What could be surprising about conveyors? Just about every distribution center has them. They move stuff from point A to point B. They're basically a commodity sold by the stick, right?
Seasoned material handling veterans know the danger of taking conveyors for granted. And after doing an annual reader survey on conveyor usage for a couple years now, we've learned to expect some surprising answers. This year one in particular came in response to our question about the most important factors considered when making a purchase. Price wasn't at the top of the list.
Safety and quality took that position, followed closely by labor savings and service quality. Most of the respondents seemed to be in a mood to improve what they had rather than buy something new. In that case, purchase price might have been less relevant to them. Fifty-five percent said their conveyor spend will be on servicing existing equipment. So it's not surprising that controls placed second on the list of spending priorities—although a distant second, selected by 20%.
Don't get me wrong, price is still important. It's hanging out on our list at about the same level as "compatibility with existing systems" and "labor savings." And it's labor savings that points to another trend. Conveyor users are not only concerned about the cost of labor, but its availability, as well. Here are two quotes about usage trends from the survey:
"More automation. Attrition is happening faster than anticipated."
"We're upgrading systems to handle additional volume."
These are economic indicators reflecting the return of business for many companies. Another survey supports this interpretation—PwC's (www.pwc.com) latest Manufacturing Barometer Business Outlook Report. It indicates that industrial manufacturing executives are optimistic about their growth prospects in 2013. Eighty percent of them expect to increase operational spending. A majority of them are also looking to hire more people over the next 12 months. But if they run into the talent availability issue that many of our respondents are so concerned about, they may end up spending more on operations than they expected. Maybe on conveyors and robots.
Amazon certainly set that example on the retail side last year when it bought Kiva Systems, makers of material handling robots and software. Amazon has also equipped its regional distribution centers with miles of conveyor. And just like the respondents to MH&L's survey, it is making sure those conveyors are energy efficient.
At Amazon's Coffeyville, Kansas, fulfillment center, for example, 33 miles of conveyor belts route orders through the packing and shipping processes. At one time those conveyor belts operated continuously throughout the day. After a Kaizen team learned about this they recommended that timers be installed so that the conveyors automatically shut down when they weren't in use. This resulted in that facility using 30% fewer kilowatt-hours of power to run its conveyors.
That was a smart investment and probably one of the reasons Amazon's profit margins, while thin, are moving up rather than down. The same promise holds true in the automotive industry, but as we report in this month's industry focus, the profit margins of auto makers depend on the efficiency of several tiers of suppliers as well. That's why GM sends teams of engineers to supplier sites to make sure any quality problems they might have don't show up in a GM plant.
Safety and quality are the most important criteria in a conveyor purchase, survey respondents told MH&L. Judging by how the automotive industry operates, those qualities go beyond equipment purchases to their very culture. The OEMs' focus on supply chain visibility is setting the pace for continuous system improvement in all industries. For the sake of the U.S. economy, let's hope all companies get on that road.
Follow me on Twitter @TomAndel.