Backed by a string of profitable years, many West Michigan manufacturers are investing in labor-saving technology and providing themselves a hedge against future softening in the market.
That’s translated into brisk business for automation equipment manufacturers and technology consultants, who say they’ve been flooded with orders as clients seek out ways to lean their operations and add flexibility to their shop floors.
“I’ve been in the automation side of the business since 1999 and I don’t think I’ve ever seen it this busy,” said Mark Ermatinger, vice president of sales at Zeeland-based Industrial Control Service Inc. “I’ve worked harder in the last three weeks than I have in the last five years.”
Industrial Control serves as a consultant for manufacturers looking to automate their processes.
While manufacturers have turned to automation technology for multiple reasons ranging from quality issues to navigating a shortage of skilled labor, they also see the technology as a way to remain lean and profitable in the face of the next economic downturn, Ermatinger said.
“I think manufacturers recognize they have to take advantage of the economy, and spending money on automation is a safe and lucrative option,” he said.
Manufacturers’ focus on automation technology has translated into substantial growth for Industrial Control, which increased its annual sales from $2.5 million at the depth of the economic downturn to nearly $5 million in 2015. Ermatinger expects the company to generate upwards of $7 million in sales this year.
Those good fortunes come as companies realize they need to invest in automation equipment to avoid being caught off guard in the event of the next recession, according to Mike Jeffrey, director of automation at ArtiFlex Manufacturing. If companies eschew investments in automation, they will lack price competitiveness when the market contracts, he said.
“Eventually, there is going to be a slowdown in manufacturing and it’s going to become more competitive,” Jeffrey said. “So if you’re not setting yourself up to be a cash-based company that can be very lean, it’s going to be very difficult.”
The Grand Rapids-based manufacturer of robotic spot welding, assembly and other automation technology worked with Industrial Control earlier this year on a project for Pennsylvania-based Worthington Steelpac.
It was a project that fit the theme of clients’ investment capital resources back into their equipment in recent years, Jeffrey said. The automation division at ArtiFlex works with customers in the automotive, agricultural, aerospace, medical device, food processing, furniture, and home appliance industries and tripled its annual sales in 2015 to about $5 million. The firm expects to grow an additional 200 percent this year, he said.
MARKET GROWTH
Industry sources differ on their projections for when the next downturn will occur.
But Ermatinger at Industrial Control expects the automation equipment industry to continue growing steadily over the next two years before the entire manufacturing sector undergoes a slowdown around 2018.
That’s a view shared by economists from ITR Economics in a recent production forecast for the industrial machinery market commissioned by the Association for High Technology Distribution, a trade group for the automation industry.
Overall, industrial demand for robots in the U.S. has increased substantially over the years. Between 2010 and 2014, sales for industrial robots rose 48 percent, with manufacturers purchasing $1.6 billion in new robots in 2014, according to data from the International Federation of Robotics.
Experts predict that demand will continue to grow with companies investing $5.1 billion in new robot sales in 2016, according to data from the Freedonia Group, a market research firm. While other economists cite a potential downturn occurring in 2018, the Freedonia Group expects automation equipment sales to reach $9 billion by 2021.
Mark Lindquist, president of Wyoming-based contract manufacturer Rapid-Line Inc., says that despite strong production levels overall, the economy has already arrived at the next downturn in the cycle, driven by a “major retraction in Chinese manufacturing.”
In response, Rapid-Line has invested $2 million in automation equipment since 2013 and plans to invest an additional $1 million in 2016 while the market is still relatively healthy, Lindquist said. The reason: Rapid-Line needs to keep its operations as lean and flexible as possible to be prepared to weather the next eventual downturn, he said.
MOVING TOWARD AUTOMATION
Manufacturers are increasingly turning toward automation because of the flexibility it allows them in their operations. Automation also helps manufacturers compensate for a lack of qualified skilled labor and better navigate future fluctuations in the labor force, Ermatinger said.
“It’s hard to get people to work and the people manufacturers do find aren’t working out,” Ermatinger said. “If you automate those cells, you wouldn’t have that issue. You still need people, but it’s not as people-dependent.”
The labor-saving benefits of automation especially come into play when it’s time to upscale or downscale a company’s workforce, sources said. Rapid-Line sees its automation investment as a “safety net” that allows the company to avoid costs associated with laying off workers in the event of a downturn, Lindquist said.
“If you don’t have people involved, the pain of picking up or retreating is not all that bad,” Lindquist said. “If you tell a (computer), ‘We’re going to go slower next week,’ it isn’t going to know the difference.”
With automated equipment, manufacturers can also more simply update their tooling when it comes time to integrate new products or processes into its operations, saving time and money, said Jeffrey at ArtiFlex. That’s especially important for manufacturers dealing with customized orders that require them to execute quick changeovers on the shop floor.
Moreover, if a machine goes down, companies can use another robot to pick up the slack more efficiently than if they relied solely on human labor, he said.
“If a bot goes down, you can just change the tooling on another and keep the line running instead of shutting down an OEM,” Jeffrey said.
Increasing quality standards in the industry have also pushed some manufacturers to more automation. OEM customers are demanding quality on such a high level that it’s becoming challenging for humans to accomplish on their own, Ermatinger said.
For example, Industrial Control is currently working with a West Michigan manufacturer to replace the company’s costly inspection gauges with 3-D visioning software. The new technology could save the company as much as $30,000 per month, Ermatinger said. He declined to share the name of the customer, citing a nondisclosure agreement.
“Without automation, they can’t really achieve what manufacturers want,” Ermatinger said. “They’re trying to make the operators they have more efficient.”
But the trend toward automation isn’t universal. German automaker Mercedes-Benz recently told Bloomberg that it removed robots from the assembly line of its S-Class sedan since the machines couldn’t keep up with all of the customizable content on vehicles these days.
IMPROVING USER INTERFACE
As automation technology has improved over the years, the equipment has become more accessible from a cost perspective and from the standpoint of programming, Jeffery said.
In the past, manufacturers needed to manage a slew of specialists coming in and out of their facilities to set up and maintain their machines. Today, manufacturers handle more of that process on their own, but automation equipment still requires highly-paid controls engineers to set up the programs.
As the user interfaces improve and equipment makers develop more intuitive programming, manufacturers have been able to move more of the process in-house.
“It’s getting simpler and simpler all the time,” Jeffrey said. “Eventually, you’ll be able to hire someone that you won’t have to pay $70 to $100 grand a year to program things because it’s easy — which may be a little scary, but at the same time, it brings our costs down.”
Jeffrey cites collaborative robotic technology, the next generation of automation, as an example of how much UI systems are improving. Instead of having to program each axis of the robot, operators can physically move the robot along the path they want it to travel. Collaborative robots also allow people to work in close proximity without a barrier because of their increased safety features.
However, it doesn’t necessarily require an investment in the most cutting-edge automation technology to find easy-to-manage solutions, Lindquist said. Many manufacturers can easily integrate entry-level automation such as monitoring software on inexpensive Raspberry Pi computers, he said.
“It doesn’t take a techno-specialist to hook that s*** up,” Lindquist said.
