Material Handling Industry State of the Union – These are “Unprecedented Times”

The phrase "unprecedented times" is often used to heighten a reader's attention. The author is screaming: "Read this, do this - or else." When it comes to the current state of the materials handling industry, "unprecedented times" isn't just a buzzword to urge you to act – it's reality. Over the course of 2021, the impact of a constrained supply chain infrastructure was just the beginning. Coupled with significant rises in the cost of materials and a lack of skilled labor, the result is even longer lead times, additional steel surcharges, and an ever-shrinking pool of reliable labor available for manufacturing and distribution operations – all vital  elements to meet the rising demand for larger scale material handling and storage systems. 

Elongated Lead Times

Pre-2021, lead times for large pallet rack systems (from order placement to material shipment) typically varied from five (5) to eight (8) weeks. There were always exceptions, based upon the individual manufacturers and select, customized orders. That said, the 5-8 weeks rule was a reliable guideline in the prior decade. The "new norm" for delivery times is represented by the following current snapshot. While the manufacturer and product category can further contribute to extended times, we are now preparing for 5- to 6-week minimums for most categories, stretching out up to 10 months.

Proactivity is key: to keep most available options open for your consideration, it is imperative that discussions start up to 30 weeks in advance for 2022 implementation. Lead times are in constant motion, so it's essential you determine a detailed project scope and secure your project funding as soon as possible. Because lead times and estimates are based on a series of assumptions, it is best to plan well ahead to prepare for any eventuality.

Not all products are affected by these changes in lead times: panelized fencing, security partitions, and modular, in-plant offices and structures have managed to keep a tight watch and are keeping to the old standards.

The Continued Rise of Steel Pricing

In my 35-year tenure, the cost of materials has never been as volatile. We've become accustomed to consistent and ongoing increases in 2021 and accept that we will not see a downturn any time soon. Replacing stock for a basic product such as a 4,000 lb., 96" beams has been eye-opening. Unit costs per beam have risen 87% over the course of 2021. It's been difficult to explain these skyrocketing costs, especially to repeat customers that didn't see this coming, year over year. Rising costs are a reality not just for materials, but for freight and labor rates as well. We are all getting a reality check as the situation develops, but are also staying close to economic advisors who track data points and trends every day.

Skilled Labor Shortage

Consensus today is that the skilled labor shortage will remain a significant challenge for all businesses for an extended period. Between a lack of applicants, a lack of specific skills, high turnover, and higher wage rates, coupled with the fact that younger workers are more excited about technology-based work rather than manual jobs, staffing challenges are prevalent. As a result, it is important to start thinking how you can get more out of the labor you have in place now. Efficiencies must be gained through the introduction and adoption of automation to address greater throughput efficiencies. Consider this where autonomous and repetitive processes are involved: the business case for an Automated-Guided Vehicle (AGV), or an Autonomous Mobile Robot (AMR) may be knocking on your door. Right now, the case for business viability may take precedence over the past expectation for a 3-to-5-year payback. If chosen selectively, automation can be more reliable and require less maintenance. After the initial set up, turn your automation equipment on and then get to work!

What will the next three years look like for you? What are you doing today to not only address the business constraints, but planned future growth and capacity? Based on the number of inquiries we receive for automated alternatives, industries are seeing the way forward. McGee is prepared to help you take the first steps. Contact us for a free consultation so that we can address the optimal area(s) for you to consider more automated options. It is the future!