Fabricating in the future

Boy, that caught my attention as I looked at the Sept. 29 cover of Fortune. Watching gas prices recede slightly in the Chicago area even after U.S. demand has pulled way back, I know that there is nowhere to go but up for oil prices. The future of crude for the masses is cruddy.

The magazine article highlighted the thinking of Matt Simmons, an investment banker and author of Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. In short, Simmons thinks the Saudis are full of it when they talk about their oil reserves. He thinks the world has produced as much as it is ever going to be able to produce consistently on a daily basis—86 million barrels a day. Energy forecasting organizations estimate that worldwide demand will be more than 115 million barrels a day by 2030.

And my daughter thinks lack of ice for polar bears in the Arctic is a big deal?

This isn’t guaranteed, but I think such a scenario is likely. You might have noticed that China and India have plenty of people within their borders, and a lot of them are looking forward to joining the world’s middle class, which comes with new appliances and a driver’s permit.

So let’s play futurist. What will this mean to metal fabricators in 22 years?

1. More fabricating operations will emerge as contracted operations for OEMs that don’t want to have one central manufacturing location. It costs to ship goods, which is one of the reasons that overseas outsourcing trends may be reversing in the coming years, and those transportation costs are going to grow. And this may involve multiple contracted locations throughout North America. Information systems and quality programs will be such that managing metal fabricating and final assembly operations remotely will not be that big of a deal.
2. Shops near large metropolitan areas will thrive. It’s going to be hard to justify paying exorbitant transportation costs for metal parts when possible sourcing options exist nearby. Rising fuel costs may isolate far-flung rural communities even more from the rest of the world.
Got that video connection yet? More customer relationships will be done via video conferencing over the Internet.
3. The push for face-to-face relationship-building will fade with the retirement of those who hate e-mail and the emergence of those who “luv 2 txt.”
4. Competition to provide metal fabricating services will come from unforeseen sources. What if someone opened up a space in a strip mall that provided equipment and expertise for would-be fabricators? You don’t have to wait 20 years for this to become a reality .
5. A lot is being written about composite materials and their increased usage in product design. Metals aren’t going anywhere, however. Most are easily recyclable, which will be much more important to the next generation of leaders.

Skyrocketing oil prices may seem like a nightmare, but such a scenario could work in the favor of fab shops that are able to survive the coming years. Today everyone talks about globalization, but the future will be about localization. (I should copyright that phrase.)

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