February 2021 Volume 3

AUTOMATION

Why Automation Matters to Forgers (Today More Than Ever) By Jon Cocco

In September, I took a call from a new customer that was looking at setting up a new forging line in Texas. He wanted us to help with automating the feeding of billets into an induction heater for two press lines. While this is a common application for us, what was different in this discussion was the reason he needed the automation equipment. His company was moving production fromChina back to the United States. Over my 20 years of running global businesses, I have moved many production lines to low-cost countries to take advantage of the labor arbitrage. Now with the ever-growing sophistication of automation, I have been seeing a reshoring trend across many industries, including with our forging customers. Push for Productivity In just about every industry, production environments are changing drastically. The operational technology (OT) of manufacturing companies use automation to enhance their operation by increasing up-time and reducing overall labor costs — enabling companies to not only to make processes more productive but also to give leadership and shop managers better quality and predictability of their equipment and output. Advanced economies are investing in automation to close the labor cost gap with emerging markets. Twenty years ago, the manufacturing value added per dollar of

labor was twice as high in Mexico vs. the U.S. By 2013, that gap had shrunk to less than 15% allowing the U.S. labor to be almost as competitive as Mexico (See Figure 1) (1). The trend of using automation to offset higher labor and shipping costs will continue to be the main lever for advanced economies to be competitive. If you are involved in manufacturing, then you are very familiar with the “push for productivity” in your facilities. Productivity (i.e., output per labor hour) is the single best benchmark for operational efficiency used across a wide range of industries. The U.S. government publishes a quarterly measurement by the Bureau of Labor Statistics (BLS) that sets the baseline among companies. For the third quarter ending in October 2020, the labor productivity increased by 4.6% (non-farm payroll). Manufacturing sector labor productivity led the way, which increased at a remarkable 19.9% annual rate as output increased at a 56.2% annual rate and hours worked increased at a 30.3% annual rate (2). While this spike is making up for the downturn earlier in 2020, manufacturing will continue to lead the way forward. Automation-driven labor productivity by the manufacturing sector is predicted to reach over 55% over the next decade (1) and thus forging facilities need to keep up.

Figure 1: Advance economies using automation to close the gap with developing economies

FIA MAGAZINE | FEBRUARY 2021 14