U.S. productivity demand points to materials handling investment

Rising manufacturing output and capacity are putting pressure on plant productivity. This is good news for the materials handling industry--as long as the Dow and housing don't squelch the urge to spend.

By Tom Andel, Editor in chief -- Modern Materials Handling, 8/24/2007

According to a report on Material Handling Equipment Manufacturing (MHEM) from the Material Handling Industry of America (MHIA), industrial production capacity utilization in the U.S. is at about 80%. 

Hal Vandiver, MHIA executive vice president, says that the MHEM forecast calls for capacity utilization to remain at about that level for the next three years while output and capacity rise. At the same time, a sustained level of corporate profits is expected to make funds available for plant and equipment investment.

That means there will be pressure on manufacturers to invest in materials handling technology to improve capacity utilization.

“Over the last five years people have not been adding plants but improving the effectiveness of those plants, employing lean practices and buying materials handling equipment and systems to drive productivity higher,” Vandiver told Modern. “We’re not losing the manufacturing title as a nation, but we are losing employees by a big margin.”

In addition to investing in materials handling systems, companies will take a fresh look at the warehouse management system (WMS) market to help them make better use of the labor they’re able to keep. Ian Hobkirk, senior analyst with Boston-based consulting firm Aberdeen Group, says companies want to create a more agile, flexible warehouse to keep up with the rapid market changes they face.

Hobkirk sites an Aberdeen study that found 86% of companies report having some level of automation in their warehouse. However, the study also found that many WMS users were lacking in nine capabilities that characterize world-class operations:

1. Advanced picking (batch picking, zone picking, cluster picking)
2. Advanced replenishment
3. Automated value-added services (i.e., kitting)
4. Labor management
5. Slotting
6. Load building/cubing (i.e., building pallets and cubing out trailers)
7. Task management
8. Yard management
9. Speech-based warehousing

Will companies make the necessary investment to adopt these practices? Hal Vandiver says how much companies spend on WMS and automated materials handling systems in the next three years will depend on the U.S. economy’s performance.

“If people are skittish about what’s happening in the stock market and with housing and their last set of orders, they’ll be reluctant to place orders,” he contends. “That’s the biggest thing our industry will have to fight: the reluctance to commit. The industry’s value proposition will have to be strong. That’s especially true of the next two years.”

Modern Materials Handling will present a Web cast on Aberdeen’s WMS report at the end of August. For more information, watch www.mmh.com.