In the Fifth Annual Quality Spending Survey, Quality magazine projects spending to nearly match pre-9/11 levels and to exceed pre-recession levels. Forecasted total spending on test, inspection and measurement equipment, quality software, and consulting, training and contract services is $2.98 billion, an 8% increase from 2004 spending of nearly $2.8 billion.
Of the money earmarked for quality expenditures during 2005, nearly 62%, or $1.84 billion, is forecast to be spent on test, measurement and inspection equipment, while 11.5% and 26.5% are projected to be spent on quality software and services, respectively. For quality software, the 2005 projected spending of $342.1 million is a 32% increase in spending from 2004 numbers and indicates a trend toward pre-9/11 numbers. The money to be spent on test, measurement and inspection equipment during 2005 represents nearly a 10% increase from 2004 spending levels. Only in consulting, training and contract services is there expected to be a slight dip of 2.5% in spending during 2005 vs. 2004. However, this area has seen significant spending increases during the past 2 years as manufacturers chose to outsource much of their quality needs rather than invest in the capital themselves.
As the United States continues its economic recovery, there will be certain regions, industries and manufacturers who lead the way. All regions in the country, except for the western United States, are projected to substantially increase spending during 2005. The South will lead the country in percentage increases, 36.6% to $823.2 million, during 2005, while the Midwest will lead the country in overall spending at a projected $1.06 billion during 2005. Only in the West is there expected to be a significant downturn in spending from 2004 numbers. See the related articles on each region within these pages.
Despite the drop in spending in the western United States, average spending per plant across the country as a whole is projected to increase by 5.3% next year. The region with the largest gain, in terms of average increase per plant spent, is the South with a 36.8% increase, or $23,028 more in average spending per plant during 2005. The Midwest is also expected to see double-digit increases in average spending per plant, 16.6%. And while more plants in the Northeast expect to be spending more money next year, the increase average spending per plant is negligible from 2004 levels.
While the southern United States may be the place where more spending occurs during 2005, the computer and electronics industries is forecast to be spending the greatest dollar amount during the coming year. Estimated spending by this segment of the industry is $677.2 million. Following close on its heels, the transportation industry, which includes aerospace, automotive and other vehicular products, is expected to spend $585.4 million during 2005. Most industries are reporting increases in spending from 2004 levels, however, because of a change in how industries are grouped, a direct comparison from 2004 to 2005 is difficult.
A direct comparison of how small and large companies will buy in the coming year is possible, and it looks like the bigger the company, the more money they will spend. According to the survey, spending in smaller companies is projected to decrease during 2005. In companies of less than 100 employees, spending is projected to drop 17.6%, or $121.7 million, to $582.3 million during 2005. Companies of 100 to 250 employees are projected to remain fairly stable in their spending during 2005 at a projected $677.6 million. The manufacturers who will be responsible for most of the new spending are the big companies-those with 250 or more employees. They are projected to spend 20% more, for a total of $1.73 billion or a $290 million increase, during 2005 than they did in 2004.
All major categories of test, measurement and inspection equipment are expected to see increases in spending. The exception is form and surface measurement equipment, which because of a projected $10 million decrease in roundness and cylindricity equipment spending, is expected to experience an overall 17.8% decrease as a category. Spending on surface measurement equipment is expected to see a 2.1% increase during 2005.
Despite this, the overall news is good. The equipment that manufacturers will purchase most often during 2005 that they didn't buy during 2004, include coordinate measuring machines (CMMs) and materials testing. CMMs are expected to see a $68.9 million, or 45%, increase during 2005, and materials test equipment is projected to see a $66.6 million, or 20% increase, during 2005.
Among CMMs, while computer numeric control (CNC) versions will make up the lion's share, $76.2 million, of purchases, manual versions are expected to see a 51% increase in use, with sales projected to hit $73.1 million during 2005. And while multisensor machines are expected to only account for $16.6 million next year, this is twice the amount that was spent during 2004.
Noncontact technology, including video and optical technologies, is expected to make its way in almost one-third, 29.8%, of chosen methods to inspect and measure parts during 2005. Machine vision is projected to see a $5.5 million increase in spending, and similar increases are expected to be seen in borescopes, microscopes and optical comparators, offsetting a drop in spending on video measurement systems.
During 2003, Quality magazine launched the supplement NDT to focus on the nondestructive test market, and in 2005 that coverage is expanding to include materials testing, a close cousin to NDT. Manufacturers plan increases in both areas of technology. Materials test is expected to see $76.4 million of new spending and NDT is expected to see $56.4 million in spending during 2005. These represent a 5.6% and 11.8% increase, respectively, from 2004 spending.
So, why is all this investment being made? The overwhelming majority of manufacturers are looking for test, measurement and inspection equipment to help them reduce scrap and rework costs. A full 58% of 2005 purchases will be for that purpose. Another important reason for new spending is to increase productivity-the same reasons investments were made during 2004. Those involved with manufacturing or fabricating metals continue to cite that as their primary reasons for investment. Transportation manufacturers, including aerospace, continue to place a premium on improving productivity through investing in test, measurement and inspection equipment, while those in computer and electronics manufacturing continue to look toward their quality investments equally as much to help them meet ISO quality standards (50%), reduce costs (50%), and reduce scrap and rework expense (48.8%).
Calibration software is an increasingly important buy. As in 2004, it is the leading software purchase for 2005. This could be due, in part, to the 2006 target date of ISO/TS 16949. As part of that automotive standard, anyone doing calibration is required to be in accordance with ISO 17025, which focuses on calibration. Indeed, calibration leads all software buys for transportation industries. And, it is an equal-opportunity investment. While an average of 58.8% of companies of 500 or more plan to implement calibration software during 2005, an almost equal amount, 57.6%, of companies that have fewer than 100 employees plan to implement the software as well. This fact further supports the increasing and universal importance of calibration in today's manufacturing plants.
While calibration and data collection software will dominate the dollars spent, almost 40% of companies buying software will buy document control and management software solutions. This is an increase from 2004 numbers and can be tied in with increasing importance placed on standards and regulatory compliance.
What may be more surprising is the person most likely to implement software within a manufacturing plant. Long the purview of the quality assurance engineer, software, including such quality engineering stalwarts as statistical process control, data collection and even geometric dimensioning and tolerancing, are increasingly being implemented more by manufacturing engineers, the survey found. Quality engineers still are the focal point for software to meet standards initiatives such as ISO 9000 and document control.
After 9/11, when companies froze their spending on new capital investment, those companies that provided outside resources continued to do well, nearly doubling their income from 2001 to 2002 spending-$495.4 million to $935 million. When the recession struck, quality services lost approximately 30% of its usage, however, those companies fared better than their counterparts in quality software, who saw a 60% shrinkage in market from 2002 to 2003. As the economy began to recover in 2003 and 2004, the services sector saw a great rebound, more than a 17% increase from 2003 to 2004. It would seem now that, because manufacturers are less jittery about investing in equipment and software, that the services sector will flatten a bit in the coming year.
However, less one think manufacturers won't be turning to service areas, think again. Calibration, certification and registration consulting and process improvement consulting will be the top service areas in which manufacturers will spend money during 2005. Process improvement consulting will see the largest percentage increase in the coming year, more than 18% to $93.1 million.
During 2003, manufacturers rushed to comply with ISO 9000 deadlines. And while 2004 saw no such rush toward compliance, 2005 promises to see those in the automotive industry focus on the conversion to ISO/TS 16949 as QS-9000 is phased out by 2006. And indeed, while certification and registration consulting spending is expected to only reach $186.1 million during 2005, 71.3% of those in the transportation industry will be including these services in their budget-more than any other industry segment and a 9.2 percentage point increase from the number of transportation plants who spent on this service during 2004. Of course, one would expect that larger companies, of 500 or more employees, would have process improvement as part of their overall goals, but companies of less than 100, nearly 43%, will also be budgeting money to improve their processes during 2005. This is nearly a 10 percentage point increase from those spending money on process improvement during 2004.
Services will also have a role, it seems, in getting new projects off the ground. Small manufacturers of less than 100 employees will lead new product development, as evidenced by their use and spending on prototyping and reverse engineering services. On average, 14.3% of small companies will have this as an expenditure during 2005, which is a 6 percentage point increase from 2004 and a 3 percentage point lead over companies of more than 500 who will spend on this during 2005.
After the products are designed and created, there will be a need to verify and test. The survey points to a projected increase in spending on lab testing, and contract part inspection and measurement by 4.2% and 19%, respectively. In these areas, larger manufacturers promise to more often have this as a line item in their 2005 budgets. While many large companies may have the internal resources to do prototyping and reverse engineering, they often still turn to outside services for test, inspection and measurement.
Quality 2005 Market Forecast:
Midwest Tops $1B
Quality 2005 Market Forecast:
South Keeps Growing
Quality 2005 Market Forecast:
Northeast Stays Steady
Quality 2005 Market Forecast:
Big Slip in the West