Funny how things go. I recently sat in my favorite local direct trade coffee house, maybe under the influence of caffeine, contemplating industrial software and MES market. The market is ripe for further consolidation, I thought. I rested in that thought for a while, then let it go. Later I was contemplating Rockwell Automation’s software situation recognizing its move partnering with PTC ThingWorx for IoT, but how it probably needed to make a move to build momentum for its manufacturing software (MES).
This morning I do a quick scan of LinkedIn and spot this press release. This is a good move. I had some in-depth interviews with Plex within the past couple of years. Good company and good idea, but I didn’t see how it was ever going to really grow.
I think Rockwell’s new software executive team should do well with this acquisition. (And as an independent blogger/analyst guy, I’m not paid to say that.)
Rockwell Automation, the world’s largest company dedicated to industrial automation and digital transformation, and Plex Systems, the leading cloud-native smart manufacturing platform operating at scale, today announced that Rockwell has entered into an agreement to acquire Plex for $2.22 billion in cash.
Plex offers the only single-instance, multi-tenant SaaS manufacturing platform operating at scale, including advanced manufacturing execution systems, quality, and supply chain management capabilities. It has over 700 customers and manages more than 8 billion transactions per day. Plex’s software capabilities will be further differentiated by Rockwell’s global market access, complementary industry expertise, and ability to turn real-time data into actionable insights.
“This acquisition will accelerate our strategy to bring the Connected Enterprise to life, driving faster time to value for our customers as they increasingly adopt cloud solutions to improve resilience, agility, and sustainability in their operations,” said Blake Moret, Chairman and CEO of Rockwell Automation. “Combining Plex’s cutting-edge cloud technology with Rockwell’s existing software portfolio and domain expertise will add customer value and create more ways to win. The acquisition will also accelerate our software revenue growth and strengthen our annual recurring revenue streams.”
A growing dilemma for manufacturers is the urgent need to increase production and improve resilience, while driving efficiency and compliance. Companies are increasingly seeking to upgrade their production systems with modern, cloud-based manufacturing execution systems that are easy to implement, use, and maintain. Plex’s platform helps customers to connect, automate, track, and analyze their operations and connected supply chains.
“Rockwell believes in the power of data and technology to transform manufacturing and industrial operations,” said Brian Shepherd, senior vice president, Software and Control, for Rockwell Automation. “Together with the advanced asset maintenance and management capabilities provided by our recent Fiix acquisition, Rockwell will have a strong portfolio of cloud-native solutions for our customers’ production systems upon completion of the Plex acquisition.”
“Plex has always been more than a company,” said Bill Berutti, CEO of Plex. “We have been a leader in the movement to smart manufacturing and a trusted partner to more than 700 manufacturing companies around the globe. Joining forces with Rockwell is great for our customers, our partners, and our employees as we move to expand our reach and impact and accelerate our mission to bring manufacturing to the cloud.”
Plex will be reported as part of Rockwell’s Software and Control operating segment which provides leading hardware and software offerings for the design, operation, and maintenance of production automation and management systems. As a part of the acquisition, Rockwell will welcome more than 500 highly engaged new employees.
The acquisition will be financed with a combination of cash and short-term and long-term debt. Subject to customary closing conditions and completion of regulatory review, the acquisition is expected to close in Rockwell’s fiscal fourth quarter.
The thing that gets everyone working together, each person doing their own self-interested thing, makes the whole better. This was Matt Mullenweg, WordPress founder and CEO of Automattic, on his podcast Distributed discussing distribute work and open source software.
WordPress.org is an open source content management tool. WordPress.com is a for-profit company that sells tools and services for WordPress. Automattic owns both and other companies (having acquired Tumblr last year). WordPress powers about 38% of the world’s Websites including this one.
Mullenweg’s podcast shares his experiences with distributed work (the only office is the Tumblr one it acquired with that company). Automattic gets the benefit of talented people no matter where they reside. And, the asynchronous work and other policies it’s adopted has created a loyalty where turnover is very low.
Back to open source.
The IT companies discovered long ago the immense benefits of open standards, open APIs, and open source. Microsoft, HPE, Dell Technologies, and many others have put a lot of their code into open source. They allow employees to work on open source projects. Why? Just as Mullenweg said, the community makes everything better. Can you build a company with a technological foundation on open source? Check out Red Hat. Or, WordPress.com.
Interviews and posts over the past few months point to a momentum in the industrial market, always a technological laggard, toward open standards and open source. I, for one, hope it not only continues, but grows. End users are finally getting enough clout to get their voices heard by suppliers.
Check out the Open Process Automation Forum work. And the advances made by the Linux Foundation. And the Industrial Internet Consortium. We are getting close to the end users’ desired state of interoperability.
This will not be bad for the proprietary vendors–at least those who can adapt and think ahead. Customer lock-in only works for a while until the customer finally feels it’s been gouged too much and bites the bullet for the pain of change. The end game for the benefit of the market and for society is more efficient and productive end user manufacturers. Sometimes we forget that.
Most things in nature live in tension. For example, take business. As companies grow larger, their need for growth requires leaving behind an outlook on a city, region, and even country. Managers see a need for a global presence in order to meet financial objectives.
Companies also have a historical physical location in a country. That nation has a vested interest in the strength of the companies within its borders. Therefore, a dynamic tension.
Another tension within a company and within a market is the interplay of cost and price.
Shortsighted corporate managers looking only at financial spreadsheets and not at strategic value began moving jobs and factories to countries where workers could be paid a fraction of US (or European) workers and health and safety standards did not suck up additional cost.
We reached a point around 2010 when this trend had gone too far and even financial managers realized that the total cost including logistics and insurance of “offshoring” was costing more in direct cost and in customer satisfaction than any assumed value.
Although I don’t think that anyone in Washington can much more than spell manufacturing, the need for jobs and taxes and even military strength has made accelerating this reshoring a big political play.
Therefore, the two news items I’ve received this month reflect the efforts of the past decade at bringing jobs back to America. The first report is from the Reshoring Initiative and the other from a survey by Thomas.
Reshoring Initiative 2020 Data Report: Reshoring Surges to Record High. Cumulative Jobs Announced Surpasses 1 Million.
Despite COVID, reshoring numbers were up in 2020. Reshoring and foreign direct investment (FDI) job announcements for 2020 were 160,649, bringing the total jobs announced since 2010 to over 1 million (1,057,054). Also of significant importance: reshoring exceeded FDI by nearly 100%, the first beat for reshoring since 2013. Additionally, the number of companies reporting new reshoring and FDI set a new record: 1,484 companies. Reshoring will continue to be key to U.S. manufacturing and economic recovery in 2021 and beyond.
About the Report
The Reshoring Initiative’s 2020 Data Report contains data on U.S. reshoring and FDI by companies that have shifted production or sourcing from offshore to the United States. The report includes data for 2020, cumulative data from 2010 through 2020, as well as projections for 2021. The report provides data and analysis in 10 categories, ranging from the number of manufacturing jobs gained, to reasons cited for reshoring, to a breakdown of data by industry, country, region and state. See the full report:
Reshoring Initiative 2020 Data Report: COVID Drives Cumulative Jobs Announced Past 1 Million
Top Takeaways from the Report
- In 2020 U.S. reshoring set a record of 109,000 jobs and outpaced FDI for the first time since 2013. COVID uncertainty has resulted in companies emphasizing operations in their home countries.
- In order to make the U.S. less vulnerable, there are now national initiatives to shorten and close supply chain gaps for essential products. The following industries are most likely to benefit: PPE, medical, tech and defense. Medical equipment and PPE are the first responders of new reshoring and FDI, with cases up nearly 2000% and jobs up 400% from 2019.
- President Biden is prioritizing reshoring highly but applying different methods than President Trump. The gaps in Biden’s plans need to be addressed in order to achieve his goal of returning 5 million more jobs.
- There is continued growth in efforts by MEPs, EDOs and states to enable reshoring. The Reshoring Initiative is deeply involved in these efforts with its Import Substitution Program (ISP). As a measure of corporate interest, the demand for this service is more than 10 X the rate of 2019.
- We anticipate 2021 reshoring + FDI job announcements to be near 200,000, up by at least 25%.
“We publish this data annually to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” said Harry Moser, founder and president of the Reshoring Initiative. “With 5 million manufacturing jobs still offshore, as measured by our $900 billion/year goods trade deficit, there is potential for much more growth. We call on the administration and Congress to enact policy changes to make the United States competitive again. Our Competitiveness Toolkit is available to help quantify the impact of policy alternatives, including a stronger skilled workforce, competitive corporate tax and regulatory structures and a lower U.S. dollar.”
Reshoring Could Drive $443 Billion in U.S. Economic Value Over Next 12 Months
Thomas, the leader in product sourcing, supplier selection, and marketing solutions for industry, today released its 2021 State of North American Manufacturing Annual Report sharing groundbreaking insights from its latest survey canvassing the North American manufacturing an d industrial sectors. While the report reveals multiple shifts in domestic sourcing trends and supply chain demands, the key takeaway is the industry’s growing prioritization of reshoring in the aftermath of COVID-19 and the associated benefits of this shift for the U.S. economy.
According to the survey, 83% of North American manufacturers are likely or extremely likely to reshore (up from 54% in March 2020). If these manufacturers with plans to reshore bring on just one single-contract domestic supplier, the shift would drive as much as $443 billion in U.S. economic value.
“We are witnessing the wholesale reexamination of supply chain relationships, which will realign global manufacturing for decades to come. With North American businesses accelerating reshoring and replacing some of their overseas suppliers with domestic alternatives, U.S. manufacturers are being presented with an unprecedented opportunity,” said Tony Uphoff, Thomas president & CEO. “The insights from this year’s State of North American Annual Report further underscore the need for increased investment in skilled labor and manufacturing technologies to ultimately improve the trade deficit and future-proof supply chains to protect against potential disruptions.”
Leading the charge toward U.S. and Canada-based operations are the automotive and oil and gas sectors, the most motivated verticals to add North American suppliers to their supply chains. Additional sentiment from survey participants reveals a strong interest in reshoring due to obstacles with overseas suppliers, such as availability of technical support and time zone differences. While the procurement professionals surveyed did identify challenges to sourcing materials locally, including barriers of price (40% of respondents) and speed (23% of respondents), the overwhelming majority of respondents still planned to reshore operations. The registered users of the Thomasnet.com® platform are reflecting this trend in reshoring as well. Thomas has processed more than $204 billion in sourcing requests over the past twelve months in comparison to $69 billion in calendar year 2018.
To download the complete 2021 State of North American Manufacturing Annual Report, click here.
Two sources of data were used to construct this report: the State of North American Manufacturing Survey, which was conducted online through Qualtrics, and Thomasnet.com® anonymized sourcing data.
Participating suppliers were mostly OEMs and custom manufacturers from a variety of industrial sectors with revenues spanning from less than $4.9 million to over $500 million. This latest installment of the Thomas Industrial Survey series garnered a total of 709 responses with 542 qualifying responses.
Survey respondents reported an average new supplier contract size of about $900,000. If 83% of the 579,811 manufacturing companies in the U.S. plan to engage with a domestic supplier on one new contract at that average size, this would total $443 billion in economic opportunity.
After my first meeting with Don Bartusiak, then with ExxonMobil, at an ARC Forum, I thought this was an extremely ambitious idea thinking that an open, interoperable, relatively easily upgradable process automation system build upon industry standards was feasible. And the timeline was aggressive.
The Open Process Automation Forum, under the auspices of The Open Group, has persevered, grown, and has now released version 2.1 “into the wild” for comments from the broader process community before finishing and adopting early next year. So, please go to the Website and review. Your comments could be most helpful.
The marketing people sent a news release, but I realized there wasn’t a lot of “there” there, so I talked with Aneil Ali, Director of the OPAF since May a year ago to get a bit more detail. A key factor gleaned from our chat was that 105 members were involved in the development of this standard. Final release is slated for early 2022.
I think the remarkable thing about 105 member companies is actually getting something done. All of us who have worked on this type of project know that there are companies (which I shall not name) who send engineers to join with the express purpose of asking lots of questions in order to delay the process or even (hopefully) entice everyone else to give up in despair. This committee worked through 22 recurring weekly meetings to bring this together. Remarkable.
And Ali does not expect the pace to slow.
To recap: Version 1.0 dealt with interoperability; Version 2.1 with information model; Version 3.0 (in process) will focus on application portability—system orchestration.
Some of the details of 2.1 include defining standard function blocks, addressing IEC61499, IEC61131, IEC62443 (security), and OPCUA. O-PAS is a “standard of standards”, an approach that greatly reduces detail work.
In addition to this standards development work, companies have been building ongoing prototype test beds and field trials which are underway proving this is more than mere paper. The Forum has also been conducting plug fests and developing certification testing partners and parameters.
The group has really come a long way.
From the press release:
The Open Group, the vendor-neutral technology consortium, has announced the publication of the O-PAS Version 2.1 Preliminary Standard. Developed by The Open Group Open Process Automation Forum (OPAF), this release represents a key milestone towards testing and field trials of the O-PAS Standard, enabling greater interoperability and portability in manufacturing control systems.
The O-PAS Standard defines a Reference Architecture and Information Model that will enable a distributed and heterogeneous ecosystem of industrial process automation resources to interoperate. The aim of the Standard is to stimulate innovation, lower system lifecycle costs, and provide end-users with more freedom when managing obsolescence within systems.
Created with the direct involvement of over 105 OPAF Member organizations, Version 2.1 progresses the overall Information Model of Version 2.0, while also adding new configuration portability capabilities.
“This latest advancement of the O-PAS Standard reflects the overall consensus of industry leaders: open, secure, and interoperable architectures are the irrefutable and inevitable future of industrial process automation systems,” commented Aneil Ali, Director of the Open Process Automation Forum. “The sense of urgency among product managers and sales teams to achieve this goal is therefore well-founded, with end-user test beds, prototypes, and field trials already up and running.”
Alongside Version 2.1, a certification program for the O-PAS Standard – due to launch in the first half of 2022 – is being developed against the various Profile-based requirements. As part of this work, test tools are currently being beta tested with suppliers.
“The updated version of the O-PAS Standard empowers end-users to look more closely at product roadmaps for O-PAS inclusion,” continued Ali. “As suppliers work to adopt the Standard within these roadmaps, OPAF is open to as much industry collaboration and feedback as possible.”
Following a finalized Version 2.1 Standard, scheduled for publication in Q1 2022, OPAF will work towards Version 3.0, which will address system orchestration, application portability, and further detail the physical distributed control platform.
About The Open Group Open Process Automation Forum
The Open Process Automation Forum is an international forum of end-users, system integrators, suppliers, academia, and other standards organizations working together to develop a standards-based, open, secure, and interoperable process control architecture. Open Process Automation is a trademark of The Open Group.
About The Open Group
The Open Group is a global consortium that enables the achievement of business objectives through technology standards. Our diverse membership of more than 800 organizations includes customers, systems and solutions suppliers, tool vendors, integrators, academics, and consultants across multiple industries.
The results of a recent survey. Where do you fit on their maturity index? Hopefully you are using the technologies and obtaining positive results.
Analog Devices, Inc. announced a newly commissioned study conducted by Forrester Consulting on behalf of Analog Devices, that shows that industrial manufacturers who have made investments in connectivity technologies (“high maturity”) are better positioned to drive innovation and gain a competitive advantage compared to firms that have been slower to implement connectivity (“low maturity”) across the factory floor.
The study, based on a survey of more than 300 manufacturing, operations, and connectivity executives across the globe, found that 85% of high maturity firms are currently using Industrial Internet of Things (IIoT) technologies across much of the factory floor, compared to 17% of low maturity organizations. Over half (53%) of low maturity organizations report that their legacy equipment is unable to communicate with other assets.
“This past year was a true catalyst for digital transformation and many businesses needed to navigate and adopt connectivity strategies that helped them to become more agile and lay the groundwork for future innovation,” said Martin Cotter, SVP Industrial, Consumer & Multi-Markets at Analog Devices. “We see significant opportunity in the adoption of connectivity solutions, including 5G, to help organizations get data more quickly, enabling end applications.”
Findings from the research include:
- Connected firms believe that improving network reliability (including adding 5G networks) will create significant opportunity: 68% of high maturity firms say this will enable them to make better use of existing cloud infrastructure and 66% believe their industrial data and IP will be more secure. Conversely, only 21% of low maturity firms believe that improving network reliability will help improve security. However, all respondents agree that improving network reliability will improve efficiency by freeing up employees who are constantly resolving downtime issues.
- Low maturity firms struggle with security risk: 54% say that their lack of sophisticated cybersecurity strategy puts their business, customer, and employee safety at risk.
- The human element continues to pose challenges: Almost half (47%) of low maturity firms say they lack the expertise to understand which connectivity technologies to invest in, indicating a skills gap. Even high maturity firms report that it is not easy for them to access the insights they need to make labor planning and safety decisions.
- Real-time monitoring of equipment and productivity demonstrates an acute awareness of the high cost of unscheduled downtime: High (5%) and medium (17%) maturity firms reported much lower occurrence of unscheduled downtime of their industrial technology or equipment each week than low maturity companies (53%). These interruptions, lead to higher cost of holding inventory and labor per unit, loss of production and customer confidence and decreased work capacity.
This research shows us that while many firms are benefiting from the promise of industrial connectivity, others have significant legacy and talent-related hurdles to overcome. Innovation is hindered by both a shortage of in-house expertise and interoperability of systems and data, two major hindrances to manufacturing modernization.
Methodology: For this study, “Seamless Connectivity Fuels Industrial Innovation” (March 2021) – commissioned by Analog Devices – Forrester Consulting conducted a global online survey of 312 industrial connectivity strategy leaders. Survey participants included decision-makers in IT, operations, cybersecurity, and general management manufacturing roles. The study was conducted in October 2020.
For the full study click here.
Manufacturing contraction lower than expected at 3.9%, driven by 1.9% growth in China
- Korea also leading the pack, but Germany falters
- Rubber and plastics machinery sector gains new significance in the light of the pandemic
- Semiconductors and electronics machinery sector emerges virtually unscathed
Market numbers and analysis from Interact Analysis are the ones I prefer. I’ve discussed methodology with executives and remain impressed with the rigor. Plus, they work with ITR Economics, a firm I’ve worked with (and miss reading Alan Beaulieu’s monthly column I sourced for another magazine). 2020 was a tough year everywhere but manufacturing for the most part surprisingly maintained output.
The latest quarterly update to the Manufacturing Industry Output (MIO) Tracker from Interact Analysis reveals unexpectedly strong overall global manufacturing performance.This is an upward revision on the previous MIO updates. At our most pessimistic point, we forecast a -4% contraction in industrial output for China. But the country’s rigorous suppression of the virus meant that production was back on track by May 2020, and the region is now posting 1.9% growth.
The Chinese recovery has had a significant impact on global growth, but it still represents considerable overall lost growth, putting China among the four global loss-leaders, along with India, Japan, and the USA, who have together racked up in excess of $200bn in lost MIO potential. Korea’s track-and-trace strategy has been hugely effective, and the country has seen strong growth in the electronics and components sectors resulting in overall negative growth of only -2.4% for 2020.
In Europe, Germany’s economy in particular has suffered, and recovery will be sluggish. Key factors here are the country’s huge reliance on export markets in Eastern Europe and globally, notably in the automotive and metals sectors which have both fared badly in the pandemic.
Where industrial machinery is concerned, one of the biggest casualties globally has been the machine tools sector, which has been hit hard by the major slow-down in the transportation industries. In Germany, machine tools is down 30% and this is reflected in weak performance in other European countries too, such as the UK where we also predict the machine tools market to be down over 30%. And Europe is not alone: few of the major regions are likely to return to 2019 levels in the next 6 years.
COVID-19 has driven, and will continue to drive, the demand for plastic and rubber medical supplies and personal protective equipment. However, the rubber and plastics machinery sector did experience a decline in demand in 2020 with Korea, India and the UK seeing contractions of the order of -15.8%, -13.9% and -13.4% respectively. However, all the top 10 regions are expected to recover to 2019 levels by 2023 at the latest. Strong APAC performance will bolster a growth that will see production values rise from $49.6bn in 2020 to $53.4bn in 2021.
Adrian Lloyd, CEO at Interact Analysis, says: “The semiconductor and electronics machinery sector is one of the few sectors to have come through the pandemic untouched. Most major regions are forecast to grow past 2019 levels in 2020, with global growth forecast at 9.9%. The few who don’t will be back up and running at a stronger level than 2019 by 2021. Growth will likely be slightly slower in 2022 and 2023 but will remain positive. APAC is the leading producer of semiconductor and electronics machinery. We forecast a 5-year CAGR for Korea of 9.1%. It’s a good sector to be in. But some regions really need to play catch-up.”
About the MIO
Our team of analysts works in close conjunction with ITR Economics, a renowned and reliable team of economists who help inform our macroeconomics forecasts. Our rigorous data collection, some of it anonymised confidential material from individual manufacturers and end-users gathered during hours of interviews either face to face or by phone, and some of it gleaned from the public domain, notably government policy and financial documents, means we have significant monthly data to pull on. With almost a full year’s worth of indicators available, it allows us to test our forecast of several scenarios and predict the overall yearly growth for 2020 and beyond more accurately.
About Interact Analysis
Interact Analysis is an international provider of market research for the Intelligent Automation sector. Our team of experienced industry analysts delivers research into three core sectors: industrial automation, robotics and warehouse automation, and commercial vehicles. Intelligent Automation – which is the integration of artificial intelligence and automation – will change virtually every industry imaginable. This combination enables greater efficiencies, productivity, convenience, and scale. It has the potential to drastically alter the outlook for many traditional industries such as manufacturing, healthcare and automotive as well as to lead to the emergence of entirely new industries.