Material Handling: Source Code for Nation's Security

In the last edition of our Newsmakers e-newsletter, we featured a Q/A with John Nofsinger, president of the Material Handling Industry of America (MHIA), on the challenges U.S. manufacturers face from China. What precipitated that Q/A was an article in the Wall Street Journal on Germany-based Siemens AG outsourcing engineering to China. MHM wanted to see if the material handling arm of Siemens, Siemens Dematic, had similar plans to outsource engineering to China, and what that would mean to the industry as a whole. To get the scoop, we interviewed John Raab, vice president of business development for Siemens Dematic. — Tom Andel, chief editor

MHM: John, what’s your take on the news that Siemens AG is outsourcing engineering for its newest cell phone products to China? Is this the start of something that could spread to your side of Siemens?

Raab: We have three main global product development centers for everything that can be productized, from conveyors to IT. None of them is currently in China. We have centers in Germany, Italy and the U.S. Application engineering, however, has to be close to the customer, so that occurs everywhere in the world where we are.

MHM: So if there's a need for one of your solutions, it's developed close to the need?

Raab: We use modular components that are developed in those main product centers. If Wal-Mart or Best Buy needs a solution for a DC, we'll work on that here in the U.S. We won't design that in Germany, Mexico or anywhere else because someone has to know what the building looks like in three dimensions. Even for those customers with several DCs, the mix of product and the system layout are different.

MHM: Does the nature of material handling make your side of the business different from the rest of Siemens?

Raab: Every system we design is unique. We're not making cell phones. There are no two identical material handling systems as there are two identical cell phones. The buildings are different and the use of the buildings is slightly different. We may have fewer air conditioners and more snow shovels in the Northeast than in the Southwest. What we try to do to keep the price points reasonable is to have as many standard modules as we can. A section of conveyor is still so many feet long, and we have various widths and configurations of sorters and AS/RS machines. All the mechanics up to this point have been developed in Germany, Italy or the U.S. We also know that as a global company we want to bring the best and brightest ideas in the world to our customers. How this will play out in the future is to be determined, but for mechanics, we're doing our own in those centers.

MHM: So the point is, as long as a component is the best, what does it matter from where it was sourced?

Raab: As part of Siemens, which is the largest controls company in the world, if I get a PLC or motor starter, I don't know where that was designed. Maybe they could have done something in China. The components of a material handling system (i.e., bearings, belting, PLC) could have been engineered in China, Mexico or the Czech Republic, wherever there's the best and brightest practice. Certainly some of the Siemens divisions like our mobile phones group, are looking to China to access the engineers there. The skill sets are equal to that of Germany and the cost per unit of engineering time for the same quality is quite a bit different.

MHM: Is it important that we invest in logistics education to make sure we have a qualified stream of home-grown material handling engineering strength?

Raab: The U.S. market will continue to need high-quality material handling and supply chain engineers. Whether they come from other countries doesn't matter as much as that they're here. The supply chain problems of the U.S. are different from those in Europe or China. You really have to know your local market. We have to continue promoting the industry. If we've had foreign nationals come here to do our engineering for us and they see opportunity in their home country, whether in China or India,and they return there, that could leave a serious vacuum in this country.

MHM: What's the future of this country's material handling engineering talent pool?

Raab: The future is very bright because we have this continuing problem to face where we have to move those goods that are made elsewhere as efficiently and effectively to the end-use customer as possible. It does no good to shift the manufacturing cost to a low-wage country only to have a huge inefficiency in your supply chain, which will add a bunch of cost. If we all want to enjoy a high standard of living, we need effective and efficient supply chain logistics. To that end, we need top-notch material handling professionals in this country. There's a bright future with MHIA and some of the scholarships that it promotes. We need to make it attractive for the best and brightest to come here and continue to help us refine and build our material handling systems.

MHM: Are we seeing the necessary curriculum development in these areas of engineering that will fill that void?

Raab: We as a company have a close relationship with a couple local universities here in the state of Michigan to offer engineering internships. So far the industry has had an ability to attract the necessary talent. At the end of the '90s, it was getting a bit scary because we just about maxed out on experience levels of talented engineers. The economic recession of the early 21st century gave us a little breathing room. Now companies are trying to capture in these expert-type systems the learnings of industry experts so that less-experienced engineers can quickly learn some of the best practices of engineering good, solid material handling systems.

MHM: Should material handling targeted by students in school as a discipline to follow?

Raab: There are few universities that I'm aware of which offer such a focused curriculum.

MHM: Is that a realistic need to encourage and foster?

Raab: It's such a large problem because material handling systems fit one piece of the puzzle in the total supply chain logistics process from manufacturing to consumption. I see more schools offering curricula in terms of supply chain planning, and less down to the right material handling systems. You either get the mechanical, electrical or software engineer who knows something about his discipline, but we also need people who understand an integrated system and how all three of those disciplines need to come together to form a solution. The goal is increased efficiency from order selection through shipment. Georgia Tech offers more material handling curricula, but most universities aren't that specific. I see a growing need for well-trained people to run a distribution center and to design the systems that go into it. This should be promoted. In this country where we've become the consumers and not so much the manufacturers. People need to understand where costs are incurred and how they can be better contained through better systems.

MHM: Sounds like you’re saying we shouldn’t forget the material handling source code. What’s the consequence if we lose sight of that?

Raab: If a disaster strikes and there is contamination in our food sources, how do we know to recall it? We know through tracking and tracing and the linking of material movement with information movement assigned to that particular piece of merchandise. That's why RFID is so significant and why we shouldn't be as concerned about Big Brother as that the technology is bringing efficiencies to the supply chain. Those are the things the public needs education about and needs to get excited about so people will start seeing material handling as a career opportunity.

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