How to recover from the recession

According to the recent Quarterly Economic Forecast issued by the Manufacturers Alliance/MAPI, there are enough economic indicators to forecast an eventual, though modest, recovery following a long and deep recession. While a predicted 2.1% rise in gross domestic product and a 3.2% rise in manufacturing production in 2010 are promising, manufacturers must ensure they have a solid foundation to effectively and profitably leverage the opportunities that a recovering economy will offer, says the forecast.

“Although there is much speculation on the rate of the economic recovery, some indications suggest that consumers’ frugal spending behavior during the recession may last well into the recovery period and beyond,” says David Johnston, senior vice president, supply chain, JDA Software. “Given this situation, manufacturers should recalibrate their supply chains now to assist in operating in today’s ‘new normal’ and lay the groundwork for future growth,” he adds.

Johnston lists some critical recession-recovery strategies to mitigate the risks and respond to opportunities associated with the current economic recovery.

  • Strengthen cash position: Manufacturers that can free up unnecessary inventory and keep it lean will have the flexibility to change business strategies or respond to market surprises. Continue rationalizing inventory levels against the changing product mix across the entire supply chain so that levels are optimally aligned with current consumer demand. Cash is also essential for companies to establish a healthy framework for growth through new product innovations, expansion into new markets, or merger and acquisition activity.
  • Realign the supply chain to achieve financial goals: In addition to addressing real-time supply chain issues like replenishment and forecast planning, manufacturers must think strategically about their businesses over the long term. Take control of financial and operational strategies with a revised approach to sales and operations planning. An integrated business planning approach goes beyond supply-demand balancing and integrates time-phased strategic revenue, cost and margin plans with a company’s operational plans. This also enables executives to more accurately set financial expectations for all sales, marketing, promotion, inventory and capital expenditure plans.
  • Plan for strategic expansion: Manufacturers should be able to gain quicker market share in emerging markets, where the competitive landscape has changed significantly. By focusing on untapped or emerging international markets, such as China and Brazil, companies can mitigate the risk associated with too much dependency on a single region. However, globalization requires strong fundamentals to be successful integrated business planning. Planning for global
    expansion should also include investment in change-management preparedness and a focus on technology.
Capitalize on the consumers’ new normal: Even as the economy rebounds, consumers will continue to be more spend-conscious than ever before. Successful companies will see this as an opportunity to create a strategic advantage by re-aligning their product offerings with the new consumer preferences. By weeding out poor performing products and setting the right pricing and promotional strategies for high-growth and new products, manufacturers can drive profitability. Catering to consumer demand now will also enable manufacturers to build market share and long-term brand loyalty, even as consumers find themselves with more discretionary spending income in the future. Additionally, establishing closer collaboration with retail partners can provide insight into point-of-sale and SKU data, enabling manufacturers to better respond to shifts in market conditions.

Group works to fizz out tax on soft drinks

Food industry representatives in Washington have stepped up efforts to derail yet-to-emerge Congressional proposals for a tax on beverages containing sweeteners. President Obama said a tax on soda is, “an idea that should be explored.” Supporters say it would help reduce childhood obesity while raising government revenue, but food industry representatives are concerned that the tax could be slipped into health care reform legislation.

Americans Against Food Taxes, a group that includes hundreds of beverage manufacturers and associations, is airing TV commercials urging the public to press Congress not to impose a “sin tax” on soda and other beverages.

“In this economy, it makes no sense to further squeeze hard-working families with a tax on grocery items like their juice drinks and soda,” said Susan Neely, president and CEO of the American Beverage Association, which is spearheading the Americans Against Food Taxes Coalition. “We want Congress to understand our position and what’s at stake for families. People think it’s an over-reach when government tells them what to eat or drink, especially when it uses the tax code to do so.

“We agree with the need to improve health care in America, but you’re not going to solve the complexities of the health system with a tax on soda pop,” Neely added. “You’re only going to make matters worse for American families.”

The group says the food and beverage industry is already doing its part to reduce childhood obesity through innovation, nutrition education, and by encouraging physical activity.

Assistance continues for dairy farmers

House and Senate negotiators have reached final agreement on a compromise FY2010 Agriculture Appropriations Bill, extending a retained $350 million in additional assistance for dairy farmers.

Farmers are struggling with milk prices that have fallen to historic lows while the costs of production-including feed, fertilizer and fuel-have grown. The agreement includes $60 million in cheese and dairy product purchases for food banks and other nutrition and feeding programs, and $290 million in direct support to dairy farmers using guidelines to be determined by the Secretary of Agriculture, under an expedited process.

“These are desperate times in farming,” said Sen. Herb Kohl (D-WI), chairman of the Senate Agriculture Appropriations Subcommittee. ”And we can’t lose sight of the fact that farming losses reverberate through our rural communities. We hope this funding can provide a measure of relief to the farms and small businesses that are struggling to stay afloat through this storm of mounting costs and debt.”

Automation News

Ethernet, wireless or serial factory automation networks

Factory automation (FA) networks play an increasingly integral role in the OEM machinery and production lines that typify discrete manufacturing, says a study entitled, Factory Automation Networks Worldwide Outlook, from ARC Advisory Group.

Wiring displacement remains a primary driver for traditional serial device networks, which rely less on commercial off-the-shelf (COTS)-based IT technology than other network types. However the compelling wiring savings delivered by traditional serial device networks is increasingly overshadowed in some quarters by the growing movement toward a single network technology, typically Ethernet, throughout the plant or enterprise, says the study.

Industrial Ethernet’s standard hub-and-spoke topology offsets any potential for wiring savings, but its rising popularity in spite of this shortcoming is indicative of

the importance of integration with higher-level enterprise systems. Wireless networks, however, represent new ground for FA networks in areas such as mobility and remote access. Continued introduction of ruggedized remote I/O, sensors, actuators, infrastructure, and other devices will further adoption of factory automation networks over the next five years, says the report.

Discrete manufacturing industries were some of the hardest hit by the recent global recession. FA networks continue to provide a significant value proposition in their served markets, however, and the market for potentially attached devices remains unsaturated.

For more information visit ARC Advisory Group.

Energy, security focus of ISA EXPO 2009

The ISA EXPO 2009 technical conference featured six conference tracks centered on key issues facing instrumentation, automation, and control professionals, including safety, security, process automation and control, energy and environment, wireless and networking, and enterprise integration. The conference program also included keynote addresses from industry leaders. John Hofmeister, CEO and founder of Citizens for Affordable Energy, and retired president of Shell Oil Company, presented the opening keynote address entitled, “Energy Security and Affordability in the 21st Century.”

“Securing the Nation’s Industrial Control Systems Infrastructure,” was delivered by Marty Edwards, US Department of Homeland Security program manager of the Control Systems Security Program (CSSP). Edward’s address discussed the current threat landscape, common vulnerabilities and security issues facing critical infrastructure control systems, and mitigation strategies being developed to address these challenges.

Lisa Long, safety engineer with the UD Department of Labor-OSHA, presented the final keynote address titled, “Overview and Findings from OSHA’s Refinery and Chemical National Emphasis Programs.” Long’s address described the program’s inspection protocol and procedures, and reviewed preliminary findings including data on the most frequently cited paragraphs of the process safety management standards and example citation language.

Food Safety News

Produce safety standards underway

The Produce Safety Project, an initiative of the Pew Charitable Trusts at Georgetown University, recently received assurances from Dr. Margaret Hamburg, commissioner of the Food and Drug Administration, that the agency has begun work on regulation to establish enforceable standards for produce safety.

The letter, dated September 16, cites three draft guidances (or commodity specific guidelines) published in July 2009 that identify and minimize risk of microbial contamination of three commodities: tomatoes, leafy greens and melons.

Jim O’Hara, director of the Produce Safety Project, is encouraged by FDA’s progress and commitment to enforceable standards for produce safety.

For more information, visit The Produce Safety Project.

Safety of imported foods needs strengthening

Imported food makes up a substantial and growing portion of the US food supply. To ensure imported food safety, federal agencies must focus their resources on high-risk foods and coordinate efforts, says a September report from the Government Accounting Agency (GAO) entitled, Agencies Need to Address Gaps in Enforcement and Collaboration to Enhance Safety of Imported Food.

Customs and Border Protection (CPB), FDA, and FSIS have taken steps to address challenges in ensuring the safety of the increasing volume of imported food. For example, CBP maintains the system that importers use to provide information to FDA on food shipments; FDA electronically reviews food imports and inspects some foreign food production facilities to prevent food in violation from reaching US shores; and FSIS employs an equivalency system that requires countries to demonstrate that their food safety systems provide the same level of protection as the US system, according to the report.

However, gaps in enforcement and collaboration undermine these efforts. CBP’s computer system does not currently notify FDA or FSIS when imported food shipments arrive at U.S. ports, although efforts are underway to provide this information to FDA for air and truck shipments. This lack of communication may potentially increase the risk that unsafe food could enter US commerce without FDA review, particularly at truck ports. FDA has limited authority to ensure importers’ compliance with its regulations, and CBP and FDA do not identify importers with a unique number. As a result, FDA cannot always target food shipments originating from high-risk importers. Finally, CBP faces challenges in managing in-bond shipments-those that move within the United States without formally entering US commerce-and such shipments possibly could be diverted into commerce.

According to GAO, FDA generally collaborates with select states and foreign governments on imported food safety. FDA has entered into several agreements and informal partnerships for imported food with certain states, and some state officials told GAO they would like to collaborate further on food imports. However, citing legal restrictions, FDA does not fully share certain information, such as product distribution lists, with states during a recall.

FSIS has begun to make available to the public a list of retail establishments that have likely received food products that are subject to a serious recall. FDA is also expanding efforts to coordinate with other countries. In particular, through its Beyond Our Borders initiative, FDA intends to station investigators and technical experts in China, Europe, and India, to provide technical assistance and gather information about food manufacturing practices to improve risk-based screening at U.S. ports.

GAO recommends, among other things, that FDA seek authority from Congress to assess civil penalties on firms and persons who violate FDA laws, and that the FDA commissioner explore ways to improve the agency’s ability to uniquely identify foreign firms. CPB and FDA generally agreed with GAO’s recommendations. FSIS provided technical comments only.

To learn more about or download the GAO Report GAO-09-873, visit GAO’s Website.