One of the most interesting bits from a wind energy conference I went to last week came from a workshop on how local manufacturers could get into the wind makers supply chain. Some of our aircraft suppliers would match up pretty well in some ways — makers require a wide mix of parts at low volume with a high degree of precision.
But there’s one big difference: profit margins. Aircraft is traditionally a pretty fat business profitwise, and that profit is spread to some extent over the supply chain. On the other hand, turbine manufacturing is already a world-wide industry. US companies would be competing against established Chinese and European turbine makers and suppliers, tightening up the margins. The upshot, said one of the speakers, is that aircraft suppliers may find it difficult to adapt to the price pressure.
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Sort of amusing (but sad) that our suppliers are hurting but resist diversification.
I doubt our suppliers would resist diversification if they could make money. Why would they not choose to make wind turbine parts if there is profit in it? But if there is no profit, or if the profit is so little as to make it more trouble than it is worth, then they shouldn’t waste their time on it.
There are a number of reasons Amercian machine shops can barely complete with the shops in the Land-Of-Almost-Right, and I don’t mean the unions (we are talking small suppliers and machine shops here). I mean OSHA and the EPA, to name two. There are other cuplrits of course, but those two stand out as entities that add overhead without value. Get government off the shop floor.
“add overhead without value”
I suppose clean drinking water has zero value? Let’s just resume the practice of dumping toxic solvents out back and to he** with the aquifer.
This shows the price you pay for coming late to the party.
It’s not profit margins. It’s unprofitable.
Huge difference.
I was addressing the aircraft suppliers.
Alternative energies can be quite profitable. It just depends where you’re at on the food chain.
It isn’t a question of clean water vs. dumping toxins – it is a matter of degree. There could be a common-sense balance but the out-of-control (and that includes under jorge boosh – he was an out-of-control liberal as well) EPA consistently shows they cannot moderate the rules to provide for common sense. All environmental rules should take the economic cost of compliance into account, else they are oppressive and counter-productive.
If they can’t come up with reasonable rules then they (the agency) should be destroyed becuause it has negative value in the present configuaration.
And which aircraft supplier in Hutchinson, or that may be moving to Hutchinson, has demonstrated that can-do attitude to manufacture parts for Siemens?
Do you really believe they located in Hutch to have all of their detail parts and assemblies built locally? Logistically, it makes perfect sense to have the final assembly/stockroom in Hutch.
It’s not the “can-do” attitude bth. We still got that. It’s not the unions. It’s not health benefits. It’s not manpower, staffing, training, etc. It’s not facilities. All of those items are cop-outs.
You’re a bright guy, bth. MIT is quite impressive. I’m sure you already know the reasons, and suspect you’ve known them for quite awhile. But those answers don’t mesh with your agenda.
I never said it was a fat and happy aircraft supplier – just that it was a manufacturer. I would love to see ALL stages of that production done here AND to see technological improvements made at NIAR. Yes, I DO know the reasons – as Don noted above the aircraft guys have grown accustomed to “pretty fat business profitwise” instead of the leaner environment the rest of us operate in. And you have made it clear that lean operating methods “don’t mesh with your agenda”
BTW – just what is it you think is “my agenda”?
Many years ago I worked for a company that had the opportunity to quote on manufacturing all flatware (spoons, knives, forks) for U.S. Government installations all over the planet. A huge contract.
We initially focused on knives. Good ol’ standard butter knives. We knew the target price was about $1.25 each. We knew the producer of the steel billets, which was the same supplier to the then current manufacturer (A mega company we’ll call “Brand X”). Whether the steel manufacturer sold the billets to us or directly to “Brand X”, their cost was $1.40 each. We haven’t even applied a penny of labor and we are $.15 over budget. All components had a “Made in America” clause. Yet “Brand X” was profitable on these knives. I’m pretty confident a lean initiative isn’t going to help in this scenario.
So how did “Brand X” do it?
Three possibilities: They may have gotten a ‘discount’ from supplier. They may be getting the billits from China or someplace. Or they may be losing money to drive the competition out of business to establish a monopoly.
A related scenario: I worked for a company that produced specialty petrochemicals. We were required to purchase feedstock from ‘Refining and Marketing’ of the same corporation at their ‘posted prices’. Unfortunately those posted prices were artificially inflated making it virtually impossible for ‘Chemicals’ to show a profit. Never mind the fact that we helped R&M make huge paper profits and that in turn made Corp profitible. I used to comment that we should consider purchasing feedstock on the open market where we could get it for a LOT less. Needless to say, that suggestion was not appreciated.
Not bad, bth. You were close. It’s not #1, or #3. A foreign company bought the billets from the american billet source for their asking price of $1.40 and then sold them to Brand X for $.75. That foreign company was reimbursed by their respective government for the difference + fee. That country, in order to support infrastructure and general commerce, offsets any steel purchases.
So even though everything is 100% made in America, it certainly doesn’t follow standard logic. It was a valuable lesson for me.
When multiple governments are offering multiple subsidies, things can get very muddy very quickly. I’m afraid that’s where we are with renewable energies right now. Aircraft is rapidly on a similar course. And we didn’t even discuss the corporate tax code!
If the waters clear, I will jump in with both feet. Renewable energy is something transformative for our nation (albeit I am still not a fan of windmills) and I would be proud to be part of it.
That is why I would like to see us find a way to ‘domesticate’ energy. The same situation exists for oil where foreign governments control us. That was part of the lesson I learned at ‘Chemicals’ dealing with ‘R&M’ and also ‘Exploration & Production’. Lots of articiality in pricing.
I wonder how that all works with all thsoe Chinese parts Boeing uses in their aircraft?
I thought some might enjoy this letter we received today. Interested in being a Windmill manufacturer?
“Thank you for participating in the WIND Supply Chain Workshop that was held last Monday in Topeka, KS brought to you by WIRE-Net’s Great Lakes WIND Network.
We know that you have been anxious to receive copies of our materials from the workshop. Please take a moment to provide us with feedback on your experience at the event. Your input will help us improve future workshops. At the end of the survey, please make note of your Username and case sensitive Password listed on the final page. With that information, you can then proceed to our site to download our workshop materials.
At the workshop, we discussed our WIND Capabilities Profile & Analysis. This on-site visit and review of your manufacturing capabilities, costs $3000, plus travel & living expenses, per visit. For all manufacturers who attended the program, we will reduce the cost of the Profile to $2500, plus travel & living expenses. You will find information on the Profile process in the workshop materials you will be downloading. You can indicate your interest in the WIND Capabilities Profile & Analysis when you register with us at http://www.glwn.org. Or feel free to contact members of the GLWN WIND Team.”
I would like to thank Kansas Commerce for setting this up. BIG MONEY!!!
sounds like less than the money the County was looking at spending to buy that Bel Aire land for ‘eco devo’. I am always skeptical about a ‘broker’ who wants to peddle my company who wants money up front like that.
I feel exactly the same way. And Mr. Voorhis should probably be a bit more skeptical when listening to “speakers” explaining that profits are too high. There just might be another factor involved…
An interesting conundrum: you have an expertise that you might like to sell to other users. Just how should you pay a possible ‘rainmaker’ for such connections? Perhaps a better structure would be a commission based on performance? After all, if you could bring my company a whole lot of business I might be willing to pay you for it … AFTER you deliver!
Sales reps are fairly common in aircraft. They usually want 5% of work they bring in to your facility, and most should have a sliding scale downward if the workload they bring in really starts to take off. Sometimes it can be a very good thing, but the sales rep needs to be 100% responsible for all aspects of the sale (i.e. travel, entertainment, meetings, etc.). Most relationships I’ve seen end up quite ugly. Finder’s fees are pretty rare in my experience.
With the letter I posted I wouldn’t be a bit surprised if they were angling for a long term fiduciary arrangement. We’ll see.
It would be good to see the KCC establish some sort of clearing house to match capabilities to needs in this area. I think we have a tremendous resource base with both our manufacturers and NIAR that would be bery useful to the turbine energy. Couple that with our location on the east edge of the main wind corridor and there should be a tremendous opportunity for both us and them.
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[...] From the Climate and Energy Project, Meril Hazlett comments on reporter Dan Voorhis thoughts about realistic profit margins for those who can make the transistion as they appeared in his post on The Witchita Eagle Business Casual blog: [...]