More businesses are seeking advanced material handling equipment and execution software to tackle immediate supply chain concerns.

More companies are buying automated material handling equipment and software to raise productivity, reduce inventory and improve supply chain logistics. Boosting productivity continues to be the main concern, driving purchases of advanced, efficiency-enhancing equipment. Furthermore, businesses are spending less on planning software and more on supply chain execution applications, which tackle such concerns as order management and deliver faster results.

Overtaking planning tools, execution applications grabbed a bigger share of the market last year, with approximately 53% of the $5.6 billion supply chain management application market, says analyst Gerald McNerney from AMR Research Inc., Boston. In 2000, execution tools accounted for 44% of the $5.1 billion market. “For as long as I can remember, planning tools had the greatest amount of market share. That shifted in 2001,” says McNerney. “It shouldn’t come as a big surprise considering the changing needs of users.” Companies are now seeking extremely focused applications that address specific pain points and fulfill the CFO’s price points and ROI requirements. Execution tools—which include order management, inventory management, transportation management, warehouse management and supply chain execution management tools—are less expensive and address tactical problems, resulting in faster return of investment. In comparison, planning tools—such as supply chain network implementation, design collaboration and advanced planning—take longer to implement and tackle more long-term issues.

Material handling equipment sales are also surging. The U.S. market for conventional and advanced/automated material handling systems and equipment will grow by 5.2% per year through 2006 to $23.5 billion, says a study by Freedonia Group Inc., a Cleveland-based industrial market research firm. This projected increase marks an improvement over the early 2000s when recession and weak capital investment took their toll. While economic recovery will be a contributing factor, technological innovations will drive demand. Material handling equipment is now more productive, efficient, easier to use and safer. Such improvements are especially pronounced in advanced/automated systems such as material handling robots, automatic guided vehicles (AGVs), material handling software and high-end services.

Conventional material handling equipment—industrial trucks and lifts, conveyors, and hoists, cranes and monorails—is expected to enjoy an increase in demand, although its growth will be more gradual than its advanced/automated counterpart. Demand for more established automated products, such as automated storage and retrieval systems (AS/RS) and automated conveyors, should also reflect a moderate rate of growth, representing a slowdown from robust increases in the 1990s. This is due to large investments made in these products during the protracted economic expansion and the durability of this equipment.

The market for advanced/automated material handling systems, which includes unbundled software and third-party-provided services, is expected to grow 6.6% per year through 2006 to $6.8 billion. Increases in capital investments by industry will aid their growth, as will the increasing demand for advanced, efficient systems. Vendors who want to improve performance at similar or lower costs will aggressively seek these systems for their ability to boost productivity.

Another trend is the integration of material handling equipment and systems with larger-scale factory automation and automated warehouse applications. Through this computer integration, material handling equipment will be able to communicate with other parts of the supply chain management process, such as inventory control, materials purchasing, etc. As a result, material handling control systems, which allow many types of material handling products to communicate through a common interface, have enjoyed a surge in popularity.

Sources: Demand for MH Equipment Increases
Material Handling Management, June 14, 2002
http://www.mhesource.com/

Supply Chain Execution Software Sales Surge
Jennifer Baljko Shah
EBN, June 13, 2002
http://www.ebnews.com/story/OEG20020613S0060