VDC Research: Industrial Sensing, Networking & Control Market Blog

Man-Machine Collaboration Webinar Review

On October 30^th, the IAS team conducted a webinar in conjunction with Photonics Magazine on the topic of Man-Machine Collaboration and Safety Sensors. The Webinar content included a comprehensive overview of current machine safety technology as well as anticipated future product developments. The session concluded with an examination of the applications that will provide growth within the segment, followed by a question and answer period.

The concept of 3D bubble safety is an emerging industry demand and has evolved out of the need to have humans and machines working together in synchronous harmony. Automated systems will handle tasks that are repetitive or dangerous, allowing workers to focus on tasks that require dexterity and critical thinking.  Several of the questions were centered on this new development of man-machine collaboration.

One question that stood out in particular was from an engineer involved with a MAG welding application. Most welding is still done by hand and it is a critical step in metal fabrication. Current vision-based automation systems have difficulty with MAG welding because of the intensity of the welding arc. The arc is so bright that it overloads the CMOS sensor in the camera system which creates difficulties for the image processing and pattern recognition algorithms. The industry is actively seeking a solution since moving heavy metal parts into position must be performed by a robot, and the welding must be done by hand. A safety system that could better allow humans and robotics to work in conjunction would have wide market appeal. The concept of 3D bubble safety is explained and explored in detail in the webinar.

A full recording of the Man-Machine Collaboration and Safety Sensors webinar is available from the Photonics Website

 http://www.photonics.com/Webinar.aspx?WID=53

Welcome to Kryvorizhstal

Kryvorizhstal (MT) is the largest steel producer in the Ukraine just ahead of the Illich Steel and Iron Works in Mariupol, 15 miles west of the contested Russian border. This area is also close to Donetsk which has been in the news recently. These two gigantic and fully integrated metallurgical enterprises are critical to the European and Russian economies as well as the global steel market. Each has the equivalent capacity to produce the steel for 100 aircraft carriers and both are at severe risk of shutting down or being commandeered.

The Mariupol facility is owned by the single richest man in the Ukraine and the structures lie next to ample deposits of coal and coke as well as a seaport for iron ore shipments. Employing around 30,000, the steelworks runs more like a city than a factory. Workers are equipped with the standard accoutrement; wrenches, measurement devices, radios and to add a Russian twist, guns. The perimeter is also heavily reinforced with light artillery. The facilities are in constant alert as fighting between Ukrainian soldiers and Pro-Russian militants rages just beyond the outer perimeter.

Both plants have seen a sharp slowdown in business as incoming shipments of raw materials has been an issue. An unfortunate occurrence, as iron ore shipments are setting records in 2014. This has created an opportunity for Chinese steelworks who have taken up the slack within the market. This can be seen in the most recent Chinese PMI, released yesterday, which many economists considered a modest but surprising and unexpected uptick in the reading.

While economists scramble, the analysts weigh in. Both plants have begun new plans for expansive overhauls of their existing processes. Kryvorizhstal and Illich are looking to retrofit existing assets with the latest automation and monitoring equipment. Several suppliers could benefit here, including SICK with their Bulkscan LMS511. The system is used to scan material as it travels along a conveyer, perfect for measuring material as it is dumped into the blast furnaces. Blast furnaces also need infrared temperature sensors during the smelting process. Position sensor vendors such as IFM may also have success with their automated crane solutions. Both Kryvorizhstal and Illich have extensive rosters of steel rolling equipment and machine building divisions.

The opportunity for automation within the Metals & Mining sector is immense. This sector will generate some of the first fully automated vehicles in the form of dump trucks used to transport ore. The operations are already automated to the point that proprietors can dial up or decrease the amount of ore produced as demand fluctuates. Automation suppliers should ignore the overall growth rates of the mining sector which have created the picture that the sector is stagnant. On the contrary, automation innovation within the Metals & Mining sector has been strong.

As the Ukrainian conflict rages on, so too will the global economy.  Record production of iron ore and steel bodes well for growth, however the Kyrvorizhstal and Illich facilities may not fully participate until they can receive unfettered shipments. This may present an opportunity for automation suppliers as un-commissioned equipment can be easily upgraded during the down-time.  The slack has already been absorbed by the Chinese steel mills which are also upgrading to the latest automation technology. Suppliers with a solid understanding of these market drivers and an intrepid sales force should target these facilities and steel plants worldwide.

110 Yen: How Japan’s Systematic Currency Devaluation is Affecting Automation Suppliers

The devaluation of the Japanese Yen was one of the biggest global macro-economic themes affecting automation suppliers in 2013. As the picture for 2015 comes into focus, the Bank of Japan (BOJ) looks to continue its role in manipulating global markets.

The Japanese economy has been mired in stagnation since the early 90s due to a confluence of factors including aging demographics, poor oversight, a high level of debt to GDP, and the emergence of China as an electronics manufacturing powerhouse. The currency had appreciated during this period rising to about 80 USD/JPY in the 2011 timeframe. Since then, Prime Minister Shinzo Abe was elected and with him brought a host of policy changes in an effort to jumpstart the Japanese economy. Japan’s “Abenomics” program is similar to the Quantitative Easing program that the US has undergone in recent years; however the program was about 3 times larger in relative comparison. This effort to unwind the strength of the Yen has worked to some degree but the policy’s effect on the economy still remains to be seen. I have compiled a chart below, courtesy of Yahoo Finance, which illustrates the drastic change in USD/JPY over the last 2 years. 

As is evidenced from the data, the change is extremely significant with an almost 40% change in just two years. This foreign exchange rate change greatly improves the pricing power of Japanese exporters. Companies such as Yokogawa, Keyence, and Panasonic now have a large advantage over both American and European firms. The impact of this change affects all automation component suppliers since Japanese firms are able to offer an additional 10, 20, and even 30 percent or higher discount on their products with little material effect to their bottom line after accounting for FX.  European manufacturers who have a heavy presence selling into US markets have been hurt the most and profitability amongst these firms remains a key issue. Manufacturers need to start developing effective strategies to counteract these trends.

The BOJ has signaled that it will take additional measures in order to support the Japanese economy which hints at further easing and devaluation of the Yen. In preparation of this reality, both American and European manufacturers must develop sales strategies that focus on selling value. Customers also respond well to suppliers who can offer the full solution. Japanese suppliers of sensors and automation components tend to be a relative black box. The components typically do not integrate well with technologies and products from other vendors that may use different protocols or wiring methods. Japanese products also are generally off the shelf and the firms tend to avoid developing custom engineered products for their customers. PNP versus NPN is one example, however Japanese products generally have a limited amount of communication protocols that can be used.

As automation systems begin to encompass more of the manufacturing landscape, end users will be looking for flexible products that they can easily integrate into existing topology. New trends such as the Internet of Things, as well as the proliferation of Manufacturing Execution Systems (MES), will change the practice of suppliers locking in their customers. American and European firms can differentiate from their Japanese competitors by offering customizable solutions that can integrate easily with other systems.

The success of the Abenomics program within the Japanese economy is still uncertain; however the effects within the global macro-economic picture are apparent and unmistakable. As the yen continues to depreciate, American and especially European firms need to take this into account. The currency will touch 110 USD/JPY, and eventually could trade to even 120, or 130 within a few more years. Automation suppliers across all disciplines, whether selling sensors, PLCs, or even software, must develop new sales strategies in order to preserve revenue and margin against their formidable and artificially advantaged Japanese competition.

The Siemens Automation Summit: Optimism Abounds

This week I had the honor of attending the Siemens Automation Summit held in Orlando Florida. During the conference analysts had the opportunity to interview Raj Batra, CEO of Siemens Automation division, 1 of 16 business divisions within the conglomerate. Raj and the entire Siemens team were optimistic for several reasons as they herald the manufacturing renaissance taking place here in the United States.

        For the last few decades, manufacturing has been looked at as a drag on the business model, with many MBA certified C-suite decision makers looking for ways to outsource, go fab-less, or get their products made by contract manufacturers. Costs like overhead and labor were the primary focus as CEOs looked to lower OpEx and improve cash flow. In the last few years much has changed with the advent of hydraulic fracturing and the abundance of cheap energy. This is coming at the same time as wage rates grow in China and many manufacturing processes are becoming automated. With Energy costs now attributing up to 60% of a factory’s total OpEx, many manufacturers are looking towards the US where energy prices are 1/3 that of Europe and ¼ that of Asia. There are other advantages to manufacturing close to home as well, namely time advantage.

        Mass customization has been in full force over the last 10 years with the sheer number of product varieties rising 250 percent. Consumer tastes and trends are changing so fast that the products are often still on the boat while demand changes overseas. Enhancing flexibility within assembly and manufacturing is one way to mitigate this risk and the way to do it is to manufacture closer to the demand center. Manufacturing is also becoming a knowledge based profession so centralizing the expertise is making a lot more sense. Companies will increasingly look to modernize existing assets with top technology, allowing machinery to continue to run long after it has been fully depreciated. CFOs and business managers are really latching onto this trend especially in this low interest rate environment where cost of capital is extremely low. Siemens has recognized that now is the time to invest capital in modern industrial equipment before rates begin to rise again and they are doing just that.

        Siemens is the recognized leader within the Industrial Automation space propelled mainly by their industrial controls products. Aside from automation, Siemens is now in the top 3 on the process side boasting a $30 billion install base. Through both of these businesses, Siemens is leveraging a relatively new services branch which is primarily software based and focused on things like asset monitoring, predictive analytics, and most importantly, project lifecycle management. As technology costs continue to plummet and labor costs rise, the new value will be created by lowering the engineering time it takes to complete a project. Through the Siemens TIA portal, now boasting over 55 million lines of computational code, engineers can see up to a 30% reduction in engineering time. In a few years Siemens expects all physical assets to become digitized, that is, all documentation, certification, validation, etc. of everything from a dumb pipe to an advanced control system will be housed in a central software program that is continually syncing in real time. Concepts like this will allow for easy changeover and procurement of replacement parts; An idea that VDC is labeling as “optioneering.”  A new, drop-in replacement can be installed, with all specifications and necessary information propagated out to all related systems. This fully integrated, virtualized, cyber physical model is the next essential step in realizing a connected factory.

                The Siemens Automation Summit was a great experience and the excitement surrounding the event was truly palpable. Engineers from legendary manufacturing companies like Dupont, Air Products, and Dow Corning were interacting and enthusiastically discussing new methods and best practices. With innovative software tools, intelligent sensors, secure industrial networks, and an army of educated engineers the American industrial renaissance is charting an ambitious course towards the next level of global economic prosperity.

 

- Frank Bertini, Sr. Analayst - IAS

3D Printing Poised to Alter the Manufacturing Landscape, are Automation Suppliers ready?

As 3D printing continues to evolve, the technology has the potential to become one of the next manufacturing game changers. 3D printing, also coined as additive manufacturing, has existed since the 1980s mainly using plastics. There are many companies utilizing the printers nowadays to create new products or to improve old ones. This revolutionary technology has gradually enhanced industries’ operational processes.

Many might ask how exactly does a 3D printer work? Well, a three dimensional object is modeled by a designer using software such as computer-aided design (CAD), then the design is sent to the printer and the material is selected. The design that goes into the printer is built three dimensionally, layer by layer, using raw materials. Additive manufacturing involves sending the raw materials through a 3D printer to create an object comprised of that particular material. These printers commonly use door interlocks for safety reasons during the printing process. Considerations need to be made for the material handling before and after the piece is printed and usually robotic arms are used when the process is automated. Typically, 3D printers are used in low volume, highly specialized manufacturing situations; it certainly has many advantages to traditional manufacturing.

Poised to replace injection molding, 3D printing can easily handle complex designs and print an item with multiple parts at once. With injection molding, parts often need to be manufactured separately and then assembled. Additionally, injection molding only comes into play with a limited amount of materials whereas 3D printing can use a wide range of materials to produce items. 3D printers can also produce unique shapes not possible with other manufacturing methods.  With the current 3D printers on the market, each printer differs based on what types of materials are used. Using the printers we currently have, we are able to print with plastics, metals, ceramics, glass, paper, and even living cells (dubbed as 4D printing).

Although 3D printing will not completely eliminate traditional manufacturing, the technology has the potential to reshape manufacturing not only in the U.S., but in other foreign countries. As President Barack Obama emphatically stated in the 2013 State of the Union address, “3D printing has the potential to revolutionize the way we make almost everything.” Using the printing technology will reduce the energy used in the manufacturing industry while also producing fewer waste byproducts.

As for the future of this technology, VDC Research predicts that the 3D printing will impact the manufacturing field in more ways than one. VDC likens the disruptive nature of 3D printing to IoT, Cloud computing, Mobile Internet, and others. 3D printing should be considered a viable option for companies as it can disrupt traditional manufacturing in the food, military, electronics, medical, consumer products, and automotive industries. This type of printing lessens the waste and the carbon footprint that manufacturing has on the Earth.

With the help of automation suppliers, 3D printing can improve significantly as there are still many technological roadblocks primarily around safety, material handling and process control.  Some opportunities for suppliers include sensors for the printing head position as well as flow sensors for the plastic and other material inks that are used in the more specialized machines.

One of the biggest challenges in 3D printing is mass production. If companies need to produce thousands of products in a short amount of time, traditional manufacturing methods are faster and more cost effective. This specialized type of printing is best used in a small batch, high mix manufacturing context, however this could be changing. New techniques involve moving the object below multiple printer heads instead of moving an individual head above the object.  3D printing still has multiple hurdles to overcome however manufacturers are quickly developing novel solutions that apply the technology in innovative ways. 

by Regina Yip - Industrial Automation and Sensors team

with contributions from Frank Bertini - Snr. Analyst IAS

Security vs. Efficiency? I Could Not Have Said it Better Myself

Recently I read an excellent article in Automation.com written by Eric Byres, CTO and VP of Engineering at Byres Security, Inc. which was acquired by Belden earlier this year, which discussed the ongoing dilemma between industrial automation companies' concern over security (and for good reason in most cases) versus the need and desire to connect the factory floor/plant operations to the rest of the enterprise so as to maximize ROA and to improve corporate competitiveness.

I am a firm proponent in encouraging companies to invest, wisely of course, in products and technologies that will enable greater productivity, increased operational visibility, greater agility and increased profitability. Traditionally industrial automation operations have operated as walled off silos from other parts of an organization and have not been connected into the larger corporate enterprise; historically this was done in many cases for good reason as the potential impact of a security breach or communications error may have had dire consequences for the company itself as well as perhaps the surrounding public.

What I really liked about this article was it touched on several different markets such as industrial networking - both wireline and wireless, functional safety and data acquisition, as after all one needs to acquire data before it can be actionable and tied into the enterprise, on which VDC has been covering for decades and it imparted a sound rationale for achieving both greater security and operational efficiency.

I strongly encourage anyone interested in, or concerned over, security and efficiency as it relates to industrial automation operations to read this article and think about how it may relate to your own organizational and/or operational issues and how you may put some of the information imparted to good use.

Happy New Year wishes to you and yours

 

US Manufacturing Profits Hit a New High

In the midst of mixed economic news from Europe a significant bright spot has been recently released by the US Census Bureau about manufacturing profits. In Q2/2011, manufacturing profits have hit levels that exceed even late 2007/early 2008 levels.

 

While some of these profits can be attributed to a weaker dollar, the interesting thing about this is that these profit levels were achieved at similar sales levels as 2008. It is worthwhile noting that even though the manufacturing companies are based in the US, the actual manufacturing being performed is, in many cases outside the US. Even so, in 2008, off-shoring was, for the most part, an already done deal. Therefore, in my opinion,  the profit improvement is more likely due to more efficient manufacturing processes which are often include industrial automation.  There is also a chance that some of this profitability is the result of deferred spending but that was more likely to happen in 2009/2010. Here in 2011, it is likely that manufacturers are spending and will continue to spend on process improvement and that bodes well for economic and, eventually employment recovery in 2012.

A Few Thoughts on Steve Jobs and Apple's Unsung Heroes

As the world mourns on the passing of Steve Jobs I thought I would put an industrial perspective on some of his accomplishments. Thomas Edison was credited with saying that genius is 1% inspiration and 99% perspiration. Without a doubt, Steve Jobs had tons of inspiration but there are likely many genius caliber personnel inside Apple that were able to implement Steve's ideas and concepts and turn them into reality.

I have been on many product launch teams involving cutting edge technologies and I can attest that it is not a simple thing. The products I was involved in were capital equipment type semiconductor testers and the instruments that went into them. These were high tech to be sure but the quantities at launch time were in the dozens not millions. In Apple's case, the innovative products often required new manufacturing techniques and ever smaller/thinner cases. Each product contained new components and everything had to be designed, tested, produced, acquired, and then manufactured in eye-popping quantities in order to have a successful launch. This truly required an army of talented engineers and programmers, as well as supply chain and manufacturing specialists. Each product upon release was under a huge public and analyst/critic microscope and therefore any product problem was magnified to an incredible degree. Despite this, most Apple product launches were very smooth and the demand for the Apple products was usually met in a timely manner.

So, in summary we have to give a lot of credit to Steve Jobs for his inspiration and contributions towards assembling the Apple team and culture but, we should also give credit to the unsung army of Apple's personnel and manufacturing partners for the work they have done making Steve's visions come true. As we say goodbye to Steve Jobs let us hope that the Apple team can continue to execute as they have in the past.

Can There Be Too Much Automation?

Within the VDC Industrial Automation and Control Practice we are always applauding the ever expanding role that automated processes are finding in new regional and vertical markets. In most cases, responsible/safe automation products and solutions are clearly superior to the manual industrial processes of the past. Outside of industrial plants there is another area where increased automation has paid dividends and that is in modern passenger aircraft. In either case, well tested industrial and aeronautic automation solutions transfers the control of mission critical processes to avoid operator/pilot type errors.

An article I read last week focused on some aircraft situations where the automated systems failed and, it appears the pilots had lost some of their edge with respect to the correct response they had to make. Planes that are in near stall condition need to point the nose down in order to pick up air speed. Pulling the nose up which might be the intuitive thing actually makes the stall condition more likely. Could there be a parallel from these aircraft situations and those that can take place in industry?  In my opinion, similar unexpected problems with automated processes could happen at almost any industrial facility. Most systems are designed with redundant and ultra-reliable components calculated to have the appropriate Safety Integrity Level (SIL) for the safety/process risk that is present.  On the other hand, recent events have shown that problems have already occurred in situations where combinations of failures and events overwhelm the automated systems. I was thinking about two obvious ones where this could have happened.

• At Fukushima Daiichi, from what I understand, the earthquake severed the facility's connection to the electrical grid and, then, the resultant tsunami almost simultaneously, destroyed the backup power sources. In such a case would it have been better to keep generating power with at least one of the reactors to keep the facility pumps cooling pumps running? I would estimate that the safest conventional and likely automated process thinking would be throwing the control rods in the reactors and isolating the steam pipes but perhaps this was the wrong move because of the other combined factors.

• In the case of the Deepwater Horizon, which was a well automated modern marvel of engineering we again see a chain of miss-interpreted tests, overridden alarms, and dependence on automated systems that could possibly delayed the reactions needed to save the rig by cutting the it loose from the blown out well. There were other factors in place here that I have discussed in earlier blogs but there is case to be made in that the automated safety systems fell short and it is likely that some manual reactions were not made or at least not in the correct timing and sequence.

Before I close, I do want to take some time to laud the efforts of the personnel directly involved with both cited incidents. They were in desperate situations and had to make difficult decisions and actions and, in many cases, lost their lives doing so. This posting was never intended as a slight to these fine individuals.

In closing I think that in many cases, industrial facility owners are increasingly looking for outside expertise to provide complete automated solutions with respect to process control and safety integrated systems. OEMS and equipment specifiers claim that 55% of their revenues are service related while at the same time end users are claiming ~38% of their expenses were for non-hardware related categories. To me that translates into a lower level of expertise at the point of use. It is unlikely that the automated systems that are put in place will fail but, if they do, hopefully the on-site personnel will have the expertise, decision making, and necessary reactions to prevent disasters.

 

George Devol - A Pioneer in Industrial Automation

This morning VDC Research Group's Industrial Automation & Control practice would like to note the passing of George Devol at the age of 99. George Devol was the inventor of the first industrial robotic arm that was placed into service at General Motors in 1961 which was the same year his 1954 patent for "programmed article transfer" was approved. Since then, automotive and industrial production facilities have never been the same. In the intervening time, industrial robots have moved to the mainstream from niche products designed for one-off hazardous location or extremely repetitive applications involving heavy materials. As many of our reports show, the position sensors, and machine safety products that go into industrial automation products can individually represent markets with hundreds of millions of revenue dollars annually.

In our opinion, all industrial automation market participants should have a few moments of reflection for George Devol as it appears we all have something to thank him for.