Just when it seemed that the quality industry was getting back on track, it appears a few bumps have popped up. Although many manufacturing companies have reported record earnings this year or “the best year in a long time,” when it comes to spending those dollars, the holder of the purse strings isn’t about to loosen the grip quite yet.
While projected to be a $2.2 billion industry in 2012 according to Quality Magazine’s 12th Annual Spending Study, this is down from the $2.6 billion reported to be spent in 2011. Despite the overall drop, there are still some glimmers of hope in the industry.
Not all companies are willing to sew the purse shut when it comes to quality spending. Thirty-eight percent of respondents indicate increases in their company’s projected spending for quality assurance and control equipment, systems, software and services in 2012 vs. 2011. For those expecting an increase in their budgets, the average is 17%. On the other hand, for the 8% of respondents expected a decrease in quality budgets, the average decrease is 32%.
Compared to three years ago, 41% of respondents indicated that his company’s approach to quality has taken on increased importance. For another 29%, quality is of the highest importance, and for another 26% quality holds the same level of importance as it did three years ago. Only 4% indicated that quality is less important than three years ago.
Hot SpotsInvestments in gages and gaging systems are expected to grow about 9% in the upcoming year to $361.2 million. Within the gaging and gaging systems category, sales in ball gages are estimated to increase 155% over the previous year to $5.1 million. Another category expected to see significant growth (56.7%) is in-process turnkey gaging systems at an estimated $14.1 million.
More than half of survey respondents (55%) indicate they will be purchasing gaging and gaging systems in 2012 to the tune of $361.2 million. The largest segment in the gages category where respondents indicated their money would be spent is handheld measuring tools. This shop floor staple is expected to make a 7.1% increase vs. 2011 spending for a total of $87 million.
At a growth rate of 625% compared to 2011 numbers, acoustic emissions equipment is the category expected to see the largest growth in 2012 for a total of $3.6 million.
Materials test equipment is poised to make significant strides in 2012 as well. Estimated spending in this category is $146 million, a 90.1% increase from 2011 figures. Within the materials test equipment category, spending on several types of equipment is expected to see triple-figure growth including scanning microscopes (325%), friction, wear testing (275%), hardness testers (217.8%), tensile testers (163.4%) and universal testing machines (121%).
While most companies indicate they are spending less in 2012, both small companies with less than 50 employees and those with more than 1,000 employees plan on spending more in terms of services, software and equipment in 2012. Companies with less than 50 employees project a quality budget of $254.1 million in 2012, an increase of 17.6% compared to 2011; and companies with more than 1,000 employees project a quality budget of $515.7 million in 2012, an increase of 16.4% compared to 2011.
The Typical CompanyThe largest concentration of respondents (27%) to this year’s survey works at companies with 100 to 249 employees. The total market in 2012 for this size company is $626 million, which equates to an annual quality budget of $61,595 per plant. The company is likely located in the Midwest. Let’s take a closer look at companies with 100 to 249 employees.
When compared to three years ago, 24.4% of respondents at these companies say that quality today is of the highest importance; 46.8% say that it has increased importance; 26.9% indicate quality is at about the same level of importance and 1.9% indicate is of decreased importance, which is a 2% decrease from last year’s respondents, indicating that the level of quality is on the minds of all employees. In comparison, 42% of respondents who work at companies with more than 1,000 employees indicate that quality is of the highest importance.
When asked to compare their 2012 budgets vs. their 2011 budgets for quality assurance and control equipment, systems, software and services, 37.7% indicated budgets will increase in the coming year, 55.6% indicated budgets will remain the same and 6.6% indicated spending will decrease, which is approximately half of what companies of this size indicated last year in regards to their budgets.
For those looking at an increase, 46.4% of respondents said the increase will be 10% or less. Another fifth of respondents indicated quality budgets will increase between 16% and 20%, and 17.8% of respondents indicated their quality budgets will increase by more than 25%.
The principal motives behind the budget increase is to improve productivity (63%), reduce scrap and rework (61.1%), and tighter part quality standards and to reduce costs, both at 53.7%.
When it comes to test, measurement and inspection equipment, this group is looking to spend $507.9 million with nearly an equal amount being allocated for coordinate measuring machines (CMMs) and gages and gaging systems, $116.3 million and $116.4 million, respectively. The majority of the CMM budget will go toward computer numerical control (CNC) CMMs at an average of $64.1 million. Of the $116.4 million allocated for gages and gaging system, $25.4 million will be spent on handheld gages and $19.2 million will be spent on fixture and special tooling gages.
Breaking down the $97.4 million allocated for quality services, companies of this size will spend $66 million on test, measurement and inspection services, while another $31.4 million will go toward consulting and training services.
Calibration services is the largest category under the test, measurement and inspection services umbrella at $41.5 million. The second largest category-lab testing-lags well behind calibration services at $7.9 million.
The largest category under the consulting and training services umbrella is certification and registration ($7 million) for standards such as ISO 9000 and TS 16949. This is followed by lean manufacturing at $6.2 million, an increase of 19% compared to the previous year.
When it comes to software, companies with 100 to 249 employees have budgeted $21.1 million. Of that, $4 million will go toward data collection software, $3 million will go toward SPC software, and $2.5 million will go toward both enterprisewide quality software and gage management software.
Equipment ExpendituresWith nearly every company looking to buy test, measurement and inspection equipment to keep their business going, it is no wonder this category makes up 87% of manufacturers’ budgets at $1.8 billion.
While only 11% of companies plan on purchasing a CMM in 2012, it is the single largest expenditure that those companies will make. Collectively, those companies purchasing a CMM will spend a total of $418.5 million, or an average of $100,375 per company. The majority of CMMs will be purchased by companies located in the Midwest at a rate of $218.4 million, a 32.1% increase on the amount Midwestern companies spent on CMMs in 2011.
Within the CMM category, $194.2 million is expected to go toward CNC CMMs; $84.1 million will be spent on manual CMMs; $55.7 million will be spent on multiple sensor CMMs; and $48.5 million will be spent on direct numerical control CMMs.
Product testing equipment also looks to be an area of substantial interest, with 23% of respondents indicating they plan on purchasing this type of equipment for a total of $290.9 million. Of that, $61.1 million will be spent on environmental test equipment; $41 million will be spent on torque testers and $37.5 million will be spent on leak testers.
Estimates for optical inspection and measurement equipment are $180.5 million for the upcoming year. The top expenditure in this category, optical comparators, ekes out a 0.9% increase from 2011 numbers for a total of $45.3 million. Last year’s top equipment in this category, machine vision, falls to the number two spot at $40 million. Rounding out the top three, microscopes expect to see a 13.1% increase in sales from the prior year for a total of $37.2 million
Software PurchasesIn 2012, 21% of survey respondents indicated they will be making software purchases. The average expenditure per company for quality software is expected to be $14,382.
The largest amount of the proverbial software pie, at $18.8 million, is data collection software. This has been the leading category for the past several years. Rounding out the top five software expenditures is statistical process control (SPC) software at $11.7 million; CMM programming and simulation software at $11.6 million; calibration software at $10.1 million; and document control/management software at $8.6 million.
Calibration software, which was not in the top 5 in 2011, is expecting a 14% growth compared to the previous year. Also expecting a tremendous growth in the upcoming year is gage management software for a total of $5 million, a staggering 194% increase from the previous year.
While not quite on the growth trajectory as calibration software, advanced product quality planning software expects 58% growth and gage repeatability and reproducibility software expects 31.3% growth for a total of $3.8 million and $2.1 million, respectively.
Quality ServicesQuality services include consulting and training services, as well as test, measurement and inspection services. Overall spending for services is expected to reach $303.4 million in 2012.
Again this year, certification and registration services are at the top of the consulting and training services that will be in demand to the tune of $41.3 million. This is followed by quality management consulting at $19.1 million, a 6.1% budget increase from the previous year, and lean manufacturing at $14.5 million.
Other areas with notable increases in 2012 include geometric dimensioning and tolerancing services at $8.1 million, a whopping 88.4% increase from the previous year; failure mode and effects analysis services at $4.5 million, a 40.6% increase from last year; and statistical analysis services at $6 million, a $13.2% increase in the past year.
Of the $184.4 million budgeted for test, measurement and inspection services, calibration services tops the list again this year at $105.2 million. This is followed by lab testing at a very distant $22.4 million, materials testing at $14.7 million, and contract part inspection and measurement at $12.4 million.
The bright spot in the test, measurement and inspection category is failure analysis, which expects to see an increase of 27% from the previous year for a total of $9.4 million.
When all services are considered, across the country calibration services are the number one expenditure. For three of the four regions-the Northeast, Midwest and South-this is followed by certification/registration, but in the West, the category commanding the second most significant amount of money is lab testing at $7.8 million.
While quality budgets have been closely monitored the past few years, it stands to reason that no matter the economy, some expenditures on equipment, software and services are necessary to keep the business up and running. Some investments will be made to improve businesses. But it appears that any investment made will be done so with careful consideration before the purse strings are loosened.
Survey MethodologyQuality Magazine would like to thank all of the respondents who participated in the 12th Annual Quality Spending Study. Questionnaires were e-mailed in July 2011 to managers and other professionals who have responsibility for quality and hold the higher degree of equipment purchasing influence in a representative sample of 16,413 Quality Magazine subscribers. Survey respondents were asked to share their spending plans for 2012. The deadline for responses was August 2, 2011.
Surveys were returned by 610 professionals for a response rate of 4%. Respondents had the opportunity to win one of three $100 American Express gift cards as an incentive to complete the survey. To estimate 2012 spending data, responses were weighted to the number of plants in each industry served. This survey has a ±3.27% margin or error. Q