Manufacturers make investments in automation, technology
Manufacturers are investing more resources in automation and technology to upgrade their facilities as the economy improves and companies focus on retooling for the future, executives said.
The national trend for new manufacturing technology also has improved the position of midstate companies that make industrial technologies. Those companies are expanding their production lines, hiring workers and considering facility additions.
During the recession, companies were content to work with the machinery they had and maintain it because they didn't have the money, or couldn't immediately get the financing, for large capital purchases, executives said. That's not necessarily the best course anymore.
"You can only push off machine maintenance so long before it bites you," said Jeff Thornton, product manager for York-based Red Lion Controls, which makes electronic control systems for industrial applications.
Red Lion is an example of companies benefitting from the increased upgrade trend. The company added more capacity to its circuit board line to meet work from a subsidiary, and it acquired a New York company last year.
Both sides of the business — metering interfaces that only monitor manufacturing processes and human-input interfaces that allow workers to control the machine — have been performing well, Thornton said.
"(Metering) has been shrinking some. Not Red Lion's share, but the industry as a whole, as companies move toward more modern technology on the human-machine interface side," he said.
The Association for Manufacturing Technology, a Virginia-based trade group for companies building industrial machinery, is tracking similar trends. In July, the group reported a 108 percent increase in manufacturing machinery orders.
Orders for all of 2011 increased more than 66 percent for a total worth of $5.5 billion, according to the association's latest survey. Orders in 2010 increased 89 percent from the previous year.
Machinery orders hit above $500 million in multiple months through 2011, with September being the best month of the year, according to the association. Orders hit 2,900 units worth about $595 million that month, better than all but one month going back to 1997 and 1998, the last time monthly machine orders peaked consistently above $500 million.
"The price isn't going up," said Pat McGibbon, association vice president of strategic information and research. "It's the additional automation that people are adding per machine."
An improved economy, new technology and a workforce thin on manufacturing skills pushed companies to buy machines for automation, added capacity and increased worker productivity, he said. Bonus depreciation rules from the federal government that allowed companies to write off capital equipment on taxes also helped, he said.
Manufacturing is entering a cycle of technology upgrades and expansion similar to what it saw over an eight-year period beginning in 1992, as well as during the 1960s, McGibbon said. Early indications are that equipment purchases have carried over into 2012, he said.
Production volume and clients also are important for automation, executives said. Small companies are doing work for big companies that are selling more, whether it's the automakers or private-label products for big-box stores. If you have to produce volume at a specific quality, automated procedures are the best way, they said.
"(Manufacturers) are making major investments in equipment and facilities, and that flows down to the companies that make parts and equipment for those large companies," said Dave Skelton, vice president and general manager of development and manufacturing for Dauphin County-based Phoenix Contact USA.
The Lower Swatara Township company added 100 people last year and is planning a midstate facilities expansion this year due to increased demand from manufacturing and other industrial sectors for connectors, control panels and automation technology.
Companies are not necessarily switching from manual labor to automation, but they're using technology to control quality and volume, Skelton said. Companies have more capital to buy equipment in an improving economy, he said. The small manufacturer doesn't add technology to lay off a worker, but rather to meet speed and quality expected from customers. Improving the process will keep customers well after the economy plateaus, he said.
"This economy is working out well for our business, which is material handling," said Jon Schultz, vice president of business development for York County-based Westfalia Technologies Inc.
The Manchester Township company makes conveyors, automated storage and logistics systems. It grew its staff 15 percent last year and plans to grow about the same this year, Schultz said. More than 90 people work for the company.
Companies with long-term growth plans are receptive to automation, as are those in the fast-growing organic food markets, he said. Also, companies moving from local to regional distribution invest in automation to improve speed and control, he said.
"It's not about the savings, or even the long-term headcount," Schultz said. "It's just a better value."