Automation Economics in the Downturn - Mhiac.com

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March 31st and April 1st, 2009

Mile High Industrial and Automation Conference

Automation Economics in the
Downturn

Robert Dunlap

dunlaprobert@stanleyconsultants.
com

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Confusion happens

NOW is the time to invest in automation!

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

What else is happening?


BW 2/27: Jobs… dismal


CSBJ 3/2: consumer spending uptick


yahoo.com 3/2: Dow lowest since 96


CSBJ 3/3: 40 new jobs


AP 3/5: Jobless claims drop


AP 3/5: Factory orders fell for 6
th

month


CNN 3/6: Highest unemployment


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

1. No more people


AI and satellites


No engineering grads


HR


Cannot give incentive


Not a value adder


Cheap lawyer


2/3 have no talent management

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

1.
HR and lawyers

“…not getting trapped
by some recruiting
formulas.”

“You are playing to a
lawyer’s weakness to
ask him to make a
business decision.”

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

2. Unions


+428,000 union jobs in 2008


Government +0.5% in 2009


Manufacturing
-
3.9%


…automation and computerization are "the
enemies of the postal union."
-

Sam
Anderson, EVP, APWU Local 1, 9/16/04

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

2. Productivity?

R
2
= 0.5789
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
0
5
10
15
20
25
30
Union Percent
ENR Const Cost Index
March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

3. Infrastructure plan


Demand rising


Colorado to receive $2.8B stimulus


$11B for (smart) Electrical grid


Failures cost $150B/year


$19.4B for water



March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

4. Automate for value


Marketing in South Africa


No money = no loyalty?


100% wrong


GM made $ thru 1930’s!


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

4. 8000 hits


“…automated systems and sensors, …
promote quality and compliance...
”*


“Automating … saves on labor, newsprint,
and overweight postage.”*


*sec.gov, 3/2/09

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

5. Green is coming


Carbon
-
83% 2005 to 2050 (!)


Trade $13~$20/ton


Gasoline +12 c/gal


Consumer power bill +7%


$150B for green




Red Herring 3/2/09, BusinessWeek 3/5/09

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

1. Intellectual capital


Invest now
-

it’s cheap


No innovations in a long time


R&D = 1.8% of sales*


People leaving the industry




*
sec.gov, 3/12/09

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

2. Growth is coming


Media sells emergencies


Unemployment



Natural rate 5%



Germany 10%



US 8%



CO jobs
-
0.8% in 2009


Your customer will be ready

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

3. 1987, 1937 or 1929?


Dow


1929


1987


The Depression
became

Great


Cyclicals




March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

4. Information is valuable


Reliability Council example


$100B, $300B, $1 Trillion


Security worsens in downturn


Plug customer leaks


Papers = 1


Products = 0


The 14
-
second test


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

4. Information opportunities


Protection


Dashboards


Informatics




March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

5. Understand user


What you’re not doing:


Benefits


Your product’s cash flows


Their cost of quality


Innovating production





March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

SUPPORTING SLIDES


FOLLOWING SLIDES TO BE USED FOR
SUPPORT; RESPONSE TO QUESTIONS

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Engineering Graduates


http://www.engtrends.com/degrees1945.html


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Not Enough Engr Grads


“At the same time, the United States is also
falling behind in general STEM [Sci, Tech, Eng,
Math] education. According to the American
Society for Engineering Education, China will
likely produce almost
eight times

the number of
engineers than will graduate in the United States
this year. Students in India are also studying
science and engineering at an average rate of
three times

that of the students in the United
States.”


http://thetartan.org/2009/2/23/news/jobs

[CMU]

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Engineering Grads
-

$15MM?!


“Topeka


State legislative leaders Tuesday
announced the formation of a task force to
address the shortage of engineering graduates
in Kansas… Last year, the deans of the three
engineering schools unveiled a five
-
year plan to
increase the number of engineering graduates
from 875 per year to 1,365 per year, an increase
of 490 annually. The proposal was supported by
industry. But the plan would cost an additional
$15 million …”


http://www2.ljworld.com/news/2009/mar/03/task
-
force
-
formed
-
address
-
states
-
shortage
-
engineer/


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Brandeis


good example


Lovers, Tyrants, and
Other Enemies:
Greek Tragedy from
Aeschylus to Brecht



Reggae
Representation,
Race and Nation



The Renaissance:
When France
Became France


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

A bad union?


Argumentum ad nauseum: proof by
assertion


Median teacher salary: $47,900


$47,900 * 40/36.5 * 12/9 = $69,990



Data from bls.gov retrieved 3/10/09; Manhattan Institute for Policy
Research Jan 2007

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Beta and Cyclicals


CPN 0.00


GIS 0.26


XOM 0.46


SO 0.46


K 0.50


XEL 0.52


COP 1.18


GE 1.21


HON 1.45


FCX 2.21


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Automation… what?


design of photolithographic masks


fare
-
collection systems


spinning and cloth manufacturing


case running


back office


metal anodization, vacuum metallization of
plastic


design of custom semiconductors


customer shipping…replenish branch
inventories

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

Automation… who?


http://www.sec.gov: 8000+


Annual report: 8000+


Between 3/3/08 and 3/3/09: 8000+!


Golfsmith


merchandise


Thrifty Car Rental


ordering and deliv


Oncor


600,000 automated meters


Mobile Mini


automated pallet racks


Northwest Natural Gas


meter reading


Olympic Steel, Roper Ind, UPS

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

An innovation


Utilities are worried about renewables


Automate weather trading, weather
forecasting, hedging, dispatch


March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

IP theft fm MES + Automation


1997: Last known year PRC made crank starts


2003: BMW licenses 3 and 5 to PRC


2005: PRC passes Germany in production


2007: PRC exports BS6 to Germany


90.1%: PRC (propaganda) literacy rate


2007: GM to increase PRC suppliers; executive
sees “no quality problems”


2009: PRC forex res $1.946T

Wikipedia, Car and Driver, The Economist, RAD, Reuters

March 31
st

and April 1
st
, 2009

Mile High Industrial and Automation Conference

NERC CIP: A challenge to mgmt


Can you define SHA
-
1?


Would you approve a product using MD
-
5?


How long does it take a logic bomb to
deploy?


Have you blocked *.cn packets?


1 day to get in nuke, 1 wk to control