When the going gets tough ... get automated
Wisdom typically comes with hindsight, rarely with real-time vision. So in recent months, it has been hard to establish any consensus about how long, deep and damaging the current downturn is likely to be.
But there seems to be some agreement that February or March of this year should yield a clearer picture of what exactly we are facing.
In the meantime, some have questioned the soaring levels of pessimism in the national media. This is a particular bugbear of Chris Buxton, chief executive of the Processing and Packaging Machinery Association (PPMA). Of his own sector he says: "There have been some isolated examples of companies having a bad time, and a couple have failed. It's awful for those concerned. But being businesslike about it, we haven't seen catastrophic effects across our membership."
The fact that this crisis had its origins in the financial sector initially limited its impacts and is still shaping its effects, Buxton argues. So while the automotive and building sectors have suffered, retailers reported mixed performances over the Christmas period.
While being careful not to court bad luck by using terms such as 'recession-proof', some suppliers see the food and pharmaceutical industries, among others, as being better-insulated against economic downturn than other consumer goods markets.
Of course, one effect of the finance-sector epicentre has been to make the banks more risk-averse when it comes to lending. "But those companies which can put together a coherent business plan are still likely to be looked on favourably by the banks," Buxton claims, adding that this is as true for food industry customers as it is for their machinery suppliers. Government backing for loan guarantees could also have a positive impact.
As retailers such as Marks & Spencer have found to their cost, says Buxton, the downturn has seen consumers turning away increasingly from premium food lines towards cheaper alternatives. This trend, if that is what it is, could itself trigger new investment in equipment as branded and own-label manufacturers seek to adapt by varying pack formats as well as product.
At cartoning systems supplier Kliklok International, marketing manager Michelle Tatum points to other influences on consumer buying patterns. "Up to 12 months ago, frozen foods were taking a nose-dive," she recalls. "Chilled foods were seen as being more nutritious, and supermarket shelves were packed with them. Since then, brand-owners such as Birds Eye have been fighting back by promoting the health benefits of their own products."
Consumer concerns over wastage, as well as health and cost issues, could also help to fuel an upturn in frozen food sales. Meanwhile, Kliklok has full-carton systems such as its high-speed Celox range suitable for anything from biscuits to frozen food, and sleeve applicators such as its Certiwrap range targeting chilled food.
At shrink line supplier Yorkshire Packaging Systems (YPS), md Glyn Johnson takes the PPMA's point about the risk of recession becoming a self-fulfilling prophecy. But as he says: "Just about every economic indicator is pointing in the wrong direction."
On the other hand, he agrees with Buxton that those companies with clear business vision can still do well. "Strong companies will survive, while weaker companies may struggle or fall by the wayside."
He draws some comfort from the cost of borrowing being at an all-time low. Assuming that finance can be made available (a big assumption), it makes more sense than ever for customers to take that route rather than using working capital, Johnson says.
Lowering costs of ownership
YPS estimates that over three-quarters of machinery acquisitions use loan finance to spread the burden of cost. This is typically over a three-to-five year period, says Johnson.
Adrian Shepherd, md of equipment company Allen Coding, says: "Everyone, in all industries, is looking for a lower cost of ownership." And he expects tougher financial constraints to lead to a change in purchasing patterns. "When people focus more on cost, there tends to be a drift away from central purchasing, with more responsibility for decision-making devolved to individual plants," he says.
Nonetheless, some suppliers like to claim that "smarter" customers will invest their way out of the downturn, the argument being that automation will increase efficiency and reduce labour costs. But as Johnson admits, the sterling/euro exchange rate is less encouraging for agents importing machinery from Europe.
Meanwhile, on the subject of automation, Fanuc Robotics points out that even the most versatile machines have their limitations, and cannot compare with the human operator for flexibility and mobility.
Flexibility in new equipment, and especially an ability to handle short-run promotional and seasonal lines has, in any case, become a requirement for many food manufacturers. But more than ever, says Shepherd at Allen Coding, suppliers are being asked to maximise the adaptability of their systems.
This is unlikely to mean 'flexibility at any price', especially in the current climate. Fanuc has a version of its M-430iA picking robot which is designed for the "high-care" section of the food handling and packing line. The 2kg payload is relatively light, and a full washdown capability means it can be installed in the most hygiene-sensitive areas. It could for instance be used for loading prepared product into ready meal trays, says food sales manager Roger Harris.
At one customer in Ireland, a total of 10 robots are installed across two separate lines handling pizzas, and a UK soup manufacturer is using the system. But otherwise, says Harris, take-up of the technology has been slow.
Slow take-up of automation
In part, says Fanuc, this is to do with the amount of competition in the market. Manufacturers and integrators hope that resistance breaks down, as it already has done to a large extent with end-of-line applications. As Harris puts it: "With a palletiser, it's easier to sell the idea. On the other hand, many manufacturers have still to accept the concept of robots in high-care areas."
As an index of openness to automation, Buxton at the PPMA quotes 2007 figures giving the ratio of production robots to population. These put the UK in ninth or tenth place in world rankings, well below countries such as Germany (in the top spot), France and Italy.
"When assessing these figures, you need to look at the nature of industry, and the prevalence of automotive production, for instance, in certain countries," he admits. "But the bottom line is that we're slow to adopt automation and new technologies."
All the same, up to last year, the arguments in favour of automation were starting to filter through to even the most traditional companies. As Buxton says: "In particular, there's been a slow trend towards recognising that the old myths about robotics - that they are expensive, unreliable and high-maintenance - have been exaggerated."
The closing gap between robotics and other machine functions is being reflected in greater co-ordination between the PPMA and the British Automation and Robot Association (BARA), says Buxton. "We've been getting closer, and will get closer still."
But the downturn could throw a spanner in the slowly-turning mechanism which has gradually been bringing many of the UK's smaller manufacturers around to the idea of automation - and in particular robotics. Cash flow issues may now stymie many of those slowly-matured good intentions.
Buxton says: "The conversion speed on enquiries is a lot slower now, though the overall rate may not have changed. Customers go through the process, get a quote, and then it all goes quiet. They tend to stall a bit. They are rather more cautious."
Even before the end of last year, Fanuc was reporting anecdotal evidence of tightening purse-strings. "At least one integrator announced that a major project was being put back until February or March," says Harris. "When that starts to happen, planning just goes out of the window."
Fanuc has responded to the downturn by using a more targeted approach to its marketing. Rather than attending exhibitions, it is targeting specific potential customers with a roadshow, which will include a demonstration of the food industry robot.
As a strategy, this recognises the fact that, while the general issues around automation are well-understood, the particular combination of barriers - and the potential benefits - are likely to be specific to each manufacturer.
KEY CONTACTS Allen Coding 01707 379500 Fanuc 02476 639669 Kliklok International 01275 836131 PPMA 020 8773 8111 YPS 01924 441355