When Shawn O’Farrell couldn’t find a standard turnkey component for an automation system, he shopped around for it on eBay as a last-ditch effort.
“The value of this component, if it was new, would be about $150,” explained O’Farrell, who serves as the area lead for manufacturing technical services at Zeeland-based engineering, consulting and product development firm Disher Corp.
“You go out to eBay and it’s $200 to $300, and sometimes even $500 for this. The mark-up is insane right now. I would go so far — and it’s a heavy word — but it’s gouging,” he said.
This one brief instant helps epitomize the minefield of issues that automation integrators and manufacturing technology suppliers must navigate to effectively serve a market in which demand for automation is exploding.
Manufacturers are increasingly turning to automation to fill the gaps left behind by workforce shortages. At the same time, automation companies and their suppliers are susceptible to the supply chain issues that have plagued all other industries since the emergence of the COVID-19 pandemic.
Prices for essentially all components have jumped, but even more disruptive is the fact that components’ availability has put a chokehold on the industry — especially smaller integrators that don’t wield significant purchasing power.
“We’ve all heard the stories about semiconductor shortages and how we’re feeling the pain in our own lives more viscerally like with cars, TVs and consumer goods. But in the controls space, they’re feeling that effect, too. We’ve seen quotes for robots with an unknown ETA, or they’re talking about over a year,” O’Farrell said. “And these are not custom or specialized pieces of tech. These are commercial robots that are in facilities all across the country.”
“They’re just not making enough of them, and that shortage in the supply chain has definitely impacted their ability to deliver,” he added.
O’Farrell said the industry is facing a perfect storm of factors that are making it tougher to navigate. Not only do more customers want automation, but in addition to supply shortages, many integrators are stretched beyond capacity and don’t have anywhere to outsource the work.
Because of these dynamics, most end users readily pay the inflated costs for components since automation has become a necessity in their businesses.
“I have clients who are telling me, ‘I don’t really care what the price of the automated solution is because I don’t have people to make my stuff,’” O’Farrell said.
“(Choosing to automate) is definitely not as tied to a return on investment purely based on efficiency gains anymore,” he added.
Unprecedented problems and solutions
Mark Ermatinger, CEO of Industrial Control Service Inc., said the rise in prices has been unprecedented. His vendors have raised their prices by 5 to 8 percent. Prices typically jump less than 2 percent, he said.
“I have never seen so many vendors increase their prices at once, especially at these rates. … I’m not sure where the ceiling is,” said Ermatinger, whose Zeeland-based company serves as a consultant and distributor of automation equipment.
As for availability, both O’Farrell and Ermatinger pointed out some ways to work around the problem, such as shopping the used market and creating systems that are brand agnostic, increasing the chances of finding available components.
“As long as it does the job, that’s all they care about,” Ermatinger said.
Finding effective ways to navigate these issues has become a competitive advantage for suppliers and integrators alike. For Ermatinger, he has introduced a new line item on his quotes called “Logistics Redundancy.”
In an effort to keep central components readily available, Ermatinger will talk with his suppliers about their available stock of components and how quickly they can ship. His company and his clients also order and hold components, creating a three-layered system to better insulate from availability issues.
“I’ve never done that — I’ve never had to deal with that before because you could always get things in two or three weeks and you were good to go,” he said. “But in order for me to win the business, this is a competitive advantage to think about redundancy in my supply chain.”
For Ryan Lillibridge and the team at Holland-based Mission Design & Automation LLC, fortifying relationships with partners and vendors along with proactive communication have been the tenets of weathering the choppy waters of the industry right now.
“We just stick close to our partners and strong vendors,” said Lillibridge, director of business development for the custom automation company. “When we learn about what’s changing in the supply chain, we talk through it with them to see if there are alternatives and then we bring that information to our end customers. … There have been times where that has changed the conversation on what the new cost is or new lead time is, but I would say more of our customers are understanding of that.”
Lillibridge also vocalized the one important nugget that manufacturers should take from this ongoing ordeal.
“If people are looking to do automation now, it’s important they get started early,” he said. “It’s a journey. Start now on that journey. … Talk about it early, figure out what it looks like.”