Ray Barnes, Managing Director of Hoerbiger-Origa, looks back at the pneumatics industry in a series of ten-year increments and looks to what the future might hold.
Overall, the British national economy has been remarkably stable for the last ten years, which is a complete change on the 'boom and bust' cycle of previous decades. Growth has been a steady couple of per cent per year and most economic indicators have been positive. There have been blips away from the trend but, for the most part, these have related to only parts of the economy, with the overall figures maintaining their direction.
The UK market for pneumatics peaked in the mid 1990s and, despite a slight drop-off in the mid to late nineties, has been effectively stable since. This has been achieved in the face of a massive decline in manufacturing, the main user sector. Hydraulics (which I comment upon as an observer rather than a participant) has been even better, bolstered by growth in demand for mobile hydraulics.
This, on the face of it, should provide a great platform upon which to review and forecast the industries' development. But there is one great overriding factor that has to be taken into account: the past 10 years has been the decade in which globalisation has become the dominant factor in economic analysis. Nowadays we have to do our domestic forecasting in context of the global economy; we have to account for driving forces from the far side of the world as much as local conditions.
Impact on pneumatics
There have been two dominant issues for us to consider. The first is common to many industries: manufacturing has migrated to low-wage economies in Eastern Europe and Asia. This relates both to our own industry and to our customers' industries.
The second, while not quite unique to fluid power, does relate particularly to the precision manufacture of high-tech goods, such as engineering components and subsystems. And that issue is that Germany, whose economy has been going through a difficult period during the past decade, was previously the undisputed powerhouse of production.
If we go back through further decades we can justifiably claim that Britain was one of the world's top three pneumatic manufacturers in the 1960s, 1970s and 1980s. That crown slipped and perhaps our pride was hurt, but our pneumatic industry has, in fact, adapted and remains robust and buoyant to this day. Germany now seems to be following the same trend.
This illustrates one of the suggested characteristics of a globalised economy: that world dominance in particular sectors has ceased to be so important. The critical thing is that local activity supports local markets; this keeps money flowing through the regional economy, supporting jobs and creating wealth/surpluses, which can then be invested freely in any sector of the economy.
Globalisation is a major geo-political force driven by governments but, at a simple level, it has been enabled by globally networked communications and computer systems. We can now transfer information anywhere effectively and instantaneously, making it possible to achieve economies of scale in manufacture not previously attainable.
The logistics industry has had to step up its game considerably, but it has risen to the challenge admirably. Distance is now almost no object whatsoever; goods can be transported 10 miles or 10,000 miles just as easily.
Many economists say that China and India will maintain their phenomenal growth rates, shifting an ever greater proportion of their population from poverty into their 'new middle class'. However, there are many, many other factors that may weigh in over the next decade and disrupt the pattern.
For instance, you have to assume that India and China may suffer from internal political change/unrest that could upset the trend. There are great swathes of population in Africa and South America desperate to participate in the global economy. Central and Eastern Europe and the old Soviet bloc countries have the capacity and the will to develop world-class industrial sectors rapidly. The United States is working to bring increasing economic influence on nations bordering the Pacific. People in Europe and North America are increasingly concerned about local sourcing to reduce global warming. And there is optimism that robotics and automation will enable repatriation of some manufacturing, thus overcoming the difficulties experienced with long-distance management.
One final observation on this subject is that we have seen the rise of email and the internet to become the dominant means of communications with our customers (as well as our colleagues and suppliers). This has changed the work experience at a very human and positive level, while industry has become much more efficient!
Most manufacturing companies had no choice but to reduce their in-house engineering capabilities through the 1990s and rely more and more on brought-in expertise. This allowed them to concentrate on their core business and reduce their overheads.
This has led to a greater need for service support from suppliers, which has been manifest in a number of different ways. For instance, end-users are less inclined to compromise component quality for cost reasons alone, while both end users and OEMs often prefer to buy-in engineered sub-systems rather than individual components so that they can 'fit and forget' rather than build themselves.
Perhaps most significantly we have seen the rise of engineering service companies. Previously these tended to be simple parts distributors working through a number of local depots, but now they have evolved to offer engineering services, maintenance contracts, scheduled logistics, etc. The fluid power manufacturers have had to form relationships with these companies and acknowledge their importance in modern supply chain logistics.
I would predict an increasing dependency on such companies, and note that their industry is growing, consolidating and globalising in a way that suggests that they are here for the long term.
For Hoerbiger-Origa, the increasing demand for service has been a good thing, because we have always offered a high level of service, including bespoke manufacture for customers requiring such support. For other suppliers more concerned with commodity supply, this trend has required more fundamental rethinking.
Hoerbiger-Origa's core products are all high-tech, hence our service ethic. The past ten years has seen some changes in actuation technology worthy of note. Electronics are now an integral part of practically all pneumatic systems, so that the once humble 'bang-bang' pneumatic cylinder has developed into a sophisticated actuator with positioning capability, speed control, etc, driven by a PLC, PC or fieldbus network. Electric actuators have come into their own, securing several niches and complementing pneumatics by creating a continuous trend to integrate both technologies for the benefit of end users.
People and skills
Earlier I commented that companies now focus on their core activities and have shed their support departments. While this makes a lot of sense for the short, medium and long term, I wonder about the very long term.
Few companies, particularly small and medium enterprises, can now afford to take on apprentices and junior staff with a view to growing their talents over a number of years. They have, of necessity, to recruit engineers and other professionals who are at the top of their game and so able to make immediate and significant contributions to the health of the company and, ultimately, to its bottom line.
But this begs the question: where is the next generation of world-class engineers going to come from in ten years' time? It is a measurable statistic that in emerging economies young people flock into the technical professions (China alone is currently producing 300,000 engineering graduates a year), but the reverse is true in established nations (Britain, Germany, France and America are all struggling to produce young engineers and technologists).
Engineering is attractive in China and India because it appears to offer the prospect of a generously remunerated life-long career. In reality, the same prospects apply here, but we need to attract sufficient numbers of talented youngsters by offering them exciting careers and by enthusing about their long-term prospects.
In conclusion, fluid power is looking forward to another exciting decade, but one of the key agenda items is to look forward more than one decade.