Chain of Thought

21st Century Success Needs Century-Old Smarts

On this third report of takeaways from the Dematic Customer Conference in Park City, Utah, I've saved the best for last. Today's conference was highlighted by its kickoff general session hosted by Todd Buchholz, former White House economic advisor who is now both an economist an author. So who do you think is this American economist's hero in business? Does the name Amadeo Giannini ring a bell?

This was an Italian immigrant who made a home and a name for himself in early 20th century San Francisco. Giannini started in business as a broker in fruits and vegetables. After the great San Francisco earthquake, when all the area banks were shutting off credit to businesses, Giannini opened his doors as the Bank of Italy. He learned all the languages of his customers. He lent money to women, opening up a women's department in his bank. He did all the things the other banks of that era would never consider doing.

Today we know Giannini's business as The Bank of America. The lesson of all this for an audience of Dematic customers: Never do business with anyone unless you know as much about their side of the table as they do. That allows you to provide better service and to innovate. Buchholz noted that Giannini even studied the dairy industry and was the first to loan money to Borden Dairy because he recognized milk as collateral. He loaned money to Disney in the early years of that studio because he recognized those Snow White drawings and cells were collateral.

“If you're on the material handling and logistics side or the supply chain management side and you're pitching a book distributor, it's not sufficient to be the foremost expert on computers and conveyor belts, you better have some knowledge of how the publishing industry is changing,” Buchholz said. “Also, understand the expectations of consumers for on-time delivery. You need to be someone who can make sense of complexity.”

The Brain Race

That requires educated professionals and Buchholz emphasized that the U.S. is in a global race for IQ points. “Whatever country harnesses intelligence will prosper the most in the 21st century,” he said. He noted that even during our recent recession the unemployment rate for those with a college degree was only 4%.

During the Q/A at the end I had the opportunity to ask Buchholz to expand on the state of the engineering talent pool and its connection to the economy. He noted that there's new growth in commodities, which makes engineering and logistics more attractive as professions—even for the unskilled, in some locations.

“In Australia they're paying truck drivers $100,000 to move to Western Australia to drive trucks around the mines,” he said. “For your people coming up in logistics we are not at the end of the effort to squeeze costs at increased speeds and to get better distribution. You're doing it to squeeze out lower skills but you need the upper skills to design the systems--so you have fewer unskilled laborers on the shop floor. So this is a great area for younger people with training but it's probably a bad area if you're an unskilled worker.”

Dematic's Take on Its and Our Future

After this session I had the opportunity to chat with John Baysore, president and CEO of Dematic North America. This was a chance to see if Dematic's experience matched the opportunities Buchholz laid out in the presentation he gave for them. Remember what he said about the demand to squeeze costs out? That's an opportunity Dematic is going after full force—by beefing up its engineering muscle.

“We're hiring engineers on the controls and software side of the business,” Baysore told me. “The strategy is to leverage software first and controls second to reduce hardware. That has helped us competitively. We're looking at lean methodologies. We've already taken out a lot of the low hanging fruit so we're looking at fine tuning from a lean perspective, meaning all of our processes and how we handle a job. That means looking at ways to take costs out and shorten project cycle time. Customers want us to be able to turn orders around quicker. We're putting pressure on ourselves to do that.”

That doesn't mean cool stuff like automatic guided vehicles (AGVs) are old hat. On the contrary, for the food and grocery industry, this technology is as fresh today as it was 20 years ago in the manufacturing world.

“There's now a tremendous opportunity for AGVs in Dematic's traditional markets,” Baysore explained. “HK was more on the manufacturing side and Dematic was a little further downstream in warehousing and distribution. As a result, to meet this growing interest in AGVs we decided to more aggressively invest in R&D. We need to create dedicated leadership with P&L responsibility in that sector to drive it. It's a great entry point for companies just ready to dabble in automation. Mix in ideas like LaserTrucks+ which adds voice picking to a non-manned vehicle and this lets companies get into some level of automation without a full-blown comprehensive conveyor system.”

This echoes what Buchholz said about understanding customers' markets. But is there enough engineering talent out there to help Dematic take that concept to a wide variety of industries? After all, as I reported in my last blog from this conference, Baysore told attendees that his company has an open requisition for 150 more engineers. Is he concerned about the talent pool?

“We've had that open requisitions for engineers since the end of the recession,” he told me. “We've never completely filled those positions because we've increased our scrutiny. We have taken a lot of fresh-out-of-school graduates from areas surrounding our field offices and trained them. We're looking for engineers on the controls and software side of the business. The strategy is to leverage software first and controls second to reduce hardware. We're looking at lean methodologies.”

To conclude our reports from the Dematic Customer Conference, it seemed fitting to ask Baysore how he felt about business prospects going into his company's new fiscal year, which starts in October. His forecast:

“We're going into 2012 with the strongest backlog we've had in five years and the strongest pipeline we've ever seen in new opportunities, so barring some kind of cataclysmic meltdown we expect to grow another $50-100 million in revenue.”

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