favorite colors, religious preferences, fashion statements, keeping up with the Joneses, or whatever... then the wide variety of offerings is justified because the vendors have correctly identified that they are satisfying more than simple technical
requirements.

--
Greg Goodman
Chiron Consulting
[email protected] -- http://www.swbell.net/chironsw -- (713) 869-6876
 
G

Grenville Spearpoint, Nestle South Afric

Jim,

While it may not give industrial automation a significant lift there is scope for expansion in the food industry.

The confectionery industry is a good example. Not too long ago there was a occupation known as 'Sweet Makers' whose members had to serve an apprenticeship. IMO this industry lacks a number
of transducers that if available would make a valuable contribution to the expansion of automation.

Chocolate goes through a process of tempering not unlike the steel industry. This is a critical factor in it's production. It's been awhile since I was involved in the industry but I doubt if
a transducer exists that provides on-line measurement of chocolate temper. It is probably still done manually on the bench.

There also a high probability that flavours still cannot be measured automatically. Manned tasting panels are likely to be the order of the day. There are a number of similar tasks in the food industry that would benefit from the development of appropriate transducers.

You may also be surprised by the lack of automation expertise in some companies that are well established names in the supply of production machinery to the confectionery industry. Some of them make excellent plant from a mechanical point of view but automation of their plant is shockingly bad.

Regards

Grenville Spearpoint
[email protected]
 
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