July/August 2010

The cost of economic recovery

By Thomas Schwieters

As we receive mixed messages and conflicting economic data, forecasts in all directions from self- proclaimed experts, and as we witness the deterioration of currencies around the world, one has to wonder what an economic recovery really is. What does it look like, and how will we be prepared once the return of capital spending starts in earnest?

One thing is certain, most of us have already been caught unprepared. I for one have fond memories of the good ole' days when inventories were up and long-lead automation components were measured in days or a few weeks at most. A lead-time of four weeks or more would cause us to specify around the long-lead item and complain to our supplier about their lack of availability. Even major items like industrial robots were readily available. Commodity type components were almost an afterthought during purchasing. Things have certainly changed. We now receive marketing material directly targeting the unavailability of certain components from major automation manufacturers. These global industry leaders spent millions of dollars marketing their products and worked tirelessly to get them written into specifications only to fall flat on their face when orders started to come in. 

On top of material shortages, we have another lack of inventory to deal with; intellectual inventory, manpower, capacity-call it what you want, our industry is understaffed. Like many of our peers, we were forced to downsize our company when our core clients suddenly cut off capital spending. Those were dark days for sure, the hardest of my life. This story is repeated all across our industry. Major manufacturers, chemical and process companies, engineering firms, supply houses, and electrical contractors, all of them have shed jobs and tightened their belts.  Unless you are a government employee, the odds are you are affected by downsizing, plant closures, and outright business closure. 

As a systems integrator, we have been warning our clients. Explaining inventories are depleted, and there are shortages across the supply chain. All of this seems to have fallen on deaf ears. Clients look almost bewildered when we review a proposal and discuss lead time. They are frustrated, now that they are ready to pull the trigger and capital has been approved, the delivery times do not meet their expectations. They want to get their new assets in production as soon as possible and start realizing the return on investment. Chances are they dusted off a project from several years ago that was put on hold and used the old information for the approval process. They complain and challenge the delivery date; to them this is just not right. Aren't the suppliers, integrators, and manufacturers hungry they ask? In their eyes, this is a buyer's market, and one would think they might be correct. However, without inventories available to execute projects, the law of supply and demand prevails. Now that spending is starting to return, there is little capacity left to execute projects let alone fast-track projects like most of our clients want.

There are thoughts of adding staff for sure, maybe trying to re-hire lost team members. This brings us back to the beginning of this article, what does an economic recovery look like?

For now, we, like most of our peers, will forge ahead and work with the staff we have. The desire to hire is quickly dashed each and every time we listen to our policy makers. The prospect of increased tax burdens, punishing policies, certain inflation, and growing anti-business rhetoric is driving the entrepreneurs and business decision-makers into a more defensive position. Those of us who are the owners and operators of private sector companies are now punished and criticized for being the job creators and risk takers. People are calling this a "Jobless Recovery" for good reason. Why would any of us want to take on more risk or invest more of our assets when the current administration clearly favors public sector expansion and greater government control? Maybe it is time our policy makers spend a week in our shoes; or better yet, maybe it is time we elect policy makers who have actually worked in the private sector. A growing private sector will be the backbone of any future recovery to come.


Thomas Schwieters (tschwieters@acss-inc.com) writes questions for ISA's Certified Automation Professional (CAP) exam and is a contributor to the ISA/Automation Federation/DOL (U.S. Department of Labor) Advanced Automation Competency Model Development. He is president of Automation and Control System Solutions, Inc., an independent systems integrator with a market focus in the Food & Beverage, Biotech, and Pharmaceutical industries.