Why is the Automation market declining?

A

Anthony Kerstens

Off topic, but sensor power still needs to be delivered and so, why bother with wireless when you have to run a pipe anyway? And if sensor power does end-up being wireless don't count on me being anywhere near it! I don't need the burns and excessive warm feeling. :)

Anthony Kerstens P.Eng.
 
D

Dave Ferguson

Come on guys think about it. Last year sales were through the roof and automation was the big thing. (Everyone upgrading everything in partial fear of Y2K. And everyone else climbing on board, buy me an extra PC or two just in case.......

This year sales down (Y2K) over, mad bosses because nothing major happened, money spent over budgets, beancounters go on rampage due to overbudget spending, automation losses....

No MBA needed to figure this one out.

Dave Ferguson

No Flames Needed, not trying to ruffle feathers but think about it.
 
Willy Smith said,

"Someone recently told me that 50% of all the lawyers are located in the US, and there are 400,000 students in US schools waiting to become lawyers. I haven't verified these numbers, but I know that these people are all going to need something to do when they get out. Wouldn't it be great if someone could figure out a profitable way for lawyers to innovate and become non-lawyers? This would truly be a contribution to US society, and would warrant a Nobel prize of some sort! ;^)"

Mr. Smith,
Here is the answer...
We need a legal-ease compiler so we can put these people to work writing automation code. I'm thinking "outside the box" of ways to put some people back in the box. So anyway, where's my prize?

I'll get right on it.

... joking of course.

Mark R.
 
Automation Listers :

This subject has stimulated a significant amount of feedback and new thinking, and I appreciate everyone's involvement!

Michael Griffin has been a major contributor - thanks, Michael. I'd like to address some of his new points :

Michael defines large as :
> For the companies I deal with, say 200 - 300 million dollars
>plus in annual sales for the largest down to 50 million dollars
>plus for some of the medium size ones. These are not giant
>companies,but this isn't a business composed of giant ones,
>rather it tends to have a lot of small or medium size ones.

Jim Pinto:
The financial and marketing definitions are :
Large : at least $ 1b and above
Medium : $ 100m to $1b
Small : $ 20m to $100m
Yes, indeed - the industrial automation is composed of a few (10-20 at most) - large companies and a host of small ones.

Michael :
> The point was though that if these companies are expanding at
>20 - 100 percent per year, why are the companies which supply
>them with components doing so poorly? What is so exceptional
>about the companies that I do business with that they are *all*
>so busy while the rest of the world isn't?

Jim :

I know *no* company in the industrial automation business that is growing 100% a year, (unless it is very tiny, which doesn't count).
Small companies (like OPTO-22 and Moore Industries - can you name a few others?) have stalled at $ 20-50m, with little or no consistent
growth (I'd really like to have *anyone* contradict me, with clear numbers).

Michael :

> Now I see Ontario booming, M. Levesque sees Quebec booming (with
>respect to the industry we are talking about) - and that just about covers
>the most of Canada

Jim :

Canada is about 10% of the US market, with *no* large industrial automation majors. Most Allen-Bradley Distributors are stuck, or declining. A-B
itself is declining. And, we are talking about some geographical segment "booming" ?
You guys are giving me a headache. Stop it!
(My apologies for my impatience - there is too much myopic repetition here).


Michael (on higher US pricing) :

> some of these US companies are physically closer to us
>than some of the Canadian companies, yet they bid 50% or more higher.

Jim :

Please understand that some US companies bid higher simply because they do *not* want the systems integration and custom-business.

Michael :

>Mr. Pinto may be entirely correct in his statement that the market is
>declining, but only from the point of view of US dollars.

Jim :

The market is declining - and *not* only in US dollars. The total market is stagnant, growing in spots, but declining overall. Doesn't anyone get my farming metaphor?? Farmers produce more, the overall market for food is the stable, but the individual farmhand (not the isolated, innovative farming conglomerate) is getting "poorer" and migrates to better work in other industries.
Please, I do *not* intend to insult the innovative and wealthy few in farming. I am drawing the parallel that there are simply fewer (and poorer) farmers.

Michael :

>Your article can be summarized as follows:
>Pinto's First Postulate: "The total automation market is stagnant
>... there may be some segments growing more than others, but the total
>market is simply NOT growing."
>Can you please cite some suitable statistics for this?

Jim :
No, it would take a book of numbers. And this is a discussion list. I refer you *not* to the Control magazines (who tend *not* to discuss these
topics openly, for fear of offending their advertisers), but to the financial analysts who drive the stock market. Rockwell, Honeywell, Emerson, Siemens and all the big companies have declining stocks, because market growth is simply not there. Consolidations (and consequent layoffs) are occurring because many companies are ailing.

Michael :

> Pinto's Second Postulate: "For the majors, their strategic core
>businesses continue to shrink and some segments are losing money."
>So, are Rockwell, Siemens, etc. seeing their PLC and motor control
>businesses shrink? Are their sales in these areas actually declining? By
how
>much?

Jim :

**Yes** indeed! PLC sales are declining (for the reasons I listed - lower price, competition, etc.) I challenge any major IA company reading this to come back and give us growth numbers for the past 1-2-3 years.

Michael :
> Pinto's Third Posulate: "most industry participants - vendors,
>customers, sales channels - continue to be blissfully ignorant of the fact
>that leadership is changing hands, talent is migrating to greener pastures
>and consolidations are occurring because business is stagnant."
> Are these people ignorant of the business stagnating, or are they
>ignorant of the "leadership changing hands" etc.? I must admit that I (a
>customer) was ignorant of both. Why though would the vendors and sales
>channels be ignorant of either stagnant business or "changing leadership".
I
>thought that that sales figures were all these guys ever talked about.

Jim :

*Key* point. It's the emperor's clothes syndrome - no one wants to admit that the industry is stagnant. Everyone *assumes* - making an ass out of u and me - that everything is OK.

*Hooray!* Michael, you have helped me to make my key point.

Let us - Michael Griffin and Jim Pinto and the Automation List challenge any major industrial automation company - Rockwell, Honeywell, Emerson,
Siemens, Invensys, ABB - to refresh this list with some growth numbers, or some of the correct facts and figures that are sorely needed.

Sadly, I think there will be no takers.

Sincerely :
jim
----------/
Jim Pinto
email : [email protected]
web: www.JimPinto.com
San Diego, CA., USA
----------/
 
K
Here are some numbers for one Process Control company. This data is all collected from Emerson Electric's 1999 annual report.

Total sales $14.2 Billion

The Process Control portion is $2.9 Billion which grew 7% from 1998. This growth is totally a result of acquisitions (Westinghouse and Daniel).
Underlining business declined in sales. The earnings (before taxes) for the division were $313 Million, down from $343 Million in 1998... particularly interesting in light of the acquisitions that "added" to earnings.

While this data does generally agree with the point of view that the process control market is declining, I would caution the List from drawing too many conclusions based on Emerson's stock price trends. Since the Process Control division represents less than 25% of the total revenues, Emerson's stock price could be influenced to a much greater extent by events in the remaining
75% of the company. I would encourage everyone to note the money Emerson has invested in its telecom power division... which incidentally is growing both revenue and earnings at rates similar to those turned in by the Process division in the 80s.

Great thread everyone!

Keven Dunphy
 
O

O'Connor, Denis

I just bought a used copy at www.half.com. There is one more copy available for $11.25. It sells on Amazon new for $22.40.

>Dick Morely invented the Modicon PLC, and is sometimes
>referred to as the father of the PLC.

>The book is:
>"The Technology Machine : How Manufacturing Will
>Work in the Year 2020" by Patricia Moody and
>Richard Morley; Free Press; ISBN: 0684837099

Denis O'Connor
Manager of Operations
EUA Cogenex Corp.
Boot Mills South
100 Foot of John Street
Lowell, MA 01852
 
A

Anthony Kerstens

When you think about it, lawyers aren't much different from us.

We carefully craft control software to control our systems. They carefully craft briefs and documents to control their "systems".

They have the right nit-picky mentality. Just teach them some electricity and programming.

Anthony Kerstens P.Eng.
 
There are many interesting points and replies to this subject. It was disheartening to read the initial report showing my industry heading downhill just as we are entering a new revolution of technology.
I remain cautiously optimistic. On one hand, the technology available can make better, more efficient manufacturers. The internet will never make razors, or cars, or barbecue grills, so manufacturing will always be a necessity. On the other hand, I have seen, especially in the automotive industry, many customers that are slow or even unwilling to accept new improvements to their plants. "It ain't broke, don't fix it" is soon followed by "Why are the Japanese building cars at such a high efficiency rate." As mentioned in the article, I have too many times seen short sighted business plans of cutting R&D and development spending to just maintain the plant a while longer. Many senior executives are just on a step waiting to move up so they look for short term gains, fat cutting, and good returns to get their next promotion. A new platform PLC5 is a vast improvement in programming and troubleshooting over a PLC2, yet how many PLC2s out there are still running - like the article says, the plant will continue to run and produce product, so how do you convince them to adopt new ideas and technologies?
I hope that some of the optimistic views expressed here are passed on to plant management, and for all of you working in plants, please consider this: The technology is here to make a quantum leap in manufacturing, increasing flexibility, efficiency and reducing costs to consumers. You can make your products better and more affordable if you take a far sighted approach to embracing the new revolution of information and automation systems.
I hope that this cry doesn't fall on deaf ears, both for the sake of my engineering and integration services and for the benefit of American manufacturing and the economy as a whole.
(stepping down off my soap box)
 
Grenville Spearpoint,
It is interesting as a Nestle resource that you find such a lack of technology because in counterpoint I have done a couple of projects for Nestle utilizing high level motion control and process control in England and Russia, where Nestle was in fact capitalizing on latest technologies. I do notice that the installed base of technology seems to flow slowly from corporate headquarters areas to plants in other countries, sometimes even other areas of a country. It seems that as these companies seek to build plants in other countries to save expense they also do not promote the highest tech solution for the plant. Is this due to a shortage of local expertise or further cost cutting measures I wonder.....
 
Good point about de-regulation. Also in my limited experience, power generation plants are often behind the curve in automation technology and could certainly benefit in increased efficiency. Another contributing factor would seem to be the further restricting rules on environmental polution, which will require more monitoring and control of pollutants by these newly constructed plants, as well as retrofitting existing plants.
 
A

Anthony Kerstens

One thing I've seen (in automotive companies) is
an attempt to follow the Japanese model of team
and "employee empowerment".

Such methods require a high commitment, not just
from management, but also from the employees. Some
of the automotive companies that I know of that
attempted this met with little success. In fact,
going down this particular garden path diverted
attention, resources, and funds away from the
task at hand and the bottom line.

I wonder if this sort of thing is a contributing
factor to decline in the automation market? If it
is, how important a factor?

Anthony Kerstens P.Eng.
 
David K. <[email protected]> e-wrote :

>I hope that some of the optimistic views expressed here are passed
>on to plant management, and for all of you working in plants,
>please consider this: The technology is here to make a quantum leap
>in manufacturing, increasing flexibility, efficiency and reducing
costs
>to consumers. You can make your products better and more affordable
>if you take a far sighted approach to embracing the new revolution of
>information and automation systems.

Jim Pinto, uncomfortable that his original article is seen primarily as a negative warning, writes :

I am delighted that David has presented this response!
The industrial automation business serves Customers (the end-user) through bringing increased Productivity. Everything else is incidental!

David K continues :

>I hope that this cry doesn't fall on deaf ears, both for the sake of
>my engineering and integration services and for the benefit of
American
>manufacturing and the economy as a whole.

Jim Pinto :

Thank you, David - I must tell you that I have had a lot of personal feedback that presents the positive and hopeful side!

It is my belief that growth is indeed coming - through agile and innovative new companies, who see what is needed and are utilizing new technology to bring results for their Customers. These are the people who succeed!

Cheers;
jim
----------/
Jim Pinto
email : [email protected]
web: www.JimPinto.com
San Diego, CA., USA
----------/
 
Anthony Kerstens suggests :

>One thing I've seen (in automotive companies) is
>an attempt to follow the Japanese model of team
>and "employee empowerment".
>I wonder if this sort of thing is a contributing
>factor to decline in the automation market? If it
>is, how important a factor?

Jim Pinto comments :

I am surprised that Anthony thinks this might be a
contributing factor for *decline* - rather than growth!

Indeed, the age of the web-communications (personal email, B2B, B2C) is the age of employee empowerment! People who have NOT empowered their employees have suffered badly! The high-growth, high-tech companies (CISCO, EMC, HP) could not survive without employee ownership and empowerment!

Jack Welch of GE (although he was known as "neutron Jack" - eliminating lots of people) converted GE from the stuffed-shirt syndrome to an empowered leader. The people who could not or would not take charge were eliminated.

Anthony is right about this :

>Such methods require a high commitment, not just
>from management, but also from the employees.

Jim :

Absolutely - commitment from both sides!
Empowerment is people "taking responsibility" for their own work and results - and unfortunately, some employees just don't seem to be able to do that!

Anthony :
>Some of the automotive companies that I know of that
>attempted this met with little success. In fact,
>going down this particular garden path diverted
>attention, resources, and funds away from the
>task at hand and the bottom line.

Jim :
IMHO - the programs of employee-ownership for major companies such as GM, Delta, United and others - have saved those companies from going downhill.

Japanese "empowerment" was an extension of their earlier "lifetime employment" which was not successful. Employee-ownership and empowerment was originated in the United States.

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

Anthony Kerstens

The question I tried to ask, but perhaps not so
clearly, was about the _attempt_ by companies
to follow the Japanese model.

Jim, let me restate my question:

I wonder if the attempt and subsequent failure
to implement management models (not necessarily
Japanese) is a contributing factor to decline
in the automation industry?

In one specific example I can think of, a
significant amount of training, reassignment
of resources, and expenditure of funds led to
dismal failure. Why? Not because the Japanese
model was bad, but the implementation was
not met by the commitment required. There was
not just a lack of commitment, but general
hostility toward those that showed interest. The
subsequent failure in fact made the situation worse.

Jim, you mention specific successes. Are there
any failures, and how big an affect did they have
on the automation industry?

Anthony Kerstens P.Eng.
 
P

Pierre Desrochers

Just a little addition to this...

I've been working in the past for a company which was built by a German conglomerat. It was built entirely with relays and controler (TTL transistors and analogic boards). When I ask one of the early engineer on why there was no PLCs and PCs, I was told that.

1. This plant was a copy of 7 others they add in Europe and they use all their spare parts to build it since the others were revamped to newer
technology
2. They believed they could not find lower level technical personnel in North America which were up to the challenge of troubleshooting such beast ... (this was mid-80s)

I've heard number 1 reason many other times after this occasion ... in different plants...

My 2 cents

Pierre
[email protected]
 
Hmmm. I don't see it that way. Not that employee empowerment doesn't make some sense, but I don't see it as the key to success in the "new" e-commerce world.

I would argue that B2B and B2C is primarily software marketing hype. Check out the companies in that sector. Check out how the overwhelming majority of companies are doing supply chain management. Note the fact that there is not a
clear standard for B2B and B2C. Vaporware and hype.

EDI is still the prevalent form of inter-company transactions. The web provides a better way of viewing downstream forecasts, but it is still not linking the supply chain.

Cisco has a unique business model. I don't see employee empowerment being the key to what their doing. They extend their enterprise systems into their supplying plants.

I think automation is more affected by cheap labor than it is modern management techniques.


From: Jim Pinto <[email protected]> :

Anthony Kerstens suggests :

>One thing I've seen (in automotive companies) is
>an attempt to follow the Japanese model of team
>and "employee empowerment".
>I wonder if this sort of thing is a contributing
>factor to decline in the automation market? If it
>is, how important a factor?

Jim Pinto comments :

I am surprised that Anthony thinks this might be a
contributing factor for *decline* - rather than growth!

....<clip>
 
Anthony Kerstens <[email protected]> restated
his earlier question :

>I wonder if the attempt and subsequent failure
>to implement management models (not necessarily
>Japanese) is a contributing factor to decline
>in the automation industry?
>In one specific example I can think of, a
>significant amount of training, reassignment
>of resources, and expenditure of funds led to
>dismal failure. Why? Not because the Japanese
>model was bad, but the implementation was
>not met by the commitment required. There was
>not just a lack of commitment, but general
>hostility toward those that showed interest. The
>subsequent failure in fact made the situation worse.

>Jim, you mention specific successes. Are there
>any failures, and how big an affect did they have
>on the automation industry?

Jim Pinto responds :

Yes, there has been a lot of re-alignment and effort at re-organization to develop employee ownership and empowerment. I am sure that this indeed absorbed a lot of resources. However, I cannot think of any failures that resulted specifically from this effort and wasted resources in this type of involvement.

Off-line, I received one wise-crack (at least I think it was a wise crack, and not serious) that "employee-ownership" was not an American idea - it was invented by a German (presumably Karl Marx) and implemented by the Russians
(presumably Communism).

Seriously, there is a subtle and significant difference between "collective ownership" and "employee-ownership". The former reduces emphasizes the "collective" - the State; the latter emphasizes the individual Employee-owner, who becomes individually responsible and accountable.

As you can tell, I am passionately in favor of individual-empowerment and employee ownership! I have seen significant success, (and admit that I am probably blinded to the failures).

&lt;soap-box on>
I strongly advise Engineers everywhere to rise up, and demand stock options, ownership and equity-sharing plans! Or else, start your own company!
&lt;soap-box off>

Cheers :
jim
----------/
Jim Pinto
email : [email protected]
web: www.JimPinto.com
San Diego, CA., USA
----------/
 
The Industrial Automation market is declining because there have been no advantages to continue to buy automation systems since the only changes have been are in hardware. The software is still the same and provides no added benefits for companies to purchase new versions. There has been no integration of front office with back office; no means of following the entire manufacturing process to track information/data, and it still takes a lot of time and effort to modify programs and to reconfigure systems.
 
F

Faiz M Bhutta

To my point of view, industrial automation market is not declining but changing very fast due to globlalization. If in one market there were few
players, now there are many players and market share of companies is divided in one market but they searched new markets and compensate the revenues. Other phenomena is fastly changing technologies which has created new avenues for business and technology becomes obsolete quickly and product life cycle is short. The mergers and acquisitions is the phenomena to have more market share in one market segment and less market share in other market segment causing more agreggate income than previously. In fact the industrial market is not declining but expanding and due to factors like international competitive environment, globalization, e-business
environment, increasing customer awareness and internet access to markets & knowledge, margins are no doubt decreasing but the companies compensate by searching new markets and web technology provided easy path for new market
search and penetration with less risk and less expenses which indirectly adds to the revenues because of less marketing expense. I conclude that
market size is expanding, revenues are increasing but margins are squeezing.

Faiz M Bhutta Intech Process Automation
 
F

Faiz M Bhutta Intech Process Automation

Yes, I read the article at JimPinto address. We have to see the factors causing market change
1.Globalization of markets causing highly volatile environment for market forces
2.customers have limitless choice because of internet access to websites
3.shorter product life cycle because of fastly changing technologies & needs
4.Easy and low cost access to markets and information because of fastly developing web technology and netwroking/communication tools.
5.cost and efficiency a prime concern
6. continous restructuring to improve efficiency
7. Contingency management theories devoid of human element

All above factors are instumental in causing change in the market which does not mean that autoamtion market is declining. Yes, it is true that above factors are casing decline in marginal profits but market expnasion and growth creates more avenues for business.

Will it stay. Yes, it will stay till the market forces balance. It is matter of supply and demand. Old forces will die and new forces will emerge and I think that this process will continue till 2010 and marginal profits can be increased if the asian markets be provided impetus to grow quickly.
Faiz M Bhutta
 
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