Warehouse Automation: Fantastic Growth...but
Beware the Automation Highway
Keep the pedal off the metal and get an expert to ride shotgun
Ripple Redux:
Once again John Ripple is back on our pages with another of his insightful forays into warehouses and material handling. John is an outstanding automation analyst who has lived the experience of automation, and has the dirty fingernails to prove it.
John is an analyst, automation expert and a fine writer. We’re overjoyed to share his insights with our global readership.
Making Money with the Top 10 Material Handling System Suppliers
If it sounds too good…
It sounds too good to be true when designing wondrous mechatronic systems that will rocket your operation into Industry 4.0 territory. It’s heady company up there.
But wait, didn’t Elon Musk tweet that excessive use of robotics automation caused “production hell” when launching the Model 3. Later clarified by (tweeting): “Yes, excessive automation at Tesla was a mistake. To be precise, my mistake. Humans are underrated.”
Maybe there are two lessons here: 1) Be careful on social media. 2) Excessive automation can be bad.
Elon was right. That hellish experience applies in varying degrees whether you’re installing a small army of robots to build a cutting-edge electric sedan or installing a few robots to pick, pack, and ship your products. Indeed, the benefits are there, but it’s a rough ride on the way. Why so?
Reason 1: Unprecedented growth.
Over the last 5-10 years, the automation industry has experienced unprecedented growth. By some accounts, more than half the people working in industrial automation have less than 5 years’ experience. That’s about 5 years shy of becoming “Experts” per Malcolm Gladwell. Meaning there are intelligent people, but with little practical real-world automation experience that are responsible for designing and building automated systems. The “Experts” are still wet behind the ears.
Reason 2: Excessive automation. Too much, too fast.
Either customers want or suppliers encourage biting off too much technology at once. Excessive automation is a relative measure. Your mileage may vary. If you are new to automated systems, it is better to start simple and build. Better to be evolutionary and live to see another day, than revolutionary and stumble in the leap forward. Resist the urge to go “all-in”. Realize you may be gambling with your company or career.
Reason 3: If you can’t define it, you shouldn’t buy it.
There’s little time to plan. Pace of business demands rapid solutions to urgent problems. It’s not unusual for suppliers in the automation business to report that their customers didn’t provide detailed requirements up front. Customers rely on suppliers to be Experts (see reason no. 1). Eventually, the “requirements” become evident at time of startup. The nature of many automated systems is that changes after the fact are intrusive, expensive, and even prohibitive. As the saying goes, “we do it twice, but we do it nice”. Make time to plan and do it right. Or else.
Way beyond lucrative
In 2010 the combined revenue of the Top 20 material handling system suppliers was $11.4 Billion USD. In 2015, they turned in $16.6 Billion USD. In 2019, they topped a whopping $23.2 Billion USD.
That’s better than a double in 10 years – not too shabby for the titans of the material handling systems industry.
In addition, mid-market and smaller robotics and automation suppliers experienced fantastic growth during the same period. There are numerous companies today that didn’t even exist a few years ago.
Warehouse Automation Requires Adaptability
Where we are today on the journey toward advanced technology
Fantastic growth requires people
The revenue numbers posted by the Top 20 are underpinned by engineers, project managers, manufacturing personnel, sales and system designers – the people needed to design, build, and install complex, customized material handling systems. Using an industry average $400,000 USD revenue per employee, we can make the following approximations:
In 2010 an estimated 28,500 people were employed by the Top 20 material handling system suppliers. In 2015 that figure rises to 41,600 people. By 2019, an estimated 58,000 were employed by the Top 20.
What does that mean to the customer installing material handling systems now? It means that 1 in 3 people involved in designing, building, installing, and supporting your complex material handling system have less than 5 years of industry experience.
Not even 1 in 2 have 10 years of industry experience!
As Malcolm Gladwell postulates in his book, “Outliers”, it takes 10 years to become an expert!
The customer is depending on the system supplier to be an expert, but a full half of the industry lacks the possible tenure to be so.
Fantastic growth requires vigilance
For the company which finds themselves in the position of requiring an automated system to remain competitive, it is a minefield.
There is a reasonable chance the project team designing and implementing the material handling system that will take your company to the “next level” is still green behind the ears.
What’s a person to do?
- You need experts on your side from concept to completion.
- Supplier reputation of 3, 5, and 10 years ago is of less importance than the team that will implement your automated system from concept to completion.
- Resist the urge to incorporate bleeding edge technology or adding complex systems in search of the last few points of return.
Foxes and hedgehogs
In his famous essay “The Hedgehog and the Fox,” Isaiah Berlin divided the world into hedgehogs and foxes, based upon an ancient Greek parable: “The fox knows many things, but the hedgehog knows one big thing.”
The nature of warehouse automation, system integration, and robotics is that technology is always evolving (mobile robots and COBOTS didn’t exist 10 years ago) and industry verticals traditionally reluctant to embrace automation are proceeding with new projects at a breakneck pace.
Suffice it say, the material handling automation industry today more closely resembles a fox than a hedgehog.
System integrators are expected to be knowledgeable across multiple verticals, equipment types, and solution approaches.
However, as Jim Collins says in his book “Good to Great”, those who built the good-to-great companies were, to one degree or another, hedgehogs.
The customers purchasing automated systems are hedgehogs in their own business and they rely on suppliers to be hedgehogs in theirs.
If you are implementing an automated system, you need an industry expert hedgehog on your side.
About John Ripple
John Ripple is co-founder of Esoteric Staffing, a veteran of the automated material handling industry, and industry advisor for robotics startups. He has led the startup of two robotics companies, building each to $20+ million revenue. His career spans the complete range: administration, sales, concept and design, project management, and after sales support. Ripple writes about the warehouse automation industry at Esoteric Staffing and can be reached at john@esotericstaffing.com