“Whether its tariffs, COVID-19, the chip crisis, shipping issues, changes in EV direction, or beyond; every market disruption is a chance to adopt or adapt your strategies and methods of getting things done.”

In this special panel discussion episode of the Manufacturing Matters podcast, Jeff Stello (Metaphase Technologies), Jason Covar (The Imaging Source), Gerd Walter (Creative Automation), and Stu Shepherd (this year’s Engelberger Award recipient; Shepherd Solutions, Inc., joined TECH B2B Marketing’s Winn Hardin and Jimmy Carroll to discuss tariffs, supply chain, and the outlook for the industrial automation landscape. Topics included automation solution pricing, COVID vs. trade negotiation comparisons, regional impacts around the world, reshoring, retasking, and much more.

Jimmy Carroll: [00:00:02] Hi everyone. My name is Jimmy Carroll. I’m the vice president of operations at Tech B2B Marketing. And welcome to this episode of the “Manufacturing Matters” podcast, where we dive into the trends and technologies reshaping manufacturing today. Before I dive into introductions today, I just wanted to note that this is a special episode for —— it’s our 100th episode of “Manufacturing Matters.” We first launched this three years ago at The Vision Show in Boston, A3’s Vision show, and now we’re on the precipice of Automate, which we’ll get to today shortly. We’ve had a lot of great conversations since then, and that includes nearly 40,000 YouTube subscribers now. And we just want to stop and say ‘thank you.’ We really appreciate every single person who’s ever listened or joined us. So for this special 100th episode, it’s a panel discussion episode. We’ll be talking about automation, tariffs, supply chain, and what’s next. It’s a sensitive topic, but one that we’re very interested in diving into. I have the pleasure of being joined today by an excellent panel of industrial automation leaders, which includes Jeff Stello, chairman of the board at Metaphase Technologies. Jason Covar, who is GM of North America at the Imaging Source. Gerd Walter, who is president and COO at Creative Automation. And this year’s recipient of the Engelberger Award for Leadership, Stu Shepherd, who is president of Shepherd Solutions, Inc. Now, before we jump right into the questions, Winn, why don’t you go ahead and set the stage for us with a recap of the current state of affairs?

 

Winn Hardin: [00:01:25] That’s my pleasure. It’s good to see you and be with you on this. Jimmy, I’m so glad we made it this far. And I know we’ll do another 100 here in the next year or two. So look forward to talking with everyone out there in the audience. Folks, as mentioned, my name is Winn Hardin, and I’m really excited about today’s panel because, while it’s a very sensitive topic, it’s probably the foremost item on all of our minds, those of us in the automation space, those in the manufacturing environment around the world, not just here in North America. So what could be more important for us to discuss, especially just two weeks before Automate. I’m sure this will be a major topic of discussion in Detroit during Automate, which is, of course, if you don’t know, North America’s largest trade show and technical conference on automation technologies, including robotics, machine vision, artificial intelligence… What else am I forgetting? Motion control. And I think I mentioned AI. All right. So, as we know, as we all are aware, the last few months, tariffs has become a very hot topic, not just in North America, but around the world. However, these tariffs and the topic of tariffs and the impacts on supply chain are very much in flux. This comes after 2024 was a fairly flat year for manufacturing and automation technology. And now, as we were coming out of that, there are a lot of questions facing us ahead in 2025. So in the case of the US, while tariffs remain in place on China and several other of our key trading partners, dozens of other tariffs were put on a 90-day hold, I think maybe one or two weeks ago.

 

Winn Hardin: [00:02:55] And just this morning, there was news out of the White House talking that the Chinese tariffs could ease significantly and ease soon. So, change seems to be the only constant going on in our marketplace right now. As they say, beware, you know, to live in interesting times, right? Now, as we know, many of the automation companies, including the gentleman on our panel today, source components from places like Vietnam, from India, from Korea, from China, while many other parts are made locally to serve domestic markets all around the world. So one of the topics we hope to discuss today is regarding tariffs, regarding supply chain, regarding automation tech. What are going to be the short- and the long-term impacts of what we’re going through right now? Current state of affairs. Now, this isn’t just a hypothetical debate. Just, I think, two-and-a-half, three weeks ago, I received my first email from an automation provider talking about increasing their prices as a result of tariffs. Do they still feel that way right now? Interesting. A lot has happened in the last three weeks, and I’m sure our panel will be able to give us lots of insights about that. Now, we’ve also expected a number of new product introductions at the insider space, where many of us are, and especially here at Tech B2B. We hear about new products that are coming down the pipeline, maybe before they make it to the public.

 

Winn Hardin: [00:04:13] And we haven’t heard a couple of key announcements. And that’s surprising. Is that a result of the tariffs and the supply chain debates that are going on right now or not? Are they just waiting for a big splash at Automate? We’ll talk more about that today. Now, even though there’s this uncertainty, it’s not all bad news by any means. I mean, people say uncertainty is difficult for business, but if these supply chain changes do affect the global manufacturing footprint, this could result —— and this is one of the topics we’re going to ask our experts about —– will this result in increased reshoring to domestic markets in Europe and North America? In Asia? And if that’s the case, then will that change how, either on surplus automation markets, or what can we expect to see from retasking of existing solutions, and how might that impact demand? Will we see integration demand go through the roof? Will that be any kind of headwind on equipment suppliers? So I think these would be interesting points for discussion today. Now, thanks again, gentlemen, for joining us. And with this all in mind, I’d like to pose my first question to Stu Shepherd. Stu, personal congratulations, sir, on the Engelberger award, a lifetime achievement award. That’s an amazing achievement in leadership. I don’t think I’ll ever get there, but nice job, Stu. So, Stu, first question to you, sir, is what do you think about these tariffs right now? How are they impacting automation providers around the world today. And what do you expect to see in the near term?

 

Stu Sheperd: [00:05:46] So in the near term, what I expect to see is a lot of indecision and a lot of confusion. One of the challenges is, is that the documents of exactly how the tariffs are going to be implemented and to what extent and for how long… All that’s really gray and really confusing. So a lot of companies out there have domestic source for a lot of their engineering and other activities, but they buy components from other countries. So you have to go through country by country to see, how does that tariff impact? And how much inventory is around that may have already arrived in North America before the tariffs were applied? The challenge is, is that most integrators can’t afford to buy stock and anticipate demand and grab extra robots or vision systems or other things, because who knows when the customer is going to free up and start ordering again? Because, right now, everybody’s kind of hunkered down, that’s the impression that I have. Because, you know, we just kind of got out of Covid, the shipping crisis, the chip crisis, and changes in EV direction. The other thing that has hit simultaneously with the tariffs that also impacts manufacturing is changes in red dye approvals. And because that changes ingredients and how even some of the foods and other things are formulated, you’ve also got some issues floating around out there that go across all of this that have to do with drug approvals and even immunizations. The changes in policy regarding immunizations have caused a lot of the automation related to creating immunizations to go away or go on hold. So there’s a lot of… Everybody kind of pulling up all engine stop, waiting to see when the smoke clears, what’s going to happen. And is this 90-day resting period truly 90 days, or is it longer or shorter than that?

 

Winn Hardin: [00:07:46] So we don’t expect Boeing’s just chock full of cobots to being currently rush-shipped over like iPhones were last week? Probably not going to happen. Gerd, are you guys chartering your personal jets to be able to bring over some goods or…?

 

Gerd Walter: [00:08:02] Yeah, I’m not doing that at this point, but I would agree with Stu. There is a lot of, a lot of hesitancy. People aren’t pulling the trigger on a lot of orders. They are starting to see some come through, but that’s just more capital budgets or programs that were already in process. The bigger programs, you haven’t seen them make their jump. I mean, the whole issue is, in some cases, the programs are relatively short and you got a couple of years. But then there are other projects like, you know, some of the bigger auto ones? That’s a five- to 10-year program. And you’ve got a president that’s going to be in there with his policies for four years. So the question is, will the following president continue a lot of these policies or not? And remember, you know, Trump did tariffs in his first term, [and Biden] carried a lot of them on. So I’m not trying to get political, but you know both parties are kind of in a protectionist mode.

 

Winn Hardin: [00:09:14] You know, right before we started the panel, we were having a discussion, Stu, and you were talking a little bit about some of the manufacturing plants’ long-term plans, multi years to create new plants. And we’re going to talk about reshoring, so we could wait a little bit on that if you want, but if you have any thoughts on that? But let me ask another question: you know when we had the Covid supply chain disruption, right? Shipping got way behind, the trans-Atlantic, trans-Pacific. Those lines were severely restricted. And then once the gates opened up, we had another problem trying to play catch up. And today I was hearing, I was watching some Wall Street Journal commentators talk about, you know, we have —— and I don’t know how they come up with this —— but they talk about, like, we have three to six weeks to be able to kind of normalize things or the shipping disruption will extend. Right? Even if things get resolved in six weeks, 90 days, 150 days. Does anybody have any thoughts on what that might do? Will shipping be a big thing or, since it’s only a couple of months, not a big deal? Not like Covid where we had years of shutdowns.

 

Stu Sheperd: [00:10:23] Well, I think shipping will not be impacted near-term because you’ve already got commitments, you’ve already got product on the boats or on trucks, and they have to be delivered. So I think those deliveries that are currently there are going to go ahead and be fulfilled. I think the backlog is going to drop and the number of shipments in the future are going to be delayed. But if it’s already in the pipeline and it’s already committed, if there’re contracts in place and people have signed those contracts? Canceling contracts is super expensive and not value added. So I think near term there’ll be little to no impact on shipping. And if anything, it’ll open up some of the shipping channels a little bit. And we crawled out of the shipping crisis. We crawled out of the chips crisis, to a large extent. But all that takes time. And the question is, how much time do we need based on what the policies are today and what they’re going to be changed to next?

 

Gerd Walter: [00:11:19] And my comment to that is, I think a lot of us are getting tired of crawling out of one thing after another.

 

Winn Hardin: [00:11:28] Yeah. Yeah. The fighter in the ring who was really looking for that bell to ring so he can have 30 seconds of chill time?

 

Jeff Stello: [00:11:35] Well, it just means one thing: change is constant. And, even back during the shipping issue, for us at Metaphase —— we’re a lighting manufacturer—— it was just as difficult for us to deal with inflation and the price increases that were coming from US manufacturers. That was a lot tougher. I mean, it’s early here in this tariff discussion, and we’re not overreacting. But that was a lot tougher when every week there were price increases for an extended period of time. Very hard to estimate where your prices are and quote things in advance.

 

Winn Hardin: [00:12:11] 100%.

 

Jeff Stello: [00:12:12] This one, I think, reminds me of prior tax proposals where everybody gets all excited about different proposals going before Congress, and it takes months and years before they never get enacted anyway. So we’ve got to be mindful of them, but at the same time, none of them are in effect yet. Or at least they’re not impacting our costs yet. To the extent they are, they’re just one source of some of our materials. We try to source as much of our materials here domestically as we can so we’re not completely dependent on foreign imports.

 

Winn Hardin: [00:12:48] Beautiful.

 

Jimmy Carroll: [00:12:50] Before I jump in and ask a question, I just wanted to see if anybody else had any follow up thoughts? I don’t want to step on them, but if not… You guys have kind of naturally segued into some of the topics that I’ve wanted to talk about here, including Covid, supply chain, political strains, whatever. What are some ways that North American manufacturers can protect themselves against these types of future disruptions? Like the ones we’ve seen in the last five years?

 

Gerd Walter: [00:13:18] We got some protection on some of our projects, and not so much on others. But, you know, we started adding terms to cover tariffs a while back in our quotes. You got some other flexibilities. You know, back during the supply chain [disruption], we put in some extra protective language, just in our terms and conditions and our general quotes, to cover supply disruptions. So, it’s the boring, tedious part, but sometimes you just got to look at… Talk to your lawyers and see what language you’ve got in your quotes and in your terms.

 

Winn Hardin: [00:13:57] Good Ts and Cs is an excellent point, Gerd. So 100% agree. Jason, as a chip guy, what are you seeing?

 

Jason Covar: [00:14:06] Yeah, I agree with the others. I think right now the biggest factor is the timing, right? The change that’s happening. But, you mentioned earlier the 90 days? Some manufacturers have already issued notices increasing. We’re seeing those on a daily basis. And so I think right now it’s determining how long to wait. Is it a matter of weeks? Is it truly 90 days? And so I think there’s internal discussions based off of that. Until that’s clarified in some way, I think there’s a lot of companies that are kind of sitting and waiting, right? In terms of that time frame. So I think that’s an important piece for us.

 

Jeff Stello: [00:14:49] We’re doing that. We made a commitment to our customers in October not to raise prices in 2025. And there was some talk of tariffs looming at that time —— not as much as there is today. But we’re still committed to that. And as long as we can find alternate sources or do other things to offset some of those price increases, we’re sticking to our pricing that we published in October, and we’re going to do that as long as we can.

 

Winn Hardin: [00:15:17] Jeff, do you attribute that a lot to diversification of your raw materials and your LED dye supply chain, being able to source it from lots of different locations?

 

Jeff Stello: [00:15:25] Yeah, it’s diversification. It’s also the cost mix. I mean, our materials cost is maybe 25% of the overall cost of our manufacturing, so it’s not an exorbitant percentage that we can’t overcome. At the same time, as a company, and as we’re growing, we’re always looking for ways to streamline the operations and to reduce costs. So we’ve been doing that pretty steadily over the last couple of years. The shipping crisis and the inflation really pushed us to do that over the last couple of years. And I think that’s positioned us well for what we’re dealing with right now.

 

Stu Sheperd: [00:16:05] I think one thing we’ll be able to measure here in just a few days is the impact on some discretionary spending related to travel. A lot of my clients, as an example, had invited me to come to their facilities to actually conduct our meetings, but instead we’ve switched back to doing mostly virtual. Likewise, Automate’s coming up. It’ll be interesting to see how much of an impact there is on attendance at Automate because of a number of companies slashing their travel budgets. And, of course, travel is inflated a lot in the recent months. So I think we’re going to see an impact on trade show spending, on trade show-related travel and other things in our industry, and you’ll find some other places where people are going to put the brakes on, at least until they have a handle on what the outcome of this is, just out of an abundance of caution.

 

Winn Hardin: [00:16:57] Go ahead, Jason, please.

 

Jason Covar: [00:16:59] Yeah. Just another point. There is… just the currency fluctuation, right? I think it might not be discussed as much, but we have facilities in Europe and in Asia. And even if you look at the euro, right? I mean, transactionally USD is a lot. But I think it’s also something to keep an eye on. If you take it back all the way to 2014, I think there were some adjustments made then on pricing based off of just currency. Just another point to put on the table as we talk about this topic.

 

Winn Hardin: [00:17:34] Stu, I’d like to ask you… Riffing off something that Jeff was talking about earlier, is this an opportunity for companies to stay the course in terms of the pricing and grab market share? I mean, is that a strategy that you might be suggesting to folks?

 

Stu Sheperd: [00:17:46] Certainly that would be a chance IF the customers are buying. The challenge is, can you get enough volume to offset, you know, what else is going on out there? But yeah, to me, every market disruption is a chance to adopt or adapt your strategies and methods of getting things done. Frankly, I like changes in the market that are going on in general. Not these necessarily, but in general, because change causes people to think and reevaluate what they’re doing. And likewise, people that are out there marketing their product need to pay very close attention to how to get the work done for the customer and how to attract the customer’s interest. So I think it’s going to help some companies focus on things like ease of use and ease of deployment and ease of support, and try to make everything they can as fast and easy as they can, and maybe smaller projects instead of very big ones to keep the momentum up. Because I think the worst case scenario for some of these companies that are out there is, there’s readily available automation in the market today that works. That’s proven to work. And we are not adopting it as fast in the US as other countries are. So now is the time to double down. The risk is, though, that with the tariffs and other changes in cost, have those automation solutions now priced themselves out of the range of being in the ROI range where customers are going to accept them? You know, that’s going to vary customer by customer. But it’s going to take a much sharper pencil and a much more focused presentation to customers to get them to move off the sidelines and get back into the game on investing. So the suppliers out there need to be really on their best game to talk about customer value and risk reduction in order to get customers attracted back into moving and buying equipment.

 

Gerd Walter: [00:19:41] Hmmhmm.

 

Winn Hardin: [00:19:42] With this chapter coming so soon after the pandemic, does that impact things? Does that give us an experience, you know, a nearness of experience that we can leverage to affect? Did that teach us anything about either diversification of supply chains or the need to sharpen the pencil? Or, you know, don’t focus on cutting-edge, the highest margin solutions, or do so with the argument that you can grab market share, customers, if you jump on this now.

 

Gerd Walter: [00:20:07] Well, I would say a lot of companies have learned to be very nimble.

 

Winn Hardin: [00:20:12] Right.

 

Gerd Walter: [00:20:14] You know, they’ve leaned out and they know how to be nimble. On the other hand, you know, there is…

 

Winn Hardin: [00:20:21] And when we say companies, Gerd, you’re talking about our manufacturing customers, right?

 

Gerd Walter: [00:20:25] Our customers. Integrators like me. All our vendors. Everybody’s had to learn to be nimble the last six, seven years. That doesn’t mean there isn’t going to be some blood on the streets if this goes on a long time. But it also creates opportunities.

 

Winn Hardin: [00:20:49] Well it does make us stronger, for those who survive.

 

Gerd Walter: [00:20:54] Yep.

 

Winn Hardin: [00:20:55] No question. Without question.

 

Jason Covar: [00:20:57] And I think the experience overall probably plays into companies reactions coming through these pain points that we had in the past years. Maybe that delayed some initial reaction or quick decision making. Maybe more methodical and looking at it, kind of throughout the process. That may be an impact of what we had just experienced a few years ago.

 

Winn Hardin: [00:21:20] Right.

 

Jeff Stello: [00:21:22] Well, let’s not forget what we experienced a few years ago. When the pandemic hit, we didn’t know how long and how deep. And it was a miscalculation of both of those. We all thought things were going to go to hell in a hand-basket, and they were going to stay there for years. It was a six-month dip and it came back stronger than ever. And I think the US economy, in particular, always has a way of demonstrating resiliency and figuring out a way to make money. And I think it’s, you know, it’s too bad that people forget what we’ve lived through in the past. And we’re seeing the same thing here, where every… You turn on the television and everything’s exaggerated on a 24-hour basis, and people think it’s never going to end. I don’t think the countries are on a path of mutual destruction. I don’t want to sound naive about it, but I don’t think it’s going to be something that goes on for an extended period of time. I think wiser heads will prevail and we’ll get through this and people will move on.

 

Winn Hardin: [00:22:23] Let’s remember, most automation companies came out of Covid really in a strong position.

 

Jeff Stello: [00:22:27] Absolutely.

 

Stu Sheperd: [00:22:28] Yeah, there was a bit of backlash in there because people overbought in the tail end of Covid. You know, thinking that the supply lines are going to be tough and all that. And there was a bulge. And then there’s a quiet period after that. I think we all learned from that, what we should and shouldn’t do on inventories. So I think there’ll be less of a push-pull effect on inventories and lead times. You know, now that we’ve come out the other side, I think everybody’s a little bit more pragmatic in their approach on planning.

 

Jeff Stello: [00:22:58] I agree.

 

Jimmy Carroll: [00:22:59] Yeah. You know, one thing I wanted to ask you guys —— I’m really curious of your opinion —— is, you know, at the A3 Business Forum… I’m sure most of you were there. There’s this theme of, you know… In terms of automation, we’re, in some ways, only just beginning, right? There’s so much room for growth. And one of the areas that people talk about when it comes to areas of growth is in small- to medium-sized enterprise. I know it’s a big thing that Jeff Burnstein’s talked about and numerous others. How does all of this impact those folks? Is it going to slow down that potential growth? No impact at all? Have you seen anything firsthand? I’m very curious.

 

Jeff Stello: [00:23:44] Metaphase is probably smaller than most of the companies on this panel. But, we were experiencing the same thing they said at A3, where things were starting to pick up at the end of last year. In fact, they were pretty steadily. Getting the election out of the way eliminated another piece of uncertainty. And things were moving along smoothly. All of a sudden, in the middle of February, our quotes activity started to slow down. Fortunately, it came back 30 days later. But I think the biggest impact it’s having on our business today is this uncertainty and buyers holding off on making decisions and how long that will go? Nobody knows. But again, I don’t think it’s going to be that long. The other thing that impacts us, where we do have products coming from overseas, is the customs administration process. So we’re in a business, small business, and every week matters and every day of production matters. And when we’re at the end of the month striving toward our target and parts are held up in customs, that doesn’t help our forecasting and our projections. So that’s another part. But that’s only short-term impact.

 

Winn Hardin: [00:25:03] Right.

 

Stu Sheperd: [00:25:04] I think one of the things I’m seeing already this year, because of the effects on business in general… A lot of companies are looking at optimizing their current in-house equipment to try to squeeze more overall operating efficiency out of the current equipment, because the lead time and cost and duty impact of buying new equipment is much higher. So I think the retrofit and the smaller adoption rates of the SMEs, it’s going to turn just a little bit. There’s some that are going to be on the sideline for sure and holding off. But if they’re trying to figure out how to increase production based on local demand increasing, they may be more likely to retrofit automation into existing equipment than they are to go out and buy new. Because to Gerd’s point about being nimble, you can’t wait for the lead time of new equipment. Sometimes you got to act now in order to hit those deliveries and hit those commitments. So I think the small companies will be maybe faster to turn on a second shift or third shift, or faster to put in retrofit automation to try to get their businesses optimized at a higher rate of production.

 

Winn Hardin: [00:26:16] Perfect segue. So you see that smart manufacturers might be looking to add capacity at this opportunity, to be able to answer domestic needs. And that brings up reshoring. So, do we think, if this goes on, if this is the new normal, how do you guys think this will impact reshoring?

 

Gerd Walter: [00:26:38] It will go two different directions. Some stuff, especially stuff already in the pipeline to reshore will reshore. Especially if it’s critical to the company as part of theirs. But then there’s other companies… You know, you’re already hearing, some of the automotive suppliers, especially the ones that are very labor intense, they’re looking even farther south than Mexico. They’re looking to Nicaragua, Honduras, Colombia. You know, they’ll make up the difference in tariffs by going someplace with even cheaper costs.

 

Jeff Stello: [00:27:20] Tariffs are only one aspect of what was starting to get people talking about onshoring. There were actually other policy decisions that were being made or that are being promoted by this administration, such as repatriation of U.S. dollars and also providing tax incentives for companies to invest here. And what will be taxed coming out of their plants versus products coming in from offshore. So I think tariffs is just one… Even if the issue of tariffs didn’t come up, i think the onshoring was already starting to build momentum here in the US.

 

Gerd Walter: [00:27:56] I don’t disagree. I think, though, it’s going to be focused more on the higher value or core competency arenas.

 

Stu Sheperd: [00:28:06] Yeah. What we’ve been seeing was a lot of the reshoring was actually not coming to the United States, but coming to NAFTA and mostly to Mexico. You go to Mexico, there’s new plants everywhere you turn down there. It’s amazing. Reshoring didn’t quite hit Canada. There’s a lot of intrinsic costs in Canada and likewise in the US. So the tariff impact within the NAFTA countries has been kind of interesting. But the challenge gets to be when you reshore back to the United States, you have to look at the entire supply chain, and understand what the tariff impacts are at the component level, because, case in point, I bought a vehicle here not too long ago. Final assembly in the United States, but it’s only 41% US content. So it has a ripple effect on the content of wherever that gets sourced from, which is not the end customer’s decision. It’s made by the manufacturers about where that content comes from. So, you know, there’ll still be a lot of indecision related to that about, do you reassure? And again, the lead time to reassure to the United States is significant, especially if you have to have facilities or, you know, other things that take a long time to get implemented. It could be three to five years before you see the impact of what’s going on. And the question gets to be, will the weathervane swing the other direction? You know, either during the current administration or the next administration.

 

Winn Hardin: [00:29:28] Right, right.

 

Gerd Walter: [00:29:30] But going back to one of you guys’ earlier points… First things first. And you’re already starting to see some early glimmers, there’s a lot of capacity in the US manufacturing. I mean, some of it’s floating around 75 to 80 [percent]. So they got capacity to ramp up plants. And you know some of the automotives are making that decision. They’re going to ramp up. The more the US plants slow down some of the other plants.

 

Winn Hardin: [00:30:00] Right.

 

Gerd Walter: [00:30:01] And there’s also what, on the global scale, they’re calling localization, where they’re building supply chains to serve local markets, in that market. You know, it was just broad diversification. The other big thing still to watch, though, is China. We got the big tariffs on that. But, you know, I was talking to some of my European suppliers and some of them are quite scared because they’re already getting beat up by China. And there’s people in Mexico getting beat up by China. And, okay, China can’t sell to the US. They’re just going to flood the rest of the world even cheaper.

 

Stu Sheperd: [00:30:47] That’s right.

 

Winn Hardin: [00:30:48] That’s a good point. It’s interesting because I actually was wondering, and that kind of goes to our next question —— it’s impossible this early to pick winners and losers, or all or none, right? It’s just going to be a wash and be a zero sum game. But, I mean, Stu, you were talking earlier about a lot of reshoring going into Central America. So would we expect —— and I really don’t know what the proposed tariff right now between North America, between the US and Mexico, is. I know that was one of the ones that was paused, if I’m not mistaken, though.

 

Gerd Walter: [00:31:19] Actually, they were excluded for a while.

 

Winn Hardin: [00:31:22] Okay. So my next question was going to be: Europe. Certain European countries. Mexico. Do we see anybody who’s actually going to really benefit from a new global normal, where supply chains are being at least redirected as friction starts here and in different places.

 

Stu Sheperd: [00:31:44] I think one of the side impacts that’s going to occur is the fact that other countries are going to have the luxury now of being able to focus on other markets besides the US. And in some cases they may double down in some of those other markets that they want to go to that they just hadn’t had time or focus to hit before. Unfortunately, on the China side of the business, there may be some countries and/or suppliers that will partner with China because they got to survive. They got to make their businesses adapt accordingly. And the consumption of product that would normally go to the US will now be available to go to these other countries at even a lower price and [with] faster lead times. So that could create competition of those other countries that then turn around and export the finished goods to the US and come in through the other door, so to speak. The thing that’s kind of unusual about the US is, yes, we’re a major exporter, but we still manufacture and consume more domestically than we export compared to a lot of other countries. And other countries survive on export more so than they do their own. You know, Italy is a really good example. And certainly China, Japan, and Korea, those countries are very skilled at exporting. If you take the eye off the ball of going to the US, where else are they going to create competition that will actually impact negatively the US side of the equation? It’s not easy to calculate that. And the risk is, so much has changed so dramatically in the past. We always saw incremental little adjustments. This time we’re seeing wholesale cranks of the knobs. And that’s making it tough to calculate what winds up coming out of all this.

 

Winn Hardin: [00:33:31] Absolutely. And we’re still in the first or second inning right. I mean it’s…

 

Stu Sheperd: [00:33:35] Yeah, it’s very early.

 

Jason Covar: [00:33:38] But I think that’s an important factor, as well, here. Deploying capital. When you talk about reshoring —— and here I mean the ROI on that —— if you’re bringing it back from a ROI perspective of domestic only, with a lesser blend of export, it looks a lot different, right? And then, while you’re in an uncertain, softer market, deploying capital in general I think will impact some of these decisions and the adoption. So, more likely, maybe augmentation and retooling and taking older equipment and enhancing it, may be a blend that you’ll see before just complete reshoring and full automation.

 

Gerd Walter: [00:34:20] Yeah. On the other hand, I would also say one thing that also hasn’t been discussed that needs to be is all the retaliatory tariffs or retaliatory worries. Because I’m already… There’s an RFQ this morning. We’re partnering with a firm in another country. But the end customer wants to make sure that that firm be primary because they want to avoid as much tariffs as possible. So I’m not going to get the lead paper on that. And normally I would.

 

Winn Hardin: [00:34:58] Yeah. And I could see our supply chains getting more complex as people try to find… I don’t know if ‘workaround’ is the right term to use in that case. But, I mean, business goes where friction is the least, right?

 

Stu Sheperd: [00:35:13] And that goes with the financial market as well. Right now interest rates in Europe are a little bit lower. So if you’ve got a European-based company, they’re going to make their loans and their financial instruments in Europe to take advantage of the differences there. Because even a couple percentage points can be a huge difference of how much debt you’re carrying and what all is going on. So, as usual, the global market will cause everything to settle out eventually. The question gets to be, you know, when will we see changes in policies or release or other changes come as the global market figures out how to adjust and adopt this new normal?

 

Jeff Stello: [00:35:54] When you ask the question, ‘who are the winners and the losers?’ Has there been a situation since World War II where the US was not a winner?

 

Winn Hardin: [00:36:01] I like living here. It’s my favorite place. No disrespect to the world out there.

 

Jeff Stello: [00:36:05] And again, I don’t want to sound naive about it, but the US economy and the consumer base, consumer spending and everything, the capital structure, everything we have as an advantage here is not going away.

 

Winn Hardin: [00:36:18] Absolutely.

 

Jeff Stello: [00:36:20] And businesses are smart. The consumers are smart. That’s not to say, you know, that it’s an automatic. But, if you ask the question again, I’ll put my money on the United States for sure.

 

Winn Hardin: [00:36:32] Especially as we continue to, you know, as the dollar demarcates, the primary currency of business. Until such time as that changes, then I’m 100% with you. At that point, who knows? That would be even more interesting.

 

Jeff Stello: [00:36:49] That’s a different scenario. And we were talking about that pretty seriously a year ago. But all of a sudden, that talks gone away, too.

 

Gerd Walter: [00:36:56] Came back two weeks ago.

 

Winn Hardin: [00:37:00] So, I’m curious: does the level of automation have any impact on who’re the winners and the losers? For example, Gerd, you mentioned earlier that US is probably local. Domestic manufacturing is likely going to try to crank up that capacity. Let’s go from 70 to 80 to 90 so we can respond and avoid that. Then we see China—— got more lights-out factories than anyone else in the world, right? Europe has a higher uptake of robotics and automation than I think, per capita, than the United States. Does that have any impact?

 

Gerd Walter: [00:37:32] Yes and no? It depends on the flexibility of the labor market. You know, I think honestly right now what’s going to push… Tariffs, I don’t think, aren’t going to push automation a ton.

 

Winn Hardin: [00:37:46] Okay.

 

Gerd Walter: [00:37:47] And, you know, the increases at the border. Increased security at the border to keep the migrants out. That’s going to shrink the labor pool. So that’s going to drive up… You know, Stu is talking about companies, adding second and third shifts. Well, they need people to add second and third shifts, too. But, you know, I’ve got customers who are talking about —— including some big ones —— figuring out how to do lights out and do it economically here.

 

Winn Hardin: [00:38:21] That would seem to be an opportunity.

 

Gerd Walter: [00:38:25] Yep. That could be a gold mine.

 

Winn Hardin: [00:38:28] Beautiful.

 

Jimmy Carroll: [00:38:32] Yeah. So, will reshoring have other unintended consequences, like a push for retasking or an increase in surplus automation equipment in certain regions?

 

Stu Sheperd: [00:38:46] The surplus. That might be, that’s an interesting thought. Typically when you see these kinds of market upheavals, there’ll be winners and losers in the domestic market. I think the key is to keep your eyes open and see if there’s opportunities to acquire that equipment. Because certainly the lead time on it would be nearly zero other than deinstall and reinstall. And there’s a lot of good quality equipment that’s out there. So I think there’s certainly an opportunity there. And from a labor pool thing, one of the things I found interesting is that I wanted to get your all’s opinion on is, a lot of manufacturers and even engineering firms are looking for experienced people and won’t hire young people, even though the younger people today have been better trained and better groomed for automation than any generation in our history. You know, with the STEM programs and stuff going on. So do you guys think that there’ll be an increase of willingness to be able to hire younger people that are coming out of these STEM programs and universities? Or do you think everybody’s going to be trying to hire only the older, more experienced people out of fear of having to do all the training and heavy lifting with young employees?

 

Jeff Stello: [00:39:58] The winners will be the ones who figure out how to adapt to the younger workforce.

 

Winn Hardin: [00:40:02] Yep.

 

Gerd Walter: [00:40:03] Yep.

 

Jeff Stello: [00:40:03] You have to.

 

Gerd Walter: [00:40:03] We do a little bit of both. And we’re trying to do exactly what Jeff said—— figure it out. We’ve got some young people and we’re training them and they’re very smart. And, you know, it’s more just getting them experience than anything, and just giving them some basic guidance. I’ve got some young people, I’ve got a young lady… Give her a tablet and she’s just got a grin on her face. And she does good work and quickly. But she also knows when to ask questions. You got the the seniors, it’s good. But sometimes they’re also bad because some of them think they know better how to do something than the people already here. So that’s always fun to deal with.

 

Jeff Stello: [00:40:56] We’ve done a good job of that at Metaphase. We have some young Turks in our engineering group who have really shined and brought some innovation and creativity to our product development.

 

Jason Covar: [00:41:10] Yeah, absolutely. I mean, they’re able to work with tools that we have at our disposal now much quicker and adopt, which is an advantage. And I think as business leaders, it’s our job to enable them and to train them. And I think taking that person and offering experience and guiding them is our job. So I very much see that being the future.

 

Gerd Walter: [00:41:36] Yeah. And you said the key word: ‘enable.’ You have to enable them.

 

Jason Covar: [00:41:41] Correct.

 

Winn Hardin: [00:41:42] Absolutely. So, gentlemen, we were hoping to maybe just take 30 minutes out of your day. We’re, as usual, well beyond that. So, I thought I might go ahead and ask a final question. With just two weeks before Automate right now, I believe everyone on this call —— as a matter of fact, I would say that with 100% certainty, either you or your company and representatives will be at Automate in Detroit in two weeks. So if we could just go around the table and start with you, Jeff, what are you most excited about seeing while you’re at Automate? And you can’t just say your stuff! Okay, we know you’re excited about your stuff.

 

Jeff Stello: [00:42:16] Well, that kind of is the answer. We’ve done a terrific job at Metaphase developing new products in the last two years. We’ve done a poor job of letting the world know about those terrific products and what we have on the market today that we think is as good as or better than our competition. So we have new initiatives going on right now, and we expect this year to be a very good year for that. Promoting these products that we’ve developed over the last couple of years. We just need to do a much better job at marketing and communicating the message to our marketplace.

 

Winn Hardin: [00:42:52] I bet you there’re still a lot of people out there who don’t know. Metaphase has the largest machine vision lighting portfolio on the market right now, actually.

 

Jeff Stello: [00:42:59] And that’s our fault. That’s no one else’s fault but ours, and we’re addressing it.

 

Winn Hardin: [00:43:03] You’ll fix it.

 

Gerd Walter: [00:43:04] Okay, I’ll look you up.

 

Winn Hardin: [00:43:06] Gerd, you stepped up. What are you excited about, Gerd?

 

Gerd Walter: [00:43:12] I don’t know, that’s the beauty of trade shows. I don’t go to trade shows to see the stuff I already know about.

 

Winn Hardin: [00:43:20] That’s true. Fair enough. That’s very true.

 

Gerd Walter: [00:43:23] I go to find out what interesting new things companies got coming out. To see what the new trends are. And then, also, I’m exhibiting, so I want to hear what the customers are looking for. You know, what are they asking me about? What are they trying to achieve? Because that’s what guides me.

 

Winn Hardin: [00:43:56] No better place to crowd source truth than, you know, at North America’s largest group of your customers, right? And, of course, then there’s all the cool, shiny things, which ——I confess to being a super geek —— are my favorite things. I love the demos and what creative things that you guys put in your booth to demonstrate what’s capable.

 

Gerd Walter: [00:44:16] What’s really fun is when I get my engineers to go through and then they tell me what’s really interesting. Because I think I’m pretty smart, but I got some smart engineers, so I just listen to them sometimes.

 

Winn Hardin: [00:44:27] Well, considering how big the show has grown, letting them walk the whole thing is not a crazy thing, tell you the truth. You can just hit the highlights. Jason, what are you thinking, man?

 

Jason Covar: [00:44:37] Yeah, it’s always good, in our community, to see our peers and see what everyone’s working on and their innovations. I think in general, we all want everyone to be successful and to, you know, have their success stories in the market. So that’s always a positive. And I’m looking forward… I think there’s collaborations going on, which is always good to see specialists working with other specialists. And I think we’ll see some of that in Detroit. So looking forward to it.

 

Winn Hardin: [00:45:06] Beautiful. Mr. Shepherd. Other than getting your award…?

 

Stu Sheperd: [00:45:13] Well, that’ll certainly be a highlight. But actually, I go to the shows for networking with customers and with the industry. A lot of my mentors will be there, and I’ll continue to learn from them. And I hope to recruit some new mentors, because the market’s constantly changing. The big thing I’m looking for, as far as what’s new, is some of the newer sensing technologies that are out there that enable robots to be smarter and utilize AI and other capabilities, especially as it relates to depth sensing, and time and flight, 3D applications. Because, frankly, the biggest movement in robot applications to make them successful has been the sensing and the work around the robot. And I think we’ll see a convergence of cobots and traditional industrial robots in the future as sensing technologies get better, to enable more collaborative applications. Because you can see it already kind of coming together. You can use industrial robots for collaborative applications, and vice versa if you have the right standards in play and the right equipment in play. So that’s kind of what I’m going to be looking for. But the biggest thing is just to get a sense of the marketplace, check everybody’s pulse, Check to see if we’re still friends.

 

Gerd Walter: [00:46:33] Depends if they were up for the award or not.

 

Winn Hardin: [00:46:38] Ha! We can always buy them a cup of coffee. There’s always next year.

 

Jimmy Carroll: [00:46:44] Well, gentlemen, I look forward to finding you toward the end of the show and hearing from people smarter than I am about what you found to be most interesting. Because that, to me, will be very informative. So, again, I want to thank you all very much for joining. This has been our 100th episode. It’s been a fun one. We appreciate your time. Anyone who has questions for Jeff, Gerd, Jason or Stu, or for us, can reach out to us at Manufacturing-Matters.com. Otherwise, we hope to hear from you soon and see you all at Automate. So thanks very much.

 

Jeff Stello: [00:47:22] Thank you.

 

Gerd Walter: [00:47:24] Thanks. It’s a pleasure.