Old Game, New Rules
"No Child Left Behind" is a controversial topic that is sparking a heated nationwide debate. Proponents want to ensure that all children receive an equal education. Opponents argue that it's impossible to apply the same rules to everyone, especially when different learning abilities or socioeconomic backgrounds are factored in.
The concept of "No Manufacturer Left Behind" hasn't been grabbing headlines. But, machine builders and systems integrators are faced with a similar dilemma. They are finding themselves responsible for more and more value-added services, such as manufacturing feasibility analysis, that were traditionally handled by their customers.
Over the last few years, there has been tremendous change in the manufacturing landscape. The effects of outsourcing, offshore production, layoffs, early retirements and lean manufacturing have changed the rules of doing business. Today, product life cycles are shorter and customer expectations are higher; equipment delivery times are shorter and manufacturers hold onto their money longer.
Many machine builders and systems integrators have been struggling to survive. Meanwhile, due to downsizing and other factors, more and more manufacturers have come to depend on integrators for project management support services.
According to most economic indicators, the storm clouds are finally parting and brighter days appear to be ahead for everyone. Manufacturers that have put off automation projects are starting to invest in capital equipment. Systems integrators claim to be swamped with work.
Business is picking up in many different industries. The Institute for Supply Management (ISM, Tempe, AZ) claims that economic activity in the manufacturing sector has been growing for 9 consecutive months. "Both new orders and production remain quite strong, indicating that the manufacturing sector is experiencing a much-needed recovery," claims Norbert Ore, ISM's chairman.
Of the 20 industries in the manufacturing sector, Ore says 17 have reported growth, including instruments and photographic equipment, transportation equipment, industrial equipment, computers, electronic components and equipment, fabricated metals and furniture.
According to Tom Bieber, president of Apex Automation Inc. (Elizabethtown, PA), systems integrators are finally on the rebound, because the capital equipment market typically lags 6 to 8 months behind the rest of the economy. For instance, Bieber says his company's sales forecasts are up 100 percent for the first quarter of 2004. "All signs and indicators of a recovery are there, but it still needs to show up in the form of cash," notes Bieber. "Many manufacturers are still reluctant to release funds. Long-term confidence just isn't there." Bieber believes people are being overly cautious, in case the economy bottoms out again later in the year.
"Looking forward, there are good reasons for optimism," adds Klaus Woerner, president of ATS Automation Tooling Systems Inc. (Cambridge, ON). "On a fiscal year basis, [our] order booking activity and backlog levels have improved. However, we continue to see some delays in customers placing orders. We are now beginning to see better capacity utilization, and the economy is instilling greater confidence in our customers."
Woerner says his company continues to see "solid opportunities for new customer assignments, both follow-on and new. In addition, quotation activity remains robust." Since the end of December, new automation system order booking activity at ATS has totaled approximately $54 million. "New assignments in precision components are continuing to ramp up and production processes are stabilizing, providing the basis for better efficiencies, economies of scale and margins," Woerner points out.
Many systems integrators claim that manufacturers can't hold off on automation projects forever. In fact, some observers believe the dam is about to burst after several "wait and see" years.
"We had a ton of projects out there a few years ago, but top management was afraid to spend money," says Mike Perreault, vice president of Midmac Systems Inc. (St. Paul, MN). "A lot of well-developed projects are still waiting to be approved."
"Manufacturers will again turn to automation to lower costs, increase yields and gain competitiveness," adds Mike Cybulski, vice president of Eastern operations at ATS. "[However], those integrators that have survived the past few years are somewhat leaner themselves and may not be able to react to a wave of orders."
Indeed, many systems integrators are taking a cautiously optimistic stance regarding long-term growth. "If demand increases and keeps going, we'll have some tough decisions to make," says Bieber. "We can either expand or hold the line. If we don't add staff, we'll run the risk of pushing delivery times out."
Despite all the changes occurring in manufacturing, some things never change. For example, the most important factor for success in any automation project continues to be the early involvement of an integrator. It's still a good idea to work with automation vendors as early as possible. "Manufacturers that truly engage [in] a partnership relationship, and open the door early in the project cycle, typically are more successful than those that come in late and only are interested in a competitive bid and lowest price relationship," claims Cybulski.
Early involvement typically results in better specifications, less technical risk, fewer changes and a better understanding of the entire project. Effective project management is the other basic tenant of successful automation systems. Lack of parts, prints and specifications, or the inability to juggle numerous tasks, will slow down even the biggest and best automation project.
More With Less
To be successful, automation projects must be competitive in price, provide a positive return on investment and be delivered on time. But, expectations are greater than ever. Manufacturers are demanding more value from integrators because they are under intense pressure to compete and control automation costs.
"The rules [of doing business] have changed," says Dan Alcombright, P.E., manager of programs and project engineering at Remmele Engineering Inc. (St. Paul, MN). "Many automation teams are given very constrained budgets. For instance, in order to bring a certain product to market, they're told that they can't spend more than $1.5 million in capital equipment."
Shorter product life cycles are the rule rather than the exception today. As a result, most manufacturers are emphasizing productivity and looking for turnkey systems that provide long-term flexibility. They want production equipment that is scalable.
Reusable and reconfigurable automation benefits manufacturers because the equipment can be used for more than one product line or more than one assembly process. With short life cycles, customers are typically more interested in flexible machines.
Timelines are also shrinking. For instance, Alcombright claims there has been a 50 percent decline in the time available to complete automation projects.
Machine builders and systems integrators have been forced to create new methods to shave weeks off project timelines. Five years ago, a project might have lasted 45 weeks; today, the same project might be only 25 weeks. World-class machine builders have improved internal practices and tools to streamline the building cycle. Better communication and specifically structured teams help speed the process without sacrificing quality, and each project contributes to an expansive knowledge base that carries through to future efforts.
Ed Zimmerman, P.E., director of technical operations at Apex Automation, says customers have been waiting until the bitter end to approve projects. "They are looking for shorter delivery times than ever," he points out.
"Some people are spread so thin that they can't do anything until it's late," adds Zimmerman. "Everyone has lost head count." They don't have extra manufacturing engineers to assign to a second priority project. "Many manufacturers are trying to figure out where to apply their [limited staff] resources," says Zimmerman.
Many engineers are so strapped for time that they can only handle the highest priority projects. When a lower priority project turns into a top priority, because of shifting market conditions, the engineers panic.
"We get some unrealistic requests today," notes Zimmerman. "We have more and more customers coming to us saying ‘I have 8 weeks [to do a job that traditionally would take 12 weeks or more]'."
New Roles to Play
Manufacturers that have traditionally maintained large internal engineering departments have made drastic cutbacks. To reduce costs, companies ranging from General Motors Corp. (Detroit) to Johnson & Johnson Inc. (New Brunswick, NJ) have been aggressively offering early retirement packages to manufacturing engineers.
The engineers left behind have been forced to change the scope of their daily routine. They're wearing many different hats today and have less time and fewer resources to devote to project management. The changing role of engineers is challenging the traditional integrator-customer relationship.
"A lot of projects are sitting there ready to go, but because of downsizing, there's no one to monitor them," says Midmac's Perreault. "Engineering departments aren't there to support some of the past projects, let alone support new projects."
Sometimes, there are no manufacturing engineers at all. For example, Zimmerman says he's dealing with more product design and product development engineers, which sometimes leads to problems. "They don't always know what they want," notes Zimmerman. "They can't communicate important things such as capacity requirements or cycle rates. They can't tell us if certain specs are based on cost or volume. In many cases, they simply don't know the questions to ask [like manufacturing engineers]. They know the product side, but not the engineering side. It puts more of a burden on us."
Many young engineers don't have the experience to manage all the steps in an automation project. "However, they're willing to listen," says Perreault, "and they value what we bring to the table. If we're willing to offer all of this up-front expertise in project management, they ultimately become a better customer. It gives us a competitive edge and minimizes the risk of the project. There's more of a win-win for both parties."
Traditionally, integrators have played a crucial role ensuring that automation projects achieve a cost-effective balance among key issues such as flexibility, throughput, time-to-market and cost. But, they're now taking on more project management responsibility.
"Manufacturers are developing creative methods to do more with less," Remmele's Alcombright points out, "and their [automation] partners must learn to do the same. To stay competitive, [we] must now provide a full range of engineering and development services to add value throughout the new product development process.
"Instead of focusing on a single aspect of the process, as [we] may have done in the past, [machine builders and systems integrators] need to bring a more complete matrix of solutions to the table."
Indeed, the role of the systems integrator has changed. They are more responsible for the total project than ever.
"More and more, we are acting as an extension of our customers' in-house resources," says ATS Automation Tooling's Cybulski. "Whether we locate our automation engineers directly in our customers' plants, contract concurrent-engineering studies, prototype tools and proof of concept work, we have definitely increased our engineering services."
Systems integrators are working more closely with their customers to ensure that automation projects achieve long-range corporate goals. They're performing more manufacturing feasibility and what-if analysis.
"[Today], a focus on needs assessment, close and active listening, and the ability to work as true collaborative teams are key," says Alcombright. "Solutions can no longer come ready-made, but must grow organically from interaction with the client."
In today's environment, collaborative relationships are the key to successful projects. Builder, integrator and manufacturer must become one team to deliver cost-effective equipment on tight schedules. The more closely each side listens to and trusts the other, the more effective the relationship will ultimately be.
Collaboration Is Important
"Today's machine builder has to listen, ask better questions and be open to deep analysis of the core issues," says Alcombright. "Understanding the client's critical-to-quality requirements and workflow allows machine building partners to develop custom solutions that address multiple areas of the client organization, including engineering, operations, maintenance, quality and information systems.
"Managing complex system projects is a lot like whitewater rafting," says Alcombright. "The team needs to anticipate both smooth waters and rapids, to watch for rocks and to know where the river both widens and narrows. An effective team, with outstanding leadership, gets through the rapids with everyone still safe in the raft. The ride may be a little wild at times, but in the end everyone agrees it was a great experience."
Great project management requires five key things: The right team, a reasonable plan, excellent communications, a closed-loop project management system, and committed leadership.
Integrators often initiate discussions and maintain dialogue between all parties, such as purchasing, finance, marketing, safety and maintenance. "We try to force departments to get together," says Midmac's Perreault. "Often, they're not talking. We have to work hard to keep an open dialogue going so they can address various issues."
Unfortunately, many automation projects have not been reviewed as closely as in the past. "We need to do more scrutinizing and risk management," Perreault points out.
With many engineers doing the workload of several people, integrators claim they're seeing more and more projects that are half-baked.
"Many engineers are simply stretched too thin," explains Perreault. "As a result, they're not putting the appropriate amount of time into ensuring [the success of the project]. For instance, there aren't as many meetings as in the past. Many engineers are not taking time to conduct preliminary investigations and get key departments involved to qualify the cost-effectiveness of projects.
"They don't seem to be writing detailed specs, as in the past," warns Perrault. "They send out a one-page spec for a multimillion dollar system. That's crazy."
Perreault says he recently received an RFP that was simply one piece of paper with eight bullets on it. "It was unbelievable," he says. "Various aspects were missing, such as key variables and tolerances, documentation and operator interaction requirements." That's hard to believe, but Perreault believes it's another sign of the times and a sad indicator of how today's engineers are being asked to do too much.