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November 20, 2017
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Convergence and the future of material handling

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The blurring of lines between providers of equipment, software, and other technologies will profoundly change the material handling world—and yours, too.

When I was an export traffic manager years ago, I generally had to contract separately for each type of service my company required—transportation, warehousing, freight forwarding, customs brokerage, packing, and so forth. That was further broken down depending on whether those activities were for the domestic or the international leg of an order's journey.

Today, those business activities can all be arranged and managed through a single, third-party logistics company (3PL). As 3PLs become increasingly involved in providing software and systems to support supply chain activities, the lines between these companies, technology providers, and consulting firms are also becoming harder to discern. (If you'd like to learn more about this trend, I can recommend two perceptive articles written by industry analyst Adrian Gonzalez, "Convergence is the word" and "Convergence accelerates—but will shippers buy in?")

The "convergence" business model Gonzalez cites has spread to another area of the supply chain: material handling. An early example was the 2013 acquisition of Peach State Integrated Technologies, a provider of distribution, logistics, and material handling solutions and consulting and engineering services, by Associated Integrated Supply Chain Solutions, a provider of lift truck and other material handling equipment and engineering, fleet management, and labor-optimization services. At the time, it was a surprising—and to some, puzzling—move by Associated's then president, Mike Romano.

Nobody's surprised or puzzled now. Convergence in the material handling world—bringing together equipment, services, and technology to provide comprehensive warehouse and distribution-centered solutions—is fast becoming a global phenomenon. In 2016, Kion Group AG, the world's second-largest manufacturer of industrial trucks, acquired Dematic, the giant systems integrator best known for designing fully automated warehouse systems. Kion previously had acquired Egemin Automation, a provider of automated lift trucks and automated guided vehicles, and Retrotech, a systems integrator. All are now part of an integrated supply chain services organization within Kion.

Just a few months later, Toyota Industries Corp., parent of Toyota Forklifts, announced that it had created a new division called Toyota Advanced Logistics Solutions (TALS) to sell integrated automation and productivity solutions to material handling and logistics markets in North America, and had acquired systems integrator Bastian Solutions LLC to provide the foundation for that business. Shortly thereafter, Toyota moved to establish a similar organization in Europe with its acquisition of the material handling systems provider Vanderlande.

Most recently, we've seen Honeywell embark on a similar path, acquiring Intelligrated, a systems integrator and provider of supply chain and warehouse automation systems and software. Honeywell had previously purchased Intermec, the provider of automated data-capture equipment and systems. The tech giant has incorporated both companies into the Sensing and Productivity Solutions division of its Automation and Control Solutions business.

At this year's ProMat show in Chicago, I met with executives from several of these companies to discuss the reasons behind their acquisitions. All of them have the same objective in mind: to be a "one-stop supplier for intelligent supply chain and automation solutions," as Kion Group CEO Gordon Riske put it. And all of them are moved by the same vision of the future: a world where e-commerce fulfillment and "Industry 4.0"—the application of the Internet of Things (IoT) to the industrial and logistics sectors—dominate business-to-consumer (B2C) and business-to-business (B2B) models.

During the show, I sat down with Jerry Weidmann, president of Wolter Group LLC, a provider of material handling equipment, automation solutions, and associated services, to get his take on this trend. It's inevitable, he said, that material handling equipment and systems will be the hub around which the industrial IoT and e-commerce fulfillment will revolve. This evolution will affect everyone involved—not just the customer that is taking orders and selling product, or the warehouse and DC operator, but also the suppliers, distributors, and other entities that provide the equipment and technologies that make this new vision possible, he commented. "The supplier base has to converge to reflect the customer's business needs," he said, adding that equipment manufacturers, distributors, and systems integrators will have to collaborate more closely than ever to ensure they can provide the right capabilities and systems that are seamlessly blended together at the level of complexity and sophistication the customer requires—and, let's not forget, at a price the customer is willing to pay.

I think Weidmann and the leaders of the companies mentioned above have it exactly right. There is no turning back the e-commerce tide or the consumer trends that fuel it. For a growing number of businesses around the world, their future success will depend in good measure on where the trend toward convergence in material handling leads.

Toby Gooley is Editor of CSCMP's Supply Chain Quarterly.

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