The impact of the MHI Roadmap to the Material Handling and Logistics industry

material-handling-industry-of-americaIn recent years the MHI (Materials Handling Institute) has reinvented itself. Originally founded back in 1945 as the MHIA (Materials Handling Institute of America), when it first came on the scene it was primarily focused on the core aspects of material handling. This meant that they centered their activities round things like AGVs (Automated Guided Vehicles), Conveyors, and WMS (Warehouse Management Systems).

MHI – The Industry that makes Supply Chains work

The new MHI takes a wider view on things in terms of the overall supply chain system landscape. They haven’t totally forsaken their roots in material handling,  but their broader take on things is spearheaded by the Institute’s new word-bite or tag-line, “The Industry that make Supply Chains work.”

The U.S. Roadmap for Material Handling & Logistics

In 2014 MHI seriously staked their claim as being an important driving force in supply chain management, when they undertook an 18 month long program to research and launch their “U.S. Roadmap for Material Handling & Logistics.”

The Roadmap report concentrates on what MHI refer to as “game-changing” technologies.  These technologies are:

  • Tools for optimizing networking and inventory
  • The development of sensor and automatic ID technology
  • Computing and data storage/analysis in the cloud
  • The development of automation and robotics technologies
  • Forecasting/predictive analytics
  • Mobile body-worn technology
  • 3 Dimensional printing technology
  • Remote, guided drones and vehicle technology

Adoption rate of game-changing technologies versus forecast increased sales volume 

MHI carried out a survey and charted the results. The survey looked to measure the adoption rate against each of their 8 supply chain technologies, against the forecast annual increase in sales, across the coming 5 year period.

The MHI technology chart showed that the technologies that currently enjoy good take-up rates, (e.g. inventory/network optimization tools) returned a modest forecast sales growth rate; in this particular case – 15%. However, technologies with a lower current take-up rate (e.g. predictive analytics) showed a faster forecast sales growth rate – 25%.

This MHI end -user survey also showed that 45% of respondents deem their organizations to be so-called “early adopters” of these new technologies. Only 19% deemed their organizations to be opportunist adopters. 46% of respondents classed their organizations as being forced into taking up these technologies by either regulations or competitive circumstances.

MHI recommendations regarding inventory/network optimization tool technology

Against each of the 8 technologies, MHI set out their thoughts what actions supply chain leaders should be taking in order to move forward.  There isn’t room within this short article to go into depth on each one of the eight, so we’ll just take a snapshot of MHI’s recommendations with regard to the way forward on inventory/network optimization tools.

The alignment of networks with end-user strategy

MHI recommend that the first port-of-call is to fully appreciate end -user needs and targets. Having done this, the next step is to establish the client’s worth in terms of sales revenue, against how much that client values that product or service. Having done that, clients/products can then be segmented.

This process poses such questions; which scenarios does the client favor? Lower prices or better lead times, or vice versa?   The answers to these questions are what will determine how the network is then to be designed.

The importance of accurate cost data

According to the MHI survey, a surprisingly large number of businesses use inaccurate cost data. The result is that their supply chains are based on data that is essentially and critically flawed.  MHI advocate that all decisions that use cost data, must use the latest cost data that is gathered by the supply chain’s networking activities.

Strange as though it may at first seem, MHI maintain that a significant number of companies have accurate variable cost data, but have difficulty when it comes to collecting fixed costs. This is a problem because of course fixed costs are misnomer. Fixed costs refer mainly to products costs rather than say shipping costs, and they vary over time.

In order to make sure that supply chain analytics are reliable, both fixed and variable costs data must be current.

Making the supply chain product specific – start small and expand

MHI say that a lot of companies make the mistake of trying to make a multi-purpose supply chain that fits everything. But because some products and/or services are so different and are governed by different factors and drivers, they simply don’t fit comfortably within the one general framework. It is therefore recommended that the supply chain should be based around one specific product or product line. One that is the most significant within the business and that is capable of generating rapid results.

Once successful supply chain experience has been gained, it may then be possible to use that experience to generate other specific supply chains for those other products that won’t sit happily with a one-size-fits-all scenario.

Training in-house staff

Unless the companies operating the supply chains are supply chain software specialists, it is extremely unlikely that they will design and build their own supply chain software programs. They will invariably source the software from a third party specialist. MHI argue that the problem here is that many companies do not include an allowance for their own in-house staff to be trained to maintain the programs.

The danger with this approach according to MHI is that without this in-house training and capability, companies will not be able to tweak and maintain the supply chain management software without outside 3rd party help.

MHI argues that if businesses do make this investment at the software design stage, they will probably improve their ROIs in the long term.

These insights relate specifically to inventory/network optimization tool technology. Each of the other 7 technologies listed has similar insights.

The 5 target areas behind the MHI Roadmap

The MHI Roadmap is taking on more credibility within the US supply chain sector. When first published in January 2014, it was a 67 page report, complete with action plan that had been specifically put together for the logistics and supply chain industry. Its aim was to improve the performance of US domestic supply change management and performance in 5 specific areas between 2014 and 2025. There areas are:

  • Increasing productivity
  • Reducing costs
  • Creating new jobs
  • Improving the competitiveness of the U.S. on the global stage
  • Positively impacting on the US standard of living

Where do we go next?

The MHI Roadmap provides a solid foundation for the US materials handling and logistics sector. It acts as a catalyst to build industry awareness of how effective supply chain management can impact on the US economy and standard of living.

Although it is US specific, there are many good lessons to be learnt that can be transferred. Download your copy by clicking here.

How relevant is the MHI roadmap to your business and the country your business is based in? Are there any other country specific problem areas you would like to draw the attention of your peers to? If so what are they?   Have your say at the feedback section below.

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