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Expert Insight: Sorting it Out
By Cliff Holste
Date: Feb. 25, 2009

Logistics News: Using All Available Resources to Plan your Next Material Handling Automation Project in Distribution

In this Capital Deprived Economy, Now may be Time to Take Advantage of the Material Handling Expertise Often Offered for Free by MHA Providers; Something of a True Free Lunch

Several years ago, when I was in a sales/consulting role, I spent literally several years working with a mid-sized medical products distributor developing the concept of what ultimately became a very successful materials handling automation system.

My boss, the owner of the company, thought I was wasting my time. I wasn’t being paid for the effort. This “prospect” was a mid-sized, privately held company, though highly profitable. But decisions to automate and spend a sizable chunk of capital don’t come easy for these kinds of companies, as I have seen many times.

The point of this story: that company received a lot of literally free consulting advice from me on what the system design should be, what it would cost, and where the ROI would come from. I also served as a real catalyst to keep the project alive over more than two years, and I really believe without my efforts the concept would have died – and the company would never have implemented a system that in the end paid off very well for them.

Only materials handling manufacturers and system providers can “afford” to spend that kind of effort. For them, or some of them at least, that effort is simply considered as the cost of the sales process.

What do they get out of it? They keep a project alive. Build relationships. Gain insight into the real needs and internal dynamics of the company. And, they certainly hope, to get some preferential treatment for their efforts when the system vendor is finally chosen, or at least “win the ties.”

Consultants, who make money only from selling their time, obviously can’t afford to invest that kind of effort that a equipment vendor can, since they don’t have the potential of a large system order down the road.

The consultants would say “you get what you pay for,” and they are generally right. Still, especially in times like these, this vendor consulting option may be worth considering, especially if a budget for consulting help is not available.

Another key point to remember right now: new systems take a long time to get going and ultimately become funded. Right now may actually be an excellent time to begin concepting and exploring ideas, for potential systems that could become a reality in 2010, when we all hope the economy is in a much different place – especially if you can do so on the cheap.

Rare Example of Something for Nothing Being (Often) Worth Something

For most MHA providers, this practice is known as consultative selling and is considered to be an essential part of the selling process. As such, it is commonly offered free of cost and obligation to the customer. The cost incurred becomes a part its sales overhead and operating expense.

There are limits to the time and effort, of course, and the skill of the people you may engage with for this help varies widely.

The provider is in a sense gambling that it will have gained favor when it comes time to close the deal, at the same time knowing that this can take months, even years to play out, eventually leading to a go/no-go decision. It’s a high stakes game as the project may never be approved, or in the end lost to a competitor. But right now, with volumes down, more should be willing to make that bet.

As a potential buyer this “freebie” has both risks and rewards:

  • The quality and validity of the provider’s proposal will be based on questions they ask and answers you provide. You are responsible for your answers. They will probably not spend much time, if any, challenging you, at least not during this “getting acquainted/dating stage”.
  • The provider may offer more than one proposed solution at different price points. While this is good, they will all be based on the application of equipment and services available in the provider’s tool box, which may or may not be your best choice.
  • The salesperson has a vested interest in seeing this through to a successful conclusion and will therefore be doing whatever is appropriate to promote the project, including setting up site visits to see the proposed equipment and/or similar systems in operation.  This effort will keep the project alive even when your focus may be diverted.
  • Having gone through this process you will gain insight and a broader understanding of your specific operational issues and possible solutions.  This, plus the concept drawings, budget proposal, and documentation furnished by the provider, are very valuable building blocks regardless of whether you proceed with the project or not.

Hopefully, eventually your project will be approved. If at that point you have concerns relative to the proposed solutions and which one (or any) is the best choice, you always have the option of hiring an independent consultant or industry expert to evaluate it and advise you. At lease up to that point, your project has advanced at little or no cost to your company.

I would love to have your thoughts on this.

Agree or disgree with Holste's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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profile About the Author
Cliff Holste is Supply Chain Digest's Materials Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.
Visit SCDigest's New Distribution Digest web page for the best in distribution management and materials handling news and insight

Holste Says:

It’s a high stakes game as the project may never be approved, or in the end lost to a competitor. But right now, with volumes down, more should be willing to make that bet.

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