Automation: SDI is focused on software, positioned for growth

If you’re a reporter like me who spends a fair amount of time behind a desk, you look forward to getting out of the office and hitting the road every now and then. Usually, that means ProMat or Modex. However, a few times a year, I get to attend one of the user conferences sponsored by solution providers in our industry.

Earlier this week, I was at SELF15, the executive logistics forum put on in Las Vegas for the past nine years by SDI.

The event coincided with the launch of a new website and return to an old name - now that the company has sold its European operations to Dematic it will no longer use the SDI Group name and just go by SDI.

During a break, I had a chance to chat with Krish Nathan, SDI’s president and CEO, about the direction of the company and some of the challenges faced by SDI’s customers.

If you’re not familiar with SDI, that could be in part because the company has traditionally flown a little under the radar, and in part because its expertise is in a niche of a niche, apparel handling. However, in that niche, SDI has made a name for itself with specialty retailers such as Abercrombie & Fitch, American Apparel and lululemon athletica, who we featured in December. In addition to its US customers, SDI has been working in South America for more than 20 years.

What then is Nathan seeing in the market? First and foremost, like any solution provider serving retailers, the challenges of ecommerce are a persistent pain point. “We talked with senior distribution executives from two large, long-term retail customers this morning,” Nathan said. “They both have an expanding direct-to-consumer business that is expected to grow five fold in the next few years and has a 10 to one peak to average ratio. For a half dozen or so days a year, they have to get a massive volume of orders out the door and they want to do it inside their traditional facilities, where they have equipment and a trained staff. Their challenge then is how to leverage the technology in the building to given them more capacity.”

Nathan believes the next frontier will be retailers looking for ways to deliver a retail experience in an e-commerce way. For example, retailers may turn retail floor space into a display area, with a single instance of each SKU similar to an automotive showroom. If you want to get a closer look, compare it in different colors or try it on in a few sizes, the products you want will be delivered to you from the back room.

“We’ve done some basic back room work for one large retailer and that leads me to believe that more brick and mortar retailers are going to move fulfillment to their retail assets,” Nathan said. “I think there’s an opportunity for automation in that environment. In fact, in ten years, I think you’ll see a level of automation inside of stores that will enable efficiencies and avoid the need to hire so many associates.”

Nathan argued that we’re already seeing the convergence of ecommerce and brick and mortar with talk that Amazon may buy some of Radio Shack’s network of stores.

How is SDI responding to those changes? For one, the company is focused on its software offerings. Like Intelligrated, which purchased Knighted Software to offer an integrated supply chain execution package, SDI is taking to market a solution that brings together a warehouse control system, an order fulfillment engine and a warehouse management system in one integrated package. “There is a space in the market between modifying a big WMS in an automated environment and implementing the most efficient distribution and picking solution,” Nathan said. “That’s the space we plan to fill.” In fact, at the conference, I talked to an IT manager from a specialty retailer who had chosen the SDI solution over a traditional WMS specifically for that reason – the WMS offered more functionality, but it was functionality he didn’t need and the implementation process with SDI was easier and faster.

And, while SDI is known as a niche player in a niche vertical – apparel handling in specialty retail – Nathan says the company is ready to branch out into other verticals as opportunities arise. Recent wins have included a nationally-known retailer of health and wellness products and a cold chain distributor. “Our experience and expertise is in specialty retail and we’ll continue to go after that space,” Nathan said. “But we believe we can bring value in other verticals when the opportunities arise.”