Dealing with an Uncertain 2012
By JEFF OWENS, President, Advanced Technology Services
Jeff Owens is the President of Advanced Technology Services, a Peoria, Ill.-based company that provides outsourced production equipment maintenance, information technology assistance, and spare parts repair. The company utilizes extensive training programs to give engineers the knowledge necessary to troubleshoot and fix the high-tech manufacturing machinery of the 21st Century manufacturer, allowing these companies to focus on their production.
Q: How do you feel that 2011 is ending for manufacturers?
A: Our feeling is that many sectors we’re dealing with now are very robust. Throughout the course of 2011, we have seen actual production over the forecast of what people were thinking — the demand has actually been greater — and they’ve had a hard time keeping up in many areas. But people are very hesitant to add labor or equipment because there’s so much uncertainty. My perception is that it’s very difficult to determine, and everyone is going month to month because they don’t know what shoe is going to drop. In the long term, manufacturing in the U.S. is stabilizing, and we may even see a resurgence because of political factors. People want to bring jobs back to the U.S.
I don’t see companies getting away from their strategy of building the product where it’s going to be consumed, so I think you’ll still see very active manufacturing output in China and India, but most of that would be for the domestic market. Here in the U.S., I think you’re going to see stabilization, and I think there’s going to be a real push for efficiency, and to improve the margins of operations here.
Q: Do manufacturers have hope or pessimism about 2012?
A: It’s a big question mark — unknown. It’s not from anything they’re doing. It’s mostly coming from the external factors. There are so many unknowns out there, and companies are just waiting. If those unknowns could be checked off, and could become at least more certain, I think people would get much more comfortable. We see when people are given the option of a long-term investment, or keeping it on a temporary basis, they choose the temporary option, just because they don’t want to over-extend themselves. When you add that up across the whole industry, there’s a lot of lack of investment in the future because of that uncertainty.
We see [ATS’] model gaining a lot of traction for a number of reasons. One, there is a lack of skilled people out there, and there’s the aging baby boomers. Most companies don’t have good apprentice or training programs, or recruiting programs for those types of people, but our company has focused [on that], which has been a positive for us. If they outsource to us, we can bring those solutions to them, because we have been growing and developing people, and we have very robust training programs in place.
Q: So, they’re just not spending the money even though they have it?
A: Right. If you have a decision to make — a serious capital investment — and there’s an option to postpone it a little bit and see how things pan out, what I have been seeing is that people are waiting to see how it pans out. With elections in the United States, deficit reduction, taxes, what’s going to happen in Europe, with issues going on in Mexico — that really causes people to sit tight.
Q: What about the elections? How can those affect manufacturing operations?
A: I think it depends on what the issues are, and I think the two sides have different views as to what the future should be. I think people are waiting to see what happens and they’re waiting to spend and hire as a result of that, too. They don’t know about the regulatory environment, they don’t know about the National Labor Relations Board, they don’t know about the tax environment. They just don’t know what the rules will be in the future, and that causes them to just sit tight.
Q: What about the tsunami in Japan or the flooding in Thailand. How is that changing what companies are doing?
A: I was surprised at the impact this tsunami had, and how it rippled across the world. I think it reminds people that having one source — and the words I hear a lot from our customers regarding that is “risk mitigation” — in a place that’s a long way away causes them concerns. Probably more so than it did before.
Q: What is your advice to a company that’s uncertain about 2012?
A: Building flexibility into manufacturing is absolutely imperative. If you make huge investments and you do lots of hiring and all of a sudden the bottom drops out of your market, it can be very rough. Building flexibility and variability into your cost structure is a very good move. We all have to be prepared, as the economy has its peaks and valleys. I think there won’t be these long-term growth trends, instead it’s going to be more up-and-down, and it’s affected by external forces. The better prepared we are to ramp our cost structure and production up and down, the better off we’ll all be.
Interview by Joel Hans, Managing Editor, Manufacturing.net