This summer I participated in four intensive workshops for the Material Handling & Logistics Roadmap. I will be writing more about this later, but one quick insight seemed worth sharing now.
One of the major themes in all four meetings was the need for standardization. Participants seemed to think of this term broadly—hardware, software, data, and processes. The desire for standardization of hardware was especially interesting because users of material handling equipment (retailers, distributors, and even consultants) have everything to gain through standardization, but suppliers see a threat to their “distinctive products”—at least that was my impression. The manufacturer of storage systems or conveyors risks “becoming a commodity” if his product is easily replaced by a better or cheaper alternative. When products are easily substitutable, the market typically drives them to commodity status and low margins.
Suppliers, therefore, have an incentive not to standardize equipment and other interfaces. By refusing to standardize hardware, software, and data interfaces, they protect their product lines and their margins. Now, I am not claiming collusion here(!) or that suppliers are not delivering great products, just noting that by ignoring or at least marginalizing the issue of standardization, suppliers are engaging in self-preserving behavior.
But that got me to thinkin’….
When an industry fails to meet or implicitly ignores a desire of its customers, it becomes a prime target for disruptive technology. Think Kiva Systems. Among other benefits, Kiva addressed a major complaint among users (and, importantly, among non-users) of semi-automated order picking systems—poor scalability. Most market solutions are very difficult scale up or down in response to changes in order volume. Enter Kiva’s bots and modular rack, which are relatively easy to scale in either direction.
So, back to standardization. If the distribution community really wants standardized systems that plug into other standardized systems, they will be willing to pay for it. Is the material handling industry capable of defining and accepting standards of equipment, software, and data, such that their customers can easily add new solutions to existing ones or exchange a better solution for an inferior one? Or is the industry acting against its own interests in so doing?
My sense is that a perceived need among a large enough customer base will eventually be met, by existing providers or new ones. That’s what markets do.