by Gary Mintchell | Aug 20, 2015 | Commentary, News
Today’s news stream brought to my iPad an item about disappointing results from an auction for Gulf of Mexico oil leases. The oil industry is in the doldrums with $50 per barrel oil. That affects technology companies who supply to the industry. We’ve seen that result in stock prices of those companies.
While considering that economic fact, this survey from PwC US came my way. Optimism regarding the direction of the domestic economy softened in the second quarter of 2015 compared to the previous nine-year high recorded in the first quarter among U.S. industrial manufacturers, according to the Q2 2015 Manufacturing Barometer, released by PwC US.
Respondents also trimmed overall growth forecasts and spending plans, reflecting caution around the strengthening of the U.S. dollar and potential rise in domestic interest rates, as well as continued uncertainty regarding the direction of global economy.
Optimism regarding the prospects of the U.S. economy during the next 12 months decreased to a still healthy 69 percent among manufacturers in the second quarter of 2015, compared to 76 percent in the first quarter, but up from 65 percent in the second quarter of 2014. Optimism about the world economy declined to 38 percent, compared to 42 percent in the previous quarter. Reflecting the reduced sentiment, projected company revenue growth for the next 12 months slowed to 4.9 percent in the second quarter, compared to 5.1 percent in the previous quarter.
“As a result of several macro-economic factors taking shape, U.S. industrial manufacturers seem to be taking a more measured view of business conditions in the year ahead,” said Bobby Bono, U.S. industrial manufacturing leader, for PwC. “Slower GDP growth, the impact of the strong dollar, issues in China and uncertainty in Europe are among the developments that are likely causing industrial manufacturers to reassess the broader economic picture, as well as spending plans across a range of categories. Still, the overall outlook for U.S. industrial manufacturers appears to be positive, marked by relatively high levels of optimism regarding both the domestic economy and company revenue growth forecasts.”
Operational Spending
Reflecting the more cautious outlook, operational spending plans dropped to 75 percent, down from a two year high of 83 percent in the first quarter. Looking at sequential changes among the top spending categories, plans for new products or service introductions dropped to 44 percent from 55 percent, while research and development decreased to 34 percent from 40 percent and information technology decreased to 22 percent from 33 percent during the first quarter. “While these spending decreases are notable, we believe they reflect more of a pause in sentiment, as management teams evaluate strategies to adjust to evolving market conditions, including the possibility of Federal Reserve action later this year” Bono added.
Capital Spending
According to the survey, sentiment regarding capital spending also trailed off with only 34 percent of respondents indicating plans for major new investments of capital in the year ahead, down from 52 percent in the first quarter. Following the recent trend, plans for M&A moderated during the second quarter as well, with 29 percent of respondents indicating an interest, compared to 43 percent in the first quarter and 38 percent in the second quarter of last year.
Headwinds to Growth
Looking at perceived headwinds, survey respondents identified lack of demand, legislative/regulatory pressures and monetary exchange rate as the top perceived barriers to growth in the year ahead. Concern about monetary exchange rate showed the biggest gain, rising to 37 percent of respondents, up from 21 percent in the first quarter. In addition, lack of demand rose to 39 percent, up ten points sequentially, while legislative/regulatory pressure jumped to 39 percent as well, up from 33 percent in the first quarter.
Of interest, the perceived barrier of lack of qualified workers dropped to 24 percent in the second quarter from 35 percent in the first quarter, representing the lowest level in six quarters. The reduced anxiety regarding identifying qualified workers dovetailed with a flat (52 percent) indication sequentially regarding plans to hire more workers in the year ahead. “It’s too early to tell,” Bono added. “But, the softer outlook might be reducing some of the near-term pressure on management teams to add more workers, though the shortage in skilled workers, or the talent gap, remains a long-term challenge across the sector.”
Global Expansion
With regard to global expansion, only 12 percent of manufacturers plan to expand to new markets abroad, and nine percent plan for new facilities abroad, both continuing a trend of reduced overseas expansion seen in recent quarters. Along similar lines, among respondents with international operations, the projected contribution from international sales to total revenue over the next 12 months remained in line with the first quarter at 27 percent, the lowest level since the fourth quarter of 2006.
Impact of Strong Dollar
PwC’s survey also included a section on the stronger U.S. dollar, which found that 82 percent of respondents expect an impact on revenues, average 3.5 percent, in the year ahead. In view of the stronger dollar, panelists believe reform of U.S. corporate taxes might be helpful (53 percent very/extremely helpful) to their own companies’ bottom line over the next 12-18 months. Three other U.S. government actions were also cited as potentially helpful: more sensible U.S. regulations, including financial regulations (49 percent); repatriation of U.S. companies’ international profits at low tax rates, less than 10% (39 percent); and international trade treaties with Asia: China, India, Japan (33 percent). In addition, a majority of panelists believe the stronger dollar may lead to new or strengthened strategic alliances (47 percent) or new or strengthened joint ventures (31 percent) over the next 12-18 months.
by Gary Mintchell | Feb 23, 2015 | Automation, Internet of Things, News, Operations Management, Technology
The big talk now in the Industrial Internet of Things centers on how to get all the devices to talk the same language.
There is much work going on in the area of interoperability–using a set of a few standards to allow disparate devices and applications to talk.
Here is a company announcing this week at the Embedded Systems Conference in Germany a caveat–since there is no standard, just use our proprietary system.
It “has all the building blocks” to construct a system. Note that this company is not expressly industrial manufacturing. We do have some interoperability standards now, but it is true that getting information from sensor to application can be trying.
At any rate, check out the Connect One system.
Connect One has introduced iChipNet, an Internet of Things (IoT) end-to-end platform that helps customers get their IoT products to market faster.
Connect One’s iChipNet includes all the building blocks – hardware, software, and connectivity – required for IoT product design. Since industry IoT standards are not yet in place, end-to-end solutions from a single vendor can ensure interoperability among IoT functions so that components seamlessly “talk” to each other. Such interoperability enables reliability and maintainability of products once they’re being used in consumers’ homes, building control, or medical devices, and beyond.
Connect One’s iChipNet platform incorporates the following building blocks:
- Embedded technology—Internet Controller chips, Ethernet modules, Wi-Fi modules for embedding inside IoT products
- Gateway/Hub—an optional gateway or hub to connect IoT products to the local network and to the Internet with a zero-configuration feature
- Cloud solution—Server software or service to manage deployed IoT products
- Smartphone app—An app library and example that make it easy for customers to provide a smartphone app with their IoT product
It’s All About Interoperability
The IoT comprises smart devices connected to the network and services that, for example, manage energy usage, provide doctors with real-time medical information, or monitor a baby or child remotely. Such services require a complete IoT platform that can efficiently manage data and ensure fast and reliable delivery to the consumer.
When developing such solutions, customers need an IoT technology vendor that can provide all the building blocks, and confidence that these building blocks work seamlessly together. Over time, by using a single vendor, customers protect themselves from software updates or upgrades that apply to a single part, rather than the whole system, and cause unnecessary system failures.
“In the absence of IoT standards, Connect One is making it easy for anyone to design an IoT device and service and get them to market quickly,” noted Erez Lev, General Manager for Connect One. “By providing all the building blocks needed, we assure customers of ongoing interoperability of our technology as their product evolves in the market. We believe IoT products should be simple and we have designed our technology to provide this.”
Connect One’s IoT Platform: Already Proven in Other Markets
Connect One has provided IoT chips and modules to market segments like home automation, medical, security, point-of-sale, asset management, smart energy, and more since long before the market was called IoT. Building on its M2M expertise, Connect One is tailoring these market-proven chips and modules for the IoT era and consumer space.
Connect One’s new IoT building blocks include everything product designers need to develop, deploy, and manage their IoT products securely and reliably. iChipNet embedded technology, available in many form factors and configurations, recognize the gateway/hub and seamlessly connect to it without end-user intervention.
The cloud solution keeps in touch with the iChipNet-based products, enabling a simple and robust management solution for products in the field. The IoT module connects to the iChipNet cloud solution automatically and its I/O ports can be controlled and managed via the cloud interface. The module has an embedded web server that enables the developer to configure and name the I/O ports according to function in a simple and intuitive manner. Finally, the smartphone app libraries and examples make it easy to build and promote a smartphone app as part of the solution or service provided by the customer.
by Gary Mintchell | Feb 20, 2015 | Commentary, News
This m&a activity was reflected in my own practice. There was much activity in divestiture on some company’s parts which means acquisition for other companies. It was an active year. Following is a report from PwC US. Interesting reading throughout–as much about workforce issues as companies restructuring.
Following a strong fourth quarter, the industrial manufacturing industry closed out a stellar year for merger and acquisition (M&A) activity, according to Assembling Value, a quarterly analysis of global deal activity in the industrial manufacturing industry by PwC US.
Total deal value (for transactions worth more than $50 million) soared in 2014, reaching $127 billion, an increase of 163 percent over the prior year and surpassing the 10-year high of $92.4 set in 2006. There were 213 industrial manufacturing deals (worth more than $50 million) recorded in 2014 for a total of $127 billion compared to 148 deals worth $48.3 billion in 2013.
Both deal value and volume spiked drastically in the fourth quarter of 2014, recording 56 deals worth $24.1 billion compared to 38 deals totaling $9.6 billion in the same period the previous year. Megadeals worth more than $1 billion were also in abundance in 2014 with 24 announced transactions worth $91.6 billion.
“The strong momentum for manufacturing deals in 2014 carried into the fourth quarter as horizontal consolidation and divestitures of non-core business continued to drive robust activity,” said Bobby Bono, U.S. industrial manufacturing leader for PwC. “Companies are monetizing non-core or underperforming assets, leveraging scale in core businesses and considering joint ventures and new strategic alliances to expand into long-term attractive markets, particularly in developing economies with a growing middle class. In addition, management’s attention has shifted away from headcount reduction and cost-cutting programs toward growth initiatives and filling the talent gaps.”
Manufacturers continue to struggle to find and retain talented workforce and a skilled labor portfolio is becoming a more important factor in evaluating potential M&A targets. Sixty-four percent of respondents to PwC’s Q4 Manufacturing Barometer cited a need to fill skill gaps in their businesses over the next 12-24 months and over the past year, two-thirds also reported having open positions that they were unable to fill with experienced or skilled employees. In order to begin filling the gap, 78 percent of respondents plan to hire new skill function employees over the next 12-24 months with the broadest needs in engineering/design (62 percent), manufacturing (44 percent) and R&D (28 percent).
Regionally, acquirers from Asia led the way in terms of volume in 2014, accounting for 107 of the 213 deals; however, inbound activity in the region remained subdued. China was the most active acquirer nation, accounting for 35 percent of all deals during the year.
While emerging market activity boomed in the fourth quarter, local market deals remained dominant and no cross-border activity was generated from Asia. Europe, on the other hand, saw a significant amount of local, inbound and outbound activity despite continued economic malaise in the region. Local and foreign buyers continue to scour the region for high quality businesses as they look to align their business portfolio with long-term attractive markets.
“China-involved deals in 2014 exceeded any year of the past 10; however, foreign buyers have become increasingly wary due to an oversupply of capacity, materials and debt in the region and local market consolidation. Given a perceived lack of innovation, inability to move up the value chain and cooling domestic markets, we expect Asian manufacturing companies to begin looking for opportunities in established markets in 2015,” said Bono.
According to PwC, strategic as well as financial investors continued to pursue high-quality industrial assets and were more willing to acquire companies with stable growth prospects, even at a higher valuation. In the fourth quarter of 2014, financial investors accounted for 36 percent of all deals.
“We expect market expansion, access to next wave technologies, and the compelling need to generate synergies to drive manufacturing M&A activity, particularly in established markets. The potential impact of the first round of regulatory tightening on U.S. economic activity along with the talent crunch will be key areas of focus for management but companies with healthy balance sheets and favorable access to financing will have a clear opportunity in 2015,” Bono concluded.
by Gary Mintchell | Oct 24, 2014 | Commentary, News
I always look forward for the manufacturing barometers from PwC. This one is interesting. Following is directly from PwC.
Optimism regarding projected company revenue growth increased among U.S. industrial manufacturers during the third quarter of 2014, according to the Q3 2014 Manufacturing Barometer, released today by PwC US. Survey respondents forecast an average growth rate of 5.6 percent over the next 12 months, up from 5.2 percent in the second quarter and 4.2 percent a year ago. The positive revenue outlook ran counter to a notable softening in sentiment regarding the future direction of the U.S. and global economies overall, coupled with increased concerns about the potential impacts of legislative/regulatory and tax policies.
Optimism regarding the prospects of the U.S. economy during the next 12 months dropped among U.S. industrial manufacturers to 57 percent during the third quarter of 2014, compared to 65 percent in the previous quarter and 60 percent in the third quarter of 2013. While the indicator remained solidly in positive territory, it represents the lowest level in the past six quarters. At the same time, optimism about the world economy dropped to 30 percent, down from 38 percent in the second quarter — a modest reading that was the lowest in eight quarters.
Growth rate rose
“The projected revenue growth rate among industrial manufacturing companies rose during the third quarter, indicating increased levels of confidence in company fundamentals and competitive positioning,” said Bobby Bono, PwC’s U.S. industrial manufacturing leader. “The improved outlook for company performance ran counter to a decline in sentiment regarding the direction of the economic environment, particularly on the international stage. At the same time, we saw a notable uptick in caution regarding the potential impacts of legislative/regulatory and taxation policies. This tells us management teams believe they are making the right decisions to grow, but remain leery of external factors beyond their control, resulting in some abatement in the level of near-term spending and investment plans.”
Among the major findings of the survey, 59 percent of respondents singled out legislative/regulatory pressures as the major headwind to growth over the next 12 months, up from 47 last quarter and 58 percent in the third quarter of 2013. This was followed by lack of demand, which was cited by 43 percent of respondents, in line with 42 percent during the second quarter and down slightly from 45 percent last year. In addition, concerns regarding taxation policy jumped to 31 percent of respondents, compared to 25 percent in the second quarter and 22 percent last year.
“As the year progresses, we’ve seen an elevation of geopolitical concerns across the world, which is adding complexity to management decision-making,” Bono continued. “Despite notable growth thus far for the industrial manufacturing industry and many bright spots regarding company performance, we believe management teams are taking a more conservative approach to cash outlays as they assess recent events and seek to gauge the direction of the global economy. However, balance sheets remain strong across the sector, boding well for future investment activity as the macro-environment becomes clearer.”
However plans down
The decreased sentiment regarding the economic outlook overall coincided with a moderation in plans for new investments of capital, with 36 percent of respondents indicating increased outlays in the next 12 months, down from 52 percent in the previous quarter and 48 percent in the third quarter last year. However, the mean investment as a percentage of sales remained at 5.7 percent, identical to th previous quarter.
Operational spending plans also declined with 69 percent of respondents indicating increased short-term spending in the next 12 months, down from 75 percent in the second quarter, and 78 percent in the third quarter of 2013. Plans for spending on research and development declined t0 36 percent, from 45 percent in the second quarter of 2014, while plans for new product or service introductions remained at 43 percent, level with the second quarter.
Most other spending categories showed quarter-over-quarter declines, with plans for investing in business acquisitions recording a considerable drop compared to the previous quarter but in line with prior year levels. Consistent with this finding, the Q3 Manufacturing Barometer also indicated a considerable decrease in plans for M&A spending. Twenty-six percent of respondents planned M&A activity in the year ahead, compared to 38 percent in the second quarter, but up from 22 percent in the third quarter of 2013. The majority of that group is focused on purchasing another business, followed by the sale of part/all of their own business or a spin-off.
Despite decreased spending plans, sentiment regarding hiring remained steady in the Q3 Manufacturing Barometer, with 52 percent of U.S. industrial manufacturers indicating plans to add employees to their workforce over the next 12 months. Consistent with the previous quarter, the most sought-after employees will be skilled labor (33 percent), followed by production workers (26 percent) an professionals/technicians (26 percent). Plans to hire white collar support ticked up modestly to 10 percent in the third quarter from eight percent in the second quarter, but remained well below the 17 percent level recorded in the third quarter of 2013.
Special Topic: Triggers to Growth
The latest Manufacturing Barometer revealed that the top potential trigger of increased investment and growth for respondents’ own companies over the next few years was lower costs of raw materials, cited by 51 percent of respondents as a major trigger. The second most important trigger to growth was listed as new products or service innovations, cited by 43 percent of respondents. Market expansion in the U.S. and less government regulations in industry were also cited as major growth triggers by one-in-four of industrial manufacturers.
Increased availability of capital to middle-sized businesses also came through as a growth trigger, cited by 25 percent of respondents. Market expansion abroad was cited as a major growth trigger by 19 percent, followed by costs of energy reduced (13 percent), and strategic alliances or joint ventures (11 percent).
by Gary Mintchell | Sep 24, 2014 | Automation, Internet of Things, Operations Management
National Instruments (NI) has been a pioneer in thinking about what is now known as the Industrial Internet of Things–along with what it calls “Big Analog Data”, Industrie 4.0, cyber-physical systems.
NI InsightCM Enterprise–a condition-monitoring solution that fits nicely within all the buzz words cited above–gained mention during NI Week the first of August. It is now formally announced as a new software solution that helps companies gain insight into the health of their capital equipment for machine maintenance and operations.
NI InsightCM Enterprise acquires and analyzes sensory information, generates alarms and allows maintenance specialists to remotely diagnose machine faults. Ready-to-run condition monitoring systems based on the CompactRIO hardware platform can acquire from a wide range of sensors for improved fault diagnoses. This hardware and software solution simplifies the configuration of and measurements from thousands of sensors, so users can remotely monitor device health, configure channels and upgrade firmware on deployed systems.
Companies in a variety of industries, including oil and gas, power generation, mining, rail and industrial manufacturing, that need to optimize machine performance, maximize uptime, reduce maintenance costs and increase safety will benefit most.
Key Benefits
- Cost-effective: Lowers the instrumentation cost for monitoring both critical and other plant equipment at a fleet-wide scale.
- Open: Offers open software architecture to access data and gain interoperability with third-party enterprise software packages, such as CMMSs, database historians and prognostics tools
- Easily scalable: Scales from one to hundreds of nodes per NI InsightCM Enterprise server and replicates one solution at multiple facilities
- Flexible: Incorporates CompactRIO to adapt to changing sensory needs while maintaining the user’s investment in the platform
