Surviving the Slowdown

Now that a full-fledged economic slowdown is upon us, the question is how to cope. For many process industry veterans, including your humble correspondent, this isn’t the first downturn, and it won’t be the last, so experience from past recessions is germane.  The first and most important lesson from the past is that this too shall pass. Despite overblown media hype, this is not a crisis. Odds are that it will progress as most recessions do—without 30% unemployment, soup kitchens or bread lines. Business will pick up sometime this year or next, and when it does, there will still be strong demand for process automaton professionals. It’s been hard over the last few years to find quality automation pros, and it’ll probably be just as hard in the future.

That means that letting core staff go right now to save money could be a big mistake. “We hire for the long term and not for short-term project demands,” says Phil Murray, principal at systems integrator FeedForward. “Our 2009 hiring does not differ from any other time. A key for us is to keep our good people during economic slowdowns. Even in today’s climate, if a known and talented I&C person became available we would most likely create a spot.”

If maintaining staff is a priority, the question becomes how to do less work with the same number of people. “If workloads do slow down, we assign more people to a project and split the work among more participants. We also do more training―both in-house and external,” explains Murray.

Training is a great way to redeploy people during slowdowns, but it must be done with a judicious eye toward cost. Web-based training and free local classes offered by vendors and standards organizations are excellent ways to train for less.

Our training arm is busier during slow economic times,” says Carl Henning, the deputy director for PTO. “Our webinars are watched more often and our one-day training classes are better attended.”

Another avenue to pursue during slow work periods is expanded use of existing automation hardware and software. Most every process plant has multiple hardware and software automation systems not being exploited to their full capabilities, often because of lack of time. With production needs reduced, that time may become  available.

Investing in a downturn can be extraordinarily profitable. When I was working for an engineering firm back in the 1990s, the worldwide plastics industry suffered from overcapacity and weak demand.

Despite this, a leading plastics firm contacted us about a new project. It got a great deal on a new machine―about a 50% discount―saving millions on a massive 300-mm extruder from the world’s largest extruder manufacturer.

The plastics company wanted us to set the new machine in its existing plant immediately. It then asked us to prepare design documents for a full-blown construction project to integrate the extruder into its plant. Because we weren’t busy, we gave the company a 30% discount on our services.

We finished the design work and waited for the company’s call. As soon as the market turned, we began construction and had the 50,000-lb-per-hour extruder up and running in six months, about a third of the time it would have taken to complete the entire project from scratch. Our client was able to sell its plastic pellets at premium prices while competitors scrambled to increase production. In the one-year window created by its foresight, the company was able to recover its entire investment.

We subsequently completed a similar project for a competitor of this company. It paid millions more for the extruder, millions more for our engineering and construction services, and sold its product for millions less (on an annualized basis) into what was then a stable market. To paraphrase Warren Buffett, outsize profits are made by buying when others are fearful.