You have been following your standard business silos for many, many years. Let’s see, what do we have now:
New sales
Used sales
Parts
Service
Short-term rentals
Rentals with maintenance
Rent to own (maybe)
Other revenues and consulting
I am not going to get into the GP Margins, since today’s numbers are all screwed up because of the pandemic and material and chip shortages that in turn increased your cost and thus your margin dollars even if you sold units below your expected margin percentage.
And then the digital age hits you suggesting that you will have to modernize your systems and procedures to get more productive and thus improve your major KPIs.
And then AI hits you and everybody telling you what you need to do to further improve the use of your data to increase sales, manage inventory, manage service and parts transactions, upsell other work and equipment, train and manage employee levels, and complete this upgrade while you are still managing to get back on track once inflation cools down to a level you can work with.
Not only do you have to educate and plan for the future needs of your customers, OEMs, bankers, and employees, but your customers finding themselves in the same boat as you are going to expect guidance from you on how to upgrade their warehouse facilities whether they be a distributor or manufacturer.
There are tons of emails and webinars to suggest how to adopt both the digital and AI worlds and receive financial results that will make you and them more profitable because of being more competitive in your markets. Competitive meaning your costs are lower, and your transactions are completed faster, with systems now available to customers to allow them to find, order, buy, receive, and pay for what they ordered when they need it. And, if possible, they would like this to happen without having to talk to anyone.
Now you know what you must plan for.
An example of what will be coming down the pike is provided by a company called Symbotic. They provide automation technology that reimagines the supply chain by developing technology that uses AI-powered robotics and software to provide the most efficient warehouse solution on the planet. Walmart, Target, and Albertsons are customers.
Symbotic uses four steps to manage a warehouse.
The Inbound Cell, where they process incoming pallets into storage. They can process 1700 cases per hour, compared to manual operations where 90-250 would be the norm.
The Storage Structure, where products move at 25 miles per hour and are packed in ways that maximize vertical and horizontal storage density. As a result, customers can increase storage volume without increasing their real estate footprint.
Case Retrieval comes next where orders are moved to outbound lifts and sequenced to Outbound Cells.
Outbound Cells receive goods that have been ordered that are then palletized by density and stability at a cell rate of 1350 cases per hour.
The ROI is outstanding because of LOWER OPERATING COSTS, 5-9x OUTBOUND EFFICIENCY IMPROVEMENT, 30-60% FOOTPRINT REDUCTION, INCREASED PALLET CAPICITY, LOWER TRANSPORT COSTS, FASTER INVENTORY TURNS AND 99.99% TASK ACCURACY.
Sure, this is not cheap to do at present, but I can assure you that it will be available for more users sooner than you think. As your distributor or manufacturing warehouse customers read about results like this using robots and systems to reduce costs that would make them more competitive in their market, they will want data and input about these types of systems, which in many cases will fall into your lap for answers and suggestions.
Now, knowing these changes are coming, let’s go back to your silos and see how they may change. The BIG change I see is in the CONSULTING AREA. Customers want more from their vendors. Customers will expect a lift truck dealer to provide ideas and suggestions on how to reduce costs and improve efficiency. If you cannot do that, they will find someone who can.
Many dealers provide services regarding warehouse operations using internal staff or “partners’ that have more technical expertise to improve upon the systems and procedures currently being used. I assume OEMs would also want to participate in ways where their equipment could be used as more digital changes come into the marketplace.
As far as the other silos are concerned, I can see new units that can provide robotic drivers would be in demand at much higher price levels. I can also see that the parts and service business would need to keep these units working and have a very high utilization rate. I don’t see these types of units being utilized through short-term rental but more in line with rental with full maintenance, priced at a premium because these units need to be working at maximum utilization.
So, you need a very good group of techs. Maybe the warehouse consulting group has its own parts and service department. Your parts fill rate will also have to be close to 100%. Partnership arrangements of some sort would have to be made with warehouse system developers that could engineer a change in the AI world.
There is going to be a lot of money to be made to help distributors and manufacturers reduce their overall material handling requirements. But these opportunities will cost the dealer as well and they develop the expertise to service their customers to a new level of profitability.
About the Columnist:
Garry Bartecki is a CPA MBA with GB Financial Services LLC and a Wholesaler columnist since August 1993. E-mail editorial@mhwmag.com to contact Garry.
