After traveling 9000 miles in 16 hours, it is a bit much to present, over six days, three seminars on the current state of industrial laser material processing and to rub shoulders with CEOs of the leading South Korean laser system manufacturers. But you do what you have to in this global technology era.
I was pleased to present my views on trends in the industrial laser material technology to several Korean audiences. The main event was participating in the 3rd International Microtech – MEMS Business Conference, a part of Laser Korea 2010. In return I had the opportunity to meet with several of the leading Korean manufacturers of industrial laser systems for both macro and micro processing.
Over the years, Korean laser companies have been reticent in sharing market data with outsiders. On this trip I found these companies more willing to define and quantify their business and markets. I sensed a sort of frustration with some of the CEOs I met with in regard to their peers across the Yellow Sea in China. Several times the comparative size and strength of the Korean suppliers vis-à-vis their counterparts in China were called to my attention.
The upshot is that in my Annual Economic Review I may have been underestimating the size and output of the Korean system manufacturers. While most of the information shared was oral, it wasn’t hard to value the Korean industrial laser system business at $600-$700 million, a figure that surpasses the reported number from China. And more to the point, China, along with Taiwan, are the largest markets for Korean laser system exports.
Because of this newfound cooperation, I expect to tweak my 2010 numbers as I begin to work on this year’s economic report.
Monday, August 30, 2010
Tuesday, August 3, 2010
The sharks are circling
This blogger has been on a bit of a hiatus enjoying some picture perfect vacation weather here in New England. Not that you particularly care but the month of July set temperature records here and we experienced several 90 degree heat waves during the month.
One consequence of this was rising water temperatures that caused the seal population along the Cape Cod coast to increase dramatically drawing the attention of Great White Sharks that also posed threats to salt water enthusiasts.
I’ve just finished compiling data for a review of fiber laser systems used for sheet metal cutting that will appear in the September/October issue of Industrial Laser Solutions. I identified a dozen suppliers that will exhibit flat sheet cutters at one or more of the big international machine tool shows scheduled for the next three months.
What is significant is the growth of the fiber laser as the heat source for this major applications sector. It is estimated that about 100 flat sheet fiber laser cutters were sold in 2009, an accomplishment in a year which saw sales in the entire sector drop by as much as half at some equipment suppliers. Based on my estimate of the 2009 flat sheet laser cutting market, this means the fiber laser now represents about 3% of total sales. And indications are that the unit numbers could double in 2010, especially as these laser systems will be highlighted at the big fabricating shows.
Three new players in this market, Amada/JDSU, TRUMPF and Hypertherm, will create some excitement at these shows, mostly because they will introduce new fiber lasers into the marketplace, posing new competition for industry leader IPG Photonics.
What can come of this is the possibility of significant growth in the fiber laser metal cutting business. Amada and TRUMPF are already among the market leaders with their CO2 powered units and Hypertherm, known for plasma technology, is offering a fiber laser package to system integrators. Whether these sales are pirated from CO2 laser sales remains to be seen, but the thinking is that even if some of this occurs it will not diminish the impact of sales to current non-laser users. There are a large number of shops now cutting sheet metal that have chosen not to invest in laser cutting, chief among these are shops using plasma, which might want to expand into precision cutting of thin gauge stainless steel, for example.. Will they now be tempted by the new fiber laser cutters? Some in the industry are betting on yes.
There are other fiber laser/system suppliers that can also impact the fabricated metal products market when they crank up their promotion. This could happen as this market sector finally recovers from a two year recession that has not, until now, shown the rapid rebound experienced by other industrial laser market sectors.
The temperature of the metal cutting market is rising drawing customers and, like the seals in the waters off the Cape Cod coast attracting sharks, in this case new market entrants ready to challenge the industry leader.
One consequence of this was rising water temperatures that caused the seal population along the Cape Cod coast to increase dramatically drawing the attention of Great White Sharks that also posed threats to salt water enthusiasts.
I’ve just finished compiling data for a review of fiber laser systems used for sheet metal cutting that will appear in the September/October issue of Industrial Laser Solutions. I identified a dozen suppliers that will exhibit flat sheet cutters at one or more of the big international machine tool shows scheduled for the next three months.
What is significant is the growth of the fiber laser as the heat source for this major applications sector. It is estimated that about 100 flat sheet fiber laser cutters were sold in 2009, an accomplishment in a year which saw sales in the entire sector drop by as much as half at some equipment suppliers. Based on my estimate of the 2009 flat sheet laser cutting market, this means the fiber laser now represents about 3% of total sales. And indications are that the unit numbers could double in 2010, especially as these laser systems will be highlighted at the big fabricating shows.
Three new players in this market, Amada/JDSU, TRUMPF and Hypertherm, will create some excitement at these shows, mostly because they will introduce new fiber lasers into the marketplace, posing new competition for industry leader IPG Photonics.
What can come of this is the possibility of significant growth in the fiber laser metal cutting business. Amada and TRUMPF are already among the market leaders with their CO2 powered units and Hypertherm, known for plasma technology, is offering a fiber laser package to system integrators. Whether these sales are pirated from CO2 laser sales remains to be seen, but the thinking is that even if some of this occurs it will not diminish the impact of sales to current non-laser users. There are a large number of shops now cutting sheet metal that have chosen not to invest in laser cutting, chief among these are shops using plasma, which might want to expand into precision cutting of thin gauge stainless steel, for example.. Will they now be tempted by the new fiber laser cutters? Some in the industry are betting on yes.
There are other fiber laser/system suppliers that can also impact the fabricated metal products market when they crank up their promotion. This could happen as this market sector finally recovers from a two year recession that has not, until now, shown the rapid rebound experienced by other industrial laser market sectors.
The temperature of the metal cutting market is rising drawing customers and, like the seals in the waters off the Cape Cod coast attracting sharks, in this case new market entrants ready to challenge the industry leader.
Tuesday, July 13, 2010
Is a puzzlement
I’m sitting on a hill in Little Compton, RI, above a tidal pond connected to the Atlantic Ocean, admiring what would be a great view except for heavy, black clouds that are being sundered by lightning flashes. It just figures that three weeks of hot and rain free weather were broken by a Canadian cold front moving through on a day that was planned for some R & R with classmates. Before you hand me that old saying about needing the rain, consider that it didn’t have to be today.
It’s all about expectations. Most every time I go down to the Maine coast I can count on foggy weather, save a glorious week in Boothbay Harbor when it only rained one day. So my expectation when planning a trip there is that inclement weather will occur.
A few weeks ago I had expectations about the country talking itself into a double-dip recession, and sure enough we seem to be doing it. I grant you that the economic news is not great, and were it not for the distractions of the World Cup, it likely would have been worse.
One of the songs in the movie Anna and the King of Siam is titled A Puzzlement. The King sings “Is a puzzlement” because he does not understand the changes that are happening. I have adopted this phrase when I am frustrated with certain events.
For example, U.S. unemployment figures were down last week, but the inevitable "but" was that they were not down by as much as anticipated. Housing starts were up last month, but not by as much as hoped. Steel production was down more than expected, but still was up from the preceding period. It’s when good news is not so good news, is a puzzlement.
And thus comes the second half of the "W" recession, or when a recovery is not large enough to be a recovery. Congress is back from another of its vacations so I expect that rhetoric will fill the news and talk shows about a slowing economy. The political right is using this to shoot at the president, while the political left will use it as raison d’être to spend more stimulus money. No matter how you cut it, we’ll all be the losers one way or another once the pols decide to use the double-dip as a political tool. Another puzzlement.
The laser business is having it mild ups and downs, with some sectors experiencing a mid-summer dip, but when haven’t they gone through this? I recall when I was in the capital equipment business we wrote off July as a month when we could not expect orders at the previous month's levels. So what’s changed? It wasn’t a recession then, just the summer doldrums. Now as it occurs in 2010, some say it’s the precursor to another recession. Is a puzzlement.
Expectations are that consumers will spend us out of recessions, and yet we chastise them for running up credit and going deeper into debt. I was on a rare shopping trip for summer wardrobe bargains on a weekday last week. The department store was pretty much empty, especially the men's department. I asked the sales clerk if he was concerned about the economy. No, he answered, a flier just came out advertising a big sale next week, and all the customers are holding off making purchases until then. I didn’t see that flier or I would have waited myself. . Luckily, the clerk kindly set my goods aside to be paid for this week at the sales prices. Consumer recession? Is a puzzlement.
As I wandered the store, waiting for my wife to find some bargains to lay-away for the sale, I perused the clothes racks looking at sewn-in labels. It’s a game I play when I kill time in the women’s department while she tries on possible purchases. My tops on international manufacturing locations has been 10 countries, but this day I could only make seven as China and Vietnam seemed to dominate certain brand names.
It occurred to me that the U. S. clothing manufacturers aren’t feeling the impact of the shoppers for these goods as they are all made offshore. Retail sales may be off, but that impacts the stores not the manufacturers. Simplistic? What else do you expect? I’m relaxing watching the storm move offshore and a brighter sky approaching from the West. It will be a better afternoon with the expectation for a lovely sunset; and that’s not a puzzlement.
It’s all about expectations. Most every time I go down to the Maine coast I can count on foggy weather, save a glorious week in Boothbay Harbor when it only rained one day. So my expectation when planning a trip there is that inclement weather will occur.
A few weeks ago I had expectations about the country talking itself into a double-dip recession, and sure enough we seem to be doing it. I grant you that the economic news is not great, and were it not for the distractions of the World Cup, it likely would have been worse.
One of the songs in the movie Anna and the King of Siam is titled A Puzzlement. The King sings “Is a puzzlement” because he does not understand the changes that are happening. I have adopted this phrase when I am frustrated with certain events.
For example, U.S. unemployment figures were down last week, but the inevitable "but" was that they were not down by as much as anticipated. Housing starts were up last month, but not by as much as hoped. Steel production was down more than expected, but still was up from the preceding period. It’s when good news is not so good news, is a puzzlement.
And thus comes the second half of the "W" recession, or when a recovery is not large enough to be a recovery. Congress is back from another of its vacations so I expect that rhetoric will fill the news and talk shows about a slowing economy. The political right is using this to shoot at the president, while the political left will use it as raison d’être to spend more stimulus money. No matter how you cut it, we’ll all be the losers one way or another once the pols decide to use the double-dip as a political tool. Another puzzlement.
The laser business is having it mild ups and downs, with some sectors experiencing a mid-summer dip, but when haven’t they gone through this? I recall when I was in the capital equipment business we wrote off July as a month when we could not expect orders at the previous month's levels. So what’s changed? It wasn’t a recession then, just the summer doldrums. Now as it occurs in 2010, some say it’s the precursor to another recession. Is a puzzlement.
Expectations are that consumers will spend us out of recessions, and yet we chastise them for running up credit and going deeper into debt. I was on a rare shopping trip for summer wardrobe bargains on a weekday last week. The department store was pretty much empty, especially the men's department. I asked the sales clerk if he was concerned about the economy. No, he answered, a flier just came out advertising a big sale next week, and all the customers are holding off making purchases until then. I didn’t see that flier or I would have waited myself. . Luckily, the clerk kindly set my goods aside to be paid for this week at the sales prices. Consumer recession? Is a puzzlement.
As I wandered the store, waiting for my wife to find some bargains to lay-away for the sale, I perused the clothes racks looking at sewn-in labels. It’s a game I play when I kill time in the women’s department while she tries on possible purchases. My tops on international manufacturing locations has been 10 countries, but this day I could only make seven as China and Vietnam seemed to dominate certain brand names.
It occurred to me that the U. S. clothing manufacturers aren’t feeling the impact of the shoppers for these goods as they are all made offshore. Retail sales may be off, but that impacts the stores not the manufacturers. Simplistic? What else do you expect? I’m relaxing watching the storm move offshore and a brighter sky approaching from the West. It will be a better afternoon with the expectation for a lovely sunset; and that’s not a puzzlement.
Tuesday, July 6, 2010
The next big fireworks
I’m sitting on the side of one of three hills that make up most of a bowl; dense woods comprising the rest shields us from the launching point of the annual July 4th fireworks display. About 6000 others join my family for what has become a holiday tradition.
Those of you who have experienced it know that the anticipation level for the first explosion ratchets up as darkness finally settles in about 90 minutes after sunset. In this period, costumed villagers mingle with the crowd and hand out lollipops to the impatient children. Meanwhile the odor of mosquito spray mingles with the smoke from the rifle fire of the local militia who entertain the mostly happy crowd.
So I had some uncomplicated time to think about the next big fireworks in industrial laser material processing. I thought back to the 1990s when the tapering off of older technologies and the decline of the semiconductor and microelectronics sectors were offset by the growth in processing sheet metal, followed by the rapid acceptance of laser applications in the medical device business, which accounted for most of the growth rate. Since then, we have been looking for the next big bang.
Slyly, seemingly unnoticed, microelectronics came back midway through the first decade while aerospace and marking/engraving held their own. The recession was the great leveler and only application in semiconductor (surprisingly) and energy (photovoltaics) bucked the trend. Medical device processing prompted by new laser technology, fiber and ultra-fast pulse took us out of the recession as noted by quarterly reports of public companies.
A few weeks ago I had walked through the laboratories of Fraunhofer ILT in Aachen and saw several dozen early developments in laser material processing, many in the microprocessing category. At that time I mentioned to several of the innovators showing their work that ILS had christened the first decade of this millennium as the era of microprocessing, a prediction that was slightly premature as this sector only caught on towards the end of the decade as the new lasers offered users a better approach, making up for some of the declines of the older lasers.
At LASYS in Stuttgart a raft of new ultra-fast pulse lasers were introduced to serve the growing needs of the microprocessing sector. And across the plaza at the Congress Center 500 attendees were listening to advanced material processing technology, much of it in the microfabrication sector.
Has the era of the high-power laser cutter run its course as the major revenue producer? I think not, at least for the foreseeable future as pent-up buying demand will boost sales sometime and the advent of multitudes of high-power fiber laser cutters will expand the process into new market subsectors. Bu the handwriting may be on the wall and a shrinking market share may make metal fabricating less than the 800 pound gorilla of the system revenue picture.
The problem is that even with ultra-fast pulse lasers at $200K plus, it will take a lot of them to make up for the almost $1 billon of high-power lasers sold in 2008, the last great year for this product.
Maybe I was in a too laid back frame of mind July 4th evening, but I just couldn’t quite see a major explosion that would vault another application - other than sheet metal cutting - into the revenue lead in the next couple of years. But just then the fireworks company unloosened a barrage of magnificent bombs that took our breath away. And maybe, just maybe, I thought I might be wrong.
Those of you who have experienced it know that the anticipation level for the first explosion ratchets up as darkness finally settles in about 90 minutes after sunset. In this period, costumed villagers mingle with the crowd and hand out lollipops to the impatient children. Meanwhile the odor of mosquito spray mingles with the smoke from the rifle fire of the local militia who entertain the mostly happy crowd.
So I had some uncomplicated time to think about the next big fireworks in industrial laser material processing. I thought back to the 1990s when the tapering off of older technologies and the decline of the semiconductor and microelectronics sectors were offset by the growth in processing sheet metal, followed by the rapid acceptance of laser applications in the medical device business, which accounted for most of the growth rate. Since then, we have been looking for the next big bang.
Slyly, seemingly unnoticed, microelectronics came back midway through the first decade while aerospace and marking/engraving held their own. The recession was the great leveler and only application in semiconductor (surprisingly) and energy (photovoltaics) bucked the trend. Medical device processing prompted by new laser technology, fiber and ultra-fast pulse took us out of the recession as noted by quarterly reports of public companies.
A few weeks ago I had walked through the laboratories of Fraunhofer ILT in Aachen and saw several dozen early developments in laser material processing, many in the microprocessing category. At that time I mentioned to several of the innovators showing their work that ILS had christened the first decade of this millennium as the era of microprocessing, a prediction that was slightly premature as this sector only caught on towards the end of the decade as the new lasers offered users a better approach, making up for some of the declines of the older lasers.
At LASYS in Stuttgart a raft of new ultra-fast pulse lasers were introduced to serve the growing needs of the microprocessing sector. And across the plaza at the Congress Center 500 attendees were listening to advanced material processing technology, much of it in the microfabrication sector.
Has the era of the high-power laser cutter run its course as the major revenue producer? I think not, at least for the foreseeable future as pent-up buying demand will boost sales sometime and the advent of multitudes of high-power fiber laser cutters will expand the process into new market subsectors. Bu the handwriting may be on the wall and a shrinking market share may make metal fabricating less than the 800 pound gorilla of the system revenue picture.
The problem is that even with ultra-fast pulse lasers at $200K plus, it will take a lot of them to make up for the almost $1 billon of high-power lasers sold in 2008, the last great year for this product.
Maybe I was in a too laid back frame of mind July 4th evening, but I just couldn’t quite see a major explosion that would vault another application - other than sheet metal cutting - into the revenue lead in the next couple of years. But just then the fireworks company unloosened a barrage of magnificent bombs that took our breath away. And maybe, just maybe, I thought I might be wrong.
Tuesday, June 29, 2010
Rose-colored glasses?
The day after a cataract operation on my right eye, I woke to find that I have been missing a more color-intensive world. As I removed the protective patch, placed after the operation, I immediately noted that my new eye lens was causing me to see brighter colors. Opening and closing my left eye revealed that, even with my corrective glass lens, I am now seeing colors that before were slightly muted; a good term for the change is brilliant. As my eyes adapted, the changed eye began to modify the unchanged eye and as the old advertisement for color TV broadcasting said, I was seeing the world with new color.
With just the wave of a scalpel, my view of the world changed. Wouldn’t it be great if a giant scalpel could change the mess in the Gulf, strife in the Mid-East, the situation in Afghanistan and employment problems here at home? My world is definitely brighter today, and I wish others' were, too.
Actually, it needs brightening today as the G-20 Summit produced dire warnings that the dreaded double-dip recession was more of a reality, and the infamous W-shaped recession and recovery was more likely. What’s worse, the Summit observers were now talking about a lengthy recovery of 2 to 3 years. Thanks a lot guys; didn’t you have any positive discussions in Toronto?
The stock market seemed to ho-hum the whole thing, with little movement on the Monday after the G-20 ministers had their fill of Canadian bon hommie and went home before they could cause any more anguish. I don’t know about you, but I am getting a little tired of that roly-poly woman in the yellow blazer, Merkel, who seems to get her way by threatening to upset the European economy by doing just about what she pleases.
Too bad security didn’t let some of the protesters slip through into the yellow zone so that the isolated ministers could hear what the “people” were protesting. I am all for civil protest, if "civil" and opposed to the idiots who seem to think that breaking store windows and burning police cars is going the attract change. In Toronto, all it caused was a $1 billion security outlay; oh well, some of it went for police overtime, so it did help the Ottawa economy a bit.
So now the talk is about another recession, or a continuance of the one we thought was over. It’s what we hear on the talk shows and from the commentators of both sides. The term double-dip gets your attention, better than a W-shaped recession and recovery.
Back before the recession, I cautioned about talking ourselves into one as the Web and papers were full of projections on the severity of the “next big one” and sure enough it happened. Now rationally it wasn’t just random talk; it was the greedy bankers, insurance companies and investment houses that did us in, but talk helped.
So let’s not let the current round of negative talk start the ball rolling, even if some of it emanates from that woman in Berlin. Things are moving up for us here in the U.S., thanks in part to a hot market in Asia--read that as China so let’s not upset the cart with talk of a double-dip. And let’s hope the doomsayers find something else to jaw about, maybe the lousy refereeing in South Africa. I’m doing my part, going back to have my left eye done in a couple of weeks. That should make the world even brighter.
With just the wave of a scalpel, my view of the world changed. Wouldn’t it be great if a giant scalpel could change the mess in the Gulf, strife in the Mid-East, the situation in Afghanistan and employment problems here at home? My world is definitely brighter today, and I wish others' were, too.
Actually, it needs brightening today as the G-20 Summit produced dire warnings that the dreaded double-dip recession was more of a reality, and the infamous W-shaped recession and recovery was more likely. What’s worse, the Summit observers were now talking about a lengthy recovery of 2 to 3 years. Thanks a lot guys; didn’t you have any positive discussions in Toronto?
The stock market seemed to ho-hum the whole thing, with little movement on the Monday after the G-20 ministers had their fill of Canadian bon hommie and went home before they could cause any more anguish. I don’t know about you, but I am getting a little tired of that roly-poly woman in the yellow blazer, Merkel, who seems to get her way by threatening to upset the European economy by doing just about what she pleases.
Too bad security didn’t let some of the protesters slip through into the yellow zone so that the isolated ministers could hear what the “people” were protesting. I am all for civil protest, if "civil" and opposed to the idiots who seem to think that breaking store windows and burning police cars is going the attract change. In Toronto, all it caused was a $1 billion security outlay; oh well, some of it went for police overtime, so it did help the Ottawa economy a bit.
So now the talk is about another recession, or a continuance of the one we thought was over. It’s what we hear on the talk shows and from the commentators of both sides. The term double-dip gets your attention, better than a W-shaped recession and recovery.
Back before the recession, I cautioned about talking ourselves into one as the Web and papers were full of projections on the severity of the “next big one” and sure enough it happened. Now rationally it wasn’t just random talk; it was the greedy bankers, insurance companies and investment houses that did us in, but talk helped.
So let’s not let the current round of negative talk start the ball rolling, even if some of it emanates from that woman in Berlin. Things are moving up for us here in the U.S., thanks in part to a hot market in Asia--read that as China so let’s not upset the cart with talk of a double-dip. And let’s hope the doomsayers find something else to jaw about, maybe the lousy refereeing in South Africa. I’m doing my part, going back to have my left eye done in a couple of weeks. That should make the world even brighter.
Monday, June 14, 2010
2x4 Redux
One of the themes I picked up on while participating in last week’s LASYS show in Stuttgart was the idea that the German manufacturing sector needs to become more competitive in world markets. Although the obvious target for competition was China, that country was never named.
I say "obvious" because in a Lasers and Laser Systems for Material Processing Working Committee meeting of the Verband Deutscher Maschinen und Anlagenbau e.V. (VDMA), to which I was invited, reference was made to the Asian market, primarily China, being the largest export market for German-made industrial laser systems outside of Western Europe.
Last year systems valued at $315 million (down 48.4% from 2008) were exported outside of Germany. Asia received 27.4% of these systems, of which China took 13.3%. Contrast this with exports to the U.S. of only 5.3% (it was a recession year, remember). In 2008 70% (~$629 million) of orders for laser systems were from foreign customers; last year it was 75%, but only $340 million. Even so, Germany is a major laser system exporter.
It was suggested that it would be better if those laser systems were put to work in Germany producing products to be exported in competition with the countries in Asia. The implication was thatautomated laser systems could reduce labor costs and contribute to improved productivity that would enable German manufacturers to become more competitive. A statement to the effect that the lower labor rates in China, for example, could be countered by productive, automated laser systems is true, as exemplified by experience in the U.S.
However, one should not denigrate the engineering talent in China, most educated in the U.S. and Europe, who have the ability, when needed, to install automated systems as that country's labor rates begin to climb, which has already started with increases of 35% or more being common. My view is that companies in China do what is necessary to meet domestic consumer demand. If this means goods of less than “world-class” stature, so be it. When consumer demand shifts, these companies are able to improve production technology to meet it, and some are already doing it.
German manufacturers have a burden that many competitors don't and that is onerous labor laws that contribute to high manufacturing costs. Unless regulations are eased, an unlikely scenario, new producers will be forced to become lean, mean manufacturing machines as has happened in the U.S.
In last week's Blog, I facetiously used the analogy of hitting someone on the head with a 2x4 to get his attention. For U.S. manufacturers it was the competition from China and outsourcing that was their 2x4 three years ago. Last year, at the depth of the recession, manufacturers reversed the trend and resourcing (bringing the business back) became common. And what reversed the trend was lean manufacturing (aided by the fall-out from the recession) which made these manufacturers more competitive.
U.S. industrial production has increased 10 months in a row as anaysts have noted. So my message to German manufacturers is that, to meet your competition in the world markets, shipping products rather than lasers to China, for example, you need to lean down and rethink your productivity plan, with lasers being part of this as they are key to many automated processes. And that is my 2x4 whack to you.
I say "obvious" because in a Lasers and Laser Systems for Material Processing Working Committee meeting of the Verband Deutscher Maschinen und Anlagenbau e.V. (VDMA), to which I was invited, reference was made to the Asian market, primarily China, being the largest export market for German-made industrial laser systems outside of Western Europe.
Last year systems valued at $315 million (down 48.4% from 2008) were exported outside of Germany. Asia received 27.4% of these systems, of which China took 13.3%. Contrast this with exports to the U.S. of only 5.3% (it was a recession year, remember). In 2008 70% (~$629 million) of orders for laser systems were from foreign customers; last year it was 75%, but only $340 million. Even so, Germany is a major laser system exporter.
It was suggested that it would be better if those laser systems were put to work in Germany producing products to be exported in competition with the countries in Asia. The implication was thatautomated laser systems could reduce labor costs and contribute to improved productivity that would enable German manufacturers to become more competitive. A statement to the effect that the lower labor rates in China, for example, could be countered by productive, automated laser systems is true, as exemplified by experience in the U.S.
However, one should not denigrate the engineering talent in China, most educated in the U.S. and Europe, who have the ability, when needed, to install automated systems as that country's labor rates begin to climb, which has already started with increases of 35% or more being common. My view is that companies in China do what is necessary to meet domestic consumer demand. If this means goods of less than “world-class” stature, so be it. When consumer demand shifts, these companies are able to improve production technology to meet it, and some are already doing it.
German manufacturers have a burden that many competitors don't and that is onerous labor laws that contribute to high manufacturing costs. Unless regulations are eased, an unlikely scenario, new producers will be forced to become lean, mean manufacturing machines as has happened in the U.S.
In last week's Blog, I facetiously used the analogy of hitting someone on the head with a 2x4 to get his attention. For U.S. manufacturers it was the competition from China and outsourcing that was their 2x4 three years ago. Last year, at the depth of the recession, manufacturers reversed the trend and resourcing (bringing the business back) became common. And what reversed the trend was lean manufacturing (aided by the fall-out from the recession) which made these manufacturers more competitive.
U.S. industrial production has increased 10 months in a row as anaysts have noted. So my message to German manufacturers is that, to meet your competition in the world markets, shipping products rather than lasers to China, for example, you need to lean down and rethink your productivity plan, with lasers being part of this as they are key to many automated processes. And that is my 2x4 whack to you.
Sunday, June 6, 2010
Find me a 2x 4
When I was young, very young, I worked each summer on a farm. It was a modern farm; with all the technology advances, diesel tractors, automated irrigation systems, and state-of-the art planting, cultivating and harvesting equipment.
And yet the owners still kept one old horse named Bill, used mostly for small plot plowing and narrow row cultivating. A farm hand, Myron, was responsible for this horse, the only person allowed to drive it for these operations.
I can recall watching Myron hitching Bill up for the days work, and being fascinated by the size and power of this animal. Myron would counter my wonder by stating that Bill was “not too bright”, needing a lot of encouragement to get going. He joked that every once in awhile he would “hit him upside the head with a 2 x 4 to get his attention.”
I don’t know why this stuck in my mind as I responded to a colleague’s concern about the latest U. S. employment numbers issued last Friday. We’ve had the same news each month for the past six months; good news from the marketplace and bad news from the employment scene.
A few months ago I, along with more learned observers, came to the conclusion that this was to be a “jobless recovery”. Since then I have been reiterating this opinion in print and verbally at several public forums. So many times that I am beginning to sound like a broken record on this subject; thus the 2 x 4 analogy. What does it take to get peoples attention?
Many companies are back to pre-recession production levels, and they are doing this with fewer employees than before the crash. When they leaned-down as the recession deepened they used every trick to keep their key people, on the premise that when things turned they wanted to be able to ramp up quickly. And this is just what happened, except they also found they could get back to normal with fewer people.
I don’t find this exemplary, but I recognize the wisdom of it, and I have sincere empathy with those affected by this change in employment practices, as this is a situation not of their making, and they are the unfortunate casualties.
Proof that this is working is given by the U.S. productivity numbers, up 2.1% for the last quarter, but up 6.1% over the past four quarters, the largest gain since 2002. So, doing more with less seems to be working. So back to the analogy, what will it take to get the publics attention, a whack with a board? Times have changed and we need to revise our thinking on the employment numbers. Experts think these will shift down over time as the unemployed find other work and their numbers gradually decline. The time period for this is said to be lengthy and that is not a relief for those affected.
Out of this may come a sleek, streamlined, superefficient U.S. manufacturing industry - buffed-up by automated processing systems, among these highly efficient
And yet the owners still kept one old horse named Bill, used mostly for small plot plowing and narrow row cultivating. A farm hand, Myron, was responsible for this horse, the only person allowed to drive it for these operations.
I can recall watching Myron hitching Bill up for the days work, and being fascinated by the size and power of this animal. Myron would counter my wonder by stating that Bill was “not too bright”, needing a lot of encouragement to get going. He joked that every once in awhile he would “hit him upside the head with a 2 x 4 to get his attention.”
I don’t know why this stuck in my mind as I responded to a colleague’s concern about the latest U. S. employment numbers issued last Friday. We’ve had the same news each month for the past six months; good news from the marketplace and bad news from the employment scene.
A few months ago I, along with more learned observers, came to the conclusion that this was to be a “jobless recovery”. Since then I have been reiterating this opinion in print and verbally at several public forums. So many times that I am beginning to sound like a broken record on this subject; thus the 2 x 4 analogy. What does it take to get peoples attention?
Many companies are back to pre-recession production levels, and they are doing this with fewer employees than before the crash. When they leaned-down as the recession deepened they used every trick to keep their key people, on the premise that when things turned they wanted to be able to ramp up quickly. And this is just what happened, except they also found they could get back to normal with fewer people.
I don’t find this exemplary, but I recognize the wisdom of it, and I have sincere empathy with those affected by this change in employment practices, as this is a situation not of their making, and they are the unfortunate casualties.
Proof that this is working is given by the U.S. productivity numbers, up 2.1% for the last quarter, but up 6.1% over the past four quarters, the largest gain since 2002. So, doing more with less seems to be working. So back to the analogy, what will it take to get the publics attention, a whack with a board? Times have changed and we need to revise our thinking on the employment numbers. Experts think these will shift down over time as the unemployed find other work and their numbers gradually decline. The time period for this is said to be lengthy and that is not a relief for those affected.
Out of this may come a sleek, streamlined, superefficient U.S. manufacturing industry - buffed-up by automated processing systems, among these highly efficient
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