Material handling, which includes the movement, storage, and protection of products, is only as effective as the technology it relies upon. And each of the industry’s primary subsegments—including cranes, conveyors, and forklifts—has its own markets, technologies, and capabilities.
Traditionally, material-handling subsegments have been highly fragmented. This fragmentation has allowed manufacturers to specialize in their respective areas, benefiting from existing brand recognition and relatively stable competition. In recent years, these subsegments have closely mirrored economic cycles, further allowing manufacturers to benefit from comparatively steady growth.
Today, however, manufacturers are having a harder time adapting to a number of trends. Urbanization and an aging industry workforce have required manufacturers to offer progressively integrated and automated services and products. Accelerating adoption of e-commerce on a larger scale is putting additional pressure on the segment with regard to SKU granularity, delivery times, and responsiveness. Furthermore, the advent of artificial intelligence (AI) and automation has created new market subsegments for automated guided vehicles (AGVs) and automated storage-and-retrieval systems (ASRS), both of which are growing at a much faster rate than traditional subsegments and creating significant challenges for OEMs.
Industry players cannot take success in material handling for granted: the approaches, methodologies, and reliance on macrotrends that worked in the past will no longer suffice. Our research points to a need for greater market integration and investment in R&D and equipment. Four pathways can help manufacturers adopt new automation technologies: moving toward a more integrated market, diversifying through partnerships or acquisitions, innovating in-house technologies, and revamping delivery models to reflect evolving customer needs.
Segment snapshot: Varying levels of automation and growth
The material-handling market has three use cases for equipment: warehouse management, shop-floor operations, and field operations. These spaces share a few common drivers of success, such as accuracy, reliability, and cost efficiencies. In warehouse management, key success metrics include picking and sorting speed and tracking accuracy. Shop-floor operations tend to value timely delivery of products to production lines and low operating costs. Finally, the field-operations use case benefits from mechanical capabilities such as construction, mining, and ports, as well as the flexibility to handle multiple operations simultaneously.
Across these activities, five equipment categories address product-movement needs, with automation playing a particularly important role in warehouse management (Exhibit 1). For example, warehouse cranes and hoists often assist with loading and unloading material in storage bays, conveyors help quickly select the right materials based on production needs, and ASRS technologies can efficiently move storage bays to optimize pickup time.
An analysis of 25 US companies across all three activities shows relatively high TSR, with better performance on the automation-heavy side of the segment. Fittingly, ASRS has the highest TSR, primarily because it has market share in both automated and conventional segments. In other words, companies that provide ASRS equipment, which accounted for five out of the 25 in our analysis, are also typically established in traditional subsegments.
In terms of growth across regions, the Americas are forecast to have the highest market CAGR by region and type of equipment, followed by Asia–Pacific and Europe (Exhibit 2). That said, global market contraction is occurring in the crane market, likely due to reduced capital expenditures and the increased sophistication of crane technology. As a result, the crane market has become highly dependent on new developments, meaning market contractions will only be partially mitigated by the expected growth in infrastructure and warehousing in the Americas and Asia–Pacific.
The shift toward increased automation is primarily occurring in the Americas and Europe, driven by the push to increase cost efficiencies in regions with higher input costs. Meanwhile, the market in Europe shows only marginal growth, given the lower impact of e-commerce and lower investments in infrastructure. Across regions, however, growth in AGV and ASRS is outsize, with increasing market share virtually unaffected by the COVID-19 pandemic.
Market trends: Performance variability and common success factors
The need for automation—and the concurrent push to collect and store the amount of data necessary to support advanced analytics—is the result of ongoing trends in the broader material-handling market, which can require different actions by manufacturers. Specifically, each segment must contend with specific trends based on its resilience to the COVID-19 crisis, the impact of market-investment schemes, changing regulations, and increased customer demand for automation or digital solutions.
Each segment must contend with specific trends based on its resilience to the COVID-19 crisis, the impact of market-investment schemes, changing regulations, and increased customer demand for automation or digital solutions.
The following market trends provide an overview of how the segment is shifting:
- Growth in e-commerce and SKU proliferation. Customer expectations around material handling are always changing, especially regarding same-day delivery, uncertain product volumes, and individualization. Yet manufacturers must contend with shorter overall lead times and increasingly complex logistics, mostly due to an increased number of warehouses and the need for locations closer to customers. Furthermore, greater risk brings about higher shares of variable and fixed costs (such as labor and space), while individualization leads to decreasing order sizes and more frequent unit handling.
- Increasing urbanization and changing demographics. Manufacturers often make use of networks of warehouses, or “warehouse footprints.” However, increased urbanization has led to higher property prices, making low-cost warehouses harder to find. Furthermore, the push for same-day (or even one-hour) delivery is making it increasingly difficult for distribution hubs to respond to orders quickly. In other words, distributors want to be closer to end users and thus need higher numbers of smaller warehouses closer to cities. Regarding demographics, manufacturers must contend with an aging workforce as well as an overall scarcity of labor. The former affects the segment as a whole, while the latter affects particular areas in which skilled labor is needed, such as crane-and-hoist operations, ASRS, and AGVs.
- Rising investment in infrastructure. Infrastructure players are investing in new renovation projects in some regions, particularly Asia–Pacific, and in infrastructure renewal. In addition, the development of new warehouses requires the relevant underlying infrastructure. As companies move into renovated factories, they are likely to adopt increasingly automated solutions, particularly if they require cold-chain distribution or clean rooms.
- Increasing focus on costs and cash. Buyers will need to focus on reducing inventory to free up working capital in order to contend with more frequent shipments and faster throughput times. Not as significant, but still relevant, is an increased focus on longer replacement cycles for capital equipment, which requires a shift toward low-maintenance and long-life equipment. On this point, warehouse-automation solutions are a key investment.
Many of these trends were already affecting material handling and have only accelerated since the onset of the COVID-19 pandemic. Furthermore, heightened awareness of sustainability and climate change has resulted in changing regulations. It’s thus unsurprising that many manufacturers have heightened their focus on health and safety. In the cranes subsegment, for example, rigorous emissions norms are anticipated to create demand for “hybrid” models, emphasizing the need for retrofitted power units or new cranes altogether. Conveyors face increasingly stringent safety standards, especially for the movement of harmful products. Safety requirements are also becoming more important for trucks.
Finally, the automation-friendly subsegments face health and safety challenges of their own. AGVs must address blind-spot accidents, reduce the need for human labor in hazardous conditions, and achieve predictable movements that are less prone to accidents.
Each of the five subsegments has specific trends related to its resilience regarding the COVID-19 crisis, new regulations, and demands for automation and advanced analytics. As the market changes, the 25 companies we analyzed have experienced wide variability in performance (Exhibit 3). And while two subsegments show higher TSR than the others—ASRS and industrial trucks, forklifts, and material movement—there are variances across the data. The conveyor subsegment remains competitive, with many players earning close to the median. Other subsegments, such as cranes and hoists, show relatively even TSR spreads. Overall, some subsegments are naturally positioned to respond better to trends. Because of this, diversifying or differentiating offerings should be top of mind for material-handling companies.
Common success factors: Cost control and M&A
Despite high levels of variation, certain success factors have come to define top performers. For starters, cost control clearly differentiates market leaders and laggards, especially during a public-health crisis that has led to increased regulations and changed the dynamics of tariffs. Costs are becoming increasingly important in segments that focus their growth strategies on emerging markets or small and medium-size enterprises, such as AGVs. All segments, however, achieve margin performance by managing operating costs, improving supply-chain performance, optimizing design, and adopting new digital platforms with advanced-analytics capabilities. Furthermore, the best-performing companies managed to flex cost much more efficiently than lower-performing companies. In fact, leaders showed a 0.2 percent cost variance per 1.0 percent increase of revenue from 2015 to 2019, while laggards showed 2.4 percent in the same period.
Those that develop fully integrated solutions via M&A tend to see higher TSR returns, though few material-handling companies have leveraged acquisitions to grow their performance (Exhibit 4). We analyzed 11 leading companies and found that they focus investments on complementary product lines—such as industrial equipment, material handling, and AI—resulting in an average TSR growth of approximately 12 percent per year. Overall, leading companies consistently pursue acquisitions, which make up about 70 percent of the analyzed investments.
For example, one German manufacturer of industrial trucks improved its TSR by 130 percentage points over the past eight years, mainly through M&A, boosting the company to top-quartile performance. Other examples include expanding digital solutions, increasing the value proposition, and expanding markets in India and the Middle East.
Taking action: Four potential pathways
Material-handling leaders often secure their pole positions with strategies tailored to the maturity of their respective segments. Historically, this has meant fueling growth by providing top-tier service— particularly through new digital capabilities—and superior cost management. Today, however, process optimization, increased investment in R&D and equipment, and new disruptive business models are growing in importance. Four pathways can help manufacturers succeed in the years to come.
Moving to an integrated market
E-commerce growth requires a much tighter integration of providers and services than anything currently offered by a single company. Due to the fragmented offerings in each subsegment, achieving the operational excellence to respond to same-day delivery, volume uncertainty, increased individualization, and lack of logistics in urban areas would not be feasible. Instead, incumbents need to diversify and expand their offerings toward a comprehensive suite of capabilities. Acquisitions or horizontal integrations with upcoming players at the forefront of technology—which can provide different types of material movements—can achieve the necessary diversification.
In markets with strong brand recognition, such as cranes and hoists or trucks and forklifts, incumbents can leverage their existing presence as a bridge toward product acquisition. Alternatively, joint ventures or partnerships would also be beneficial in that they allow new players to enter the market and drive growth.
Either way, capturing growth in e-commerce requires a move from submarkets to an integrated market, which can be achieved at different levels of scale and scope. While this doesn’t necessarily mean that a crane provider acquires a conveyor provider, such integration can be achieved in the “connection point” between the two types of product movement. When services are adjacent, such as conveyors and forklifts, a full partnership or acquisition is a potential solution.
Diversifying through acquisitions or partnerships
Inventory reduction, longer replacement cycles, and the switch to automated solutions have increased customers’ focus on costs and cash—which in turn has a ripple effect on providers of material-handling equipment.
Inventory reduction has the same effect as growth in e-commerce, driving the need for more efficient distribution channels. In addition, tighter cash control is capping growth for capital-intensive industries, such as cranes, conveyors, and ASRS. Strict cost controls to facilitate lower capital expenditures from customers and new delivery models, such as long-term pay-per-use contracts and leasing-and-rental contracts, are becoming necessary to remain competitive.
New delivery models can also help. Industries separated from material-handling markets are starting to shift to the “RaaS” (robot-as-a-service) model to drive mutual advantages for customers and capital-equipment providers, reduce initial customer expenditures, and provide regular streams of revenue to providers. Some companies are already providing rental agreements for RaaS equipment.
Investing in in-house technology development
Rapid urbanization is resulting in changing demographics. To ensure cost competitiveness in a market with existing and forecast labor scarcity, especially in areas with aging workforces, the push toward automation is critical.
In Asia–Pacific, rising costs are fueling the automation wave. In subsegments where automation is already present, such as AGVs and ASRS, technology capabilities—such as customization, system flexibility, and integration with the Industrial Internet of Things—are facing increased competition. In subsegments with less sophisticated technology, such as forklifts and cranes, automation is increasing through substitution (for example, from forklifts to AGVs) and better integration with other material-handling equipment (for example, the integration of cranes with on-the-ground distributions or with ASRS). Here, the main differentiator between leaders and laggards is how much cash is available for investment.
A ‘one-stop solution’: Revamping delivery models to reflect evolving customer needs
The market is set for growth, but not all players will be ready to capture the benefits. Winning companies will need to create “one-stop solutions” that rely on efficient models to facilitate easier delivery to customers, including a low-cost base and the ability to dilute capital expenditures. Integrated offerings across adjacent subsegments can also provide one-stop solutions. This could mean strong joint ventures and partnerships with OEMs playing in adjacent segments or with standardized and immediate-to-implement interfaces to enable equipment communication across multiple material-handling subsegments. Either way, the goal is to ultimately provide a seamless integration of all types and modes of material handling.
Material handling has always been about keeping up with changing technology. Whichever pathway is the best fit, manufacturers will need to pursue higher levels of automation through improved cost efficiencies to release resources for investments, enhanced digital technologies, and advanced-analytics capabilities. The pieces of the puzzle may be shifting, but the goals remain the same. The only way to succeed is to quickly and accurately connect with customers where they are and to fulfill their needs as they change over time.
Vineet Gupta is a partner in McKinsey’s Silicon Valley office, where Shekhar Varanasiis an alumnus; Daniel Mongrain is a consultant in the Montreal office; and Paolo Tosato is an associate partner in the Boston office.
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Continuous material handling is the means used to process the flow of goods or certain products along their route. It represents the evolution of traditional handling, which is a staple in our warehousing facilities. This handling allows storage, production, reception, picking, etc., tasks to be done.How can materials handling equipment contribute to the success of materials handling management? ›
Material handling is made easier using Material Handling Equipment such as forklifts and order pickers and includes activities such as loading/unloading trucks, palletizing goods, retrieving goods from storage to be shipped out, and more.How can we improve material handling process? ›
- Increase Production. Whenever your material flows slowly (or even stops completely) it affects all downstream processes and increases total production time. ...
- Lower Cost. ...
- Prevent Safety Hazards. ...
- Improve Quality Control. ...
- Find Your Flow and Improve Material Handling Efficiency.
Standardize the handling types of equipment to the extent possible as it means interchangeable usage, better utilization of handling types of equipment, and lesser spares holding. Install a regular preventive maintenance program for material handling types of equipment so that downtime is minimal.How do you ensure continuous quality improvement? ›
- A focus on improving services from the client's perspective.
- Meaningful engagement at all levels is required for success.
- Recognition that all processes can be improved.
- Continual learning using an “all teach, all learn” philosophy.
- Decision-making is improved by using both data and team knowledge.
A well-designed material handling system can improve customer service, lower costs and reduce the risk of accidents and damage. With a material handling system in place, products will be easier to find, orders will be filled more accurately, and there will be fewer worker accidents and injuries.What is effective material handling? ›
Work involving material handling should be simplified reducing, combining, or eliminating as much excess movement as possible. Recall that the shortest distance between two points is a straight line and when applicable, use gravity to assist or move materials.What are some examples of good practices in materials handling and storage? ›
Wear appropriate personal protective equipment, such as a hard hat, safety shoes, gloves and glasses. Provide and maintain clean, clear access to warehouses, storage areas and stored materials. Keep aisles, travelways and exits clear and free of slip, trip and strike-against hazards.What are any two systems to improve the material handling? ›
Dedicated robotic systems and robot cells represent a fundamental shift in material handling systems. These solutions deliver a much higher work output than any person could, and are especially suited to strenuous, repetitive tasks.What is the most important process in material management? ›
Materials Management Process
Purchasing: Purchasing the right amount of goods is important for two reasons. First, it ensures the end-user has everything they need to operate. Second, this process can minimize the amount invested in storage and stored inventory.
Instead of manually lifting, safely use equipment where possible. Pushing, pulling and carrying can all be avoided by using conveyors, lift trucks, slides or hand trucks. Reduce the weight or the force needed to move the load. Pushing and pulling can be simplified by reducing the load.How do you ensure proper resource utilization? ›
- Use technology for improved productivity. ...
- Maintain optimal resource utilization. ...
- Conduct in-depth project planning. ...
- Track hours. ...
- Monitor available resources. ...
- Focus on upskilling and outsourcing expertise. ...
- Review resource utilization regularly. ...
- Create an active task board.
Cost effectiveness: The effectiveness of the material handling system can be measured in terms of the expenses incurred per unit weight handled. Equipment utilization ratio: This ratio can be computed and compared with similar firms or in the same over a period of time.What are some examples of continuous improvement? ›
Employee training, skills development, cross-training programs, educational benefits, and courses can all be seen as examples of continuous improvement. Most employees will come into a job with a particular set of skills and competencies and develop some more in their day-to-day work.What is an example of continuous improvement in quality? ›
Another process of continuous improvement involves reviewing employees' performances. Here's an example: A department manager conducts yearly reviews to assess their employees' performances. After the reviews take place, the manager uses these reviews to identify areas where the team needs further training.What are the five ways in the continuous improvement? ›
- Step 1: Define. Identify the target process. ...
- Step 2: Identify. Identify the process customers and suppliers. ...
- Step 3: Select. Establish desired performance goals. ...
- Step 4: Implement. Develop an action plan to achieve the goals. ...
- Step 5: Evaluate. Establish ongoing feedback.
- Management Support. Devoting effort to identify root causes and develop solutions take time away from the day-to-day work. ...
- Understanding of the big picture. There would be numerous opportunities for improvement. ...
- Involvement of people. ...
- Delivering value.
Four Principles of Continuous Improvement are as follows:
Principle 1: Stop fixing and start improving. Principle 2: The best practices are the ones you already have. Principle 3: Changing behaviour is more important than changing processes. Principle 4: If you aren't failing, you aren't trying.
The Continuous Quality Improvement Cycle is a series of steps – Plan, Do, Study, Act – for structuring a CQI practice.What is one of the important principles of material handling? ›
The standardisation principle of material handling believes that all methods, equipment, controls, and software should be standardised within the limits of achieving the performance objectives. This should not sacrifice the needed flexibility, modularity or throughput.
Objectives of Material Handling
The primary objective of using a material handling system is to ensure that the material in the right amount is safely delivered to the desired destination at the right time and at minimum cost.
Materials management uses inventories and production requirements for planning and control to ensure materials are available as required to meet production schedules. This material planning includes managing logistics, stock levels, materials quality, cost and more.What are the three main material handling activities? ›
These early methods treated the three basic stages of handling—materials collection, manufacturing, and product distribution—as discrete steps, and materials were moved in individual rather than bulk units.What is material handling process in industry? ›
The material handling process specifically refers to how materials are stored, organized, treated, moved, and otherwise processed on a smaller scale, within a building or from a transport vehicle to a building and vice versa.What are the two main functions of material handling? ›
Functions of Material Handling:
ADVERTISEMENTS: (a) Minimization of movement of semi finished items during the production process. (b) Planning movement of optimum necessary places in one unit.
1. Purchasing 2. Central service supply 3. Central stores 4.How does material management contribute to the success of organization? ›
Importance of material management
As shown, material management is vital to ensure the steady flow of goods for production purposes to satisfy customer demand. It also guarantees production schedules are met. Moreover, it can help save production costs while maintaining product quality (TWI, n.d.).
- Physical Capital.
- Human Capital.
- Cost. When looking for various construction materials, one will realize that the rate varies extensively. ...
- Climate. ...
- Durability. ...
- Availability. ...
- Sustainability. ...
- Maintenance. ...
- Aesthetic Appeal. ...
The most effective approach to materials handling problems is an analysis, if the situation demands it. A number of methods of Analysis are available to the materials handling engineer, who must be able to form. Structure and tools used is connection with them there are a number of elements common to all of them.
- trying a less risky option.
- preventing access to the hazards.
- organising your work to reduce exposure to the hazard.
- issuing protective equipment.
- providing welfare facilities such as first-aid and washing facilities.
- involving and consulting with workers.
Some of the common hazards associated with material handling include: Falling materials and collapsing loads that can crush or pin workers. Back injuries due to improper lifting techniques. Struck-by material or equipment hazards.How do you increase efficiency and utilization? ›
- Track your Current Productivity and Utilization. ...
- Analyze, Analyze, Analyze. ...
- Improve your Planning. ...
- Manage Customer Expectations. ...
- Create a Productive Working Environment.
Proper utilization of resources is important for maintaining productivity, because it prevents staff from underperforming or being overburdened by workloads and burning out. Projects can be managed with better visibility, reducing the risk of oversights. Maximum utilization of resources gives you a better ROI.How does material handling improve productivity? ›
With effective materials management, chances of stock-outs are minimized. Materials are stored at appropriate locations, for easy movement. All this ensures that plant and workers do not lose any productive hours and hence maximum utilization & higher productivity are possible.How do you describe material handling? ›
Material handling is the movement, protection, storage and control of materials and products throughout manufacturing, warehousing, distribution, consumption and disposal.What is the term used to describe continuous improvement? ›
Kaizen is an approach to creating continuous improvement based on the idea that small, ongoing positive changes can reap significant improvements. Typically, it is based on cooperation and commitment and stands in contrast to approaches that use radical or top-down changes to achieve transformation.What is meant by continuous process improvement? ›
Continuous process improvement is defined as, “The ongoing improvement of products, services or processes through incremental and breakthrough improvements.” It doesn't only mean that a business should make changes along the way when things aren't working smoothly.What are the main purposes of material handling? ›
The main objectives of material handling are as follows: It should be able determine appropriate distance to be covered. Facilitate the reduction in material damage as to improve quality. Reducing overall manufacturing time by designing efficient material movement.What are the characteristics of a good material handling system? ›
In most cases, you'll find these three characteristics: cohesion, coordination and connectivity. An integrated system incorporates all machines, products, practices and processes. An integrated system permits and encourages the continuous flow of materials throughout the entire process.
Employee training, skills development, cross-training programs, educational benefits, and courses can all be seen as examples of continuous improvement. Most employees will come into a job with a particular set of skills and competencies and develop some more in their day-to-day work.What are examples of continuous improvement in the workplace? ›
- Optimizing a process. ...
- Implementing brainstorming. ...
- Editing your team's work. ...
- Reviewing employee performances. ...
- Simplifying purchasing methods. ...
- Maintaining health and safety. ...
- Managing potential risk. ...
- Recognizing cause and effect.
Some examples of continuous processes are pasta production, tomato sauce and juice production, ice cream production, mayonnaise production, etc .How do you measure success of a process? ›
- Efficiency = production time / total process time.
- Throughput = number of units produced / production time per unit.
- Error rate = total units produced / total number of errors.
- Quality rate = (total number of quality units / total number of units produced) x 100.