There is a common misperception that U.S. manufacturing is dying. That is far from the truth. U.S. manufacturing is not dying, it is changing. And that change is occurring faster and faster.
The U.S. industrial sector is by far the largest in the world, with a value added by industry of over $2 trillion, followed by China, Japan, Germany and Italy. Most other countries in the world see the United States as a very lucrative market. This in turn forces U.S. manufacturers to go to great lengths to be competitive in an ever-changing manufacturing environment. And a powerful way to ensure that competitiveness is to obtain the best tools available.
So it is important that at mid-year, U.S. consumption of advanced manufacturing technology equipment was up 7.7 percent over 2006. This would be the fourth year in a row of such growth.
U.S. manufacturing output has continued to grow steadily over the past three decades, with the exception of the downturn in the late 1990s. During that same period of time, however, U.S. manufacturing employment has continued to decline.
The reason for this is productivity improvement, and that is driven by advanced manufacturing technology equipment. Productivity is truly the 21st Century growth engine, and it will have a dramatic impact on manufacturing in the future.
Prior to the mid-1970s, productivity in U.S. manufacturing was achieved primarily through labor improvement. Beginning in the mid-1970s, technology began to have an impact on manufacturing productivity, with advances such as CNC machine tools. In the late 1990s, you saw improvement driven by the pressures of the global marketplace. The advancement of information technology enabled manufacturing around the world to participate in the global markets, and it created a need to drive productivity even faster to remain competitive. In the future, emerging manufacturing technologies will continue to impact productivity, and who knows what the future may hold.
The manufacturing technology sector itself is also in transition. The needs of the customers are changing, and this will bring both evolutionary and revolutionary change.
A good example of evolutionary change is the multi-tasking machine. In the past, manufacturing companies would purchase a lathe, a mill, a grinding machine or a drilling machine. Today, they want one machine to do it all. Why? To reduce their costs.
Revolutionary transition is more disruptive, where there is a significant change in the process itself. An excellent example of this is water-jet cutting. If you go back 20 years, intricate shapes were developed either by hand-cutting with torches or more recently cutting with lasers. Today a high pressure stream of water can cut anything from baby diapers to titanium.
A second example is additive manufacturing. Historically, the manufacturing process was a material removal process to create the final part. Today there is technology available that essentially prints parts, 3-D printing, a revolutionary technology that may be looked at today as something in the future, but five years from now may very well be the standard course of business.
And finally, predictive manufacturing: In the past, engineers programmed a part, developed a process, put it on the machine and hoped it would work. They made the first part. They measured it, determined what was incorrect and made changes.
There is a concept rapidly evolving today called “first part correct.” In the United States, the smart machine initiative is designed to create interactive manufacturing capabilities where the first part manufactured is correct. In this environment it is important that machines, controls and sensors from different suppliers be able to communicate with each other. Today that is not always possible.
To address this problem, AMT has begun an effort to create a research program to develop MTConnect, an open standard addressing manufacturing Inter-Operability. AMT is working with the University of California in Berkeley, California, to develop this communication protocol. This will be an open standard, available to all without charge. It will ultimately allow a manufacturer to monitor all of the production equipment in a factory simultaneously, regardless of who makes the equipment. This knowledge will be of tremendous help to a manufacturing company striving to become more efficient – and thus more competitive.
The standard will not compete with existing products. It is being designed to allow a manufacturer to combine products from multiple manufacturers as easily as you can now obtain a USB drive, or a printer, from any manufacturer in the world and simply attach it to your computer.
Demonstrations of the standard are expected to be featured at the International Manufacturing Technology Show in September 2008 at McCormick Place in Chicago.
IMTS is one venue where most of the world’s machine tool builders are represented, and today this industry is very international.
In this manufacturing technology transition you're also seeing the supply base itself change. The manufacturing technology companies historically were domestic suppliers. They produced equipment for their home market.
In the global environment of today, manufacturing technology is a global business and must be served by global players. In fact, in 2006, machine tool shipments exceeded $59 billion, with Japan being by far the largest producer of machine tools, followed by Germany and China.
At the same time, when you look at the consumption of machine tools from 2001 to 2006, China, at over $50 billion, has been the largest consumer of machine tools in the world, followed by the United States and Germany. So this is in fact a global market and global companies must adapt to doing business in a manufacturing environment spread around the world. When you look at how companies have evolved, there are three different models.
First, let's look at two companies that evolved primarily through internal growth. Haas Automation, a U.S. company, has one plant in Oxnard, California, factory outlets around the world, and technical centers in China and in Europe. They are one of the largest producers of standard machine tools in the world, and yet, they manufacture in one plant. Contrast that to Mazak Corporation that has seven plants worldwide, 24 technology centers and 39 technical centers. These companies have approached the market through internal growth in different ways, and both have been very successful.
A second model is the one followed by Hardinge. The original Hardinge Company was founded in New York in 1890. In 2000, they acquired three companies in Europe that gave them a global presence. They continued their acquisition strategy in 2004 and bought the rights to Bridgeport products. Today, they manufacture in the United States, in Europe and in China, and are indeed a global company. Their geographic growth was driven heavily by external acquisition.
And the final example is MAG Industrial Automation Systems. MAG began in 2005 with the acquisition of Cincinnati Machine and Cincinnati Lamb. Since then, they have acquired Giddings & Lewis, Fadal, Cross Hüller, Hüller Hille, Hessapp, and Witzig & Frank. They recently acquired Ex-Cell-O and are in the process of acquiring Boehringer. Today MAG Industrial Automation Systems is one of the largest machine tool companies in the world with a manufacturing and sales presence spread throughout the world. They are truly a global player.
So you have, four companies utilizing three methods of growth: internal growth, growth through acquisition and growth through consolidation. Three different strategies, each successful. And this has created four global players in a very dynamic market.
So as we go forward, we should remember that manufacturing is an exciting business to be in. There will always be a need for manufactured products. And as the economies of the developing countries continue to expand, you will see dramatic change in the demand for products on a global basis.
Manufacturing technology is the engine that drives this growth because without advances in manufacturing technology it will be impossible to be more efficient and more competitive.