Viewpoint: “More with less” is here to stay

This month we dive into the details of Logistics Management’s 2013 Warehouse/DC Equipment and Technology Survey our annual study conducted by Peerless Research Group (PRG) that offers a comprehensive snapshot of the investment plans of managers involved in the purchase decision process of materials handlings solutions.

As we’ve illustrated in retail case studies over the past year (Asics, Best Buy, Tuesday Morning), online and brick-and-mortar retailers are working feverishly to re-invent distribution operations and revolutionize their business models based on the application of materials handling systems and how they interrelate with their transportation networks and operations.

The new standard is distribution networks closer to population centers, 99.99 percent picking accuracy, lightning fast turn around on all orders, and same-day shipping for most—goals that can only be hit through enhanced communication across the supply chain.

And while our study over the course of 2011 and 2012 revealed heightened investment in equipment and systems to help reach these new ambitious standards, this year we find that spending has cooled. In fact, analysts say that our findings further validate that the recession-era mantra, “doing more with less,” has not only stuck, but it has become the new mindset of U.S. business.

As Editor at Large Josh Bond deftly reports this month (page 24), investment inside the four walls is steadying and will be readjusting to a new, slower pace of growth over the next two years following the release of pent up demand after the downturn. At the same time, “facility activity as a percentage of capacity” numbers have jumped up by as much as 10 percent in one year following six straight years of decline.

According to John Hill, director at supply chain engineering firm St. Onge, percentages between 60 percent and 70 percent are traditionally a sign that investment is not only imminent, but necessary. When they rise above 70 percent, Hill tells Bond, it’s often mandatory to spend on materials handling equipment just to keep up.

“In the past couple years, we saw the effect of delayed spending,” says Hill. “Now, many have caught up; and unless growth is phenomenally good, there won’t be as much pressure to spend.”

And this year’s respondents feel confident in their ability to keep up with whatever volumes are thrown their way. In fact, 95 percent told us that they expect their activity to increase or stay the same over the next two years—validating that they are ready to do more without further investment.

According to our analysts, many operations put their investment dollars to good use inside the four walls over the past two years. They’ve upgraded weakened systems, pulled the trigger on more sophisticated automation, and have concentrated on keeping labor engaged through technology that makes them more productive.

But for this overall confidence level to be maintained without hearty investment, Hill suggests warehouse/DC decision makers now focus on the technology necessary to improve trading partner collaboration in order to harness the data and work toward real-time visibility—the holy grail of supply chain management.