Day One at Dematic’s Logistics Conference

Here are two statistics to consider. Between the end of 2009 and the end of June 2014, the US GDP has grown by just under 10%, or about 1.5% a year. During that same period, the materials handling industry grew by about 75%.

While companies may not be investing in labor or new stores or new factories, they are clearly investing in automation to streamline their distribution and order fulfillment practices. Another way to look at it: companies are trying to not only speed up their fulfillment processes, they want to accelerate past the competition. Think of it as hyperperformance.

That was the backdrop for Day One of Dematic’s 29th annual Material Handling & Logistics Conference in Park City, Utah. “If you think about it, companies have only so much capital to invest,” said John Baysore, Dematic North America’s president and CEO. “A retailer with a growing e-commerce business can invest in more stores or in solutions to lower their distribution costs. Most are choosing their distribution costs because the ROI on automation is so good.”

During the opening session, attendees from companies as diverse as Lululemon, Grainger, Office Depot and the Federal Reserve Bank echoed Baysore’s comments. They talked about the need to automate in order streamline their processes, keep up with growth and integrate networks following mergers and acquisitions. By the way, if you want to add a third statistic, Dematic’s North American revenues have grown by about 160% during that time period, outpacing the industry as a whole.

This is one of my favorite events of the year. It brings together about 400 end users for four days in September to learn about the latest developments in our industry and network. While the first conference I attended 12 years ago was almost entirely focused on equipment, the educational sessions now include talent management, career development and broad supply chain issues like managing global growth, supply chain resiliency and the importance of culture to your organization. The food and entertainment ain’t bad either – we’re listening to Cheap Trick tonight and George Bush on Tuesday. (Caveat emptor – I was a member of this year’s conference planning committee.)

I asked Baysore about some of the trends he is watching. Here are five key takeaways:

1.) Labor is a key driver: It’s not just the cost of labor, Baysore said. It’s also labor turnover and availability. “Many of our customers just can’t find the labor they need,” he said.

2.) Don’t forget accuracy: “Accuracy is so much more critical when you’re filling e-commerce orders than when you’re sending stock to a store,” Baysore said. Automation enforces discipline and accuracy.
 
3.) Software is making it possible: Every major materials handling solution provider is investing heavily in technology and software development. Baysore says it reflects the emphasis today on total solutions rather than hardware. Software is also what makes today’s solutions work. “Software allows us to get greater throughput at a lower cost with the same or less hardware than we needed in the past,” Baysore said.

4.) Maintenance is a new focus: “We think maintenance is so important that we bought a software company to support it,” Baysore said. Like a jet airliner or piece of heavy construction equipment, today’s systems are expensive, complex and expected to last for 15 or 20 years. “In the past, automation meant a conveyor and sortation system,” Baysore added. “Today, a solution may include five different pieces of automation along with pick-to-light and voice. And the investment is much higher, so it’s a bigger deal from a lifecycle cost.”

5.) Little guys are getting into the game: At Modern, we’ve noticed that smaller companies than ever are investing in automation. Dematic has noticed it as well. Baysore says the cost of automation has come down and throughput has improved to the point that smaller companies can now justify the implementation.

So, that was five trends. Perhaps the umbrella overtop of all of them is the growth of e-commerce, which is remaking every industry. “We really think e-commerce is going to drive out industry for the next ten to fifteen years,” Baysore said.

If so, expect our industry to continue to outpace the rest of the economy.