Day 5 of ProMatDX

Yesterday, Day 4 of ProMatDX, I focused on micro-fulfillment. Today, let’s take a look at what’s on the mind of the customer?

So much of what we thought we knew about demand – that thing that drives the actions of our customers – was upended. We all stopped shopping in stores and stepped up online ordering. We saw shortages of staples like paper products, cleaning supplies and essentials for baking; one retailer of craft supplies told me how it had to scour the globe for elastic as everyone dusted off their sewing machines and made masks. BOPIS and curbside-pickup became things, as did micro-fulfillment.

Now that we’re seeing what looks as if it will turn into a pretty dramatic recovery, organizations are grappling with how to turn the spigots back on to meet improved demand – a new problem – and how to get enough people to staff their facilities – an old problem.

What, then, is on the mind of the customer for materials handling solutions? To find out, I turned to two veterans in the supply chain design and consulting side of the industry. Bryan Jensen, executive vice president of the St. Onge Company, and Jim Tompkins, chairman, Tompkins International.

Uncertainty rules the day: Supply chain managers know the sun will rise in the east and set in the west. After that? Who knows? “The thing that makes the pandemic different from every other disruption is that there is no clarity at all on time,” Tompkins said. “If a hurricane is coming, you may not know how severe it’s going to be, but you know that it’s going to hit the coast on Tuesday and by Saturday, if you’re still standing, you’re fine.”

The timing of when the pandemic will be over, and what the world will look like once we put it behind us “is driving folks crazy. You go into a meeting to talk about a proposed e-commerce solution and it turns into a discussion about the vaccine,” he added.” Many of the investments in micro-fulfillment, robotics and automation “are almost somewhat arbitrary.”

And, of course, it’s not just the pandemic: We’re living a time of chip shortages and weather disruptions, like the winter storms in Texas and the Southwest.

What is he advising his clients to do? “You’d like to tell them to be bold and make big decisions, but that’s probably not wise,” he said. “The better advice is to think more about scenario planning. Ask what you can do if this or that happens, and have options in place. Maybe you won’t have the highest productivity or fastest delivery, but you’ll still be able to execute.”

His final warning: “The guy who spends $50 million on a new facility and only ends up using a third of the capacity is going to get fired. They guy who builds a $20 million facility and has to put on a third shift might get hit with over-time, but he’ll still have a job.”

Give careful thought to the labor and automation dynamic: “The most over-arching question we’re asked today is: What about these robots?” said Jensen.

His response: Unless you’re a manufacturer that is pumping out the same number of orders every day, instead of a company with a lot of peaks, take a step back and consider all of your options. “In my view, robots aren’t the answer most of the time right now,” he added. “That’s not to say that they won’t be the answer in five years” as the technology continues to evolve and improve.

The most successful implementations he seen to date are those that started small and worked with a Robot-as-a-Service, or RaaS, model. Essentially leasing the robots or paying for them based on a utilization rate. “That allows you to find out how flexible the robots are before making a larger investment,” Jensen said.

The robot question is related to the labor availability issue that has plagued our industry for at least the last ten years, and operational efficiency. In Jensen’s view, many of the operators in our industry are paying too little for labor and have not asked what they can do to improve their existing operations before looking at automation. “The questions we ask a client are what are they currently paying for labor and what would they have to pay in order to get labor?” he said. “That becomes the tipping point, and it may resolve itself.” As to the second, he said “We take a potential client through all of the possible solutions to increase productivity, from conventional to semi-automated to highly-automated. Robots aren’t the only way to do that.”

After robots, the second most asked question, Jensen said, reinforces the uncertainty dynamic: Is the growth of e-commerce permanent. “And the answer is: It depends,” Jensen said. “Are you a grocery store or Amazon? Are you a luxury retailer or are you Walmart?” He noted that the percentage of e-grocery sales is starting to drift down from the peak, likely driven by shipping charges. And, today’s Wall Street Journal reported a jump in brick-and-mortar retail sales, as shoppers begin to return to stores. Jensen’s bet is that the truth will lie somewhere in between: Brick and mortar sales will continue to recover, but probably not get back to 2019 levels any time soon.

So, what’s a customer to do? “Put more thought into what you think your future supply chain will look like in the next 2 to 3 years rather than in solutions,” Jensen said. “You want to put in a plan so that if those percentages go up or down, you’re covered. Then, you can think about solutions.”

Click on the links below to read all of this week’s ProMatDX blogs:
Day 1.
Day 2.
Day 3.
Day 4.
 

SC
MR