Automation: Materials handling on fire

There’s something happening here
What it is ain’t exactly clear … “For What It’s Worth”

With apologies to Buffalo Springfield, there’s something happening in the materials handling industry and what it is ain’t exactly clear.

A few weeks ago, I had the chance to visit three materials handling equipment suppliers in Chicago. They produced different products and had different geographic reaches. All three, however, were having strong years and are anticipating good things in 2012.

At the same time, Modern and Logistics Management, our sister publication, just completed two surveys of our readers that indicate the end user community is taking a very cautious approach to 2012.

17% of Modern readers said their materials handling budgets have been cut for next year, compared to 15% who reported their budgets had been cut last year; 26% said they are taking a wait and see attitude towards spending, compared to 22% in 2010. Only 14% reported that they will be spending more next year on materials handling, compared to 23% in 2010.

Logistics Management received similar feedback in its annual Warehouse/DC Operations survey. My colleague Maida Napolitano found that “inventory turns are not improving, more DCs are closing rather than opening, and many companies are opting to be more cautious, leveraging cost reduction measures that require little or no investment.”

If those two opposing views have you scratching your head, you’re not alone. “I’m seeing two very divergent circumstances in the market that I cannot reconcile,” says Clark Skeen, president of CubiScan and vice chair of the supply chain execution industry group at the Material Handling Industry of America. “I’m as confused professionally as I have ever been.”

On the one hand, CubiScan is having a solid year. At the fall MHIA meetings and at CSCMP, many suppliers were bullish on their businesses. “At the same time, I read economic reports about sluggish consumer spending, a global slowdown and tenuous political events,” Skeen says.

So which is it? I put that question to Hal Vandiver, a longtime economist with MHIA and now president of F. Hal Vandiver & Associates. Vandiver has been calling for 7 to 8% growth in 2012. He will be updating his forecast at the end of the quarter, but for now, he suggests that there may be some truth in both views. “I believe we will continue to have seesaw results in the marketplace in general but on a line of steady, slow improvement overall,” Vandiver says.

His reasoning is this. Industry leaders that have taken the time to evaluate their operations and calculate the potential improvements from a materials handling project are making investments. “They are having no problems securing funding, most of it internally generated I believe,” Vandiver says. We are seeing that approach played out in the companies we put on our cover each month, including John Deere.

The rest of the pack – “those who do not have a clear understanding [of how their investment will produce a return on their investment]” – are sitting on their assets, “hampered by concerns over elections, leadership and policy uncertainties,” Vandiver says.

Vandiver’s best analysis is that until consumers begin to spend again and drive demand for durable goods and households, the economy will muddle along. “It is going to take us about two more years to pull out of this muck, in my opinion,” Vandiver says.

I’d love to hear what you’re seeing in your business and how your company is planning for the future. Email me at [email protected].