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Road to  Sustainable  Recovery: The Environment for Manufacturing and Automation in 2010 and Beyond Craig Resnick Research...
Outline <ul><li>Where are We Now? </li></ul><ul><li>Global Indexes Impact on Manufacturing </li></ul><ul><li>Energy Trends...
Where are we now? <ul><li>Global recession is easing, manufacturing back on a growth track, the worst is presumably over <...
The Global Recession: Not Over Yet <ul><li>Most believe that US recession is now over, but economic reports make it too ea...
Impact on Manufacturing: A look at Recent PMIs from Around the World <ul><li>PMIs, or  Purchasing Managers Indices  are a ...
JP Morgan Global Manufacturing PMI Comes Roaring Back
European Manufacturing PMI Indicates Similar Trends <ul><li>Graphic Courtesy of http://eurowatch.blogspot.com/ </li></ul>
German Manufacturing PMI Data from Market Economics Indicates Turnaround <ul><li>Germany's manufacturing sector improved f...
China Manufacturing PMI Indicates Recovery <ul><li>At 56.1 in December, up from 55.7 a month previously, the headline HSBC...
India Manufacturing PMI Shows Expansion <ul><li>A rebound in manufacturing helped India’s economic growth accelerate for t...
Brazilian Manufacturing Industry Back on an Expansion Path <ul><li>The headline seasonally adjusted Brazil Manufacturing P...
Russian PMI in Decline <ul><li>Business conditions in Russia’s manufacturing sector deteriorated further at the end of 200...
Latest Manufacturing Institute for Supply Management (ISM)  Report On Business <ul><li>Manufacturing growth accelerated in...
Latest Manufacturing ISM  Report On Business Month PMI   Month PMI Jan 2010 58.4   Jul 2009 49.1 Dec 2009 54.9   Jun 2009 ...
US Durable Goods Rise <ul><li>Orders for durable goods, those meant to last several years, rose 1 percent. Last week, the ...
USBLS Productivity and Costs (Output per Hour of all Persons) Rising Manufacturing sector productivity grew 13.4 percent i...
Industrial Production and Manufacturing Capacity Utilization in the US Increasing For the fourth quarter as a whole, manuf...
Canada’s Manufacturing Sales Increase in October… <ul><li>Gains in some Canadian manufacturing sales sectors were offset b...
… But Canada’s Industrial Capacity Utilization Falls <ul><li>In the manufacturing industries, the capacity utilization rat...
Capital Spending has Yet to Make Full Recovery <ul><li>BATON ROUGE, LA--(Marketwire - January 4, 2010) - Industrial Info R...
Capital Spending has Yet to Make Full Recovery <ul><li>Global spending on oil and gas exploration and production has been ...
Another Key Indicator: the Price of Oil <ul><li>Long term oil prices are going to go up. </li></ul><ul><li>There is a fund...
International Energy Agency (IEA) report shows Long-term Shortage & Supply Concerns <ul><li>Energy investment worldwide ha...
Energy Information Administration (EIA) Energy Consumption History and  Forecast
Energy Capital Project Costs are Still High, Declining for Upstream
Energy Capital Project Costs are Still High, Increasing for Downstream
IHS Cambridge Energy Research Associates Capital Costs Index for Power Generation
Consolidation Suppliers  and  Users of Automation Have been Consolidating.
End User Industry Examples of Consolidation <ul><li>Exxon Mobil Corp.'s planned purchase of natural-gas producer XTO Energ...
Siemens Invensys Marcam Eurotherm Wonderware SimSci APV Triconex L&N SCADA N-Pignone SCADA PacSim ABB Honeywell POMS Measu...
How has ARC Revised its Growth Forecasts? <ul><li>Market effectively bottomed out in 2009 </li></ul><ul><li>North America,...
Investments Must Continue to be Made in Key Industry Segments, In Spite of Economy! <ul><li>America’s Crumbling Infrastruc...
Infrastructure Needs Modernization <ul><li>ARC Estimates Total of $65 Billion in Installed Process Automation Systems are ...
IT Versus Automation – Installed Base
Automation is a Small Percent of Project Spend, but has a Huge Impact
Average Loss Per Major Incident, a Key Driver of Increased Automation At an Average Cost of Close to $100M in Damages per ...
The Maintenance Service Scenario Today 35% 28% 20% 6% 6% 4% Source: Shell Global Solutions 63% of maintenance labor result...
Stimulus Spending, Where Does It Go?
Obama’s Infrastructure Plant and What it Means to the Automation Business <ul><li>Infrastructure: $90 billion  </li></ul><...
Obama Stimulus Plan Targets Energy <ul><li>Energy: $58 billion  </li></ul><ul><li>Where does the money go? </li></ul><ul><...
What the Stimulus Plan Means for Automation <ul><li>Power and Water are seeing Huge Investments </li></ul><ul><li>Increase...
Industry and Its Role in Power Consumption <ul><li>Industry is Number One Consumer of Total Energy </li></ul><ul><li>Indus...
ARC Economic Indicators Survey <ul><li>From July to December, the survey had 109 respondents </li></ul><ul><li>Survey will...
ARC Economic Indicators Survey: Results <ul><li>Majority of respondents are more optimistic about overall economy </li></u...
From your perspective, how do you view the change in the economic climate from: At the end of the year, the Majority of re...
At your site, approximately what is your current manufacturing capacity utilization? On average, the majority of users are...
At your site, how is your Capacity Utilization changing? Majority of respondents expect little change in capacity utilizat...
How are your orders and bookings changing? Respondents increases in bookings offset by decreases in bookings resulting in ...
How is your Backlog changing? Backlog increases are offset by backlog decreases
How to you expect your Spending will change next month? Manufacturers Still Tentative about Plant Investment
How do you expect your CAPEX spending will change next month? Little change in CapEx at the end of 2009
The number of individual plant or manufacturing operations in my company are: Respondents come from a wide manufacturing b...
Which of the following vertical industries best describes your firm's manufacturing business? A wide variety of industries...
Respondent’s Primary Business Good cross section of organizations involved in manufacturing
Respondent’s Geographic Location Majority of respondents from EMEA region
Respondent’s Job Function Management and Sales functions well represented in results
Thank You For more information, contact the author at cresnick@arcweb.com  or visit our web pages at www.arcweb.com
The Sustainability Challenge <ul><li>In addition to having to deliver to a highly competitive, flat world economy, manufac...
Sustainability Will Raise the Bar Even Higher To create zero waste 25% reduction in  solid waste in 3 years <ul><li>To be ...
“ Green” Buildings Energy Recovery Package Innovation PepsiCo’s responsibility is to continually improve all aspects of th...
Climate Change Creating Havoc Mean Temperature Change World CO2 Emissions CO2 Concentration <ul><li>Scientists project a 3...
The Addition of Power Generation Capacity is Getting Harder, Energy Conservation and Management a Must <ul><li>Asian deman...
Manufacturers and Processors Have The Most To Gain By Saving Energy <ul><li>Uses more energy than any other single sector;...
Major Energy-Intensive Industries Sustainability impacts ALL! Energy Consumption  (Trillion Btu) Petroleum Chemicals Paper...
Energy Challenges Create Drivers For Sustainability <ul><li>The World Commission on Environmental and Development defined ...
Application Example*   UPS Worldport - Louisville,  KY The world’s largest fully automated package sorting facility Sort C...
KPI Efficiency Goals Accomplished through Advanced Automation Solutions ! pps: packages per sort  (1 sort: aprox. 2.4hrs) ...
The Triple Bottom Line Impact on Sustainability ?
Increased Efficiency Impacts Sustainability Positively <ul><li>82% Reduction in Injuries (LTI) </li></ul>ECONOMIC   ENVIRO...
What Can We Collectively Do To Navigate The Road to Recovery?  <ul><li>Recession was global, no region spared </li></ul><u...
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  • In the past year alone, automation market consolidation reached new levels with the acquisition of GE by Honeywell. ABB acquired Cellier Engineering and made a majority investment in supply chain supplier Skyva. Invensys purchased Baan and Walsh Automation. Emerson Electric purchased Saab Marine Electronics, Kenonics, and MDC software. Siemens recently announced its acquisition of ORSI.
  • Chapter 1 - Executive Summary 7/21/2008 Copyright - ARC Advisory Group
  • New position created: Assistant Secretary of Commerce for Manufacturing and Services Cross-agency initiative under development Dept. of Commerce draft report on manufacturing highlights rising energy costs as factor in eroding U.S. competitiveness
  • Transcript of "Economic climate for manufacturing 01 10"

    1. 1. Road to Sustainable Recovery: The Environment for Manufacturing and Automation in 2010 and Beyond Craig Resnick Research Director ARC Advisory Group [email_address] Larry O’Brien Research Director ARC Advisory Group [email_address]
    2. 2. Outline <ul><li>Where are We Now? </li></ul><ul><li>Global Indexes Impact on Manufacturing </li></ul><ul><li>Energy Trends </li></ul><ul><li>Industry Consolidation </li></ul><ul><li>ARC Growth Forecast and Drivers </li></ul><ul><li>Effects of Stimulus Spending </li></ul><ul><li>ARC Economic Survey Results </li></ul><ul><li>The Sustainability Challenge </li></ul><ul><li>Navigating The Road to Recovery </li></ul><ul><li>The Sustainability Challenge </li></ul>
    3. 3. Where are we now? <ul><li>Global recession is easing, manufacturing back on a growth track, the worst is presumably over </li></ul><ul><li>Manufacturing must adjust to impending demand increases </li></ul><ul><li>Significant investments will still need to be made in many sectors, (Oil and Gas, Power) </li></ul><ul><li>Some sectors of the manufacturing economy may not ever recover to their previous status (US Automotive Industry for Example) </li></ul><ul><li>We have looming, long-term crises that will be addressed with the help of more advanced forms of automation </li></ul>
    4. 4. The Global Recession: Not Over Yet <ul><li>Most believe that US recession is now over, but economic reports make it too early to call an end. </li></ul><ul><li>Employment and real estate, housing continue to drag down US economy. </li></ul><ul><li>“ The 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003. The Commerce Department report Friday is the strongest evidence to date that the worst recession since the 1930s ended last year, though an academic panel that dates recessions has yet to declare an end to it.” </li></ul><ul><li>Reuters: Germany said its economy shrank 5% in 2009 and probably stagnated in the fourth quarter, compounding concerns that Europe's recovery will be rocky. </li></ul><ul><li>Reuters: China is expected to return to double-digit economic growth in the fourth quarter of 2009, partly due to a low comparison base in the fourth quarter of 2008, when GDP growth dipped to 6.8 percent. </li></ul>
    5. 5. Impact on Manufacturing: A look at Recent PMIs from Around the World <ul><li>PMIs, or Purchasing Managers Indices are a good indicator of overall health of manufacturing. Shows purchasing manager trends in orders for materials. Number of Below 50 indicates a general contraction in manufacturing. </li></ul><ul><li>At 56.1 in January, up from 54.6 in December, the JPMorgan Global Manufacturing Purchasing Managers’ Index registered its highest reading for 5.5 years. The latest improvement in overall operating performance reflected accelerated growth of production and new orders, while a slight gain in staffing levels was signaled for the first time since March 2008. </li></ul><ul><li>The most recent Markit Eurozone Manufacturing PMI reached 51.6 in De-cember, up 0.4 percent points from November and the highest reading since March of 2008. According to Markit, Germany and France spear-headed the upturn, with growth in Germany marking a 26-month high in November. </li></ul><ul><li>December marked a fifth consecutive month of expansion in the ISM PMI, while the overall US economy grew for the eighth consecutive month. The PMI for December reached 55.9 percent, which marks the highest reading since April of 2006. </li></ul>
    6. 6. JP Morgan Global Manufacturing PMI Comes Roaring Back
    7. 7. European Manufacturing PMI Indicates Similar Trends <ul><li>Graphic Courtesy of http://eurowatch.blogspot.com/ </li></ul>
    8. 8. German Manufacturing PMI Data from Market Economics Indicates Turnaround <ul><li>Germany's manufacturing sector improved further in December but below the flash estimate, the BME/Markit Economics said on Monday. The seasonally adjusted manufacturing Purchasing Managers' Index or PMI increased to 52.7 in December from 52.4 in November. – Markit Economics </li></ul>
    9. 9. China Manufacturing PMI Indicates Recovery <ul><li>At 56.1 in December, up from 55.7 a month previously, the headline HSBC China Manufacturing PMI™ pointed to a marked improvement of operating conditions in the Chinese manufacturing sector that was the second-fastest recorded by the series to date. For Q4 as a whole, the PMI averaged its highest reading in the survey history. </li></ul><ul><li>Manufacturing production in China rose sharply in December, with the average rate of expansion for Q4 the fastest since Q2 2004. Where a rise in output was signalled, panellists widely attributed this to greater inflows of new work. </li></ul>Source: Markit Economics
    10. 10. India Manufacturing PMI Shows Expansion <ul><li>A rebound in manufacturing helped India’s economic growth accelerate for the first time since 2007 in the second quarter, a recent report showed. </li></ul><ul><li>Policies employed by the central bank and the government are providing a stimulus to the economy worth more than 12 percent of gross domestic product. </li></ul>Source: CLSA
    11. 11. Brazilian Manufacturing Industry Back on an Expansion Path <ul><li>The headline seasonally adjusted Brazil Manufacturing PMI™ rose slightly since November, hitting its highest level for just over two years. The latest reading signaled a robust improvement in the health of the Brazilian manufacturing economy. Underlying this expansion were faster increases in output and employment, while new order growth remained sharp. </li></ul>
    12. 12. Russian PMI in Decline <ul><li>Business conditions in Russia’s manufacturing sector deteriorated further at the end of 2009, according to December survey findings from VTB Capital. Output was only marginally higher than in November, and new orders fell for the second month running. </li></ul><ul><li>Meanwhile, manufacturers continued to shed staff and cut inventories. Input and output prices both rose on the month but, in both cases, the rates of inflation remained historically weak. </li></ul>
    13. 13. Latest Manufacturing Institute for Supply Management (ISM) Report On Business <ul><li>Manufacturing growth accelerated in January as the PMI registered 58.4 percent, an increase of 3.5 percentage points when compared to December's seasonally adjusted reading of 54.9 percent. This is the sixth consecutive month of growth in the manufacturing sector, and the highest reading for the Index since August 2004 when it registered 58.5 percent. </li></ul><ul><li>“ Overall, the recovery in manufacturing is continuing, but there are still some industries mired in the downturn as evidenced by the seven industries still in decline.&quot; </li></ul>
    14. 14. Latest Manufacturing ISM Report On Business Month PMI   Month PMI Jan 2010 58.4   Jul 2009 49.1 Dec 2009 54.9   Jun 2009 45.3 Nov 2009 53.7   May 2009 43.2 Oct 2009 55.2   Apr 2009 40.4 Sep 2009 52.4   Mar 2009 36.4 Aug 2009 52.8   Feb 2009 35.7 Average for 12 months – 48.1 High – 58.4 Low – 35.7
    15. 15. US Durable Goods Rise <ul><li>Orders for durable goods, those meant to last several years, rose 1 percent. Last week, the government estimated they had climbed 0.3 percent for December. </li></ul><ul><li>Bookings for capital goods excluding aircraft and military equipment, a measure of future business investment, increased 2.2 percent after a 3.2 percent jump. Shipments of those goods, used to calculate gross domestic product, rose 2.1 percent in December, the biggest gain since March 2008. </li></ul>
    16. 16. USBLS Productivity and Costs (Output per Hour of all Persons) Rising Manufacturing sector productivity grew 13.4 percent in the third quarter of 2009, as output rose 8.4 percent and hours worked fell 4.4 percent (tables A and 3). The third quarter gain in manufacturing productivity was the largest in the series, which begins in the second quarter of 1987.
    17. 17. Industrial Production and Manufacturing Capacity Utilization in the US Increasing For the fourth quarter as a whole, manufacturing output increased at an annual rate of 5.7 percent.
    18. 18. Canada’s Manufacturing Sales Increase in October… <ul><li>Gains in some Canadian manufacturing sales sectors were offset by losses in others for a net gain of 0.1 percent in November, Statistics Canada said Wednesday. </li></ul><ul><li>Manufacturing sales were worth $42.6 billion in November, and represented the fifth increase in manufacturing sales in six months, the report said. </li></ul><ul><li>Among the major gainers were chemical manufacturers, which reported a 5.3 percent monthly increase and petroleum and coal product sales rose 2.9 percent, StatsCan said. </li></ul><ul><li>The largest drag on overall performance was a 4.3 percent decline in the transportation industry and some of its sub-sectors. </li></ul>
    19. 19. … But Canada’s Industrial Capacity Utilization Falls <ul><li>In the manufacturing industries, the capacity utilization rate increased to 65.6%, from the record low of 64.7% in the second quarter. </li></ul><ul><li>This increase followed four quarters of decline. It was attributable in part to strength in the transportation equipment industry, where capacity utilization rose for a second straight quarter following eight consecutive quarterly declines. </li></ul>
    20. 20. Capital Spending has Yet to Make Full Recovery <ul><li>BATON ROUGE, LA--(Marketwire - January 4, 2010) - Industrial Info Resources (Sugar Land, Texas) -- The goalposts keep getting moved. Owners and operators of oil and gas terminals and transmission projects in North America are now looking to the second half of 2010 for a recovery in capital spending, according to Jesus Davis, Industrial Info's manager of oil and gas industry markets. &quot;Six months ago, those owners and operators thought capital spending might return in the first half of 2010,&quot; Davis said. &quot;Right now, and for the next six months, they're just trying to keep their doors open.&quot; </li></ul><ul><li>Chevron Corporation (NYSE: CVX) today announced a $21.6 billion capital and exploratory spending program for 2010, a five percent decrease from projected 2009 expenditures. Included in the 2010 program are $1.6 billion of expenditures by affiliates, which do not require cash outlays by Chevron's consolidated companies. </li></ul><ul><li>SUGAR LAND, TX, Nov 16, 2009 (MARKETWIRE via COMTEX) -- Researched by Industrial Info Resources (Sugar Land, Texas) -- On Friday, November 13, Suncor Energy Incorporated (Calgary, Alberta) announced capital spending plans for 2010. The company plans to invest approximately US$5.24 billion, with $1.43 billion going to growth projects and the remainder going toward sustaining existing operations. The growth projects include the restart of construction on stages 3 and 4 of the company's Firebag bitumen production facility, leading Suncor President and CEO Rick George to say in a conference call, &quot;This officially restarts the growth of oil sands.&quot; </li></ul>
    21. 21. Capital Spending has Yet to Make Full Recovery <ul><li>Global spending on oil and gas exploration and production has been projected to rise by 11 per cent to $439 billion in 2010, reversing a drop in pending in 2009 as energy prices climb. A survey conducted by analysts at Barclays Capital on 387 oil and gas producers showed that the increase in the spending on exploration and production followed the drop in spending of 15 percent in 2009 from the previous year, when oil prices reached a record high. </li></ul><ul><li>Exxon on Monday (Feb 1) said capital spending reached $27.1 billion last year, up 3.6% from a year earlier. Fourth-quarter spending reached $8.3 billion, Exxon's highest three-month total ever. Exploration expenses charged to income, which capture spending on unsuccessful wells, rose 39% last year. </li></ul>
    22. 22. Another Key Indicator: the Price of Oil <ul><li>Long term oil prices are going to go up. </li></ul><ul><li>There is a fundamental gap in long term supply versus demand. </li></ul><ul><li>The U.S. raised its forecast for crude-oil prices in 2010 by 1.5 percent on speculation that consumption will increase as the global economy recovers. </li></ul><ul><li>Jan 14: West Texas Intermediate oil, the U.S. benchmark, will average $79.83 a barrel this year, up from last month’s forecast of $78.67, the Energy Department said today in its monthly Short-Term Energy Outlook. That’s up 29 percent from the 2009 average price of $61.66 a barrel. </li></ul>
    23. 23. International Energy Agency (IEA) report shows Long-term Shortage & Supply Concerns <ul><li>Energy investment worldwide has plunged over the past year in the face of a tougher financing environment, weakening final demand for energy and lower cash flow. </li></ul><ul><li>In the oil and gas sector, most companies have announced cutbacks in capital spending, as well as project delays and cancellations, mainly as a result of lower cash flow. </li></ul><ul><li>Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty. </li></ul><ul><li>The capital required to meet projected energy demand through to 2030 in the Reference Scenario is huge, amounting in cumulative terms to $26 trillion (in year-2008 dollars) — equal to $1.1 trillion (or 1.4% of global gross domestic product [GDP]) per year on average. </li></ul>Source: IEA, Seekingalpha
    24. 24. Energy Information Administration (EIA) Energy Consumption History and Forecast
    25. 25. Energy Capital Project Costs are Still High, Declining for Upstream
    26. 26. Energy Capital Project Costs are Still High, Increasing for Downstream
    27. 27. IHS Cambridge Energy Research Associates Capital Costs Index for Power Generation
    28. 28. Consolidation Suppliers and Users of Automation Have been Consolidating.
    29. 29. End User Industry Examples of Consolidation <ul><li>Exxon Mobil Corp.'s planned purchase of natural-gas producer XTO Energy Inc. (XTO), an event that could put a spotlight a controversial drilling technique that is allowing access to vast new domestic supplies </li></ul><ul><li>Mines and Energy Minister Edison Lobao confirmed that Petrobras is in talks to buy a stake in Portugal's Galp Energia </li></ul><ul><li>Breitling Oil and Gas Corp. announced Wednesday that it has in place a preliminary agreement for the purchase of Southwest Energy Exploration of Oklahoma City, OK </li></ul><ul><li>Kraft trying to purchase Cadbury </li></ul><ul><li>Inbev and Anheuser Busch merger </li></ul><ul><li>India's Reliance Industries Ltd. has just sweetened its bid for chemical maker LyondellBasell to $13.5 billion </li></ul><ul><li>Merger of Kirin and Suntory pending </li></ul><ul><li>Mars and Wrigley merger </li></ul>Bottom line: Newly created enterprises need help to develop strategic manufacturing plans!
    30. 30. Siemens Invensys Marcam Eurotherm Wonderware SimSci APV Triconex L&N SCADA N-Pignone SCADA PacSim ABB Honeywell POMS Measurex Allied Signal InterPlant Consulting P&F Safety Systems L&N Walsh Automation =Recent Rockwell ICS Triplex Pavillion Tesch DataSweep Eutech Entrelec APV (Divest) UGS CEDES HSB CMS Tecnologia Incuity Soft. DLI Eng. Tata Hon Goldstar Hon Emerson DMI Bristol Bab. Damcos IndX InterCorr Enraf PAS APC MDC Autom. Grp. Gepa Applied Aut. Robicon Propack SAT Quantum Engineering Xian Hensheng Ber-Mac Kuhlman Elect Vectek Electronics Morgan Shinwha BJC Innotec Rutter Hinz Maxon Callidus Roxar Cellier Engineering August Systems Combustion Engineering Alfa Laval Automation Systems Mod. Dynapro ETG Entek IRD Sequencia Anorad EJA ORSI Milltronics Turbo-Werk Moore Compex Vickers Danfoss Flow US Filter Westinghouse Intellution (Divested) Kenonics CSI PC&E Daniel Saab Marine Electronics Orion CEM Solartron Mob.
    31. 31. How has ARC Revised its Growth Forecasts? <ul><li>Market effectively bottomed out in 2009 </li></ul><ul><li>North America, Japan, Western Europe ALL contracted 2009-2010 </li></ul><ul><li>BUT we still expect the global market to grow </li></ul><ul><li>Recovery could be delayed depending on a number of factors, double dip recession, etc. </li></ul>
    32. 32. Investments Must Continue to be Made in Key Industry Segments, In Spite of Economy! <ul><li>America’s Crumbling Infrastructure </li></ul><ul><li>Roads & Bridges </li></ul><ul><li>Water & Wastewater </li></ul><ul><li>Power industry </li></ul><ul><li>Aging control systems </li></ul><ul><li>Nanotechnology </li></ul>Sustainability is the Issue! Sustainability of Your Business! <ul><li>Innovation Instrumental in Driving Economic Growth </li></ul><ul><li>Users and Suppliers Must Continue to Invest in R&D </li></ul>
    33. 33. Infrastructure Needs Modernization <ul><li>ARC Estimates Total of $65 Billion in Installed Process Automation Systems are Reaching the end of their Useful Life </li></ul><ul><li>The Majority of this is in the Hydrocarbons Sector in North America, Europe, and Middle East </li></ul><ul><li>Industry is Plagued with Old and Inefficient Technology that Management is Hesitant to Replace </li></ul>
    34. 34. IT Versus Automation – Installed Base
    35. 35. Automation is a Small Percent of Project Spend, but has a Huge Impact
    36. 36. Average Loss Per Major Incident, a Key Driver of Increased Automation At an Average Cost of Close to $100M in Damages per Incident, Operational Error is The Single Biggest Reason for Unscheduled Shut down
    37. 37. The Maintenance Service Scenario Today 35% 28% 20% 6% 6% 4% Source: Shell Global Solutions 63% of maintenance labor results in no action!!
    38. 38. Stimulus Spending, Where Does It Go?
    39. 39. Obama’s Infrastructure Plant and What it Means to the Automation Business <ul><li>Infrastructure: $90 billion </li></ul><ul><li>Where does the Infrastructure money go? </li></ul><ul><li>$30 billion: Highway construction </li></ul><ul><li>$10 billion: Rail and transit projects </li></ul><ul><li>$31 billion: Modernize federal and other public buildings for long-term energy savings </li></ul><ul><li>$19 billion: Water projects </li></ul>
    40. 40. Obama Stimulus Plan Targets Energy <ul><li>Energy: $58 billion </li></ul><ul><li>Where does the money go? </li></ul><ul><li>$32 billion: Fund a smart electricity grid </li></ul><ul><li>$20 billion-plus: Renewable energy tax cuts and a tax credit for research on energy efficiency and clean energy, plus a multiyear extension of the green energy production tax credit </li></ul><ul><li>$6 billion: Weatherize modest-income homes </li></ul>
    41. 41. What the Stimulus Plan Means for Automation <ul><li>Power and Water are seeing Huge Investments </li></ul><ul><li>Increased Investment in Intelligent Building Automation Systems </li></ul><ul><li>Increased Emphasis on Boiler Efficiency </li></ul><ul><li>Sophisticated Approaches to Energy Management </li></ul><ul><li>Hundreds of Millions of Dollars Worth of New Systems and Instrumentation Will be Required </li></ul><ul><li>Money is entering the system </li></ul>
    42. 42. Industry and Its Role in Power Consumption <ul><li>Industry is Number One Consumer of Total Energy </li></ul><ul><li>Industry is Number Two Consumer of Power Behind Buildings </li></ul><ul><li>Industry Generates a Significant Amount of its Own Power </li></ul>
    43. 43. ARC Economic Indicators Survey <ul><li>From July to December, the survey had 109 respondents </li></ul><ul><li>Survey will continue to run monthly </li></ul><ul><li>ARC will develop monthly, quarterly trends </li></ul><ul><li>Respondents are encouraged to take the survey each month (click on link) </li></ul>
    44. 44. ARC Economic Indicators Survey: Results <ul><li>Majority of respondents are more optimistic about overall economy </li></ul><ul><li>Manufacturing capacity utilization steady at 70 percent </li></ul><ul><li>Order and booking activity holding steady, with increases offset by decreases </li></ul><ul><li>Backlog increases offset by decreases </li></ul><ul><li>Manufacturers Still Tentative about Plant Investment </li></ul><ul><li>Manufacturers Capital Spending holding steady </li></ul>
    45. 45. From your perspective, how do you view the change in the economic climate from: At the end of the year, the Majority of respondents are optimistic about economy – Pessimism is way down
    46. 46. At your site, approximately what is your current manufacturing capacity utilization? On average, the majority of users are maintaining capacity utilization of more than 70 percent
    47. 47. At your site, how is your Capacity Utilization changing? Majority of respondents expect little change in capacity utilization
    48. 48. How are your orders and bookings changing? Respondents increases in bookings offset by decreases in bookings resulting in little overall change for last couple of months of 2009
    49. 49. How is your Backlog changing? Backlog increases are offset by backlog decreases
    50. 50. How to you expect your Spending will change next month? Manufacturers Still Tentative about Plant Investment
    51. 51. How do you expect your CAPEX spending will change next month? Little change in CapEx at the end of 2009
    52. 52. The number of individual plant or manufacturing operations in my company are: Respondents come from a wide manufacturing base
    53. 53. Which of the following vertical industries best describes your firm's manufacturing business? A wide variety of industries are represented in the survey
    54. 54. Respondent’s Primary Business Good cross section of organizations involved in manufacturing
    55. 55. Respondent’s Geographic Location Majority of respondents from EMEA region
    56. 56. Respondent’s Job Function Management and Sales functions well represented in results
    57. 57. Thank You For more information, contact the author at cresnick@arcweb.com or visit our web pages at www.arcweb.com
    58. 58. The Sustainability Challenge <ul><li>In addition to having to deliver to a highly competitive, flat world economy, manufacturers have to meet the new SUSTAINABILITY challenge </li></ul><ul><li>Sustainability is the response to the increased pressure on the environment, the rising demand for natural resources, energy, and the need for a socially responsible approach to business </li></ul><ul><li>Sustainability will drive towards a higher level of COLLABORATION between organizations and systems and most likely a complete rethinking of traditional organizational structures </li></ul><ul><li>Automation Suppliers are uniquely positioned to help manufacturers meet the SUSTAINABILITY challenge with Collaborative Power and Control Solutions </li></ul>
    59. 59. Sustainability Will Raise the Bar Even Higher To create zero waste 25% reduction in solid waste in 3 years <ul><li>To be supplied 100% by renewable energy </li></ul><ul><li>Stores 25% more efficient in 7 years </li></ul><ul><li>Fleet 25% more efficient in 3 years </li></ul>To sell products that sustain resources & the environment 20% supply base aligned in 3 years Wal-Mart Corporate Environmental Sustainability Goals
    60. 60. “ Green” Buildings Energy Recovery Package Innovation PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate – environment, social, economic – creating a better tomorrow than today. Provide Trustworthy PRODUCTS Conserve and Respect our ENVIRONMENT Sustainability Will Raise the Bar Even Higher PepsiCo Respect and Fairly Treat our PEOPLE
    61. 61. Climate Change Creating Havoc Mean Temperature Change World CO2 Emissions CO2 Concentration <ul><li>Scientists project a 3º to 7º F rise in global temperatures by 2100 – Consequences could be dramatic </li></ul><ul><ul><li>3.7º F = Arctic ice disappears </li></ul></ul><ul><ul><li>5.4º F = Amazon disappears </li></ul></ul><ul><ul><li>7.2º F = Agriculture declines </li></ul></ul>
    62. 62. The Addition of Power Generation Capacity is Getting Harder, Energy Conservation and Management a Must <ul><li>Asian demand for equipment and services drives up Capital Goods Prices globally </li></ul><ul><li>The cost of new plants is rising very rapidly </li></ul><ul><li>Example: US estimated costs for new PowerGen capacity </li></ul><ul><ul><li>Up 19% in the last year </li></ul></ul><ul><ul><li>Up 69% since 2005 </li></ul></ul><ul><ul><li>Up for all types of plants </li></ul></ul><ul><ul><ul><li>Steam </li></ul></ul></ul><ul><ul><ul><li>Combined cycle </li></ul></ul></ul><ul><ul><ul><li>Wind </li></ul></ul></ul><ul><ul><ul><li>Nuclear </li></ul></ul></ul><ul><ul><ul><li>Hydro </li></ul></ul></ul>Index Value <ul><ul><li>(These measures includes design, equipment, and construction; exclude fuel costs) </li></ul></ul>
    63. 63. Manufacturers and Processors Have The Most To Gain By Saving Energy <ul><li>Uses more energy than any other single sector; >1/3 of U.S. energy consumption </li></ul><ul><li>Produces approximately 30% of U.S greenhouse gas emissions </li></ul><ul><li>Accounts for more than 35% of U.S. natural gas demand </li></ul><ul><li>Accounts for 28% of U.S. electricity demand </li></ul><ul><li>Energy is key to economic growth in domestic manufacturing </li></ul><ul><li>Many companies have been unable to pass higher energy costs on to their customers, which has impacted their profit margins negatively </li></ul><ul><ul><li>Source: US Department of Energy </li></ul></ul>Industry 33.4% Transportation 27.2% Commercial 17.9% Residential 21.5% Energy Use
    64. 64. Major Energy-Intensive Industries Sustainability impacts ALL! Energy Consumption (Trillion Btu) Petroleum Chemicals Paper Primary Metals Food Processing Nonmetallic Minerals Tobacco/Beverages Furniture Leather Machinery and Computers Wood Transportation Fabricated Metals Textiles/Apparel Plastics/ Rubber Electrical Printing Miscellaneous 1 10 100 1000 10 100 1000 10000 Energy Intensity (Thousand Btu/$ GDP) Energy-Intensive Industries Industrial Energy Intensity vs. Energy Consumption Mining <ul><ul><li>Source: US Department of Energy </li></ul></ul>
    65. 65. Energy Challenges Create Drivers For Sustainability <ul><li>The World Commission on Environmental and Development defined Sustainability as the development that meets the needs of the present without compromising the needs of future generations </li></ul><ul><li>The Core Principle is care and respect for the environment and the society we live in </li></ul><ul><li>By applying this approach manufacturers judge the success of product designs not only by the financial but also by the contribution to society and the ecosystem </li></ul><ul><li>The concept of sustainability reaches beyond environmental stewardship </li></ul><ul><li>Sustainability is a positive business approach that has as much to do with delivering economic benefits, and being a responsible member of the community, as it has to do with reducing the environmental impact </li></ul>
    66. 66. Application Example* UPS Worldport - Louisville, KY The world’s largest fully automated package sorting facility Sort Capacity Per Hour: 421,000 packages Number of Conveyor Drives: 25,314 Miles of Transport Conveyors: 128 miles Power consumption: 72 MVA (City of Louisville: 114MVA) Facility Size: 5.6 million square feet YTD Overall Investment > $2 billion IT Equipment 4,500 Scanners 6,000 PCs 1,500 Printers >500 Data Communication Devices 380 Servers <ul><ul><li>*Source: Presentation by ARC at Schneider Electric Initi@tive 2008 </li></ul></ul>
    67. 67. KPI Efficiency Goals Accomplished through Advanced Automation Solutions ! pps: packages per sort (1 sort: aprox. 2.4hrs) pph: packages per hour 1999 Grade Lane (manual) 2007 Worldport (automated) % Volume 495,000 pps 812,000 pps 64 Design Capacity 215,000 pph 304,000 pph 41 Staffing (Sorting) 1984 2362 19 Productivity (per person) 48 pph 93 pph 94 Injuries (LTI) 10.9/yr 2.0/yr -82 Missorts 1/2226 1/4554 -51
    68. 68. The Triple Bottom Line Impact on Sustainability ?
    69. 69. Increased Efficiency Impacts Sustainability Positively <ul><li>82% Reduction in Injuries (LTI) </li></ul>ECONOMIC ENVIRONMENT SOCIAL <ul><li>Information leverage and system flexibility enhancement through enterprise collaboration </li></ul><ul><ul><li>Energy efficiency maximization through use of variable speed drives for motors wherever possible </li></ul></ul><ul><ul><li>Throughput increase and sorting error reduction through advanced automation solutions implementation </li></ul></ul><ul><ul><li>Jet and truck fuel reduction by maximization of the sorting intelligence of material handling solutions </li></ul></ul><ul><ul><li>Increased visibility and regulation of power consumption through Power and Automation collaboration </li></ul></ul>
    70. 70. What Can We Collectively Do To Navigate The Road to Recovery? <ul><li>Recession was global, no region spared </li></ul><ul><li>Recent economic news remains mixed </li></ul><ul><li>Manufacturing was hit hard </li></ul><ul><li>But: </li></ul><ul><li>Global recession is receding </li></ul><ul><li>Recent economic news is positive </li></ul><ul><li>Manufacturing must adjust to impending demand increases </li></ul><ul><li>Significant investments will need to be made </li></ul><ul><li>Stimulus spending, plus demands for sustainability, will increase automation </li></ul>Industry Leaders Need to Plan Now to seize the road to recovery
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