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2012 Industry Outlook: Momentum stalls

Modern’s 2012 outlook finds that overall market uncertainty has slowed materials handling spending and has increased facility consolidation and engineered process improvements. Cost containment has returned as the most important issue of the day.
By Lorie King Rogers, Associate Editor
March 01, 2012

AIDC technology
Investing in automatic identification and data capture technology is one way for operations to make people more productive. And, according to our survey results, 51% plan to do just that: invest in information technology hardware and software solutions, or automatic identification and data capture (AIDC) technology.

“What I saw in the survey results lines up perfectly with what I see in the small-to-medium business (SMB) market,” says Drew Nathanson, vice president of AutoID for the VDC Research Group. “The bigger guys have more money and are willing to be first and take more risk with their investments. The SMB market follows their lead and invests in well-established solutions. They don’t have the resources to risk,” explains Nathanson. So, whatever the solution, it has to be proven before they can adopt it. Nathanson adds that he sees that scenario as an underlying theme in this year’s survey results.

“Within the warehouse, distribution center and yard, we’re seeing growth overall in the AIDC market, about 5% to 6% in bar code, RTLS, RFID, as well as other AIDC solutions,” Nathanson says, adding that this growth supports the continuing trend of end users using multi-modal data capture in their operations. 

Lift trucks reaching up
Lift trucks and accessories top the list for specific equipment that companies plan to evaluate or consider in the next 12 months. And, the North American lift truck market, which was up about 20% over 2010, is expecting another good year in 2012, says Jim Moran, chair of the Industrial Truck Association (ITA) and senior vice president at Crown. 

Whether a company is growing or maintaining its fleet, Moran says the focus is on maximizing productivity within their businesses. “The market is seeing tremendous growth in products that involve fleet management
,” says Moran. Customers are interested in products outside of the lift truck itself—anything that manages the fleet and reduces costs, like data collection devices that gather information about the truck and the operator so they can turn that data into useful information that drives improvements.”

In regard to the trucks themselves, customers are investing in electric trucks, particularly narrow aisle, turret and high-level stock pickers that can lift higher than before. That said, there’s no doubt that people are being very cautious when it comes to spending. According to Moran, most end users are still making their purchases on an ad hoc basis, which has been the norm for the last couple of years.

This tracks with survey results that indicated that 43% of respondents are currently concerned about the availability of labor, and 49% express concern over this issue in the coming years. In the warehousing and distribution sector, 52% of respondents rate labor productivity and management among the most important best practices, and that number spikes to 70% two years from now.
“It’s always been a challenge to keep up with training and manpower,” says Moran. Today’s lift truck products are more sophisticated, but suppliers are making them easier to service because of shortage of people to service them. Lift trucks can perform more complex tasks, but at the same time, it’s easier to diagnose and service problems.”

A solid software market
Warehouse management systems (WMS) and enterprise resource planning systems (ERP) top the list for information management systems for specific materials handling equipment that companies plan to evaluate or consider in the next 12 months. 

In the supply chain management software market, spending is on the rise and likely the result of pent up demand after the economic downturn, says Clint Reiser, enterprise software analyst at ARC Advisory Group.

“Capital spending tends to be more volatile than the economy in general, but it’s rebounding and we have taken part in the rebound,” says Reiser. “The rate for supply chain planning applications is above trend.”

Other factors keeping the market going well, he says, are the rise of sales and operations planning solutions, tools that analyze supply in conjunction with demand, and tools that enable scenario planning on the fly. According to Reiser, companies have other IT systems in place, but they are using these planning tools to gather data from disparate systems and bring it together for better overall planning.

Steve Banker, service director of supply chain management at ARC agrees. The recession interrupted a positive trend, but, he says, “I think we’re back on an historical trend line of growth that is forecasted to be slightly higher than rate of inflation.”

According to the survey results, 23% say they will be investing in enterprise applications over next 18 months. But Banker says end users tend to be overly optimistic and he doesn’t expect that number to be quite that high. “Our experience is that these numbers are higher than when we get the real data from suppliers.”

Conveyor on the rise
Once again, caution seems to be the watchword when it comes to future investments in conveyor and sortation systems. Survey results indicated that 24% of respondents are proceeding with investments in equipment that includes conveyor, but CEMA reports an anticipated growth of 10% in the industry for 2012.

According to Bob Reinfried, executive vice president of the Conveyor Equipment Manufacturers Association (CEMA), it’s safe to say that every single category that CEMA tracks all had double digit increases over 2010, which he also attributes to pent up demand. 

According to Reinfried, unit-handling equipment was the driving force. In unit handling, meaning equipment that handles light-to-medium loads of 500 pounds or less, 2011 was a record year for conveyor shipments, with about 30% growth that translated into about $8.5 billion. With orders taking about six to nine months to result in a shipment, that means there’s more money in the pipeline for suppliers.

2011 Industry Outlook: Optimism shines
Materials handling industry experts report that 2010 was better than expected and believe that we’re painting a brighter picture for 2011.


Respondent demographics

Questionnaires were e-mailed in January to Modern Materials Handling and Logistics Management readers by Peerless Research Group (PRG) yielding 314 total respondents from manufacturing (30%), warehousing (30%), corporate (29%) and other aligned professionals (11%). Revenues of responding companies range from large—24% have sales of $500 million or more—to small—45%are under $50 million). Only those responses from management and personnel involved in the purchase decision process of material handling solutions were considered.

About the Author

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Lorie King Rogers
Associate Editor

Lorie King Rogers, associate editor, joined Modern in 2009 after working as a freelance writer for the Casebook issue and show daily at tradeshows. A graduate of Emerson College, she has also worked as an editor on Stock Car Racing Magazine.


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