2013 State of the Industry: Brian Papke, Mazak

Brian Papke is the president of Mazak Corporation, which designs and manufactures CNC turning centers, multitasking lathes, vertical and horizontal machining centers for the aerospace, automotive, electronics and construction industries.

CURRENT STATE OF BUSINESS
I believe the level of economic uncertainty our country faced near the end of 2012 contributed to a slight weakening in the state of business. When companies are unsure as to what the future holds in terms of taxes and government spending, they tend to “apply the brakes” and limit their capital investments.

That being said, I believe businesses will continue to limit major spending in 2013 until a significant level of confidence in U.S. policymakers and in their plans for reducing budget deficits has been reached. However, the more our country’s government entities work together, the faster this confidence level will grow and the quicker the state of business will strengthen. Generally, companies today favor manufacturing in the U.S. and they just need tangible proof that they will have stability and favorable structure for further investment.

Aerospace and automotive are the two market sectors I see generating the most activity in 2013. Commercial aircraft backlogs are very high and will continue as such for quite some time, driving deliveries and creating more opportunities for that sector. Since consolidating, the automobile industry has been operating at higher levels, with an average production rate of 14-15 million units per year.

Even the housing industry is showing signs of improvement and, in turn, should drive growth for other related market segments. Finally, energy related industries may have some short-term inventory corrections, but the long term is very bright.

MAJOR TRENDS
In terms of major industry trends developing during the coming year, I see a strong need for manufacturing efficiency, especially if the U.S. continues to face economic uncertainty. As manufacturers strive to further boost efficiency, they will demand machine tools that not only produce parts faster, but that also combine multiple processes (multitasking machines) and make automation (bar feeders, robots or palletized systems) integral to machine functionality. Such complete manufacturing solutions will be a key to U.S. shops increasing their overall competitive advantages.

Manufacturing processes will continue to be influenced by the accelerating speed of doing business, shorter lead times, and the dynamics of instantaneous electronic communications in business. Continuous improvement in manufacturing efficiency will effectively support the growing and ever-changing technology demands of shops across all industry segments.

Throughout 2013, look for more investment in technology that will enable machine tool builders to produce their equipment more efficiently and productively so that they can pass along better savings to shops looking to cost-effectively increase their productivity.

CRITICAL ISSUES
The level of economic uncertainty our country faced during the last two months of 2012 made it an awkward time for the manufacturing industry. Everyone wants to have a clear, definite picture of the economic climate because when there is uncertainty, working within a set budget becomes extremely difficult.

If the cost of doing business continues to increase in 2013, companies are going to do their best to operate leaner and more productively than before as well as cut costs, which will most likely entail reductions in labor. Every aspect of the business will be challenged to create lean processes, reduce lead time and increase profitability.

Economic uncertainty is nothing new for businesses. During the most recent recession, for instance, companies were prepared to initiate lean-based strategies and those that were ill-prepared got a major reality check. In fact, I believe the recession taught us all a valuable lesson on how not to be lulled into a false sense of security and that we can no longer spend without taking the future into consideration.

But no matter what the economic environment is in 2013, I am confident that manufacturers, armed with hindsight from weathering past economic storms, will quickly adapt and take the best course of action for their businesses. Shortened lead times, faster speed of business processes, creative innovation of products and investment in productivity are all crucial to long-term success.

As was the case in 2012, U.S. manufacturing is definitely experiencing some positive momentum as we move into the New Year. Our energy costs continue to be fairly reasonable and manufacturing in the U.S. is favorable. On the other hand, manufacturing overseas is becoming more expensive due to increased wages, accelerating shipping costs and land prices in foreign markets.

To keep conditions favorable in the U.S., manufacturers must further shorten lead times and operate even more efficiently and productively than they did in 2012 to offset any significant 2013 changes associated with taxes or government spending policies. This way the industry will see higher demand for more productive machines and machines that incorporate automation.

PERSONAL INSIGHTS
An increased amount of trivial-type restrictions continue to hinder the forward momentum of business in this country. There needs to be a better climate between government and business in terms of maintaining competitiveness on a worldwide basis. Our government framework must be one that is less intrusive and more supportive of U.S. manufacturing. After all, U.S. companies are here to create jobs and establish a healthier, more stable environment for all of us.

Consider the energy industry and the resulting benefits if government and business would work together more effectively on making the U.S. completely energy self-sufficient. Can we create the vision of the future and put aside some small differences to reach for that common idea? If so, the future of U. S. manufacturing can be unlimited.

Mazak Corporation, 8025 Production Drive, PO Box 970, Florence, KY 41022-0970, 859-342-1700, Fax: 859-342-1865, www.mazakusa.com.