Economic Indicators Point Up...
In his opening remarks to the Material Handling and Logistics Conference, sponsored by HK Systems and Irista, company CEO John Splude said the year ahead looks good.
“We’ve seen a strong up-tick in many indicators,” said Splude, “including positive growth that began in the third quarter of 2003. We expect significant increases in the fourth quarter.”
Among the positive signs Splude noted were increased interest in larger, overall material systems, as well as growing interest in the company’s software offerings.
“The fact that our order backlog has increased 250 percent from the last year is a good indicator that the economy has turned the corner,” said Splude.
He also cited statistics from the ARC Advisory Group’s research on the logistics management software market forecasting, indicating growth in that market through 2006.
“We are seeing a closer integration between software and material handling,” Splude said. “Customers are now coming to us with their problems and challenges, compared to just the requests for quotes we saw a short time ago.”
Speaking to a record crowd at this, the 10th such conference the company has sponsored, Splude said the company’s bookings this year will hit $300 million.
Echoing Splude’s optimistic outlook was Managing Director and Senior Economist, Russell Sheldon of BMO Nesbitt Burns Economics. Sheldon works closely with the capital markets traders, sales force and clients, providing market analysis and interpretations of major economic releases.
In his talk, “A Compass on the Economy,” Sheldon paraphrased Will Rogers, noting that the economy will get better in spite of our government’s attempts to improve it.
“The lack of job growth,” said Sheldon, “is an indicator that things are improving.” While this might seem contrary to general thinking, it’s Sheldon’s opinion that too many people were hired in the boom years of the last decade and now companies are scaling back to proper size. The disappointing August employment picture led some analysts to question the longevity of the rebound. In Sheldon’s view, all signs point to a sustainable, self-reinforcing recovery in the U.S. economy, augmented by stepped up expansion in the rest of the world.
“There’s been an acceleration in economic activity in Japan, China and Europe,” said Sheldon, “and the leading economic indicators are pointing the way to a meaningful improvement around the world.”
He noted that even pessimists now agree that the Q3 growth numbers will be strong, probably better than an annual rate of four percent.
“Some think the third quarter growth spurt is simply the temporary result of the July tax rebates and the lagged effect of enormous mortgage refinancing activity earlier this year,” said Sheldon.
He added that U.S. businesses were forced to cut costs to return profit margins to their historical average of 10 percent. He said it’s been a painful adjustment, requiring slashed production, inventory depletion, cancelled capital spending, debt refinancing, reduced business travel and marketing expenditures, and massive layoffs. “But the worst is now over and the payoff will be substantial,” Sheldon said.
...and May Stay Up
Credit profiles of rated capital goods companies have shown modest improvement, and the long-anticipated recovery in the sector may start soon, according to a report by Standard & Poor’s Ratings Services. While industry fundamentals remain fairly weak, demand has stabilized, and near-term prospects are gradually improving.
“Although the industrial economy seems to be starting to recover from one of the sharpest downturns in recent memory, some end-markets will inevitably lag, keeping pressure on many rated companies,” said Standard & Poor’s credit analyst Robert Schulz. “The health of the U.S. industrial economy is a key driver of credit quality for rated capital goods issuers.”
A number of favorable factors are helping to boost economic growth, including the recent tax cut, expansionary monetary policy, a continued low-interest-rate climate, notwithstanding recent increases in intermediate and long-term rates, and the brevity of the Iraq war.
As industrial companies finalize their near- to-intermediate-term capital spending plans, of critical importance will be whether anticipated accelerated second-half 2003 growth can be sustained into 2004 and 2005.
3PL Study Offers Industry Insight
The latest edition of a major study of third-party logistics (3PL) customers identifies several key opportunities for 3PL providers, according to a leading industry trade association executive.
“Findings of the Eighth Annual Third-Party Logistics Study give valuable insight into the direction in which the 3PL market is moving, and providers should take heed,” said Joel Hoiland, president and chief executive officer of IWLA, The Association for Logistics Outsourcing.
Primary among the study’s several findings is the fact that customers have high expectations of their 3PL providers, but a gap exists between what customers receive and what they expect to receive.
“3PL providers must rise to the challenge of meeting the increased expectation of delivering integrated, end-to-end solutions or face a lack of business growth — or worse,” Hoiland said. “Those that meet the challenge will profit greatly, as manufacturers and suppliers become more dependent on companies they can form partnerships with to outsource noncore competencies.”
He added that 3PL providers must continually work to enhance their relationships with customers by focusing on value-added capabilities to differentiate themselves from the competition.
While the cost and implementation of these additional services and technologies can be overwhelming, small and mid-size warehouse and logistics outsourcing entities should take heart, Hoiland noted.
Warehousing remained the logistics activity most often outsourced among North American study respondents (73 percent), followed by outbound transportation (71 percent).
More Positive Business News
A new survey by GlobalSpec found that revenues are expected to be up, while the percentage of those companies planning to cut spending is dropping considerably.
GlobalSpec, an online technical product resource for the engineering industry, surveyed 600 respondents in engineering, corporate management, manufacturing and quality assurance. They found that 87 percent of the companies anticipate total revenues this year will be the same or ahead of last year. That’s up eight percentage points from last year’s survey. In addition, 75 percent of respondents indicated their 2003 revenue projections are on target or ahead of target — that’s up 11 percent from last year.
The positive economic trends were also reflected in how companies are spending. Only 28 percent of the companies surveyed are reducing spending this year, compared with a whopping 55 percent last year. Only 17 percent reduced capital expenditures, compared with 37 percent in 2002. And the renewed focus on spending even spread to research and development, with only seven percent of companies saying they reduced R&D spending, compared to 23 percent last year.
Hyster Offers Management Program
Hyster Company, manufacturer and marketer of lift trucks, has released the Hyster Fleet Analysis on compact disc. It is an introduction to the principles of fleet management.
The Hyster Fleet Analysis CD demonstrates the necessity and advantages of a well-coordinated fleet management strategy. It examines the basic costs associated with material handling and applies the concept of fleet management to real-world situations.
According to Jeff Meyer, manager, Hyster Fleet Services, it is estimated that businesses waste more than $1 billion annually in unnecessary expenses associated with material handling equipment. These costs are specifically related to operating and maintenance expenses. “The truly troubling news is that only six percent of end users know what their true material handling costs are, while even fewer have programs in place to reduce them,” he said.
Protecting the Supply Chain
The Healthcare Distribution Management Association (HDMA) issued recommended guidelines for pharmaceutical distribution system integrity. The new standards further protect the safety and efficiency of the pharmaceutical supply chain by enhancing the industry’s current tactics used to combat criminal activity and deter drug counterfeiting.
HDMA, which represents distributors of pharmaceutical healthcare products, submitted these landmark guidelines to a U.S. Food and Drug Administration (FDA) task force considering ways to better track drugs through the distribution system. The FDA currently is evaluating the guidelines, and HDMA continues to work with regulators to develop any and every protection required to guarantee patient safety.
The new guidelines uniformly raise the standard of practice throughout the entire distribution system by providing recommendations for purchasers conducting tough due diligence, thorough background checks, and onsite inspections for compliance with federal and state laws pertaining to prescription drugs. The guidelines also recommend establishing systems and processes for reporting suspicious product and/or entities suspected of unlawful activity.
What Matters Most?
As the only professional organization focused exclusively on warehouse management, the Warehousing Education and Research Council (WERC) is always searching for new programs and information to enhance the services it provides to the industry. The newest program is WERC’s Warehousing Industry Resources Event (WIRE), a product and service showcase, will make its debut at WERC’s annual conference in Atlanta, scheduled for May 2004. WIRE focuses on education, information and contacts.
That focus mirrors the results of a recent study, conducted for the Center for Exhibition Industry Research (CEIR) by an independent organization, which confirmed that prospective buyers believe face-to-face interaction with knowledgeable experts is important. Specifically, 76 percent of attendees rate face-to-face interaction with potential suppliers as very important and 70 percent rate face-to-face interaction with current suppliers as very important. CEIR’s study also showed that 76 percent of attendees particularly value building awareness of new products, services or solutions at such an event and 67 percent of them find it very important in evaluating vendors.
“We believe WIRE will provide productive, quality time for our attendees and industry suppliers to communicate in a relaxed business environment,” says Rita Coleman, acting executive director and senior director education and research for WERC.
More on Tax Relief
In September we told you how investing in necessary capital equipment or software now can result in substantial savings on tax payments. Karen Spuckler of Sedlak Management Consultants created a report illustrating the impact and advantages of the special depreciation allowances within the Job Creation and Worker Assistance Act of 2002 and Jobs and Growth Tax Relief Reconciliation Act of 2003. The additional news is that the date for making qualified purchases of capital equipment has been extended to January 1, 2005. To view the full report, visit Sedlak online at www.jasedlak.com.
In a report for Vision, published by Genco Distribution System, Arnold Maltz, associate professor, Arizona State University, says customers continue to expect more from the warehouse, whether firm-owned or operated by a third party. “Modern warehouses are expected to handle more than 99 percent of all transactions perfectly and react immediately to the special requests,” says Maltz.
Same-day shipment of orders has also become routine in many warehouses. Both customers and warehouse management continue to raise the goals for accuracy, timeliness, flexibility and responsiveness to customer requests.
He adds, “Demand for warehouse services in the U.S. is changing as manufacturing moves to lower cost areas of the world while customers become more supply-chain savvy.”
Exel Helps Hurricane Victims
Exel announced the successful distribution of relief supplies to Hurricane Isabel victims along the North Carolina coast. The company donated freight services to collect and deliver the relief products from Exel associates and customers to help those in Carteret County affected by the hurricane. The initiative collected a full truckload of personal necessities, cleaning items, blankets and clothing.
“Many Exel associates in this area have been personally affected by past hurricanes,” says Angie Tschopp, Exel’s operations manager, Raleigh. “We understand the importance of giving back, so we asked customers in the area to add to what our associates gathered by donating goods or purchasing items for those affected by Hurricane Isabel.”
Managers Making News
William Dobbins has been named president and CEO of Caster Concepts Inc.
Patrick M. Byrne has joined Accenture as managing partner of the company’s Supply Chain Management service.
Harris Waste Management Group Inc. announced the promotion of Ashley Walls to the position of manager, parts sales.
John King has been appointed vice president sales and marketing at SK Daifuku.
Interroll announced the appointment of Steve Hankey to small belt drive product manager for AC-powered products.
Associations Making News
APICS and the APICS Educational and Research Foundation collaborated to develop two workshops on CD-ROM: Inventory Control Workshop Series and Lean Manufacturing Workshop Series.
The inventory control series includes four-hour sessions covering the basics of inventory control on through detailed looks at many aspects of the subject.
Lean manufacturing is covered in seven sessions, beginning with an eight-hour introduction, followed by six four-hour sessions. For buying information, contact APICS at 800-444-2742, or visit its bookstore online at www.apics.org.
Members of the Council of Logistics Management (CLM) elected Elijah Ray, senior vice president customer solutions, Standard Corporation, to be its next president. Also elected to offices were: First Vice President Mark E. Richards, vice president Associated Warehouses Inc.; Second Vice President Mary-Lou Quinto, supply chain consultant; Secretary and Treasurer Rick D. Blasgen, senior vice president integrated logistics, ConAgra Foods.
The Conveyor Equipment Manufacturers Association reports that its July 2003 Booked Order Index was 114, up two points. This represents an increase of two percent from June 2003. However, it also represents a decrease of two percent from July 2002.
The Hoist Manufacturers Institute, an affiliate of Material Handling Industry of America, has released two new publications: Manually Lever Operated Hoist Inspection and Hoist Maintenance Personnel and Manually Lever Operated Hoist Operators. These are guides for inspection, maintenance and operation of manually level-operated hoists, also known as ratchet lever hoists.
Improve Your Performance
Companies that have automated some or all of their asset management operations achieve such benefits as improved asset utilization and performance, improved budgeting and planning procedures, and improved overall profitability, according to Aberdeen Group’s new Enterprise Asset Management Benchmark Report: Maximizing Value in What You Own.
The report suggests that the degree to which asset management professionals understand and communicate the location, health, and performance of their companies’ fixed, physical, and capital assets has a direct impact on overall corporate financial performance. Enabling technologies like Enterprise Asset Management (EAM) solutions can help, particularly in asset-intensive industries like manufacturing, utilities, and transportation.
“Most companies need to improve the currency, flexibility, and communicability of asset-related data,” says Mark Vigoroso, senior analyst, Supply Chain Research, Aberdeen Group. “To achieve these improvements, asset-heavy firms must graduate beyond paper-and spreadsheet-based asset management processes.”
Be Part of MHM’s January Issue
Material Handling Management will kick off 2004 with an industry forecast. Your company’s buying plans play a major role in the material handling industry’s economic health. Your responses are an important leading indicator of our country’s standing in global logistics. Help us present the material handling industry’s health picture by answering our short questionnaire. Your identity will not be part of the report. We’re interested only in statistics.
The survey should take just a couple minutes, yet can serve as an invaluable tool for industry strategists. Broad-based questions, such as what amount of money you plan to spend, assuming you do plan to spend, and the types of equipment or software you’ll be investing in, are what we’re after.
Do it now, online at www.MHMonline.com. Just click on the Material Handling Management survey button.
Thank you for participating.
Letter to the Editor
To George Weimer:
This article [U.S. Secretary of Manufacturing? May 2003 MHM page 41] was very good. I usually like your articles, but this was top notch and I agree with you whole heartedly. I also teach at a local college and it seems that most students shy away from mechanical engineering classes and I think it is because they don’t see a future in manufacturing. I hope you forwarded a copy of this to President Bush. On the other hand it is hard to get good educators because of the low pay. I can speak from experience as a former F/T college instructor. Our manufacturing jobs in Dayton have fallen off the edge of the world in the last 20 years. There have been so many manufacturing jobs sent to Mexico and China it is hard to imagine what is happening. I vote for you for the Secretary of Manufacturing. Thanks for the article.
David Kirkpatrick, P.E.
KLH Engineers, Inc.
Companies Making News
Irista Inc., an industry developer of logistics management solutions, has formed a strategic partnership with AFMS Transportation Management Group, a consulting firm, specializing in the areas of domestic and international transportation. Irista and AFMS formed the partnership to respond to increasing rate and service level complexity in the transportation marketplace.
Rite-Hite Corporation has completed the acquisition of CAEMA Verladesysteme GmbH, a Germany-based manufacturer of loading dock equipment. This merger enhances Rite-Hite’s ability to provide local services and solutions specifically designed to meet European market needs.
Lockheed Martin, Siemens Dematic Postal Automation and Northrop Grumman’s automation and information systems business, three suppliers of mail processing equipment, were recognized by Postmaster General John E. Potter for working to advance postal automation standardization. The companies received the postal service’s Partnership for Progress Award.
C&D Technologies signed an agreement to purchase some assets of Matsushita Battery Industrial Corporation of America and Matsushita Battery Industrial de Mexico, S.A. de C.V. for manufacturing certain industrial lead-acid stationary batteries in North America.
Hytrol has revamped its website, www.hytrol.com, with an easy-to-navigate product information section. You can now immediately access information on EZ Logic and Stockyard items, as well as special and standard solutions.
ORBIS Corp., North America has established a Bentonville, Arkansas, office, staffed by a veteran sales, design and engineering team. The office is set to collaborate with the vendor community to meet Wal-Mart’s need for the standardization of in-bound, floor-ready display units.
Radcliffe Inc., a supply chain software and services company, announced that it has acquired ServPlex Corporation, a WMS software company that caters to third party logistics (3PL) providers.
HHP, provider of imaged-based bar code data collection and mobile computing systems and LXE Inc., a provider of rugged mobile computers, announced a strategic sales and marketing alliance.
Corporate Express Inc. (a Buhrmann Company), a business-to-business supplier of office and computer products and services, announced the opening of its new distribution facility in Hanover, Maryland. The 200,000-square-foot distribution facility will be the home of the company’s Mid-Atlantic Division.
Lista International Corporation, a manufacturer of storage and workspace systems, has purchased the assets of the Ergomation product line of adjustable height workbenches and workbench accessory systems from Aero-Motive, a subsidiary of Woodhead Industries Inc.
Ford Power Products has selected Engine Distributors Inc., one of its 16 North American distributors, as the engine assembly location for its emission-certified products. Also, Ford Motor Company will be the manufacturer of record and hold emission certificates for 2004. This distinguishes Ford from most other manufacturers of LSI industrial engines, which must meet new EPA requirements starting January 1, 2004.
Matrics Inc., a pioneer in the advanced development and standardization of low-cost, high-performance, EPC-compliant RFID technology, announced PICA, the company’s new, high-speed RFID tag assembly system enabling the RFID transformation of the consumer goods supply chain. PICA, which stands for Parallel Integrated Chip Assembly, dwarfs all existing RFID tag-producing processes available today.
Pactiv Corporation announced an agreement to purchase the plastic packaging assets of Rock-Tenn Company. The purchased assets are related to the manufacture of amorphous polyethylene terephthalate (APET) and polypropylene products.
Award For Savi
Savi Technology, which has provided data-rich active radio frequency identification systems and support software to the U.S. Department of Defense for nearly a decade, was recently named as the recipient of the “National Transportation Award for 2003” by the National Defense Transportation Association (NDTA). Savi Technology has the distinction of being the first technology company to win the prestigious award, which has been given in past years to major transportation and service providers.
The award was announced at the Association of the United States Army’s (AUSA) annual meeting at the Washington Convention Center. Through three successive multi-year procurement contracts with the U.S. Army’s Product Manager for Automatic Identification Technologies, Savi Technology has been the primary provider of RFID-related technologies to all military branches for more than seven years.
Liberty Carton Wins Award
Liberty Carton Company, a division of Liberty Diversified Industries (LDI), won top honors at the Premier Print Awards for its Liberty Pursuit board game and gift book.
Liberty Pursuit was created by Liberty Carton’s design team as a holiday gift for LDI to present to its customers, vendors and employees. The game board was designed to take players back to the accompanying gift book for answers on American history and culture.
The Premier Print Awards, also known as the “Bennys,” are part of the Printing Industries of America’s annual recognition to honor excellence in printing. The “Benny” is a copper statuette of Ben Franklin and is given to top winners in each printing discipline.
Looking For Innovation
As we head toward 2004, Material Handling Management is looking for innovation in material handling from the user community. If you need a preview of the kinds of ideas we’re seeking, stories about this year’s award winners begin on page 26. In 2004 we’ll be spotlighting a winner each month, from which we’ll choose the Innovator of the Year next December. Awards for the class of 2003 will be presented at a special banquet slated for March 30, at NA 2004 in Cleveland. Submit your entries to Tom Andel, chief editor, at [email protected]
Ask the MHM Editorial Advisory Board
As noted elsewhere in this issue, Material Handling Management is interested in your company’s buying plans for 2004. You can take part in our online survey on this topic by going to www.MHMonline.com and clicking on the survey button. MHM asked members of its Editorial Advisory Board about trends in material handling and about their plans for 2004. Here are their replies:
1. What trends in your business are driving the need for capital investment in material handling?
Gerald Moultry, vice president, field operations, Pharmaceutical Distribution, CardinalHealth: “We have upgraded our network over the past seven years, so we don’t see a great deal of immediate need for material handling equipment. However, with the potential of RFID (radio frequency identification) technology, we anticipate some investment to allow us to take advantage of the efficiencies the technology will bring. We are positioned for growth in the mid-teens without having to make significant large material handling investment. I don’t anticipate large projects such as new facilities but I can see us investing in things such as lift trucks and racking as we expand existing facilities.”
Brian O’Donnell, director of technical operations and planning, Liz Claiborne:“The trend for Liz Claiborne to invest in material handling equipment is driven by several factors:
a) growth (capacity issues)
b) customer demands (compliance issues, changes in shipping requirements, etc..)
c) customer service (cycle time)
d) changes in order profiles
e) cost (ROI).”
David Lockman, CIT, manager of engineering, Distribution Operations, L.L. Bean, Inc.: “We look to invest in new technologies to avoid the capital expense of things like a new facility. If we can extend the life of our existing footprint through increased efficiencies, we can account for a much better ROI for the investment. Secondly, we will invest in new technologies to reduce our ratio of DL to gross sales. Using this same theory, we can assist in lowering the SG&A expense as well. This drives greater bottom line performance and keeps our stakeholders happy.”
2. What role do material handling logistics and supply chain management play in contributing to your bottom line?
Gerald Moultry: “Material handling logistics and supply chain management play a significant role in contributing to our bottom line because there is continuous pressure on margins so we have to gain efficiencies to improve the gap between margins and expenses.”
Brian O’Donnell: “We feel that logistics helps to differentiate us from the competition, being able to consistently deliver.”
David Lockman: “Good systems and hardware keep our direct labor to a minimum, driving higher net profit. In addition, we can also decrease lead time to our customers, theoretically serving them better so that they continue to shop with us.”
3. What role do you play in selecting the appropriate technology? Gerald Moultry: “It’s my responsibility to stay on top of new technology and identify potential technology advancements that will drive network efficiency.”
Brian O’Donnell: “My team analyzes business conditions and capacity and recommends the appropriate level of technology to support business requirements.”
David Lockman: “My team is responsible for all material handling systems and their integration in our Distribution and Returns facilities.”
4. Will any project you initiate in 2004 involve new systems or a retrofit of an existing system?
Gerald Moultry: “We do have a new facility planned to open in 2004 which will complete our upgrade of our network.”
Brian O’Donnell: “In 2004 we plan to make several adjustment across the network. This will include material handling and software modification.”
David Lockman: “We will invest in new technologies in 2004, but exactly what has not been determined. We will invest both in systems upgrades for productivity as well as material handling systems for improved efficiencies and capacities.”
If you have a material handling problem or a question which you’d like to pose to the MHM Editorial Advisory Board, please forward it to Tom Andel, chief editor, at [email protected] We’ll print the Board’s responses in future issues.
Roger Huff, plant operations manager-N.A. Powertrain Operations, Material Planning and Logistics, Ford Motor Company
David Lockman, CIT, manager of engineering, Distribution Operations, L.L. Bean, Inc.
Tan Miller, senior director, logistics, Pfizer Pharmaceutical
Gerald Moultry, vice president, field operations, Pharmaceutical Distribution, CardinalHealth
Brian O’Donnell, director of technical operations and planning, Liz Claiborne
David Rogers, vice president logistics, Rockwell Automation
Gregg Schwerdt, distribution manager, Beauty Care, Procter & Gamble