Economic Recovery Reflected in Survey

Nov. 1, 2004
Mike Kotecki, vice president, HK Systems, used a bit of radio frequency identification (RFID) technology to take the economic pulse of the audience at

Mike Kotecki, vice president, HK Systems, used a bit of radio frequency identification (RFID) technology to take the economic pulse of the audience at the company's material handling and logistics conference. While the results can't be considered scientific, they are interesting. In response to his questions, each attendee pushed a button on a remote to select answers that were then immediately displayed on a screen.

Many of the responses to the survey echoed comments made earlier by John Splude, president, in his opening remarks.

Speaking to nearly 300 attendees, Splude said that since mid-2003, economic conditions have been improving for his company.

"We're seeing," said Splude, "that customers are looking for more innovation in the products they buy and, in 2004, software sales have shown some growth."

To judge the audience's level of recovery, Kotecki's survey question was, "What mode do you view your company to be in at this time?" Fifty-five percent of the respondents said they are currently on a moderate growth curve. On either side of the moderate majority were 16 percent who were experiencing explosive growth, and 21 percent who said business was flat. (Some responses are not reported, thus percentages won't necessarily equal 100.)

In a related question, Kotecki asked, "How has your company's productivity changed since 2000?" The overwhelming majority, 75 percent, reported they are doing more with fewer people. And while there were several other responses, seven percent reported they were too busy to check! It's apparent that we're more productive these days. Splude predicted RFID will be responsible for the greatest gains in productivity in the industry. "However," he warned, "large-scale use of RFID will require standards resolutions."

He noted that education of RFID is the key to its understanding and gains in productivity.

RFID was a major focus of this conference, so the response to Kotecki's question, "What is your company's current strategy for RFID?" was particularly interesting. Nearly one-third (32 percent) said, "We will wait and see." An equal number (28 percent) said they were either scrambling to meet customer compliance demands or have a self-imposed interest in applying the technology for its benefits.

While the industry is still challenged by rising steel prices, Splude says personal and professional cautiousness is driving executives to demand higher returns on any investments they make.

Those demands were reflected in Kotecki's question, "What is your company's typical required payback period-for investments?" More than half, 52 percent, said they expected an ROI in one to three years. Twelve percent said their companies expected the return in less than one year.

And where are the investments for growth and survival being made? Thirty-eight percent said it's being put into software systems. Hard assets are getting 23 percent of the investments in manufacturing and 18 percent in distribution. Nearly one-quarter (22 percent) of the respondents said their companies are investing in human capital in the form of adding personnel.

Some interesting numbers popped up when Kotecki asked, "In what direction is your company steering its logistics strategy?" Almost half (47 percent) of the attendees said their companies were consolidating and centralizing distribution facilities. Only 19 percent said their companies were opting for decentralization to serve customers with regional facilities. While 30 percent were making no change in logistic strategies, four percent did indicate they would be relying more on outsourced distribution or using third-party logistics providers.

Is this consolidation in response to inventory levels? Kotecki asked, "What has been the direction regarding inventory levels in your company?" Thirty-four percent responded that there has been a decrease of inventory wherever possible for cost reduction. While 17 percent have increased net inventories for better customer service levels, about one-third, 32 percent, claimed they were doing a bit of increasing and decreasing.

— Clyde E. Witt, executive editor