|
Items in cart [1] |
Questions? Call 888-624-8373 |
HARDBACK + PDF HARDBACK PDF BOOK PDF CHAPTERS Free Resources |
||||||||||||||||
|
||||||||||||||||
|
|
|||||||||||||||
| ||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||
| Copyright © 2009. National Academy of Sciences. All rights reserved. Terms of Use and Privacy Statement |
Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 103
Powder Metallurgy Parts
DIRAN APELIAN
JOHN J. MEALY
P. ULF GUMMESON
CHICKERY J. KASOUF
Worcester Polytechnic Institute
THE INDUSTRY AND THE TECHNOLOGY
Net shape processing involves metalworking in which the output from the
first formation is very close to the final required tolerance and specifications,
requiring little additional machining. This manufacturing can be very attractive
because of its efficiency, conservative energy use, and relatively minor environ-
mental impact. Net shapes, originating as metal powders, date back thousands of
years (e.g., gold, copper, iron), but modern powder metallurgy (P/M) had its be-
ginning in the 1920s with the use of porous self-lubricating bearings in home
appliances. This development was followed in the U.S. auto industry by attempts
to make structural components from easy-to-handle copper-based powders. These
parts are attractive because P/M is a cost-effective metal processing technology
with little or no scrap. In Germany, during World War II, iron powder was used
to make porous rotating bands for artillery shells to replace scarce guilding metal.
P/M is now the fastest growing net shape metal manufacturing industry in
the United States. With the exception of the large captive P/M operations of the
auto companies in the early years (1930s-1960s), the balance of the industry has
traditionally consisted of relatively small entrepreneurial firms. These firms are
squeezed in the supply chain between the large raw material suppliers and big
automobile customers, with their heavy pressure on parts prices. Thus, P/M parts
manufacturing is a small industry with a history of secrecy, price competition,
and margins too narrow to permit any meaningful research. R&D is largely left
to raw material and equipment suppliers and to a few universities.
The lack of critical technology mass inhibited R&D among part producers
because of the limited resources of any individual firm. It is often the case that
103
OCR for page 104
04
U.S. INDUSTRYIN2000
the larger firms in the industry can engage in development programs while the
smaller firms lag in technology development or rely on their suppliers (e.g., ma-
terial or equipment producers) for R&D. The dynamics of the external forces
affecting the level of innovation and technology commercialization in fragmented
manufacturing industries, and in particular the P/M parts industry, is the focus of
this chapter.
The basic steps of conventional P/M technology are:
1) manufacturing of powders, predominantly by melting followed by atom
zation with high-pressure water or gas;
cants);
1_
21 mixing and blending the powders and additives (carbon, alloys, lubn
, C7 C7 ~
3) feeding the mix into a die and consolidating (compacting) the mix, apply-
ing pressures of about 50 tons per square inch, resulting in "green" shapes, and
4) sintering the green compacts at about 2100° Fahrenheit, causing solid state
diffusion and bonding.
These processing steps result in distinct industry sectors powder produc-
ers, equipment manufacturers, and parts producers. Part producers can be further
divided into conventional iron and copper-based P/M and production that uses
more specialized materials or production processes such as tungsten or metal
injection molding (MIM), a technology similar to injection molding of plastics
and ceramics.
P/M has a number of advantages over competing technologies:
.
Many metal powders are manufactured from recycled metals or scrap,
notably iron/steel and copper, while others are made from virgin ores (tungsten,
nickel).
Net shapes are mass produced to close tolerances over long production
runs without scrap residue (machining chips, grinding residue, casting risers, etc.~.
P/M is the lowest energy consumer of all comparable metal working pro-
cesses and is environmentally benign, producing a minimum of fumes and toxic
waste (Bocchini, 1983~.
P/M makes possible otherwise impossible alloys and metal/non-metal
combinations of materials or self-lubricating bearings, metal filters, and metal/
matrix composites.
.
.
.
.
P/M design solutions are often remarkably cost effective.
There are many other applications for metal powders, but this chapter will be
restricted to the parts industry, i.e., companies manufacturing structural compo-
nents, self-lubricating bearings, and friction materials by "compacting and sinter-
ing" metal powders, predominantly iron, steel, alloy steel, copper, and copper-
based alloys. From a modest beginning of about 2000 tons per year in the mid
OCR for page 105
POWDER METALLURGY PARTS
105
1940s this industry has grown to about 12,000 tons in 1950 and 350,000 tons
annually today. This evolution is discussed in more detail later in the chapter,
and is illustrated in Figure 3 (p. 113~.
P/M INDUSTRY STRUCTURE AND STRATEGY
The $1.8 billion North American powder metallurgy parts industry currently
includes approximately 213 companies competing at venous levels in the manu-
facture of P/M structural parts, powder forging, beanngs, friction matenals, and
metal injection molded products. More than two-thirds of part sales are automo-
tive applications, the most significant growth segment since 1980 (see Table 1~.
The industry has responded to several years of real growth that, while currently
moderating, is expected to continue. While some managers and analysts have
suggested less reliance on automotive parts, these parts continue to exhibit strong
growth as auto producers continue to use new P/M applications at the same rate
as the industry diversifies into new applications (Roll, 1985~. They are attractive
for parts producers because of the large volumes that come with a successful
contract. Automotive applications have increased from 15 pounds per U.S.-made
auto/light truck in 1988 to 29.5 pounds in 1996. Recent forecasts suggest that this
volume will increase to 32.5 pounds in 1998 (Winter, 1996, 1997~.
Auto company captive P/M plants became the first large-scale P/M opera-
tions, but they began to increase their outsourcing during the 1970s, and many of
the P/M divisions were divested during the 1980s. This did not change the P/M
industry's dependence on the automobile, but it caused major changes in the sup-
ply chain and in the industry's pattern of technological innovation and economic
performance during the early 1970s. This period saw the auto industry, and
thereby the P/M industry, struggle through the energy crisis and the onslaught of
TABLE 1 P/M Markets
1980
1996
Market % of Market % ofMarket
Market short tons Market short tons Marketgrowth (%)
Auto and truck 72,300 44.9 220,400 69.0205
Recreation and tools 22,200 13.8 36,400 11.464
Appliance 13,200 8.2 19,500 6.148
Hardware 10,900 6.8 7,300 2.3(33-0)
Industrial equipment 8,800 5.5 11,800 3.734
Business machines 7,800 4.8 3,800 1.2(51.3)
All other 25,900 16.1 20,200 6.3(22.0)
TOTAL 161,100 100.0 319,400 100.098
Source: White (1996b).
OCR for page 106
06
U.S. INDUSTRYIN2000
foreign competition, "auto transplants" (domestic production facilities of foreign
owned auto producers), and auto imports. Earlier strong demands and tight pow-
der supply were followed during this period by falling P/M part sales and even
auto industry restrictions on new P/M parts developments.
Current P/M industry prosperity is based on the success of auto industry
restructuring. Longer production runs, lower cost energy and labor, and cost
reduction programs initiated by suppliers in response to automotive customers,
have made the North American P/M industry the most competitive in the world,
with a cost advantage in 1996 of about 20-30 percent over Japanese parts produc-
ers. Strengthening of the dollar since then has reduced this advantage, but com-
petition with overseas firms has yet to become a major issue in the North Ameri-
can P/M industry.
Powder metallurgy has thus played a very substantial role in re-engineering
powertrain components and has successfully converted other engine parts. This
success, in turn, continues to drive P/M growth for automotive and other custom-
ers. Much technical innovation in applications originates in the U.S. auto indus-
try with its ongoing acceptance of P/M as a solution in their search for more cost
effective net shape manufacturing technologies.
A number of factors have recently contributed to setting the P/M industry
apart:
A healthy economy has led to a surge in demand.
P/M has been able to meet this demand from latent capacity brought forth
with relatively inexpensive productivity improvements.
.
P/M still has untapped, latent competitive potential or, expressed differ-
ently, has yet to reach that level of commercial maturity, when long-term growth
rate levels off and price competition and excess capacity may call for restructur-
ing of individual firms or consolidations within the industry.
The advent of just in time inventory (JIT), the desire for fewer suppliers, and
total quality becoming the condition for doing business at any price led to a need
for closer relationships, often partnerships, in the supply chain. These require-
ments frequently span three links in the chain raw material and equipment sup-
pliers, parts manufacturers, and their customers (i.e., original equipment manu-
facturers or OEMs). These factors have favored firms with more sophisticated
financial, managerial, and technical resources, which sometimes, but not always,
translates into size.
P/M part producers face difficult conflicts. Customers are demanding more
engineering services, price concessions, and, in some cases, global supply capa-
bilities (Kasouf and George, 1994; Kasouf et al., 1996~. Consistent with Lorange
(1988), this often leads to a situation in which new business requires investments
that part producers may be reluctant to make because of the risk of losing the
business downstream after developing it (Kasouf, 1998~. Also, the sharing of
information to improve quality and reduce cost, desired by the customer, may be
OCR for page 107
POWDER METALLURGY PARTS
107
at risk, since part producers are sometimes reluctant to share developments when
they are unsure about the long-term potential of the relationship with a customer.
Although part producers generally find relationships with their suppliers valu-
able, few horizontal relationships were observed in the industry and these are
generally limited to areas such as training and trade missions. l here is evidence
of interfirm cooperation whereby one manufacturer sources some unfavorable
product mix (usually a product with a short production run) to a smaller manufac-
turer who is set up to deal with that type of production profile, thus allowing the
larger manufacturer to maximize his capacity. This is not uncommon in western
Pennsylvania where 46 of the 213 P/M companies in the United States are located
within a thirty-five mile radius of each other and have established mutually ben-
eficial relationships.
Among part producers, the attractiveness of relationships was negatively re-
lated to firm size, i.e., smaller firms found alliances more attractive than larger
firms (Kasouf and Celuch, 1997~. Moreover, firms that found relationships at-
tractive tended to be optimistic about the future growth of the industry and thought
that the technology was changing more rapidly than firms that did not find alli-
ances attractive. This may suggest that relationships seem to be attractive for
firms willing to share information to deal with growth opportunities that might be
difficult to address with limited R&D funds. Thus, the challenge for the supplier
in this situation is to develop a satisfied customer yet increase its power vis-a-vis
the customer by raising switching costs. This might involve working with its
own suppliers to develop a competitive advantage or vertical integration in the
case of larger companies.
Like firms in any industry that is greatly dependent on a dominating cus-
tomer base, such as automotive, P/M part producers have always considered di-
versifying their risk by developing other markets and applications. While these
markets are important and substantial, some of them (e.g., hardware and business
machines) have either moved offshore or moved to other materials with more
favorable price-performance tradeoffs in those applications (Noted in Table 1~.
The net result is that these other markets have failed to encroach on the auto-
motive market share. Their comparatively slow growth of only 11.5 percent
since 1980, versus 204 percent for the auto and truck market, dramatically illus-
trates how closely linked the future of the P/M industry is to the fortunes (and
misfortunes) of the auto industry. Automotive applications may eventually
account for close to 80 percent of the market.
While approximately 70 percent of the P/M part volume is sold to the auto
industry, the mean percentage of automotive sales is under 40 percent (Kasouf,
1997~. This suggests a "tiering" of the industry, i.e., some firms have little or no
automotive sales, while other firms focus mainly on automotive applications. As
the auto industry continues its supplier rationalization, many P/M part producers
will have to find other markets or means of dealing with other tier one or two
suppliers. Strategic redirection will then be critical for some of these firms.
OCR for page 108
108
U.S. INDUSTRYIN2000
In spite of long-standing predictions of industry consolidation (e.g., Roll,
1987), there are more companies today in P/M parts manufacturing than at any
time in the past. In general terms we can identify three different types of compa-
nies:
· Job Shop/Specialty Manufacturers. These are the small firms who com-
prise the largest group in the industry. They typically generate less than $10
million per year in revenue and operate with lower press tonnage, up to about 200
tons and under. They produce more complicated, short-run parts, respond quickly
to change and have low overheads in terms of organization structure. We esti-
mate that there are about 165 companies in this category (including the metal
injection molders), accounting for 77 percent of firms in the industry.
.
Repetitive Process Manufacturers. An estimated 36 companies (17 per-
cent of the firms in the industry) comprise this group, each generating $10 million
to $50 million in annual sales. These firms typically focus on low to medium
press tonnage (up to about 500 tons), provide high customer service, and perform
many secondary operations. They have the capacity to innovate effectively and
generate medium profit margins. However, their limited size makes them vulner-
able to supplier rationalization.
· Large Process Manufacturers. This group of firms includes the largest
producers in the industry. They have large presses from 200 to 1000+ tons and
low manufacturing costs due to high volume. They have the most sophisticated
quality management systems, a high level of technical support and service, and
the lowest prices. We estimate that there are 11 firms in this category, represent-
ing 5 percent of the total. They account for approximately one-half of the
industry's production (Table 2~.
Though the number of parts manufacturing companies has increased from
156 in 1980 to 213 companies in 1997, an increase of 37 percent, the concentra-
tion of market share among the largest firms in the industry is increasing, as
demonstrated by Table 3. The predicted industry shakeout has not occurred, but
the industry may be evolving away from fragmentation. Porter (1980) defines a
fragmented industry as one in which no single firm has significant market share
TABLE 2 Number of Firms with Combined 50 Percent Market Share
Year Number of firms Combined market share (%)
1982 1 1 50.5
1987 1 1 50.5
1991 12 52.1
1996 1 1 51.8
Source: PMRC.
OCR for page 109
POWDER METALLURGY PARTS
TABLE 3 Total Market Share of Largest Firms (%)
109
Year 3 largest firms 4 largest firms 5 largest firms
1982 19 24 29
1987 21 26 31
1991 26 33 38
1996 30 34 38
Source: PMRC.
and can strongly affect industry outcome. He suggests that an industry is frag-
mented when the four largest competitors have less than 40 percent market share.
Thus, the increasing concentration of market share among the largest competitors
is an important industry trend (Table 3~. Given the rationalization of the automo-
tive supply base, and the increasing sophistication required by the auto industry,
we may be observing the emerging importance of size and skill requirements for
P/M part producers. These may evolve into entry barriers, which have histori-
cally been very low in this industry. This industry is still fragmented by any
standard, but the most recent mergers and acquisitions among the largest firms
(e.g., the growth of Sinter Metals, recently acquired by the British firm GKN)
may signal the emergence of several relatively large global firms that do have the
capacity to affect the structure of the industry.
A longer history of the market share data is provided in Figure 1, which
illustrates the market share of the eight largest part producers from 1967 to 1996.
The industry exhibited substantial concentration among the four largest firms in
30
a 25
cn
20
15
10
5
\ jest P/M firm
Second largest firm
Third largest firm
tic _ ~
~ ~:~
are
0010B 83 101001 83 83 10~001 83 N3gl0000B 83 N3g,0000~100100~101~00~0000~000~00800~1001~100001
O
1967 1972 1977 1982
Year
1987 1991 1996
FIGURE 1 Market share of the top eight P/M part producers 1967-1996.
Source: PMRC.
OCR for page 110
0
U.S. INDUSTRYIN2000
1967. It experienced greater fragmentation in the early 1970s and the 1980s as
the auto companies divested their captive P/M units. The 1996 data suggests a
trend toward renewed consolidation.
Viewed from a global perspective, P/M part producers as stand-alone metal
processing companies are a largely American phenomenon. In Europe, and even
more so in Japan, parts fabricators often are captive operations in very large firms
that are consumers of P/M parts, without any substantial number of second- and
third-tier smaller producers that are independent of the large parts consumers.
They therefore remain captives of the existing market, without the ability to influ-
ence the growth and acceptance of new P/M applications outside the large estab-
lished firms, automotive or otherwise, and without the resources or fertile mar-
kets needed to test the strengths and opportunities of their own P/M initiatives.
There appears to be no "new application pull" to the extent that exists in the
North American market.
The U.S. auto companies' struggle to restructure and become competitive set
the stage for the recent unprecedented success and growth of the P/M industry, a
development that has not been repeated in Europe, Japan, or other foreign mar-
kets. For more than fifty years the U.S. P/M industry has remained as large as the
rest of the world combined, and the U.S. car and light truck content of 30-35
pounds of P/M parts remains more than twice the weight in any foreign car. One
German observer (Huppmann, 1991) comments on the difference between the
U.S. and European P/M industries: "While the U.S. industry early on sought
cooperation with customers and conscientiously focused on developing parts, e.g.
for the auto industry, the European industry all too long fought a battle about
properties aimed against wrought steel."
North America has remained the market of P/M acceptance, causing foreign
competitors to seek a presence in the U.S. by acquisitions (e.g., European compa-
nies) or by establishing transplants here (e.g., Japanese companies, including one
powder producer and three parts producers). The P/M industry's ability to re-
spond to the auto industry challenge is in no small measure due to its own success
in advancing the technology, stepwise and incrementally, rather than in major
breakthroughs. One of the keys to continued inroads against competing tech-
nologies is higher physical properties at acceptable cost. This requires bringing
together technological advancements in raw materials, process equipment, and
parts production for higher density P/M components. Higher density translates
directly to higher physical properties. The traditional and relatively costly method
to reach higher densities, "double press/double sinter," is giving way to less costly
single press warm compaction with much improved properties, notably fatigue
life, the key to high stress applications in engines and transmissions. The search
for other process innovations continues.
To illustrate accomplishments, the industry has now concluded ten years of
manufacturing powder-forged connecting rods for North American vehicles
(White, 1996a), and one estimate concluded that over 75 million connecting rods
OCR for page 111
POWDER METALLURGY PARTS
111
have been produced (White, 1996b). Other innovative product applications in-
clude bearing caps and warm formed torque converter turbine hubs.
A useful tool to analyze the competitive success of North American P/M part
producers is Porter's (1990) "Diamond of National Advantage." He argues that
constantly innovating industries can be explained by four factors characterizing
the competitive environment of the home country (Figure 2~.
Factor conditions. In addition to the traditional factors of production land,
labor, capital Porter suggests that specialized resources that support the indus-
try affect the competitive position of a nation or region's firms. In P/M part
production, U.S. firms enjoy a skilled work force, especially in the western Penn-
sylvania area. Moreover, American P/M metallurgists and engineers have be-
come adept at developing conversion applications for the auto industry. This has
helped develop an entrepreneurial spins in the industry; these firms are constantly
seeking new applications for the technology.
Demand conditions. Porter suggests that, while many opportunities are glo-
bal, the characteristics of the home market affect the perception of buyer needs
and the development of appropriate responses to those needs. It is a great advan
Factor
Conditions
Firm Strategy,
Structure,
and Rivalry
+
\4
Related and
Supporting
Industries
FIGURE 2 The determinants of national competitive advantage.
Source: Porter (1990).
Demand
Conditions
OCR for page 112
2
U.S. INDUSTRYIN2000
tage when need in the home market mirrors future global demand. As noted
above, American P/M fabricators have been responsive to a large customer base
pushing them to develop new applications. American-made vehicles contain the
largest volume of P/M parts in the world. These applications are a foundation for
application development in other parts of the world. If future worldwide demand
for P/M parts parallels American part development, then these firms are well
positioned for global competition.
Related and supporting industries. Powder and equipment suppliers are
largely global competitors. However, the relationships that American part fabri-
cators develop with their suppliers are critical because in many cases upstream
R&D or inventory management are essential elements in developing new prod-
ucts. The large, more sophisticated firms in the industry have learned to leverage
suppliers effectively to create value with limited resources (Kasouf, 1998~.
Firm strategy, structure, and rivalry. The strategies used by firms to re-
spond to customer requirements and the nature of competition among firms also
affect the global competitiveness of a nation's industry. As noted, the indepen-
dent part producers have generated customer-focused, entrepreneurial strategies
to generate new developments. This customer focus has served the industry well
in conversions. Moreover, the intense rivalry among firms has forced the indus-
try to maintain a cost-effective orientation while adding engineering expertise
(Kasouf and George, 1994~.
In summary, American part producers feel the dual pressures of providing
more expertise at a lower price. This conflict is difficult to resolve, but the de-
manding U.S. customers in the auto industry have forced these part fabricators to
take advantage of factor advantages to develop cost-effective solutions that will
serve them well when expanding into global markets. The competitiveness of the
1990s has resulted in an efficient industry ready for global opportunity.
INDUSTRY PERFORMANCE
This section is the first attempt to look at the small but rapidly growing P/M
parts industry from the standpoint of economic and competitive performance, and
the factors, technical and non-technical, that have caused or forced changes in the
industry in the last thirty to forty years. However, few if any statistics are in the
public domain. What is available is limited to raw material tonnage, generalized
reports, and private sources.
Production and Market Share
Table 4 compares North American and world shipments of metal powder.
"Iron & steel," "copper base," and to some extent "nickel" are indicative of the
OCR for page 113
POWDER METALLURGY PARTS
TABLE 4 Metal Powder Shipments, North America and the World
113
Metal powders North America World
1000 short tons 1997199619951990 19961990
Iron and Steel 375351347219 639600
Copper and Cu base 24232319 48
Aluminum 40343736 100
Molybdenum (est.) 332
Tungsten, Hz-reduced 113 30
Tungsten carbide 11115 incl.above
Nickel 121010 22
Tin 111
Stainless steel 243 15
Estimated total 438434298 825
Source: MPIF.
U.S. tonnage share of the world market for steel P/M components (about 50+
percent). This share has not changed in any meaningful way the last forty years.
Only modest quantities are importedlexported, either of components or the
corresponding raw matenals, which if considered, would not change the market
share estimate in this report. Figure 3 shows the historical trends of steel powder
consumption in North Amenca.
1,000 ski.
Tons
400
350
300
250
200
150
100
50
Us o Us o Us o
us us ~(D
Cal
FIGURE 3 North American steel powder shipments.
Source: MPIF.
1 1 1 1 1 _
- 1 1 1 1 1 -
: 1 1 1 1 1 ~ =
== ~ Total all Uses t - \
~ 7 - I~' .
== 1 1
= = r I <' ~ ~ =
~ At-- _
l 1
l Jet/
/~1
-
~r
=
t ~
. l P/M Components
it
. ~ All other uses
. ~ ~ 1
_ T I
o Us o ~o
a: co ~ ~O
~CD o
OCR for page 114
4
U.S. INDUSTRYIN2000
Histoncally, U.S. and world steel powder supply has exceeded consumption
by a wide margin in all but a few brief periods of shortages. Even in those periods
foreign powder capacity never translated into continuous U.S. imports because of
high shipping costs, cost of warehousing, JIT, and the difficulty of providing
rapid and professional service. The U.S. oversupply has historically made for a
competitive powder market with downward pressure on steel powder prices (see
Figure 4~.
Equipment suppliers have not had import/export constraints and foreign P/M
press and furnace manufacturers have long been successful in selling and servic-
ing their products in the United States. Their U.S. counterparts also have sub-
stantial exports.
Recent growth of the industry has been substantial but concentrated (Table
5~. The increase in iron shipments between 1991 and 1996 a cumulative 75
percent was primarily shared among the 20 percent of companies that account
for 80.6 percent of sales.
100
10
Index and
Cents per lb.
~, .
~ . .
. . .
rConsurner Price Inde' c, CPI-W
. ~ _
fly
,
~ ~ ~ ~ 'rice, cents/ t ~
. .
_
.
Price in Constant Dollars, cents/lb
l l l l l l
1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
FIGURE 4 North American steel powder prices: primary unalloyed P/M grade; index
1953= 100.
Source: Private source.
OCR for page 115
POWDER METALLURGY PARTS
TABLE 5 Steel Powder Shipments in North America
115
Tons Annual Cumulative Charge
Year (thousands) change, (%) from 1991, (%)
1992 215 18
1993 255 18.6 40
1994 303 18.9 67
1995 313 3.2 72
1996 319 1.9 75
Source: MPIF.
Total steel powder shipments for all uses for the period 1991-1996 for Japan,
Europe, and North Amenca, are shown in Figure 5. One can note that the Amen-
can industry has grown significantly vis-a-vis Japan and Europe. Moreover, the
U.S. P/M industry has succeeded in increasing its share of the structural compo-
nent market through innovation and new applications over other metal working
industries (Table 6~.
A desire to be close to customers has often led to clustering of parts manufac-
tunng firms near major markets, notably Michigan. Just as often this clustering
has been the result of an entrepreneurial and skill tradition, such as the concentra-
tion of parts plants in northwestern Pennsylvania and New England. Recently,
some manufacturing has been developed in the south because of lower labor and
energy costs.
In the absence of specific industry data by SIC code or a sufficient number
of public companies, it is difficult to evaluate the financial health of the indus-
try. Given this void, the Powder Metallurgy Research Center conducted a fi
Sh. Tons
400,000
350,000
30O,OOO
250,000 -
200,000 -
150,000 -
1 00,000 -
50,000
O
-
~f
_ L _
_ _ ~ _
,- ~ _ ~
C _ - 1 1
1
~1 1
~1 1
- 1 1
- 1 1
_ T T
A<
dW
:=
1
~Up
FIGURE 5 Steel powder shipments, all uses.
Source: MPIF.
| North America |
11
Japan |
urope I
OCR for page 116
6
U.S. INDUSTRYIN2000
TABLE 6 Weight of Materials in Pounds in a Typical U.S. Family Vehicle
% change
Matenal1997199619941990198019781978-1997
Reg steel sheet
Stnp, bar, rod1411.01409.01389.01405.01737.01913.0-26
High arid medium
Strength steel296.0287.0263.0238.0175.0133.0123
Stainless steel47.546.545.034.027.526.083
Other steels36.038.542.539.554.065.9-45
hon387.0389.0408.0454.0484.0511.0-26
Plastic and plastic
composites242.0245.0246.0229.0195.0180.035
Aluminum206.0196.0182.0159.0130.0112.083
Copper and brass46.545.042.048.535.037.026
P/M Parts31.029.527.024.017.015.6101
Zinc die casting14.015.516.018.520.030.9-55
Magnesium cast.6.05.55.03.01.51.1445
Fluids/lubricants198.0198.0190.0182.0178.0198.0-15
Rubber139.0139.0134.0137.0131.0146.0-5
Glass96.594.089.086.583.586.412
Other materials102,0100.094.084.095.0120.0-15
Total3248.03236.03171.03141.03363.03576.0-9
Source: American Metal Market, quoted in the International Journal of Powder Metallurgy.
nancial benchmarking study at Worcester Polytechnic Institute (Healy, 1997~
This study developed average values for key financial indicators by using a cross
section of parts producers. These producers represent firms of all sizes, allow-
ing us to develop a "composite P/M parts producer" representing an estimate on
the industry average over a span of ten years. We have also made use of infor-
mation and statistics culled from published data or made available by private
sources (Table 7~.
Raw Materials. The raw material share of total manufacturing costs, despite
more costly premixes and larger parts, for which raw material costs are a larger
share of manufacturing costs, has fallen in the last ten years from about 30 per-
cent to 26 percent. The raw material share of net sales on the other hand contin-
ues to be slightly less than 22 percent of net sales for eight of the last ten years.
Direct Labor. While raw materials as a percent of net sales fell modestly
over the last ten years, it fared better than direct labor costs, which have remained
a constant percentage of net sales, in single batch or average job shop/specialty
firms. Barring some immediate manufacturing breakthrough, direct labor costs
do appear to continue at slightly less than 10 percent of net sales and seem to
remain fixed in relation to volume despite the substantial increase in volume.
OCR for page 117
POWDER METALLURGY PARTS
TABLE 7 The Composite P/M Parts Firm ($1,000)
117
% change
from 1986
1986 % 1991 % 1996 % 1991 1996
Net sales$8284 100$10,514 100$13,402 100 27 62
Raw materials2,013 242,239 212,882 22 11 43
Direct labor944 111,041 101,327 10 10 41
Other mfg costs3819 465~405 516~827 51 41 79
Total mfg costs6776 828,685 8311,035 82 28 63
Gross margin$1508 18$1,829 17$2,367 18 21 57
Note: Values are in constant 1986 dollars, as reported by the U.S. Bureau of Labor statistics for
"Bars, Cold formed, Carbon."
Productivity. We earlier pointed to the apparent lack of variability of labor
costs with volume. This also related to the age of existing production equipment.
Despite the design advances in new equipment, most of the existing equipment in
the P/M parts industry, though often rebuilt, is very old, which has a direct effect
on productivity (Table 8~.
Approximately 70 percent of the press equipment currently in use is over 10
years old, and over 30 percent is over 20 years old. Maintenance costs in P/M at
5.6 percent of net sales are twice the National Association of Manufacturers aver-
age of 2.3 percent for standard industry cost. In 1997, the total P/M parts industry
equipment purchases are approaching $100 million for the first time, or approxi-
mately 5 percent of the parts industry's sales.
The P/M industry is very close to the National Association of Manufacturers'
net sales per employee, which reflects the minimal spending on activities outside
the production area by P/M companies (Table 9~. As can be seen, the productiv-
ity reflects a 7 percent drop in real dollars adjusted for the Bureau of Labor Statis-
tics producer price index for corresponding metal products (e.g., cold finished
bars, carbon) during this period.
TABLE 8 Age of P/M Equipment
Equipment Age Distribution (%) %
Years old 20 >10+
Presses
Mechanical 15 16 36 33 69
Hydraulic 12 16 44 28 72
Sizing 13 18 39 30 69
Furnaces 23 24 30 23 53
Source: MPIF/PMPA.
OCR for page 118
118
TABLE 9 Productivity Indices (Constant 1986 Dollars)
U.S. INDUSTRYIN2000
Year Pounds per employee Net sales per employee Price per pound
1986 30,900 $73,900 $2.39
1989 27,500 $79,062 $2.88
1991 28,400 $83,183 $2.93
1995 41,200 $91,913 $2.23
(%) Change +33 +24 -7
Research, Intellectual Property, and Technology Diffusion
The industry trade association, Metal Powder Industries Federation (MPIF),
and the P/M professional organization, the American Powder Metallurgy Insti-
tute (APMI International) have been major catalysts in fostering professional de-
velopment and technology advancements in the P/M industry. The annual Inter-
national P/M Technical Conference and Exhibits has been a good forum for
cross-fertilization and development of ideas, a precursor for technology develop-
ment. This is clearly manifested in the growing number of technical presenta-
tions made at the conferences (Table 10~. In the recent past, MPIF has also been
active in arranging trade missions to Japan and China.
As reported earlier, R&D have traditionally been nominal at best in the P/M
parts industry, and we have not seen any significant increase in the last five to ten
years. The industry has concentrated on gradual process refinements relying
heavily on raw material and equipment manufacturers to carry out whatever ma-
terial and equipment improvements would be most conducive to increasing the
market for P/M parts. Cognizance of the importance of intellectual property pro-
tection is noticeable in the number of patents issued. Table 11 illustrates this
growth.
Research and development in the P/M industry, essentially only material and
process development, was until very recently directly focused on perfecting ex-
isting processes and products and metal powders and P/M parts. Little funda-
mental research has been performed in or by the industry over the years. Funda-
mental research on new atomization techniques, alloying during atomization
TABLE 10 Growth of APMI Conference Presentations
No. of technical No. of pages in
Year presentations proceedings
1982 39 571
1987 55 895
1991 146 1888
1995 192 2443
OCR for page 119
POWDER METALLURGY PARTS
TABLE 11 Patent Activity
119
No. patents % change % change from
Penod issued 1981-1985 prior year
1981-1985 159
1986-1990 180 +13 +13
1991-1995 219 +37 +21
1996- 1997a 260 +64 + 19
aAnnualize for a five-year period based on the number of patents issued through October 1997.
process via gaseous reactions, new composite P/M materials, and novel compac-
tion processing methodologies, among other areas, has not been pursued. As a
result, the basic science of P/M technology has taken a back seat to developmen-
tal projects.
Globally and in the United States, the academic community has not been
engaged in R&D and teaching in the fields relevant to P/M parts manufacturing.
There is clearly a need for more research. The recent increase in industry consor-
tia and scattered university-based cooperative research in the United States is an
encouraging sign. Government funding for research, with one exception, has
been nonexistent. At CTC in Johnstown, Pennsylvania, the Navy Manufacturing
Program has financed a multi-year program to develop P/M industry standards,
an effort unlikely to have been supported by the industry on its own. On the other
hand, in Europe, Japan and Russia, government investments in P/M research have
been consistent and substantial. Yet the return on these investments has been
poor compared to the much greater success of the U.S. industry. This raises the
question of focus and timing of government support of technology.
CONCLUSIONS AND RECOMMENDATIONS
Although this chapter has focused on the P/M industry, within the spectrum
of metals processing industries there are several industry clusters with similar
characteristics. The gap between firms with R&D capabilities and smaller firms
with limited resources can result in a tiered industry, in which the smaller firms
are unable to compete effectively for contracts with demanding OEMs. In P/M,
most of the new applications and increases in market share have occurred be-
cause of innovations and technology commercialization driven by the customer,
principally the automotive industry, and not due to major investments by P/M
parts producers. Suppliers, or powder producers, have invested in R&D to assist
the parts producers. There is a symbiotic relationship between suppliers and parts
producers.
P/M industry investments in R&D, taken as a whole, are minimal and are not
evenly distributed across the industry. Facilitating the development of R&D ca-
pabilities in smaller firms is important for the growth of the P/M parts industry.
OCR for page 120
20
U.S. INDUSTRYIN2000
The Metal Powder Industries Federation and the trade associations have
played an important role in establishing forums for "cross-fertilization," informa-
tion dissemination, and professional development programs; but these efforts are
not sufficient. Innovation and technology commercialization require investments
in knowledge of workers and in research and development
The metals processing industry in general, and the powder metallurgy indus-
try in particular, are in transition. To strengthen their supply drain, the OEMs
have been seeking a smaller base of more sophisticated suppliers (e.g., Sage et
al., 1991; Bertodo, 1991; Helper, 1991; Lyon et al., 1990~. To avoid being
squeezed out, smaller firms need to recognize the value of investment in technol-
ogy development and commercialization. One reason for optimism is the consid-
erable enthusiasm for solving the technical problems of the industry within alli-
ances of multiple firms centered in universities (Table 12~. Interestingly, there is
TABLE 12 Attractiveness of R&D Alliance Options for P/M Part Producers
FF FUFFU
General Research and Development
Effects of trace impurities on properties 5 1222
Detection of green cracks 10 623
Effects on side wall lamellar sheer 8 1319
Advanced process automation capabilities 12 1114
New joining techniques 7 1516
High temperature sintering 10 1319
Improved powder delivery systems 20 911
Corrosion resistance 6 1323
Further process developments 12 1118
Improved material properties 5 1424
Computer Software Applications
Cost/Investment alternative analysis 12 916
Applications database to assist designers 11 620
Automatic tool design generation 13 1512
Process plan generation 10 188
On line standards database 12 221
Expert systems to help design parts 6 821
Process models end analyses 4 1319
Process Models and Analyses
Sintering simulation 3 1122
Compaction simulation 5 1418
Tool and press deflection analysis 11 1414
Part dimensional analysis 13 1210
Process cost analysis 14 119
Powder flow analysis 4 1020
Note: FF = interfirm cooperation; FU = single firm and university; FFU = multiple firm and univer-
sity.
Source: Kasouf et al. (1994).
OCR for page 121
POWDER METALLURGY PARTS
121
an inverse relationship between size and the relationship onentation, with smaller
firms seeing more value in developing alliances (Kasouf and Celuch, 1997~.
REFERENCES
Bertodo, R. (1991). "Alignment of Automotive Suppliers to a Strategic Vision," International Jour-
nal of Vehicle Design 12(3):255-267.
Bocchini, G.F. (1983). "Energy Requirements of Structural Components: Powder Metallurgy vs. Other
Production Processes," Powder Metallurgy 26(2):101-113.
Drucker, P. (1998). Managing in a Time of Great Change. New York: Truman Talley/Plume.
Frame, P. (1995). "GM Exec seeks Suppliers with Global Savvy," Automotive News (May 1).
Healy, J. (1997). "Financial Benchmarking of the P/M Parts Industry," work in progress, Worcester,
MA: Powder Metallurgy Research Center.
Helper, S. (1991). "How Much Has Really Changed Between U.S. Automakers and Their Suppliers?"
Sloan Management Review 32(Summer): 15-28
Huppman, W. J. (1991). "Wettbewerbschancen derPulvenmetallurale," P/MInternational 24(2):124
Kasouf, C. (1997). "Interfirm Relationships in the Powder Metallurgy Parts Industry," testimony to
the Federal Trade Commission Joint Venture Project, June 24, 1997.
Kasouf, C. (1998). "Interfirm Relationships in the P/M Value Stream: Case Studies," working paper,
Worcester, MA: Powder Metallurgy Research Institute.
Kasouf, C., and K. George (1994). "Interfirm Relationships in the P/M Industry," research report,
Worcester, MA: Powder Metallurgy Research Institute.
Kasouf, C. and K. Celuch. (1997). "Interfirm Relationships in the Supply Chain: the Small Supplier's
View," Industrial Marketing Management, 26(6):475-486.
Kasouf, C., D. Zenger, P. Ulf Gummeson, and D. Apelian. (1994). The P/M Industry Study: A Final
Report. Princeton, NJ: Metal Powder Industries Federation.
Kasouf, C., S. Nigam, and K. Celuch. (1996). "Globalization in the P/M Parts Industry," working
paper, Worcester, MA: Powder Metallurgy Research Center.
Lorange, P. (1988). "New Strategic Challenges for the Materials Oriented Firm: Requirements of
Management to Steer Towards the Year 2000," Materials Research Society:139-146.
Lyon, T., A. Krachenberg, and J. Henke, Jr. (1990). "Mixed Motive Marriages: What's Next for
Buyer-Supplier Relations?" Sloan Management Review (Spring):29-36.
Monts, R. (1995). "Ford Wants Suppliers as World Partners," Automotive News (April 17).
National Association of Manufacturers. (1996). "Benchmarks for U.S. Manufacturing Productivity,"
Schaumburg, IL: McGladrey & Pullen.
Porter, M. (1980). "Competitive Strategy," New York Free Press.
Porter, M. (1990). "The Competitive Advantage of Nations," Harvard Business Review (March
April):73-93.
Price, B. (1995). "Extended Enterprises," presented at Creating and Managing Corporate Technol-
ogy Supply Chains, Cambridge, MA: Massachusetts Institute of Technology, May 10, 1995.
Roll, K. (1985). "The State of the P/M Industry," 1985 Annual Powder Metallurgy Conference Pro-
ceedings, Princeton, NJ: Metal Powder Industries Federation.
Roll, K. (1987). "Powder Metallurgy at the Turn of the New Century," 1987 Annual Powder Metal-
lurgy Conference Proceedings, C. Freeby and H. Hjort, eds. Princeton, NJ: Metal Powder In-
dustries Federation.
Sage, L., T. Ozan, D. Cole, and M. Flynn (1991). The Car Company of the Future: A Study of People
and Change, A Joint Research Project of Ernst & Young and The University of Michigan. Ernst
& Young and The University of Michigan.
OCR for page 122
22
U.S. INDUSTRYIN2000
White, D. (1996a). "Review of P/M in North America," Advances in P/M and Particulate Materials:
Proceedings of the 1996 PM2TEC Meeting, Princeton, NJ: Metal Powder Industries Federation,
A-3 to A-13.
White, D. (1996b). "P/M Technology Trends," International Journal of Powder Metallurgy
32(3):225-228.
Winter, D. (1996). "Materials '96 - Powder Metal: '96 Best Yet for Powder Metal," Wards Auto
World, Detroit, MI, Sept. 95, 31(9):56-57.
Winter, D. (1997). "Brisk Growth for Powder Metals," Wards Auto World, Detroit, MI, Sept. 97,
39(9):78-81.
Winter, D. (1998). "Powder Metals Take a Breather," Wards Auto World, Detroit, MI, Sept. 96,
32(9):63-64.
Representative terms from entire chapter:
market share
