Final thoughts from Supply Chain Advantage
September 12, 2012 - MMH Editorial
Let’s go out on a limb: I think the economy is improving. I say that despite the headwinds we all acknowledge, such as persistent unemployment, a continuing crisis in Europe, a potentially nuclear Iran, an election that’s too close to call and the impending fiscal cliff.
A reasonable person might ask: What the heck does this guy know? He was an English major. Fair enough. My wife and daughter would probably nod in agreement.
So why am I an optimist? For one, I’ve noticed that the dialogue among the analyst and professional investment community is changing. The other day on CNBC, one commentator pointed out that all of the headwinds I mentioned above have been plaguing the economy since 2008, and yet we continue to see incremental improvement. This morning, Ken Langone, a legendary investment banker, and Richard Grasso, the former head of the New York Stock Exchange, both opined that the economy has bottomed – they’re expecting a nice turn around beginning in the second half of 2013. That’s a time when many have been predicting the start of a double dip.
On Tuesday evening at Supply Chain Advantage in Park City, Steve Forbes, the editor of Forbes magazine and former Republican presidential candidate, acknowledged the tough times we have come through, but predicted good times ahead. The way Forbes sees it, our current situation is not the new normal. It’s an anomaly that will pass. He added that if five years from now he’s proven right, he’ll never let us forget and if he’s wrong, well, he’d blame it on the wine. Smart man.
What’s the view from the materials handling industry? I put that question to John Baysore, president and CEO of Dematic North America, at Dematic’s supply chain conference on Tuesday. For starts, Baysore says Dematic is planning for growth and not a recession. “We divide our business into three segments,” he said, outlining the degrees of automation a company may deploy, from simple pick-to-light or voice-pick solutions all the way up to complex integrated systems with multiple automation technologies. “We’re expecting growth in all three segments,” he said, “with the most significant growth in complex integrated systems.”
He pointed out that Dematic is increasing it’s R&D spending, especially in the development of software solutions and its portfolio of technologies.
More importantly, he noted that the materials handling industry, and not just Dematic’s business, is outpacing economic growth in all of the regions where Dematic does business. “In North America, GDP is growing at 1-1/2% a year and the industry is growing from 8-to12%,” Baysore said. “In Europe, our CEO believes the industry is growing at 4% a year. In South America, Brazil is an economy that has taken off. And in Asia, Australia is healthy and China is doing extremely well, as is Korea.”
Baysore attributes the industry’s growth to a number of dynamics, some of which are specific to certain geographies. In China, for instance, where wages are still relatively inexpensive, the need for accurate inventory and orders is driving automation. Here, manufacturing is automating to take labor out of the equation and get more competitive. In distribution, the e-commerce boom and the increase in each picking is driving the demand for labor saving innovation. “It’s just not practical to add hundreds of employees in a piece picking operation,” Baysore said. “More importantly, it’s difficult to find them. Labor availability is an issue.”
I agree with everything Baysore said. I am hearing similar insights from other executives in our industry. At the same time, as Steve Forbes suggested on Tuesday, I think good times are coming, slowly, inexorably and surely. And, hey, if I’m wrong, I can blame it on the wine.
Get an unfair advantage
Monday marked the opening of Supply Chain Advantage, the annual logistics conference in Park City, Utah sponsored by Dematic.
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