Manufacturers find ‘necessity is the mother of automation'

Walker, Mich.-based HS Inc. was founded in 1969 as a tool and die maker, specializing in injection mold design and manufacturing.

As of 2021, it had an estimated $80 million in mold making operations, placing its H.S. Die & Engineering Inc. business at No. 8 among North American tooling companies in Plastics News' annual ranking.

The legacy business line suited HS Inc. well for decades. More recently, though, its tool and die segment was exposed to market disruptions and uncertainty, forcing company executives to make a strategic decision earlier this year to focus solely on automation solutions.

For President Dale Hermiller, it was a "bittersweet decision" to transition away from the company's origins.

"We were founded on tool and die, but we had a severe drop-off in workload and available work in that space," Hermiller told Crain's Grand Rapids Business, a sister publication of PN. "We tried many strategic initiatives to make it through to the other side where the work would pick back up, which forecasts were telling us was going to be the first quarter of 2024, maybe the last quarter of 2023. But at that point, with the competition and the pricing … it was getting more and more difficult to be successful in that area. Being diversified gave us an opportunity to focus on a new strategic direction."

This shifted focus to automation is increasingly common among manufacturers.

As Michigan's strength in advanced manufacturing grows, more companies are investing in Industry 4.0 capabilities. The state has experienced a slew of new expansion projects in recent years from local automation solutions providers looking to meet growing demand across various industries. This includes:

• Holland, Mich.-based JR Automation last year shared a $9.9 million expansion plan to add new facility space and 140 new jobs.

• Walker, Mich.-based Axis Automation in late 2022 unveiled plans to invest nearly $6 million in additional team members and capacity for automation projects.

• This year, automation supplier Apex Control announced a $3 million expansion in Hudsonville, Mich.

Hermiller said it's been interesting to watch the growing demand for automation. When HS Inc. started to offer automation solutions about 20 years ago, most projects served the automotive sector. Today, HS Inc. also serves more diverse markets such as aerospace and consumer goods.

While he emphasized the difficult decision to pivot away from tool and die, Hermiller is excited about the opportunities for growth with automation.

"I believe that automation is essential for manufacturers to succeed, not only from a labor reduction standpoint but also from an efficiency and an ergonomics standpoint and so many different aspects," he said.

HS is one of several West Michigan manufacturing companies growing in the automation space. Part of the reason behind this growth is that automation helps fill workforce gaps as labor shortages have affected industries like manufacturing in recent years.

"With the workforce today involving a struggle to find employees, we've had more and more people reaching out to us to automate than we ever have before," said Jamey Moore, vice president of operations at Specialty Tooling Systems Inc., an automation systems manufacturer. "We've done more work in the last 18-24 months with fully automated lines than we ever have, and the technology continues to advance."

To support this growth, STS is building a new 198,000-square-foot manufacturing facility in Walker. The space will be a sort of "flagship facility" for STS for building out larger systems.

STS will obtain temporary occupancy toward the end of July to start moving in equipment from the company's facility on Wilson Avenue. The company's corporate headquarters on Three Mile Road will remain at that location.

Moore said STS already has projects being designed to occupy the new facility as soon as the team can move in. The company sought to scale up quickly as demand for automation solutions increases and as the company aims for $100 million in revenue in the next three to five years, according to Moore.

"We just got to this point where we needed to add more floor space so we can push what we need to do in order to reach that milestone," Moore said. "The growth has been there and we're continuing to evolve toward it."

Holland-based Mission Design and Automation also has experienced recent growth. The company wrapped up a roughly $5 million expansion in 2021, which included a new 50,000-square-foot facility to support more large-scale automation projects. CEO Scot Lindemann said Mission already is contemplating its next expansion as the new facility already is at capacity.

For Lindemann, leveraging new technology through automation is perhaps easier than ever as the technology has evolved.

"There are newer, easier, better technologies allowing new industries to adopt automation. The barrier to entry is lower; the flexibility of the tools is better," he said. "We like to say that automation is a journey. It's about getting started, training your people and getting some positive momentum."

At the same time, Lindemann said it's important to invest in employees, and automation can help enhance a workplace and offer new opportunities to develop skills.

"Even though we get all excited about the technology, it still really is a people business," Lindemann said. "There's the idea that robots and automation are going to take away jobs, and the counter to that is it's actually going to make your job better and free you up to do other tasks. … It gives you a better job, and you're going to be able to say you work on new technology and have those skills."

A recent report from market analysis firm Lightcast shows that job openings for automation engineers in West Michigan are double the number found in comparable regions. Moreover, the graduate pipeline produced 202 completions in 2021, indicating a sufficient supply of qualified individuals to fill these positions.

Meanwhile, demand for automation equipment pushed the industry to a new record for the number and value of robots sold in 2022, according to the Ann Arbor, Mich.-based Association for Advancing Automation. Companies across North America ordered $2.38 billion in robots last year, an increase of 18 percent over 2021, which was also the industry's prior highwater mark.

Lakeshore Advantage Corp., the economic development organization serving two West Michigan counties, has made a dedicated push into the automation space by helping companies adopt solutions, including by offering Industry 4.0 grants to a half-dozen companies so far.

The region includes 53 companies that are designated as automation or automation support firms. Since 2018, 22 growth projects have leveraged more than $12 million, represented over $95 million in total investment and sustained 838 new and retained jobs, according to Lakeshore Advantage.

According to the Lightcast report, the number of automation engineers in the region has increased by 40 percent between 2017 and 2022. It is forecast to grow by an additional 15 percent in the next five years.

Financial institutions also have participated in the automation surge as client investments drive loan growth. Overcoming labor challenges has been a key driver, according to banking executives.

"The tightness in the labor market is not a short-term issue. It's a demographic issue. We have more people in the U.S. now who are going to retire every year than will graduate high school and college, and the byproduct of that is you have a demographic pyramid that's going to mean a smaller workforce year on year on year," Tim Spence, president and CEO of Fifth Third Bank, recently told Crain's Grand Rapids Business. "Where we've seen is people invest in technology, it was to try to address that."

Spence recently visited a commercial laundry facility in Ohio that cleans medical scrubs and sheets for hospitals.

"I've probably never seen more automation than on a factory floor," he said.

The owner told him that nearly all the investment in automation was made because of the tight labor market. The laundry company generated a 10 percent reduction in unit costs and cut their labor requirement in half, Spence said.

"It could well be that if 'necessity is the mother of invention,' that will mean that 'necessity is the mother of automation' in several different places," Spence said.

West Michigan's automation cluster also has generated recent merger and acquisition activity.

Industry growth led Grand Rapids private equity firm Blackford Capital to launch a new industrial automation platform with the recent acquisition of industrial automation provider PACIV.

Jeff Johnson, managing director at Blackford Capital and PACIV chairman, said the acquisition comes at a key inflection point for PACIV, which is well positioned for strategic add-on acquisitions, targeted geographic expansion and continued organic growth.

"According to Blackford's analysis, the automation sector as a whole is growing at roughly a 10 percent annual rate, which ranks near the top of all markets today," Johnson said.

As well, the owners of Zeeland-based Industrial Control Service Inc. recently sold the business to private equity-backed Motion & Control Enterprises LLC in Pennsylvania.

CEO Mark Ermatinger told Crain's Grand Rapids Business that the acquisition will help Industrial Control sustain growth as demand for automation solutions continues to accelerate.

"We hear from companies every week that want to get into automation primarily because of the shortage of labor," Ermatinger said. "We decided to get into the game with mergers and acquisitions to be able to grow faster."

Crain's Grand Rapids Business Reporter Mark Sanchez contributed reporting to this story.