Part of a series on the changing channels of distribution
Silently and without a great deal of fanfare, a number of changes have occurred in the world of automation, motion control and mechatronics. Sometime along the way we have reached a tipping point, a point at which human-driven change reaches critical mass and its momentum becomes unstoppable.
We're beginning to see a major shift in the balance of power among suppliers of the various systems used on the factory floor, a shift that may not favor traditional distributors of electrical automation and control technologies, except for those who find a way to adapt.
First, an overview of a few of the small changes leading up to this tipping point:
General trends in the human side of manufacturing - Right-sizing and re-engineering of in-house engineering expertise — along with the retirement of high-skill technicians as many experienced baby-boomer electricians, machinists, tool makers and others left the work force — have boosted demand for simplified, plug-and-play technologies.
Continued acceptance of new business techniques — Lean manufacturing and value engineering philosophies caused many companies to re-evaluate their costs of operation. Administrative costs associated with purchasing, stocking and staging the components used later in manufacturing were identified and studied to a much greater detail.
Growing customer expectations — Consumer trends explored first by Chris Anderson in Wired! magazine and later explored by Wharton School of Business, MIT and others point to a growing demand for more variety. It's no longer acceptable to offer just a few sizes or colors or flavors of anything — customized products demand a premium.
A ramping of global competition — In the late 1990s through the post-9/11 downturn, most “low innovation” companies left North America in search of cheaper sources of manpower. Companies remaining increased their reliance on automation and mechatronics to not only eliminate labor but to improve their ability to provide mass customization of their products.
Changes in technology — Subtle advancements in electronic technologies have made that aspect of automation and mechatronics easier to understand. Plug-and-play designs make things much easier.
Demographic changes in technology business — Many of the primary players (owners) of technology businesses are pushing into their 60s. As this group eyes retirement, their propensity to expand or radically change their business drops.
Armed with these observations of change, let's look at a couple of additional data points.
Distributors have long served as a bellwether of shifts in market perceptions. Their very survival depends on their ability to quickly respond to customer shifts. One such shift was noted in a recent survey of distributors with roots in the power transmission industry. These are the companies that traditionally have provided things like motors, gear boxes, bearings and other mechanically oriented products. But customer demands for coordinated systems — electronic, mechanical and hydraulic — have pushed them into a new business.
Based on a survey of distributor members of the Power Transmission Distributors Association (PTDA), Chicago, PTDA distributors view the motion-control industry as part of their future offering. Sixty-one percent of the PTDA members responding indicated they currently participate in the motion control business. More importantly, 43 percent plan to expand their efforts in the near-term future. This number came in far higher than the estimates of many long-time industry experts.
The focus isn't just on the power side. One interesting aspect of the survey comes from the number of members surveyed currently building a place for themselves in ancillary products such as sensors (54 percent), controllers, and electric/electronic machine guarding products (both at 50 percent). They joined products like AC drives, servo systems and high-performance gearboxes in garnering the group's attention.
The power transmission distributors are using specialists to lead this charge, a relatively new phenomenon. In previous years, distributors relied on their manufacturing partners for things like training, marketing direction and customer technical backup. Today, PTDA members are increasingly harnessing the power of specialists: 60 percent of the PTDA distributors responding indicate they use a specialist in some part of their business, and these people aren't just graduated sales people. Eighty-two percent of these specialists carry either an engineering degree or more than three years of in-the-trenches technical experience.
Why do I believe these changes are significant?
As a 30-year participant in the industrial control and automation space, I have witnessed a number of emerging trends. My studies of behaviors in the market point to additional trends approaching the tipping point.
Motion control and mechatronics is a crossroads
There has been a battle brewing over the rightful ownership of the mechatronics (which is best defined as the marriage of mechanical and electronic automation technology) and motion-control channel space. This critical piece of the automation puzzle lies precisely betwixt things mechanical, electrical and hydraulic. During the early-adoption years, a few narrowly focused wholesalers filled the gap as motion specialty houses. However, the long-term needs of the market dictate a need for a mainstream supplier, and technology trends in electronics are making the applications simpler and less expertise-driven.
What part of the technology is difficult?
In the early days of general motion control, the technology was difficult. In many cases it involved a team of engineers. You needed someone with strong mechanical skills, an engineer who understood “block transfers” (and other high-end communications in the controller) and a servo amplifier expert. Countless automation suppliers relate how these early sales involved man-days of engineering time just to establish communications before any actual movement could be tested.
Today, the electronic side of the application is plug-and play. Common device networks and sensors with built-in intelligence simplify application connection. Nearly everything is easier — except the physics around the mechanical component. A search for PLC programmers can turn up dozens, maybe hundreds of qualified people. But topics like moments of inertia, torque requirements, radial and thrust loads result in just a few knowledgeable candidates. And these candidates work where? In the mechanical side of the automation industry.
Winning sales — the time factor
In system selling the person who discovers the potential problem or need first enjoys a natural advantage. Studies of actual projects in special machine builder, OEM and end-user environments point to mechanical design occurring prior to the control design. Simply put, the mechanical side of the machine — bearings, gears, belts and actuators — is designed first. Then, after the mechanics are firmed up, things like motors, servo systems, sensors and machine guarding are added. Clearly the person involved in selling the mechanical side of the design knows about the project in its earliest stages. They often are providing electric motors or hydraulic movers. Extending that offering makes sense to the customer. And, it makes great business sense.
There can be no artificial segmentation in a solution-driven world
In days gone by, automation buyers selected components from a cadre of parts suppliers — a bit of electrical here, a bearing there, a hydraulic valve somewhere else and a motor from yet another vendor. Today customers look for a solution — period.
Early adopters in the motion-control channel recognized this several years ago. A few vendors with strong clout with their channels encouraged cross-technology migration. For instance, electrical automation leader Rockwell Automation pushed their distributor channel to establish relationships in the mechanical and hydraulic world through strategic placements in their Encompass Partner program. This takes us back to the results of our survey. Twenty-some percent of PTDA members report being fully engaged in all aspects of the motion-control business with another 40 percent being partially engaged. I see a clear trend here. Power transmission distributors will soon be there in numbers and with a competitive advantage.
Recommendations for electrical distributors who sell automation solutions
By the time Young King Belshazzar observed the mysterious writing on the wall, it was too late. Fortunately, we have time to re-tweak our direction. In the slow-growth post-recession economy, customers are accelerating their demand for solutions — not products. Clearly defined product-oriented silos are coming to an end. In the old days — it was called “following the wire.” Now, we must think about what's connected to our cool technology-driven products.
In the next handful of years, very few successful distributors will be purely electrical, purely mechanical or purely anything else. Today's industrial and OEM customer doesn't define the world that way — and it really is about the customers. If you haven't started building a new expanded list of partners, now is the time to start. And this must extend past the electrical/electronic sphere into the mechanical. To be successful, you'll need to network with a whole new batch of people. Many progressive distributors have discovered the value of dual membership in the National Association of Electrical Distributors (NAED), St. Louis, Mo.; and Association for High Technology Distribution (AHTD), Waukesha, Wis.; and PTDA. Finally, our research indicates distributors leading the charge with a well-defined specialist process accelerate their profit and growth curve.
Frank Hurtte is founder of River Heights Consulting, Davenport, Iowa, a firm specializing in “knowledge based distribution.” He has 28 years of distribution industry experience and a lifetime in sales. During his career, Frank has gone through nearly every aspect of the wholesale business. You may have met Frank in one of his previous lives — he worked in sales management for Allen-Bradley and at several senior executive posts with Van Meter Industrial. He is the author of The Distributor Specialist: Customer Champion, Profit Generator! You can contact him at [email protected].
Major Moves in the Automation Market
Here are a few recent deals that point the direction in which factory automation is evolving.
Kaman Industries Acquires Minarik
Kaman Industrial Technologies Corp., Bloomfield, Conn., took an expanded stake in the motion control and automation markets with the acquisition of Minarik Corp., Glendale, Calif. Minarik is the largest distributor of motion control equipment in the U.S. The transaction, valued at $39 million, closed on April 30 and Minarik is now part of Kaman's Industrial Distribution Segment.
Kaman serves primarily the user MRO market. The addition of Minarik's OEM focus could open new markets. If Kaman and Minarik hit these markets together via some form of coordinated attack, where end-user salespeople pass information to the OEM sellers, the market could be vastly affected.
Motion Industries Forms Partnership with Revere Control Systems
Revere Control Systems, an industrial control system integrator headquartered in Birmingham, Ala., announced in March the formation of an alliance with Motion Industries, also headquartered in Birmingham. Motion Industries is a leading distributor of maintenance, repair, and operation (MRO) replacement parts to a wide variety of industrial customers in North America.
Under the terms of the alliance, Motion Industries sales offices will be able to offer their customers turnkey automation and control system integration services, to be provided by Revere. Motion's customers can now have a complete package of products and engineering services from one trusted single-source supplier.
Graybar Canada Acquires Ontario Automation Specialist
Graybar Canada, a subsidiary of Graybar, St. Louis, acquired the assets of AVAD Industrial Sales Inc., Sudbury, Ontario. AVAD specializes in solutions for the automation, control, power distribution and energy monitoring market. The acquisition is part of a push by Graybar Canada to focus on growing its role in the industrial market in 2010, the company said.