The supply chain inflection point

“Only the paranoid survive.” Given the claims almost every candidate is making about the other guy (or gal), no matter their party persuasion, you might think I’m talking about politics. But, I’m talking about materials handling.

That quote came from a book by Andy Grove, the former CEO of Intel, and he was talking about business leaders. The great ones, he added, never stop worrying and never stop learning.

That was one of the themes at yesterday’s opening ceremony at Supply Chain Reset, the annual logistics conference in Park City, Utah sponsored by HK Systems, now part of Dematic. By the way, for you Sons of Anarchy fans, today is patch-over day, when the HK Shirts become Dematic shirts.

Mike Kotecki, senior vice president of North American sales and the MC for the opening, added that the economy, and the supply chain, is at an inflection point. There’s $2 trillion in cash worldwide sitting on the sidelines, available for investment. Merger and acquisition activity is on the rise, which from a supply chain view means the need to rationalize supply chain networks and facilities. Inventory management has never been more important. While there seems to be no demand out there today, about 220,000 new people are added to the planet every day. Eventually those people will consume something.

And last, but most important for those of us in the materials handling business, the U.S. has maxed out on productivity – in the second quarter of this year, the nation’s productivity rate dropped by nearly 2% even though the hours worked was up. Some thinks that means business will need to hire again to keep up with demand. I look at that $2 trillion on the sidelines and think it’s the opposite: it’s an opportunity for business to invest some of that $2 trillion in automated and semi-automated materials handling solutions and technologies that will allow their existing labor to increase productivity and meet demand without appreciably adding to labor. For our industry, that’s a good thing.

At dinner the other night, I talked to one of Dematic’s product managers who works with refrigerated warehouses. That industry is taking a harder look at automation than in the past. A robotics supplier told me that sales in 2010 have slowed from 2009, when they completed a number of projects, but his phone is ringing off the hook with requests for proposals. End users may not be looking to automate their entire operations, but they are looking for ways to automate key segments of their operations, like case picking.

That’s the big change and the inflection point I think our industry has reached. End users are realizing that their choices are no longer limited to a manual warehouse or a full-blown automated storage and retrieval system (AS/RS). There are a wealth of solutions available to fill the middle ground between those two options. That’s the opportunity for our industry over the next five or ten years. The challenge is to find that combination of technologies and solutions at the right price point to get productivity moving again. Hopefully, like Andy Grove’s take on paranoid leaders, the best in our industry never stop learning, never stop worrying and continue to innovate.