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MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
1
R E S E A R C HB R I E F
The last few years have been a time of growth.
However, with expanding business comes add-
ed pressure to perform. These pressures come
in the form of more orders to fulfill, more each
picking to meet e-commerce orders, and more
stock-keeping units (SKUs) to manage.
To meet these pressures, DCs have gotten
bigger, and DC operators have expanded their
labor forces, according to an annual study of
DC operations by Peerless Research Group.1
The U.S. Bureau of Labor Statistics (BLS) also
tracks warehouse labor, with its data showing
that in December 2015 warehouse jobs
reached 840,700, up from 620,500 jobs back in
December of 2009, when sector employment
hit a low point coming out of recession, an
increase of 220,200 jobs, or 35%.2
With these macro trends at play, it’s no
wonder that respondents to this survey
agree that factors like coping with “relentless
competition” and a “changing workforce”
influence the material handling system
investments they will be making.
Automated material handling equipment such
as sortation systems, conveyors and automated
storage & retrieval systems (AS/RS) allow DCs
to fulfill more orders with less labor—and may
also save storage space. With an economy in
growth mode, investment in automated material
handling has made a comeback. While there is a
slight decrease in material handling equipment
growth forecast for 2016, in part due to the
strong U.S. dollar and its impact on exports,
the fact is that you can’t always meet business
growth and omni-channel complexity simply by
adding labor—at least not efficiently. At some
point, companies that manage DCs need to look
at automated material handling solutions and
new or expanded processes to reap efficiencies
while gaining speed and capacity.
To better understand how companies are
currently approaching decisions regarding
the evaluation, purchase and installation
for material handling systems, and to trend
any changes that have occurred with these
processes during 2015 and 2016, viastore
systems, Inc., along with Modern Materials
Handling magazine conducted a benchmark as
well as a follow-up study among top material
handling managers to investigate and trend
critical topics to include:
• automated material handling services
and solutions that user organizations
most commonly look for from an original
equipment manufacturer (OEM);
• types of providers (e.g., OEMs, system
integrators, consultants) organizations are
turning to for design, implementation, and
maintenance services for their automated
material handling systems;
• provider characteristics considered most
important when evaluating automated
material handling systems and solutions
providers;
• material handling systems and technologies
currently in use and planned for adoption
during the next five years;
• an organization’s primary objectives in
employing and the benefits produced from
material handling deployments.
ESTABLISHING EFFECTIVE MATERIAL HANDLING SYSTEMS for distribution
centers (DCs) can be a complex challenge filled with variables around budgets, op-
erational goals, and the skills and expertise of various suppliers—including original
equipment manufacturers (OEMs), integrators and engineering consultants. You
don’t have to sort through all these variables alone: This latest research provides
critical information by your peers about key considerations involved in evaluating
and implementing material handling solutions.
M AY 2 0 1 6
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
2
R E S E A R C HB R I E F
BackgroundBoth studies possess similar profiles for those
involved in material handling systems as well
as software application purchase and design
decisions.
• Respondents across both studies have
comparable primary job functions with the
majority working in engineering, operations,
warehouse management and executive
management. (See Figure 1.)
• The 2016 study, though, does show
that slightly fewer respondents work at
businesses running a manufacturing facility.
Results to this survey as well as the findings
with the 2015 study will help point out the
necessary steps involved in pragmatic material
handling implementations.
The best, most practical way forward when
contemplating material handling systems
choices is to learn from your peers. This
benchmark study is a chance to see what
type of automated systems companies are
choosing, which warehouse or order fulfillment
processes those systems address, and what
mix of partners—OEMs, integrators and
consultants—companies are tapping to help
design, deploy and maintain effective material
handling solutions.
Primary job function
18%20%
Executivemanagement
16%13%
Operations
22%24%
Engineering
10%14%
Warehousemanagement
9%7%
Purchasing
7% 5%
Plantmanagement
13%10%
Sales
5% 7%
Other
2015 2016
figure 1
Types of facilities operated
76%
67%
77%
75%
59%
63%
Manufacturing
DC/Warehouse
Warehouseconnected tomanufacturing
2015
2016
figure 2Responding organizations in both studies are
running multiple facilities; one out of four
(25%) operate at least five manufacturing
plants, one-third (32%) maintain over five
warehouses and distribution centers, and
one out of six run five or more warehousing
facilities connected to their manufacturing
operations. (See Figure 2.)
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
3
R E S E A R C HB R I E F
more to consulting firms and OEMs/system
manufacturers to architect their material
handling systems. (See Figure 3.) This may
indicate that many projects are further along
in the evaluate/design/build/install cycle, so
OEMs are taking a more prominent role. The
shift toward OEMs may further reveal that
material handling operations are becoming
more focused on results, and that OEMs are
going to be best able to install and maintain
their equipment as part of an effective whole.
The Decision Process for Material Handling Systems: Who’s InvolvedDesigning material handling systemsJust like in 2015, organizations believe that
their internal engineering group is best
equipped to handle the design phase for their
material handling systems platform.
While in-house engineering teams remain
the primary choice for systems designs, the
managers surveyed in 2016 are also turning
Organizations best qualifiedto design material handling systems
13%
19%
Consulting firm
37% 38%
In-houseengineering
29%
19%
Systemsintegrator
21%25%
The systemmanufacturer
2015 2016
figure 3
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
4
R E S E A R C HB R I E F
The implementation of manufacturing or
storage software applications also involve
a committee that is largely comprised of
executive management, operations, IT, and
engineering. Interestingly, the 2016 research
shows that companies are less likely to involve
operations and IT for their current applications
and software decisions. (See Figure 5.)
Installing material handling systemsDecisions regarding the installation of material
handling systems are largely established by
committee. While corporate executives and
operations managers are regularly involved,
organizations in the 2016 study appear to be
less reliant on IT and warehouse management.
(See Figure 4.)
Functions involved in decisionsfor the installation of material handling systems
56%59%
Executive
53%
47%
Operations
42%39%
Engineering
40%37%
Plantmanagement
37%32%
Warehousemanagement
17% 16%
Purchasing
15%
9%
IT/ISDepartment
2015 2016
figure 4
Functions involved in decisions for manufacturingor storage applications/software
53%56%
Executive
44%
38%
Operations
48%
36%
IT/ISDepartment
36%34%
Engineering
33%
28%
Plantmanagement
28%
23%
Warehousemanagement
12% 12%
2015 2016
Purchasing
figure 5
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
5
R E S E A R C HB R I E F
Spend on Material Handling SolutionsFor many organizations purchase decisions for
material handling systems in 2016 are shifting
to a more centralized approach showing that
the process is being taken from the facility-
level and is now apt to occur at corporate
headquarters. (See Figure 7.)
Executive management, engineering and
operations are recognized as the most qualified
for evaluating, purchasing and installing material
handling systems for their company. The current
study, however, shows a growing level of trust
with those involved in purchasing and plant
management job functions. (See Figure 6.)
Departments considered most qualified to make materialhandling systems purchase and installation decisions(Average score based on 5-point rating: 5 = Most/1 = Least)
2.682.61
2.632.59
2.152.61
1.992.30
0.550.84
Engineering
Operations
Executive
Plant management
Purchasing
2015
2016
figure 6
Centralization vs. decentralization of purchase decisions
46%
38%
54%
62%
At each location
Corporate headquarters
2015
2016
figure 7
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
6
R E S E A R C HB R I E F
Company spending, whether it’s purchasing,
installing or upgrading material handling
equipment, is down slightly from 2015. (See
Figure 8.)
On average, businesses are investing slightly
more on material handling software and
applications in 2016 than they did in 2015.
This is mostly attributed to some companies
posting a healthy increase in their spend levels
on storage software and applications. (See
Figure 9.)
Those planning to expand or modernize their
current facilities fell slightly in 2016. Yet,
among those planning expansion or updates
to existing DCs and warehouses, about one in
six (16% in each study) expect these efforts to
occur in three or more of their facilities.
Annual budget for installing new, or upgradingexisting material handling systems
$885,000 $875,500
Average budget
$88,200 $74,435
Median budget
2015 2016
%spending500K+
17%
2016
19%
2015
%spending
$1M+12%13%
figure 8
Plans for installing new warehousing and distributionsystems/facilities within the next five years
67%67%
60%
49%49%
46%
Plan to updateor expand DCs
Plans to install newDCs within 5 years
2015
2016
figure 10 As in 2015, slightly less than one half claims their
company will be installing new warehousing and
distribution centers during the next five years.
Of these companies, more than one out of 10
in each wave anticipates they will build three or
more DCs or warehousing facilities over the next
five-year period. (See Figure 10.)
Plans for installing new warehousing and distributionsystems/facilities within the next five years
67%67%
60%
49%49%
46%
Plan to updateor expand DCs
Plans to install newDCs within 5 years
2015
2016
Installing 3+DCs/warehouses 11%
2016
13%
2015
Annual budget for installing new, or upgrading existingmanufacturing or storage software and applications
$615,400$615,400 $631,400
Average budget
$71,150 $66,215
Median budget
2015 2016
figure 9
Annual budget for installing new, or upgrading existingmanufacturing or storage software and applications
$615,400$615,400 $631,400
Average budget
$71,150 $66,215
Median budget
2015 2016
%spending500K+
15%
2016
15%
2015
%spending
$1M+12%9%
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
7
R E S E A R C HB R I E F
Those choosing an equipment manufacturer for
their next material handling project are likely
to make this choice, in part because decision-
makers expect manufacturers to be the most
knowledgeable about the system, its inner
workings, and its capabilities as well as its
applications. Using the manufacturer would
also minimize any finger-pointing in the event
of a system failure.
Reasons for hiring a systems integrator to
implement and manage a material handling
solution is, from a practical viewpoint, based
on an SI’s knowledge and experience across
a range of systems. Logically, an SI would be
best at integrating disparate systems.
Usage of consultants for material handling
system needs is consistent across the two-
year period. Regarding these partnerships,
about one-half always or sometimes rely on
consultants while others rarely or never use
this channel. (See Figure 12.)
Advantages in using consultants for material
handling systems management are attributed
to their experience with a diversity of systems
designs and are often best informed about
available options and costs.
Organizations Used to Implement Material Handling SystemsWhen asked who would be considered for
material handling systems implementations,
systems manufacturers remain the top
choice. Engineering firms are growing as
a more acceptable choice while systems
integrators are less likely to be hired for these
implementations. (See Figure 11.)
“They would have the most real world
experience with companies like us. So, they can help us make the right decisions for our
specific needs.”
“Integrators are not usually tied to one
product line and can create a total system
using the best that many manufacturers
have to offer.”
Organizations to be used for next material handling systems project
45%47%
Material handlingsystems
manufacturers
33%
20%
Systemsintegrator
16%18%
Consultant
6%
15%
Engineering firm
2015 2016
figure 11
Usage of consultants for material handling systems
Always Sometimes Rarely Never
10%9%
41%37%
18%
16%
36% 34%
2015 2016
figure 12
“Our material handling equipment
manufacturer should have the most
knowledge of their solutions and how
to best make them work for our needs.”
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
8
R E S E A R C HB R I E F
Material Handling Systems Usage and Purchase IntentMaterial handling systems and equipment
range from static, structural systems such as
rack systems, to highly automated, software-
driven solutions such as automated storage
Material handling systems currently in use
66%66%
44%42%
37%29%
18%13%
17%12%
16%12%
12%10%
11%9%
11%9%
11%5%
14%13%
2015
2016
Rack systems
Conveyor/sortation
WMS
Robotics
Pick to light systems
Carousels/VLM
AS/RS
Voice systems
Shuttle systems
Put to light systems
Others
figure 13
Organizations having mechanized/automatedorder selection equipment
20%
2015
23%
2016
figure 14“We would look for a partner who understands and
is actively involved in the end-to-
end design and performance of the
system.”
& retrieval systems (AS/RS), inventory
management solutions, and robotics. While
North American warehouses are perceived
as being less automated than those in places
such as Northern Europe or Japan with high
labor costs, some level of automation is not
uncommon, as seen by the fact that roughly
one-fifth of companies surveyed employ
some form of automated system for order
selection/order fulfillment (see Figure 14), and
nearly one-half use conveyors and automated
sortation (see Figure 13.)
In particular, those using robotics are
employing them for applications such as pallet
building (40%), case picking (29%) and each
picking (22%).
So while one out of five respondents in
2015 indicated they use an automated order
fulfillment processing system, usage of these
systems shows slight growth over the last 12
months. (See Figure 14.)
Looking five years out, rack and sortation
systems are thought to be the solutions most
likely to be adopted. Curiously, the 2016 study
projects that technology necessary for efficient
inventory management and order processing
such as WMS, robotics and AS/RS will drop.
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
9
R E S E A R C HB R I E F
their five-year planning for more advanced
material handling equipment such as robotics
or AS/RS systems, and are only confident in
considering the more basic equipment such as
rack systems.
(See Figure 15.) While it’s difficult to pinpoint
why this modest drop is seen for certain
categories, it may be that economic volatility in
recent months has caused some organizations
to be more conservative when it comes to
Material handling systems planningto install during the next five years
46%43%
42%32%
31%19%
24%17%
18%12%
16%10%
14%11%
13%12%
12%12%
10%11%
15%6%
2015
2016
Rack systems
Conveyor/sortation systems
WMS
Robotics
Pick to light systems
AS/RS
Carousels/VLM
Shuttle systems
Voice systems
Put to light systems
Other
figure 15
“They have knowledge of new
systems along with costs and benefits.”
“They offer us the potential to learn
new ideas.”
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
10
R E S E A R C HB R I E F
improved uptime and optimal ROI are among
the improvements that operations are
realizing from highly proficient systems
(see Figure 16.)
Material handling systems implementations
and upgrades are transforming operations
and leading to significant benefits. Efficient
and precise material handling processes,
Benefits from operating material handling systems
86%83%
84%78%
83%75%
83%77%
82%78%
81%76%
72%66%
70%69%
2015
2016
Improvingefficiency
Maximizinguptime
Improvingaccuracy
MaximizingROI
Improvingquality
Minimizingdowntime
Fast orderfilling
Ergonomics
figure 16
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
11
R E S E A R C HB R I E F
evaluating material handling providers and
their solutions. Qualities also rating highly
important are after-sales support, design and
engineering most important. (See Figure 17.)
Characteristics Considered Important When Evaluating Material Handling Providers and Systems for Possible PurchaseDelivering systems on budget and on
time continues to be a prerequisite when
Issues considered important when evaluating material handling providers
88%86%
85%80%
79%77%
83%73%
80%73%
80%73%
80%73%
73%70%
80%68%
78%68%
68%68%
71%63%
59%58%
62%56%
63%54%
56%53%
34%36%
2015
2016
Deliver within budget
Deliver on schedule
Price
After installation support
Design/concepting expertise
Engineering expertise
Software functionality
Systems training
Interface/Integration issues(conveyor/rack/controls/software, etc.)
Integration experience
Installation time
Software flexibility and intelligence
Ability of supplier to manufacture product
Total project management services
Total contract management
Industry thought leadership
Prior experience with your company
figure 17
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
12
R E S E A R C HB R I E F
However, improvements over the past year have
been accomplished in areas related to rapidity
of order fulfillment, ergonomics, maximizing
uptime and reducing downtime. Conversely,
suppliers have slid on decisive operational areas
such as order accuracy and efficiency, ROI, and
overall performance quality. (See Figure 18.)
Evaluating Current Suppliers on Key AttributesInterestingly, the managers in both waves of
our research feel their current suppliers of
material handling systems could improve on
the quality of their service and support. In
fact, ratings on key attributes were all sub-par.
Rating material handling suppliers on…(Average score based on 5=Excellent/1=Poor)
2.242.28
2.002.26
2.372.21
2.222.14
1.922.08
2.222.01
1.221.75
2.121.65
2015
2016
Fast order filling
Ergonomics
Improving accuracy
Improving efficiency
Maximizing uptime
Maximizing ROI
Maximizing downtime
Improving quality
figure 18
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
13
R E S E A R C HB R I E F
software functionality and integration, but is
focused on results and system effectiveness.
This pragmatic approach can be seen in the
fact that respondents continue to see issues
such as delivering material handling projects
within a budget and on schedule as a top
evaluation criterion, as well as rating after
installation support highly (see Figure 17.) At the
same time, issues such as intelligent software
continue to be top of mind when it comes to
material handling investments, and when it
comes to longer term issues and technologies
influencing system investments, factors such as
“relentless competition,” e-commerce growth,
and the changing workforce gained slightly in
importance (see Figure 19.)
The Future of Material Handling AutomationLooking to the future, operations will focus
on and invest in areas related to software
integration, wireless technology, automation,
and programs aimed at staying competitive
in their respective marketplaces. In particular,
during the next five years the greatest
concentrations are expected to target
sustainability, labor management, IoT, and
urbanization. (See Figure 19.)
Conclusion: It’s All about ResultsThis most recent wave of our research shows
a market that is fully cognizant of needs such
as material handling equipment with greater
Trends in which companies will be investing over the next five years(Average score based on Highly likely=11/Not at all likely = 1)
2015
2016
7.166.69
More intelligentsoftware integration
6.445.94
Mobile andwearable computing
5.805.85
Robotics andautomation
5.635.83
Relentlesscompetition
4.935.73 Sustainability
6.605.62
Big Data andpredictive analytics
3.965.38
The growthof e-commerce
4.285.36
The changingworkforce
3.805.10
Sensors and theInternet of Things
5.714.30
Masspersonalization
0.682.26 Urbanization
figure 19
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
14
R E S E A R C HB R I E F
MethodologyThese research studies were conducted by
viastore systems, Inc., with the 2016 survey
serving as a follow up study to the benchmark
wave that was established in 2015. This report
was developed by Peerless Research Group on
behalf of Modern Materials Handling and based
on data provided by viastore systems, Inc. The benchmark study was executed in April
of 2015; the follow-up study was conducted in
March of 2016. Both surveys were administered
over the Internet among subscribers of Modern
Materials Handling magazine as well as among
lists from viastore systems.
The findings in the benchmark are based
on 306 material handling managers and the
results to the follow up wave are based on 292
participants.
Respondents in both studies are mostly
employed in manufacturing, wholesale and
retail, consulting services, and third-party
solutions providers. Companies of all sizes
are well-represented in each the respondent
base: slightly more than four out of 10 (42% in
2015/45% in 2016) are employed in companies
reporting under $50 million in annual revenues,
one out of four (26% in both studies) are with
mid-size companies ($50 million - $500 million),
while roughly one-third (32% and 29%,
respectively) are with organizations having
$500 million or more in annual revenues.
Respondents appear to be approaching
material handling system investments in
a level-headed way. They know there are
business trends like changes in the labor force
and the IoT they need to begin to consider
while pondering their system investments,
but the top priority is results. Systems need
to have minimal downtime and be fast at
processing orders. Providers need to be able
deploy their systems on time and within
the budget, while being adept at after sales
service, software integration, and designing
systems that work well as part of an integrated
whole. They want systems that are cost
effective in the short run, but can help them
adapt to the changing world in the long run.
As in last year’s study, there are a mix of
participants and suppliers involved in material
handling projects: operations managers,
purchasing managers, executives, OEMs,
systems integrators, and engineering
consultants. It’s notable that involvement by
executive management is up slightly this year.
That may speak to the increasing importance
of omni-channel fulfillment and logistics
prowess on corporate performance, and it
also is consistent with the notion that system
projects need to be practical and results-
focused, even as they address complex issues
like e-commerce fulfillment. Senior executives
know the macro trends, but they insist on
projects that are results focused.
Footnotes:1 “2015 Warehouse/DC Operations Survey,” Logistics Management, November, 2015.http://www.mmh.com/article/2015_warehouse_dc_operations_survey_industry_tackles_omni_channel_and_growth
2. U.S. Bureau of Labor Statistics, employment survey data, warehousing & storage. http://data.bls.gov/timeseries/CES4349300001?data_tool=XGtable
MATERIAL HANDLING SYSTEM CHOICES: PRIORIT IES AND PARTNER
APPROACHES OF PURCHASE DECISION-MAKERS
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R E S E A R C HB R I E F
About viastore systems, Inc.
viastore is a leading international provider
of automated material handling software
and system solutions.
System solutions include AS/RS
(automated storage and retrieval systems),
shuttles, vertical lifts, conveyor systems.
Software solutions include integrated
SAP supply chain execution, warehouse
management system, and warehouse
control systems software.
Our tailor made solutions deliver ROI
results and optimize a clients’ total cost of
ownership. Based in Stuttgart, Germany
with North American headquarters in
Grand Rapids, MI, the company employs
over 470 people worldwide and has annual
sales of over $140 Million.