FABTECH 2014, and the hunt for smart capacity

As a type this, the S&P 500 is heading again into record territory, and the industry’s premier event in the U.S., FABTECH, comes to Atlanta this week. Coincidence? Well, yes, a complete coincidence.

Still, there’s something different about this year’s FABTECH. There seems to be a general optimism that hasn’t existed since before the Great Recession. It’s not sugarcoated optimism, either. During the past several months I’ve visited shops that are buzzing with activity, and I’ve been to places where a lot of machines just aren’t running. It’s not the economy; it’s the competitive environment. Some OEMs aren’t spreading work out to as many fabricators as they used to.

Some shops keep getting more work from existing customers. For sure, some of that work is new part programs, but some of that work also is coming from competing fabricators. Those preferred metal fabricating suppliers are getting more and more work from a handful of large customers. Of course, after the telecom bust of 2001 and the Great Recession of 2009, fabricators know the perils of high revenue concentration, so they try to find time in the day to look for new customers outside of their core markets.

The fabrication business has always been a place for high demand variability. A shop bids on a multitude of large projects, several hit at the same time, and managers try their best to handle the increased workload without pushing other orders behind. To that end, the industry may be in a race to build excess capacity—and here is where I find the optimism. Shops aren’t buying equipment or hiring people without careful forethought.

They don’t want to just add capacity in a particular process; they want to shorten the entire order-to-cash cycle. They want information systems integrated with capital equipment. They want to know where parts are, and for how long. They want to know why this machine was down, why that setup took so long, why those parts were defective. You could call it adding “smart capacity.”

Comments from Doug Olds, vice president of Washington Metal Fabricators, perhaps describe it best. He remembers metal fabrication as a different business before the Great Recession. The Washington, Mo., company wouldn’t be in business if it didn’t do some analyses before it made the move toward purchasing equipment or hiring people, of course, but he remembers the whole process being more relaxed, less intense.

Postrecession, this all changed, and Olds feels it’s for the better. “The recession helped us in a very strange way,” he said. “While we did take a big hit and a one-year loss, it changed our philosophy on how we do business and how we buy equipment. We’re much stronger now coming out of the recession.”

The company leaders walking the FABTECH show floor have lived through some tumultuous economic times. And they’ll be looking for some smart capacity.