Materials handling matters

“We are on the cusp of real transformation in retail distribution and manufacturing.”

That was one of two quotes I highlighted in my notebook during Kevin Gue’s introduction of the Material Handling & Logistics U.S. Roadmap at MHI’s fall meeting in Orlando earlier this month. Gue is a professor at Auburn and the editor of the Roadmap.

Based on two stories that appeared in the Wall Street Journal this week, the transformation is already in motion. Both pieces highlight how leading companies, and their C-level executives, are recognizing the value that logistics and intralogistics brings to their organizations. 

The first was GM Cuts Costs for the Long Haul, by Jeff Bennett. The story describes how GM’s Chief Executive Dan Akerson plans to boost North American profit margins from 8% to 10% by, in part, focusing on logistics. “We spend billions a year on logistics,” Akerson told the WSJ’s reporter. “…Any savings I can get by cutting my logistics bill goes right to my bottom line.”

One of the first examples of this focus is a new plant to manufacture hoods, fenders and doors for its Tahoe and Yukon models that GM is opening next to an assembly plant in Arlington, Texas. Prior to this, those components were shipped from plants located more than 1,000 miles away in Ohio and Michigan. Now, the parts will travel 20 feet from machine to welder. GM estimates the savings at about $40 million a year in shipping costs, according to Bennett.

The larger point is this: having closed unprofitable plants and reset labor costs, GM realizes the next opportunity to improve its operations is by focusing on logistics.

Story number two is on the front page of the Wall Street Journal on October 14: Soap Opera: Amazon Moves In With P&G. Serena Ng reports how Amazon has set up a direct-to-consumer order fulfillment area inside a P&G warehouse. P&G passes the inventory over to Amazon, and the internet retailer packs, labels and ships “items directly to the people who ordered them.”

“Logistics have long been crucial to success in retail,” Ng writes. Amazon’s strategy, she adds, “offers a rare glimpse at how [Amazon] is trying to stay ahead of rivals … By piggybacking on [its suppliers’] warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods.”

That reminded me of the other quote I highlighted from another panelist during the Roadmap presentation. She wondered how much we’re doing as a whole to promote our industry. She asked: “How many of us go to our kids career days and tell their classmates what we do?”

It’s a good question. Clearly, innovation is happening in our industry by our customers right now. Materials handling, and the broader logistics industry, has a great opportunity to help them reach the next level of cost efficiency and optimization. In other words, what we do, really does matter. Let’s make sure our customers know the value we bring to their businesses.