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01 December 2002

Turning it around

All industry signs point toward a stronger year ahead.

The industry is working under a new business model now, and this year's ISA 2002 show was no different: how to do more with less. Attendees were actually walking around cutting deals. Exhibitors were actually talking about real business with real customers. And while our economy is far from out of the doldrums, some manufacturing industry segments appear to be turning upward.

"I said the economy would turn in July or August, and it hasn't," said Michael A. Lane, president of Wago Corp., a Germantown, Wis.-based manufacturer of electronic, electrical, and automation control products. "Since then, it's been flat.

"We're seeing light at the end of the tunnel, however. I think it will turn by the end of the first quarter at the latest. My 2003 budget is based on that," Lane said.

"The automotive segment worries me," he said. "The Japanese [automakers] are retooling, and Detroit isn't. They could find themselves two years behind." Business areas Wago sees picking up, Lane said, include packaging, automation, and materials handling.

Systems integrators exhibiting at the show agreed business could be better.

"It still feels like we're treading water," said Karl Swanson of PCT Engineered Systems in Davenport, Iowa. "There's some increased spending on projects but not enough to feel we've turned the corner." PCT specializes in the metals (steel and aluminum, for example) and the conversion market, including plastic film and coatings.

"We had quite a bit of work in the till before the slowdown. Now we're burning up the backlog," said Robert Rosa of Engineered Energy Systems, a Livingston, N.J.-based systems integration firm specializing in building automation systems and upgrades. "We're OK for the next six months, but I don't know what will happen after that." Rosa said pharmaceutical manufacturing was his firm's strongest business segment.

Despite tight capital budgets, Phoenix Con tact's Davis Mathews said areas such as his firm's wireless products are selling.

Dick Verville, marketing manager for in dus trial measurement and control at Honey well, sees project activity improving, but that has not added up to additional revenues. "It's a struggle like everybody else," he said.

He sees good signs in South America, Asia, and "particularly China." Europe and North America have been difficult, he said. Ver ville doesn't see many firms earning huge profits this year, and that will affect Wall Street.

"The economy is pretty flat," agreed Jerry Mason, marketing manager for Parker Han nifin Corp.'s Partek/Atlantic tubing unit in Tucson, Ariz. "The semiconductor industry, in particular, is in the toilet," Mason said. "I'd say the instrumentation market generally is flat."

"In Germany, the economy is slow, at a 0.5% national growth rate," said Martin Braband, president of Tixi.com GmbH. "There was a big [negative] impact on the economy since 9/11," he said, "but our business is slowly picking up."

"There's more outsourcing going on, and I see asset management as an important part of where manufacturing needs to go," said Bill Moore, vice president of ARC Advisory Group.

"Business is great. I work in systems integration, which is anticyclical," said Stephen Wal ton, a strategic consultant for instrumentation and industrial automation.

GLOBAL GAZING

While the U.S. and much of Western Europe continue to experience slow growth, other parts of the world are looking good.

"We're seeing good business in just about every area but North America, including parts of eastern Europe and the Middle East," said Jane Lansing, Emerson Process Management vice president for corporate marketing.

Lansing, who specializes in PlantWeb marketing, said Emerson has benefited from landing large equipment installation jobs in China and western Africa. Even parts of Latin America have been active, she said.

Industry segments that have held up well, she said, include pharmaceutical makers, oil and gas, and hydrocarbons. The pulp and paper industry generally has been "not good" from a business point of view, Lansing acknow ledged. Chemical companies have generally been another slow to no grower segment, she said.

Jim Cummings, president of systems integrator firm Total Systems Design Inc. in West Chester, Pa., said 85% of his firm's business comes from pharmaceutical makers. In that segment, construction is "fairly active" in Puerto Rico, Ireland, and Singapore.

These days, largely be cause of FDA regulations, "50% of a project is information based as opposed to controllers," Cummings said.

Another systems integrator vendor, VI Engineering Ser vices Inc. in Farmington Hills, Mich., said it is seeing signs that once-delayed projects "are becoming live orders," said Dean Streck, vice president of operations.

"They need to make large investments to stay ahead in research and in manufacturing tests. For example, if they manufacture a new pacemaker version, it must be tested extensively," Streck said. Like Cummings, Streck said his firm is also seeing more business coming from IT infrastructure projects.

Similarly, Bruce Fuller, product line marketing manager at Everett, Wash.-based Fluke, said companies are making moves right now. He said the semiconductor industry, while money is tight, will purchase product if they see a cost benefit. "If it affects their production lines, they can find the money." Right now, Fuller said, the pharmaceutical industry is doing well for his company.

At MTS Systems Corp., sales and marketing manager Arnold Dumas said pharmaceuticals, biotechnology, petroleum, petrochem, and food and beverage are doing well. He said pharmaceuticals are doing well because they have the money right now. He added the big demand from customers is accuracy and repeatability.

Manrique Brenes, product manager at San Jose, Calif.-based Cisco Systems, said as far as the manufacturing sector at his company goes, the automotive industry is doing quite well. "Automobiles is where we have our largest active engagement."

LEVERAGING ASSETS

Talking about the economy and growing areas of the world is one thing, but companies continue their quest to squeeze the most out of whatever assets they have. A panel of asset management experts and strategists worked that topic over in a session on "Driving Operational Excellence in Plant Asset Management."

Moderator Moore said, "I think you all are painfully aware of the economic landscape we're dealing with. There's a slump, accounting errors that won't relent, and excess in capacity. An excess in capacity means companies aren't building any greenfield plants."

At its most fundamental level, the concept of asset management is the "use of data to better manage operations."

Putting Moore's declaration on newly constructed plants together with the notion of asset management, the result is that companies want to "squeeze" more product from existing equipment. Vendors won't be turning larger revenues from the sale of new hard equipment. Manufacturers need to find methods of producing more and higher-quality product from existing hard resources.

Moore said he sees the terminology of as set management as follows:

• Condition monitoring is associated with the vibrations of rotating and reciprocating machine. These are the standard vibration sensors and accelerometers.
• Plant asset software systems are software-based entities that take typical plant data such as temperature, pressure, and flow and analyze and massage that data with the software's built-in intelligence.
• IT and remote asset management refer to the enterprise's software, networking, and communications assets and its mobile capabilities resources.

David Brochu of SmartSignal spoke of conditioning monitoring and knowing something is about to break down: "I was speaking to a plant manager in Houston recently, and he's got five plants, and he's building a sixth. But he says that sixth plant is coming out of the other five. There's no new equipment, there are no new systems, and how do I get 20% improvement in productivity out of five plants so I don't have to build that sixth plant?"

HOT TOPICS

What will be big issues in the automation world going forward?

"We've got to solve people's pain," John Berra, president of Emerson Process Man agement, said during a lively panel session hosted by industry visionary Richard (Dick) Morley. Even two or three unplanned shutdowns a year is a "big problem" for process manufacturers, Berra said. "That's what we need to turn our attention on."

"What will be hot technologies?" Morley asked during his "Dick's Last Retort" session.

"Look for wireless everywhere," said Ken Crater of Control.com. Agreeing in various degrees were Morley and three other outspoken panelists: Jim Pinto of Pinto.com; Shuzo Kaihori, CEO of Yokogawa Corporation of America; and Berra, who is also chairman of the Fieldbus Foundation.

"Every valve and every attendee at ISA will be wireless" within 10 years, Pinto predicted.

Several in the audience expressed security concerns, especially with wireless.

At a "Cybersecurity of Industrial Control Systems" forum, special agent Kelly Bren nan outlined how the FBI classifies cyber threats: insiders who may be friends or former friends of the network; hackers; and virus writers who put backdoor robots into the virus software.

In addition, Exida's John Grebe, Dow Chemical's Eric Cosman, and Rockwell's Keith Unger discussed plant security cybersecurity.

"Attacks from competitors-industrial es pionage-mean security is an ongoing pro cess, not a technology solution," said Unger, founder of ISA's SP99 control system security committee. "The key is to manage risks."

Unger hailed efforts of the ISA SP99 committee, which aims to prevent unauthorized access to process control systems.

NETWORK SECURITY

When it comes to network security, process control and IT are "worlds in collision," said Eric Byers, head of British Columbia Institute of Tech nology's Internet Engineering Laboratory and Industrial Incident Database.

At a session on "A Hard Look at the Network Security Risks for Industrial Control Systems," Byers suggested a plan to plug security holes: audit the process system; develop a security policy for control systems; develop an architecture; develop intrusion detection systems that monitor traffic patterns; develop a system to track and record exceptions; and develop an incident response plan. IT

Ellen Fussell, Nick Sheble, Jim Strothman, and Gregory Hale contributed to this report.

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