Shifting the focus to people

The trade association MHI is in high cotton right now. From March 17-20, it welcomed 800 exhibitors—many with lavish displays of eye-popping equipment and systems—and an estimated 25,000 attendees to the biennial Modex show in Atlanta. And by co-locating with a new transportation- and logistics-focused show called Supply Chain & Transportation USA, MHI, which already has double-barreled action going with Modex and its ProMat material handling-focused show, has solidified its position as a dominant player among vendor-based logistics and supply chain trade organizations.

MHI runs a very tight ship, and it shows in the professionalism of its staff and its events. Its recent success, though, can also be chalked up, at least in part, to being in the right place—meaning the right logistics market segment—at the right time. Since the start of the Great Recession in 2007, many businesses have cut costs by shedding labor and capping hiring in favor of investing in automated material handling equipment that can do the job more efficiently and cost-effectively. As a result, a lot of vendors in the material handling space, MHI's core membership base, have prospered greatly. So has, by extension, MHI.

But a new "State of the Industry" study by MHI and the consultancy Deloitte released at Modex concludes that the cost-cutting binge may have gone too far. The study, which canvassed 450 high-level supply chain executives across multiple verticals, warned that a "singular focus" on cost control could begin working against companies by choking off investments in "essential innovations that are the key to long-term growth, performance, and efficiency."

The study acknowledges that businesses expect to increase their supply chain investments during the next three years. However, in many cases, these investments "will be just enough to get by and not nearly enough to drive disruptive innovation and competitive advantage," MHI and Deloitte said.

The study suggests that businesses begin steering their capital investments toward people and software (think analytics). The supply chain field needs to add 1.4 million new jobs by 2018 just to keep up with demand, the study said. With older workers retiring and incoming talent in short supply, no one knows where the labor will come from.

Amazon.com, for one, isn't waiting to find out. The giant e-tailer staked out a very conspicuous presence at Modex—at the heart of the vast exhibit floor—with one goal in mind: recruitment. The Amazon armada was not there to talk up the company's value proposition to customers, but to demonstrate how cool it is to work there.

As for analytics, MHI and Deloitte said they were heartened that 80 percent of the survey's respondents viewed analytics as either very important or moderately important to their business. That embrace has come none too soon, because, as the report said, the supply chain side of the house is "a step or two behind the commercial side" when it comes to tapping analytics' full potential.

What's interesting about the report's conclusions is they are seemingly at odds with the views of most of the respondents. Over 70 percent said that "controlling costs" remains their top priority. However, the implication in the report's analysis is that, by sticking stubbornly to the cost-cutting mantra, businesses could be sacrificing long-term goals on the altar of short-term gains.

This is MHI's first stab at crafting a "State of the Industry" report. Only time will tell how it will evolve, but so far, we have to give it a tip of the DCV hat. MHI could have simply reported the research findings without comment. Instead, it dared to point out the potential risks inherent in staying the current course. So far, so good.