The 85th General Meeting Feature Presentation
Scott Lynch
Turning Challenges into Opportunities
The following presentation was delivered at the 85th General Meeting Monday afternoon session, May 9. It has been edited for content and phrasing.
Introduction:
One of the most instrumental organizations in the pressure equipment industry is the American Boiler Manufacturers Association. ABMA's President and CEO Scott Lynch joined ABMA in June of 2014. Previously he spent 15 years with the world's largest association management company. While there he held executive positions with the American Bearing Manufacturers Association, the U.S. Apple Export Council, and the National Association of Local Housing Finance Agencies. Mr. Lynch has been busy over the past two years. He spent his first year upgrading the association's infrastructure. In 2015, he engaged the ABMA's Board of Directors to set a new strategic direction for the association. Mr. Lynch serves on the board of directors of the National Association of Manufacturers Council of Manufacturing Associations, and is a guest columnist for Power Engineering Magazine.
Mr. Lynch's slide presentation can be accessed here.
Mr. Lynch:
I took over the ABMA about two years ago. My predecessor was Randy Rawson. Many of you in the room probably know Randy. He was with ABMA for about 25 years. His predecessor was there for 25 years, and his predecessor was there for 25 years. So there really haven’t been many leaders in this organization, and it has a long lineage of leadership in the boiler industry.
I’d like to offer perspectives on today's challenges in the boiler industry. But I'm also going to give you a little bit of insight on how we as an organization have shifted our focus to be more relevant to our members and the industry. And I will talk about our partnership with organizations like the National Board and ASME. Finally, I am hoping that my dialogue here opens doors for more partnering opportunities with these two great organizations.
ABMA is made up of the leading manufacturers and suppliers in the boiler industry. We look at ourselves as the voice of the boiler manufacturer. We are advocating for the interests of the boiler industry with federal agencies, mostly the Department of Energy (DOE) and the EPA. And our members tell us we are the place for connecting with manufacturing leaders in the boiler industry. Let's talk about industry challenges and how our association is looking at solutions.
Our first major challenge is our workforce challenge. All of our companies have openings on both the shop floor and the engineering departments. But they can't find workers. Now, I realize that our jobs are not in downtown Chicago or in Los Angeles. Our jobs are in Chanute, Kansas, and an hour outside Tulsa; and in Abilene, Texas. These are not booming metropolises that attract people, and our company names don't rhyme with Boogle. But we have great jobs in our industry. We have high-paying jobs. We have jobs that offer great opportunities to travel the world, and we want to make sure that people know about this.
Another issue is that the workforce is graying and baby boomers are retiring. We have many people on our shop floors who have 20, 30, and 40 years in the industry. Yet, we don't have the next generation of workers coming up to replace them. These people are retiring on Friday and being consultants on Monday, working two or three days a week, because we can't fill those positions. Our companies are really concerned about that brain drain. When a person decides he no longer wants to work, what's going to happen? How is that transition working so that the retiree has somebody to pass their knowledge on to? The experience of these veterans is going to be lost, and our members are trying to figure out how they can address this issue.
On the regulatory front, there are two major issues we are dealing with right now. The DOE feels that standards for one product should be exactly the same as standards for another product. One product is in a catalogue, and one product is an engineered system that takes six to nine months to create, working with the end user to create the exact specifications for their application. We continue to try to work with the DOE on this. We explain to them that standards with the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) and residential standards can't be taken and placed into a commercial industrial boiler. It's an uphill climb. It's something that we are working on and are focused on.
As an example, we are working on efficiency testing for commercial packaged boilers currently with the DOE. And in our first meeting with them, they were asking about testing and using a lab, and we said that many of our boilers wouldn't even fit in a lab, and that blew their mind. They didn't even think about it in that perspective. It’s a challenge for us to make sure that the government understands there are uniquenesses in the market and all boilers are not the same.
On the Environmental Protection Agency (EPA) side, I refer to a photo of coal. If you remember, Hillary Clinton said she was going to put all the coal people out of business, and then she backtracked from that when she walked into West Virginia. One of the issues among our members is that they don't know what the future holds, they don't know what to invest in, they don't know what products are going to be the next product because of lawsuits with DOE, things are proposed, then they don't get passed, and then they get changed. On the EPA side of things, as a boiler manufacturer, we will do whatever we need to do that's necessary within reason.
We've reached the minimal efficiency standards pretty easily with what's out there right now with EPA and DOE. We are just trying to figure out what direction it is going. And I think end users are having that same problem. End users share our problem of not knowing what's going on. They don't know when coal is done, or whether natural gas is next, so they are not investing. And I think the whole issue is infecting our infrastructure greatly.
The next challenge is a knowledge challenge, and this is on two fronts. The first is the purchase of a new boiler. Does the end user understand what features are available? In many cases, features on our boilers can save them money. Do they understand that? When they put in a request for proposal (RFP) and it has a mistake in it, if our members did that for them, it would adversely affect them. But if they put that in the proposal, then we get kicked out of the system. Education needs to take place, especially with the engineering, procurement, and construction (EPC) firms – the ones that are doing the larger jobs. A lot of times they are looking for bottom-line dollars. They don't understand the full process or the full activity.
On the other side is maintenance of a boiler, upgrades, retrofits, whatever you want to call it. I talked to a couple of our rental companies that do technician work. They say they go in on their normal schedule and recommend an upgrade or a fix, and large systems, like a large hospital, will have a couple of different companies come in since they don't want to feel like they are focused on one company. And all they say is, “Well, company ‘A’ didn't tell me to do that, so I'm not going to do it. I'm not sure it’s really necessary.” And this leads to problems. In the end it's going to lead to more money, and it could lead to disaster, and it's a real big issue. And so, educating the end user is critical. The more we educate the end user, the more money for our members because they are going to get more work out of it. But we are hoping it addresses boiler safety in that the operator knows what they are doing and the maintenance is done on a regular basis. But right now, in many cases, it's not being done.
The last challenge is a competitiveness challenge, and this works in a number of different directions. One challenge within the U.S. market is overseas suppliers coming into U.S. markets. Another challenge is the number of U.S. providers going overseas to manufacture their boilers (e.g. in Korea and Mexico) and then bringing them back into the U.S. market. The third problem is that our U.S. suppliers are hurting because of this. We hear from our suppliers all the time. If a product is being made in Korea, they are not buying a burner for it from the U.S. If it's being made in Mexico, sometimes it's coming from the U.S., sometimes it's not. There is a shift in the marketplace, and it's going to continue to shift. Some U.S. manufacturers are moving production overseas, some overseas manufacturers are coming into the U.S. market, and you also have suppliers in the middle. This is definitely a challenge we are facing.
Let’s talk about some solutions we are working on. The first is what we are looking at for our new strategy for ABMA. We want to lead industry perception change for the boiler industry. We want to increase the workforce pipeline. We want to be a solutions provider for our members. We feel like it's not enough to have a meeting, a newsletter, events, or conference calls. We want to know your base points as a company and how can we help you solve them.
And finally, we want to be a thought leader for the industry – a convener, a way to bring people together to bring about solutions. The first thing we are doing is raising awareness of the boiler industry. We are going to focus on engineering and vocational schools over the next three years. We want to talk to them about the boiler industry as a career and we may look at donating some materials and machinery, and also look at doing some guest lecturing. We want people to understand there is a great career in this industry and that people need to understand who we are and what we do. We don't feel that information is out there. We want people to know there are opportunities, especially at the vocational level. Maybe they are not going to be taught the exact welding that we need them to learn, and maybe we can help them teach more advanced welding and not just for plumbing. There is an opportunity there, and so we are looking into that.
The next area of awareness is knowledge – knowledge at the front end of the purchase, knowledge at the back end, and during, and keeping the boiler up-to-speed. And knowledge in the form of promotions, going to trade shows, and teaching people about our industry.
When I came to ABMA I was amazed at how many organizations touch our industry. My previous job was president and CEO of the American Bearing Manufacturers Association. We were a standards developer and created our own standards, and we were the central point of this. Well, the boiler industry is so different, and I wanted to list a couple here: the National Board, ASME, AHRI, NFPA, and U/L. Biomass Thermal Energy Council (BTEC) is now doing a biomass standard, and API makes their standards for the petroleum industry.
We are looking at how we can be a central point for these organizations to make sure they are aligned, they are talking together, and everybody is pushing in the same direction. We are passionate about this and we want to make sure the best opportunities are coming out of these engagements.
Let me talk about ways to engage right now. We have a magazine that prints twice a year, Today's Boiler. Anybody can write an article for Today's Boiler, especially anybody in this room. And what we are looking at is thought leadership. Our subscriber list is the boiler manufacturers and suppliers and then about 20,000 people who are operators in the industrial and commercial sectors. The other opportunity is to present at one of our meetings. Our summer meeting is coming up in June, we have an annual meeting in 2017, and then we have a manufacturers’ conference that will take place next April. The first two meetings are CEO level meetings, the senior executive level meetings. At the manufacturers’ conference, we do tours of the manufacturing facilities. We will also provide an end user tour as well. That meeting will be in Houston, Texas. The summer meeting is in Lake Tahoe, and in January it will be somewhere in Florida. So the manufacturers’ conference is more for the engineers and some other activities, but if there was an issue that came up on the National Board level where our audience was an audience that we needed to talk to, that's definitely another way to deal with the issue.
If anybody has any questions, I'm happy to answer them.
MEETING ATTENDEE: How many members have apprenticeship programs?
MR. LYNCH: That's a really good question. A number of our association's companies have been successful in partnering with community colleges and local schools, and they have done a little of that. They have had more luck on the engineering side than they have on the trade side. They do have internship programs. The one thing I didn't mention is that we have a scholarship right now that gives money to students who are going into engineering. We will be expanding that next year and offering an internship program where we would be placing students with companies, depending on where they are. But it's definitely an issue.
MEETING ATTENDEE: Is unemployment at 27 percent? Does that sound about right? I heard it's about 27 percent.
MR. LYNCH: Yes, it could be. In some areas it's definitely worse than others. The other problem we have is that we do have members in locations such as Chanute, Kansas, and Hutchinson, Kansas, and unless you are from those areas or have a relative nearby, some members don’t want to hire you. One member told me that the only way he will hire somebody anymore is if they went to school in the area or if they have a relative nearby. Otherwise, he said he’s training them for two years and then they move to Chicago. I went back to him and said, “Maybe the two years is what you are going to get, and if that's to fill the job, then you’ve got to fill the job.” But I think there will be more of that.
MEETING ATTENDEE: Are you talking about the secondary school level or high school?
MR. LYNCH: At this point we are struggling with that a little as to where to put our resources, because you are spread thin once you go to high schools. I think we are talking more about the trade schools and then colleges and universities and community colleges. But, there is value in engaging high school guidance counselors. It could get down that far. We are looking at finding a trade school and a university that has some interest in working with us, piloting a program, getting something off the ground, and then sharing that experience with our members and have them replicate it within their communities, and then having us move on to different groups. But it's a huge challenge.
MEETING ATTENDEE: To piggyback on that question, we are now working with the Department of Education to try to reinstitute vocational education at the high school level shop class.
MR. LYNCH: That's a good idea. The DOE outreach would be a long-term process, but it is something worth looking at and it would be more of a national outreach. Our members are pocketed in four key areas: Oklahoma, Kansas, Texas, and California, and then you have the Midwest. So we are going to try to move our focus to those areas where the most amount of members are located.