Expand now to other industries

When building custom or OEM equipment, you may target a particular industry, but always be prepared to change your aim due to the ups and downs of automotive, medical, semiconductor, mining, solar and many other industry segments

By Dave Perkon, technical editor

While involved with system integration and custom equipment building for nearly 30 years, I have personally experienced many ups and downs, peaks and valleys regarding industry's ability to spend money. These expenditures have varied widely over the years. It's a never-ending cycle of feast or famine and sometimes near-destruction, so consider expanding your target industries.

I remember, at the lowest point of the great recession in early 2009, a manager telling me I need to get more work in the shop. I'm sure he thought it was just me, but I knew why. I couldn't find any companies we did work for that were spending money. It's a common question for an integrator or machine builder—what happened to all the money? Where was it? It wasn't in the industries we typically looked in.

During this time, I watched as the bottom fell out of the automotive industry. At least I hope that why this occurred. I was attending a bid meeting at an automotive supplier, and a half dozen of my machine-building competition were in attendance, as well. The purchasing agent proceeded to request the world from all the bidders.

 

It was clear that only the low bidder would get the job, but the bid requirements demanded more than 100 hours of work from each bidder at the meeting. Half were smart enough to no-bid the project. The remainder quoted the project and met again, as a group, with the purchasing agent, who immediately requested 10% off their quoted prices. The bidder who gave the discount was then told by the purchasing agent, with a purchase order in hand, that he would receive the order if he took an additional 10% off his quote, which he did in front of the other two bidders. The winning company, after giving a 20% discount, never did get its final 10% payment either—an unbelievable, but valid way for a project to cost about twice the quoted amount. It was time to look for other industries to do work for; actually, it was past the time.

The projects and money can disappear for the whole company or just a part of it, such as its panel shop. For a year or two, a machine builder’s shop was full of work and shipping multiple control cabinets daily. Then all of a sudden, the shop floor was empty. When machine builders or panel shops are supplying machines and services to just a few industries, such as mining and semiconductor, the floor can drop out quickly.

As soon as the mining sector has copper hit its lowest price in a decade or a significant player in the semiconductor industry decides to mothball a $6 billion plant, the machine upgrades stop and equipment needs disappear, along with the need for control cabinets. Some may call it poor planning, but when the bottom drops out of both industries at the same time, the only plan is to supply other industries, as well.

How do you compare? See our 2017 State of Initiative report!

When the recession was at its worst, or any time industry has a drop in capital equipment spending, I would chase work in any industry. The industry where the sun was shining during one extreme industry downswing was solar. I landed a large project, which was very helpful at the company where I worked. It was a new industry for us and was outside of our design comfort zone, but it was worth the engineering effort to go there. While I watched our competition go out of business, our doors stayed open with many billable employees.

Of course, the solar industry collapsed, due to at least one very poor government spending decision along with China's predatory practices and mercantilism, but I was already off chasing medical-device manufacturing, another new industry segment at the machine builder for whom I was working.

Times are good now, so what new industry are you looking to provide equipment for?

The diversifying path into the discrete medical-device-manufacturing industry got the company out from under the shadow and normal ups and downs of the automotive industry and the collapse of the solar industry. It also helped to expand our skill set throughout the company.

The discrete medical-device industry has many high-tech manufacturing and processing requirements, as do most industries. If your company is new to this or other industries, it is better to start small and develop or improve a process, design a lean machine or solve a long-term problem for a customer. Small steps often lead to more advanced work, such as vision inspection systems, laser marking, cutting and welding, dispense systems, presses, vision-guided motion and robotics and complete multi-station assembly systems—all advanced areas that keep a machine shop busy and keep work on the assembly floor.

Serving diverse industries may not seem important when the economy is doing well, but it is the best time to find work or customer needs in other industries. Starting with small projects leads to the big project that kept the doors open during a famine. Times are good now, so what new industry are you looking to provide equipment for?

Show Comments
Hide Comments

Join the discussion

We welcome your thoughtful comments.
All comments will display your user name.

Want to participate in the discussion?

Register for free

Log in for complete access.

Comments

No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments