Automation projects spike as OEMs gear up
By Industrial Distribution Staff -- Industrial Distribution, 11/1/1999
With many original equipment manufacturers rebounding from down cycles, distributors of OEM components and parts see activity picking up.Equipment manufacturers in industries such as semiconductors, agricultural equipment, and energy continue to be flat. Yet distributors who supply OEMs in sectors like automotive, pharmaceuticals and finished goods packaging report an increase in business this fall. Factory automation products that require assemblies of fluid power components are among the ripe opportunities for 2000.
"This year we will probably be off about 10 percent from last year, but I'd anticipate for 2000 a 20 to 25 percent increase over this year based on the proposal activity," says Carl Floody, president of R.R. Floody Co. in Rockford, Ill. Floody distributes fluid power and motion control products in the Midwest and is also a manufacturer's representative.
He says customers such as large machine tool makers that supply automakers are busy again. "That seems to be where the bulk of their business is," says Floody. "We see a strong trend there and expect that to continue for quite a while."
Greg Pfleger, executive vice president of Shingle & Gibb Co. in Moorestown, N.J., says customers that make equipment for the corrugated and finished goods packaging industry bounced back this year. Improvements in the Asian economies helped trigger that, he says.
"In our region, the mid-Atlantic, we're still up double digits in gross margins," he says. "We're heavily tied into the corrugating industry. Six months ago it was in the dumper and today they're coming out of it ... we're seeing these guys with incoming orders and backlog.
"We also see a lot of automation projects going on, people looking at particular sections of plants and machinery to do things faster," says Pfleger. "For our OEMs a lot of times each product is a new one, it requires research and development to [new systems] on the production floor. The factory automation guys have been busy through the whole [Asian] thing ... that didn't affect them as much."
OEMs continue to require distributors to provide more services like engineering and technical support, which they once did in-house, Pfleger and others say.
"Often we're engineering for them, providing a solution guaranteed and after-the-sale support," says Pfleger. "It may need programming, startup and wiring."
In another case, R.L. Miller, Inc., a fluid power house in Bethel Park, Pa. is doing more kitting of parts for customers. This winter the firm will begin assembling hoses and fittings, cut to specifications and packaged, for an air compressor manufacturer.
Miller president Mark Lewis says it's been a tough year for key OEM customers that make machinery for the mining and steel-related industries. However, he says pneumatics components are growing well, and cites a startup company that uses pneumatic actuators to run automated hospital pharmacies as a solid prospect.
"Our business isn't hitting the tremendous growth I'd like to see but I remain an optimist always," says Lewis.
Michael Turnball, chairman of Purchased Parts Group, Inc. in Nashville, Tenn., which provides inventory management programs for OEM assembly lines, sees outsourcing as the main trend. "We believe all they [manufacturers] want to do is final assembly and marketing, and they want to outsource all the steps in between."
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