Recovery is on track, sort-of

The subjects today are “jobless recovery” and “productivity,” both interrelated so I will treat them as one. The financial media has seized on the former in an attempt to explain why the overall economic news is positive but the not-so-positive news on the unemployment front continues week after week. And more astute observers looking for causes have latched onto the recent productivity increases as one culprit.

There may be some truth in this as we close out the first quarter of 2010 and the time for retrospective analysis is upon us. From what I have read, heard, and experienced so far this year, the picture for manufacturing, globally, is about what was forecast in January; slow but positive growth in the manufacturing sector and caution on the part of the manufacturers in regard to company expansion and capital spending. In January I was told by a number of equipment suppliers and their customers that the first quarter would be the bellwether and that a “wait and see” attitude before committing to expansion would be the prudent thing to do. And the manufacturers could afford to do this as they were running lean and able to handle increasing business from their customers with the status-quo. All of this understandable and commendable.

But as the quarter closes we should have started to hear comments from the capital equipment suppliers that their markets were beginning to stir. And it is happening, for industrial lasers in market sectors that were identified as potential drivers back in January—medical devices, energy, and semiconductors. But the fabricated metal products sector still seems frozen, about what was expected with that industry talking about a late-first-half recovery beginning.

News of companies hiring temporary workers and others adding part-time help is often heard today. Becoming more common is the talk, and action thereof, about automation; taking us back to the jobless recovery and productivity issues. Investing in automation for manufacturing operations is expensive but not as expensive as the recurring costs of salaries and benefits. I have spoken to manufacturers who, having run lean for more than a year, are reassessing their production operations as they gear up for business growth and asking the hard questions about restaffing. Many of these companies are looking hard at what they want to be as their businesses normalize to pre-recession levels.

Back in the summer of 2009 we heard a lot about companies using the recession as a time to look to innovations. It may turn out that innovation is a cover word for automation that will lead to productivity and profit enhancement. No mention of employment here.

I’ve just returned from a trip to Europe where the same prospects and solutions are under consideration in manufacturing, both in the established industrialized West and the burgeoning states of Central Europe. Admittedly there are certain restrictive government polices that acted as a deterrent to employment reductions and consequently inhibit to a degree automated solutions to productivity increases, but the issue is a factor and automation is a well used word today.

I had the privilege of visiting two fabricated metal product producers in two regions in Belgium. One, a manufacturer of air handling equipment, has automated his turret punching systems with robot load/unload automation that not only allows for unattended and more productive operations but in the doing also improves the quality of the parts produced on the systems. As he said, “In order to compete against China (his main competitor) he must keep overhead costs down.” If he adds non-automated equipment (needing more people) it will take him 5 years to get his investment back, with automation it is 3 years.

The other, an international maker of industrial paint booths, has added a laser cutting system that uses an automated shuttle system to load/unload sheet metal and cut components, again adding the advantage of “lights-out” operation. In fact, at this company the only staffed work shift was leaving the plant at 4 p.m. and the lights were being turned off, and yet the laser cutter was still spitting out cut parts and the shuttle was feeding more sheets and shifting completed work. And yet no mention of this was made by the company owner who didn't even call this to my attention as I was exiting the now abandoned shop floor.

Both of these represent recent additions and investment made as the recovery begins, in automation, not in employment, as both company owners told me they do not have plans to add people. Just a small example of what I think may be support for the “jobless recovery” idea; and certainly examples of productivity enhancement through automation.