Is Your Technology As Efficient As It Could Be?

Is Your Technology As Efficient As It Could Be?

Technology spending is up on machines and software that help businesses run leaner so they can drop more money to the bottom line.

During the recession, manufacturers pulled back significantly on their technology spending. Whether on computer systems or machine tools, companies retrenched to protect themselves during the downturn. As a result, some companies had outdated technology in their shops.

That may be changing, however, in a 2011 marked by easier borrowing and an economic recovery. While spending on software lags, spending on machine tools is going ahead full steam as manufacturers replace outdated equipment.

Manufacturers are being more strategic than ever before in their technology spends. The name of the game in 2011 technology spending is efficiency. Companies are searching for ways to make their operations more efficient with the goal of dropping more money immediately to the bottom line. They're finding it through software that includes business analytics and multitasking machines. With these purchases, U.S. manufacturing firms are striving to make themselves competitive on a global scale.

Machine Tools Lead the Way

Manufacturers are updating to multitasking machines to drop money to the bottom line.
Photo: Mazak Corp., via The Association for Manufacturing Technology
Doug Woods, president of the Association For Manufacturing Technology (AMT), reflects an upbeat attitude when it comes to the machine tools market in 2011 -- and he should. For the first three months of the year, machine tool purchases are up 118.6% over 2010 and show few signs of slowing down. "At our show late last year, small- and medium-sized manufacturers were looking for multitasking, multifunctional machines," Woods says. "They're looking to increase automation and reduce labor costs, and the prices on those types of machines have gone down considerably. They're much more affordable now."

Woods says the recession has made manufacturers more aware of the waste in their operations.

"We've seen manufacturers buying equipment that is going to help them survive the next downturn," he says. "In doing so, they're also upgrading their equipment in such a way that they're more able to compete on an international stage."

The payoff for these multitasking machines, according to AMT, is within the first year. That makes this the right time to upgrade.

Software Lags

While machine tools continue to rebound, the picture on the software front is less clear. While most manufacturers haven't opened their purses yet to invest in the latest computer technology, they are definitely in the exploratory stage, says Bruce Barchus, analyst at Clifton Gunderson in Milwaukee.

Barchus says what manufacturing is experiencing now can be described as a Y2K echo -- manufacturers who updated their software packages to deal with the Y2K crisis (which never materialized in any serious way) are now looking to update and invest in new technologies.

"We're seeing an increase in small to medium manufacturing companies that are evaluating their current software options and figuring out how it affects their businesses," Barchus says. "Will it lead to an increase in spending on IT going forward? At this point, it's too early to tell."

Barchus adds that companies are trying to figure out where they will get the best bang for their buck when it comes to investing in a new ERP or other system.

Most smaller manufacturers are still in a cost-containment mode when it comes to technology, says Jim Andreucci, a Clifton Gunderson analyst.

"They're not overhauling their shop floor at the moment," Andreucci says. "We're on the tail-end of the recession at the moment, and there's a hesitancy to spend yet.

"It's definitely better than it was 18 months ago, but we're not back to a peak," he adds. "I don't see them opening up the pocket books yet."

Chris Forbes, president of Knovel, a New York-based producer of web-based engineering resources, says in contrast to what people are seeing among smaller firms, large manufacturing firms are investing heavily in software solutions.

"We're in an information culture, and that has spurred dramatic increases in spending on technology among big manufacturers," Forbes says. "There's more pressure on companies to capture people's ideas and translate them into actions. You must update your software to do that to leverage what you can from technology. If you do it right, you can see substantial cost savings -- thousands of dollars in some cases."

From the Field

Brian Papke, president of Mazak Corp., a Florence, Ky.-based manufacturer of precision metal-cutting machines, says the recession hit his business hard.

"After the credit crunch of 2008, the machine business dropped like a rock," Papke says. "Financing was difficult to get."

Machine tool orders are leading the investment in the latest technology. So far in 2011, they're up 118.6%. Photo: Optical Gauging via The Association for Manufacturing Technology
"The downturn lasted until May 2009, when Papke started seeing small increases in orders. In 2010, his orders were up 120% and through May, orders are up 100%. Papke believes it shows conclusively the strength of manufacturing.

"It shows a willingness of companies to invest in equipment that is going to make them more able to compete on an international level," Papke says. "We're seeing an increase in orders for multitasking machines that can do more manufacturing with a smaller footprint."

Manufacturers are looking to get the latest machine technology into their plants quicker than they used to, Papke says. Manufacturers used to keep equipment for five years or longer, and now they're turning it in after two years.

"We're having to show our newer models even faster than we used to," Papke says. "We're seeing an increase in multitasking-machine purchases. Manufacturers are looking for lean, and they're looking for machines that will help them get there."

David Burns, president and CEO of ExOne in Irwin, Pa., says orders for his company's additive manufacturing machines are up in 2011.

"There's more capital spend occurring this year than we've seen in the past couple of years," Burns says. "Manufacturers are looking for machinery that can change the game for them. They're looking for machines that will give them that edge they need."

Fielder Hiss, vice president of product management at SolidWorks, says he's seen firms invest in software that helps them cut down their time to production. "We saw a significant increase in the use of our 3-D design programs, and more companies are looking to 3-D design to streamline their product development," he says.

Hiss says companies are looking to differentiate their product offerings more quickly, and products like 3-D design modules allow them to prototype more quickly without all the waste that comes from traditional prototyping.

Such has been the experience of Emhart Glass Research Center in Elmira, N.Y. Pierre Ngankeu, senior mechanical engineer in the Process Automation. & Simulation group of the company, says Emhart has saved money and time since investing in Ansys 3-D modeling technology. In the past, engineers at the company would have to build physical molds so that they could test the physics of the glass products they were making.

"After we moved to 3-D modeling software, we've been able to cut down on the amount of materials we buy and use," Ngankeu says. "We save time and money, and a process that used to take months to do now takes days or hours."

According to Dave Caruso, vice president of marketing and products for Endeca, a Cambridge, Mass.-based producer of business intelligence software, companies are shifting their focus away from software that helps them run the business to software that allows them to analyze information.

"People are saying, I have to make better decisions,' and more people within organizations have to make decisions," Caruso says. "They can't make those decisions unless the information they're receiving is organized for them. That's the kind of software manufacturing executives are looking for today."

Caruso also says people are trying to make decisions closer to the source to ensure the most cost-effective solutions are available at the earliest possible moment in the production process. Companies can't do that unless they have a system in place that allows them to see the information when they need to see it.

"One user should be able to find the information they need and understand it when they see it," Caruso says. "That's what today's software can do for them."

With such investments accelerating as the recovery progresses, there is a sense that manufacturing can still lead it. Woods, for one, feels bullish about the future of American manufacturing.

"Anyone who's dismissed the United States' ability to have a strong manufacturing base or to be a leader of the world is seriously missing the boat," Woods says. "This new investment in technology will carry it forward to new heights of success."

Editors Note: This article is Part 2 of IW's series on the competitiveness challenges facing the U.S. manufacturing community. Part 3 will appear in the August issue. Follow the series online at www.industryweek.com/competitive.

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