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Automation Economics in the Downturn

Automation Economics in the Downturn. Robert Dunlap dunlaprobert@stanleyconsultants.com. Confusion happens. NOW is the time to invest in automation!. 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

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Automation Economics in the Downturn

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  1. Automation Economics in the Downturn Robert Dunlap dunlaprobert@stanleyconsultants.com Mile High Industrial and Automation Conference

  2. Confusion happens NOW is the time to invest in automation! Mile High Industrial and Automation Conference

  3. 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 6th month • CNN 3/6: Highest unemployment Mile High Industrial and Automation Conference

  4. 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 Mile High Industrial and Automation Conference

  5. 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.” Mile High Industrial and Automation Conference

  6. 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 Mile High Industrial and Automation Conference

  7. 2. Productivity? Mile High Industrial and Automation Conference

  8. 3. Infrastructure plan • Demand rising • Colorado to receive $2.8B stimulus • $11B for (smart) Electrical grid • Failures cost $150B/year • $19.4B for water Mile High Industrial and Automation Conference

  9. 4. Automate for value • Marketing in South Africa • No money = no loyalty? • 100% wrong • GM made $ thru 1930’s! Mile High Industrial and Automation Conference

  10. 4. 8000 hits • “…automated systems and sensors, … promote quality and compliance...”* • “Automating … saves on labor, newsprint, and overweight postage.”* *sec.gov, 3/2/09 Mile High Industrial and Automation Conference

  11. 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 Mile High Industrial and Automation Conference

  12. 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 Mile High Industrial and Automation Conference

  13. 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 Mile High Industrial and Automation Conference

  14. 3. 1987, 1937 or 1929? • Dow • 1929 • 1987 • The Depression became Great • Cyclicals Mile High Industrial and Automation Conference

  15. 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 Mile High Industrial and Automation Conference

  16. 4. Information opportunities • Protection • Dashboards • Informatics Mile High Industrial and Automation Conference

  17. 5. Understand user • What you’re not doing: • Benefits • Your product’s cash flows • Their cost of quality • Innovating production Mile High Industrial and Automation Conference

  18. SUPPORTING SLIDES • FOLLOWING SLIDES TO BE USED FOR SUPPORT; RESPONSE TO QUESTIONS Mile High Industrial and Automation Conference

  19. Engineering Graduates • http://www.engtrends.com/degrees1945.html Mile High Industrial and Automation Conference

  20. 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] Mile High Industrial and Automation Conference

  21. 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/ Mile High Industrial and Automation Conference

  22. 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 Mile High Industrial and Automation Conference

  23. 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 Mile High Industrial and Automation Conference

  24. 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 Mile High Industrial and Automation Conference

  25. 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 Mile High Industrial and Automation Conference

  26. 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 Mile High Industrial and Automation Conference

  27. An innovation • Utilities are worried about renewables • Automate weather trading, weather forecasting, hedging, dispatch Mile High Industrial and Automation Conference

  28. 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 Mile High Industrial and Automation Conference

  29. 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 Mile High Industrial and Automation Conference

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