You may have seen our recent article on expected consolidation among materials handling vendors, including one very large merger between two of the major conveyor system manufacturers we expect to be announced very soon. (See Consolidation is Coming - Very Soon - in the Material Handling Supplier Market.)

The bottom line is that many vendors view that there is simply not enough market – even in good times – for the number of MHE vendors in the US, especially in the conveyor/sortation system area. That is not to say that there isn’t a lot of market available – there is – but when you divide that across the number of US players, plus the growing number of international entrants, it’s hard for any one vendor to really get substantial market share.

And there are a whole bunch of European and Asian players in the US today. I don’t know for sure when the first foreign material handling manufacturer entered the US market, but I do recall that sometime around 1980, Kosan Crisplant opened a sales office in Fredrick MD.  With corporate and manufacturing facilities in Denmark, Kosan Crisplant, was well known throughout Europe for its Tilt Tray Sorter, automatic package induction technology, and advanced sorting logic controls.

To the surprise of many in the industry, especially domestic tray sorter manufacturers, they were quickly successful and sold systems directly to major retailers like K-Mart, Target, JCPenney, Mervyn's, and Sears, as well as other large to medium-size operations. Some attributed the rapid success to the level of quality and craftsmanship of the equipment, which negated any concerns there may have been relative to purchasing equipment manufactured and technically supported outside of the USA. 

Another reason for Kosan Crisplant’s early success in the USA market, and arguably the most important reason, was that these “big box” retailers were in the process of consolidating their small non-automated regional DCs into fewer large-scale, highly-automated DCs. They understood that a proven, high-quality, high-capacity sorter was an essential component to their being able to implement that strategy. At the time, Jim Smallwood, President and CEO of Kosan Crisplant USA Inc., told me that all they had to do to close a deal was arrange a trip to the factory and then visit a completed installation.

I believe that Kosan Crisplant’s sales and system performance success did more than just open the door to foreign material handling equipment manufacturers; it also dispelled the notion that, in the USA market, low price was more important than quality and performance.  This was a major wake-up call for USA conveyor manufacturers and the beginning of noise reduction and quality improvement initiatives throughout the industry that continues to this day.

I think US manufacturers need to make even greater efforts in this regard. It’s just one person’s opinion, but a few years ago I was told by a Project Manager of a well known home shopping-type retailer that their new EVP of Global Logistics and Distribution considered USA manufactured MHE equipment as being “inferior” to European standards.  While the PM made it clear that he did not necessarily agree with this assessment, that executive was not alone in that opinion.

Today, foreign vendors make up a significant and growing segment of the MHE industry.  Two of the largest system providers in the US are owned by foreign corporations: Dematic and FKI Logistex.  There are many other foreign corporations operating directly here, such as Beumer, Daifuku, Eurosort, Knapp, Schaefer, Vanderlande, and Swisslog, just to mention a few.

Take a look over your shoulder and you will also see that the Chinese are coming.  While they don’t have their act together from a marketing/sales perspective yet, they will be persistent and likely will have a big advantage in equipment costs. That will appeal to some segments of the market, even if the offerings are lacking in other areas.

As Bruce Bleikamp of Peach State Integrated Technologies commented in a letter on the consolidation article and prospect of one major merger soon, “While on the one hand, there may be one less manufacturer, companies purchasing automated material handling systems have even more sources to consider,” he wrote, referring not only to foreign entrants, but the rise of material handling systems integrators over the past few years.

US domestic manufacturers will have to continue to meet this foreign competitive challenge – and some will “bulk up” through mergers in response. While not all of these domestic and foreign MHE providers are “thriving,” the fact that the US market can support all of them at one level or another really says something.

In the end, this is a good thing for buyers - and for those manufacturers which can adapt.

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.