The Economic Thermometer: How Are MHEDA Members Feeling?
January 2, 2024
2024 Material Handling Business Trend
The current economic uncertainty is driven by a combination of global supply chain disruptions, inflationary pressures and geopolitical tensions, leading to heightened market volatility and cautious consumer behavior. Members should monitor key performance indicators and proceed accordingly. View all 2024 Trends at www.mheda.org/trends.
The Economic Thermometer: How Are MHEDA Members Feeling?
By Nicole Needles
It’s always a topic of discussion and constantly on everyone’s minds: the economy.
Checking in on past trends and predictions for the next quarter is crucial in running a business, especially in the material handling industry. With the year coming to a close, The MHEDA Journal wanted to do a pulse check on how members are feeling about their businesses, the economy and where they are going from here.
Based on the Q3 2023 Key Insights Report from MHEDA and ITR Economics, there are a couple of conclusions drawn about the current state of the industry. Inflation is lessening, but we will likely not reach the low inflation rates of about a decade ago. Members should take steps for upcoming contraction as well as revisit their capital expenditure plans. Having cash on hand and preparing for stricter lending policies will also be beneficial.
Overall, MHEDA members are feeling optimistic or neutral about the economy in the coming months and going into 2024. Very few are feeling pessimistic about most aspects of the economy.
Many members, including Scott Fawcett of Bode, are taking this lull to better plan for their business.
“We are working on internal structure and making plans that we haven’t been able to focus on over the last few years. Now is the time to stabilize the house in preparation for the future,” he said.
Others are eagerly awaiting to see which direction this slower time will take everyone.
“Late 2022 to early 2023 economic slowdown has now turned into a robust, not quite furious mid-2023 booking season. While this is a very welcome change it’s too early to understand if this is a bubble or sustained trend. We will be closely monitoring quote activity and bookings as we close out 2023 as we try to plan for 2024 and beyond,” Troy Carter of Daifuku said. “Over the next 12 months, we are optimistic without expecting a significant change overall. We have been on an economic rollercoaster for a few years and barring any major incidences look forward to some stability in the short term.”
This is the shared sentiment of many MHEDA members as the economy is becoming a bit difficult to predict. Many are predicting that a recession is coming, which may still be the case but has yet to occur. The bottom line is that things are always changing.
“I have seen the sales environment change since the first of the year from every month being very strong to some months being very strong to some months being a little soft causing our year-to-date sales to be up just slightly,” David Cranston Jr. of Cranston Material Handling said.
Which Problems Are Sticking Around?
A few of the top concerns from members currently are not surprising. We’ve been hearing and thinking about these for the last few years. Members show continued wariness surrounding labor shortages, interest rates and supply chain issues.
With labor shortages, it’s important to not only be strategic in your hiring and recruiting, but it’s also important to keep current employees happy so that they aren’t prone to leave the company. Although labor shortages are an issue, it’s actually the prime time to hire material handling talent. You can read more about this on pg. 57.
Although the labor pool is ready to go, it can still be a challenge for companies to take on hiring costs or more employees, especially for newer or growing companies.
“We are monitoring our pipeline and the probability of our opportunities to support bringing on additional team members. Salaries are by far our largest expense,” Chuck Frank of Zion Solutions Group said.
Interest rates have gone up causing owners to have to take a hard look at their cash flow and spending.
“Interest rates have been the biggest impact on the commercial building side so many of our clients have tabled the expansion idea. As a result, we are modifying and improving their material handling needs within the space they occupy,” Fawcett said.
Supply chain issues are softening, but only marginally. The supply chain across all industries never fully recovered from the disruption of COVID-19 in 2020. However, members are grateful for the increased demand whether the supply chain is equalized or not.
What’s the Bright Side?
With all of the talk of detriments to the material handling industry, there are also many opportunities that members can take advantage of right now. These opportunities are so vast that they almost leave the difficulties in the dust. As previously mentioned, increased demand is a huge opportunity for MHEDA members in most sectors. It gives businesses a chance to secure lifelong customers and a chance to perfect processes.
Greg Brown of W.W. Cannon said, “Business is out there but you must have a robust marketing plan and a sales team that responds quickly and prospects continually. I’m always optimistic that there will be opportunities if we are poised to capture business as it makes itself available.”
As everything has a domino effect, the rise in demand is causing many businesses to increase the usage of automation. MHEDA members are getting a handle on automation, learning about it and implementing it in warehouses and everyday processes. If harnessed correctly, automated technology can be a game changer.
Automation is so prevalent in the industry, that it was not only included in the 2023 Material Handling Business Trends released by MHEDA, it’s carried over into the recently-released 2024 trends as well. You can read more about these trends on pg. 18.
As another effect of increased demand, e-commerce has become a quintessential way that consumers do business. Transactions have migrated almost exclusively online, and expectations for the lifecycle of online purchases are high.
“E-commerce has been very strong, and companies are figuring out the right balance of e-commerce vs. brick and mortar. While online shopping has slowed the demand remains high and companies continue to monitor expedited delivery and transportation costs,” Frank said. “This helps drive more fulfillment centers supporting increased demand for what we do. The other driving factor is the tough labor market. Companies are spending far more on automation to offset the lack of qualified and dependable labor.”
All of these opportunities and challenges are a direct result of economic changes and are key indicators of what’s coming next.
Where Will We Go From Here?
In typical MHEDA fashion, members are always looking forward. It’s important to have conversations surrounding the economy, trends and business practices, but it’s more important to act on these conversations. The MHEDA crowd plans to do just that.
Steve Johnson of Nashville Wire shares company plans for keeping the momentum going.
“We’re going to provide the best service and quality at the best value, maintain our great business ethics and not cut corners.”
Milt Tandy says that in light of the coming recession, Wire-Crafters plans to use it to its advantage. “History tells us a recession will last approximately 10 months. That gives us time to get our house in order and sharpen our blades. We will not panic when things slow down; we will work a little harder to be ready to run when the tide turns.”
Others plan to manage things wisely and take initiative when it comes to cash flow and inventory.
“We’re going to be diligent in measuring and managing expenses, be diligent with capital and resources, tighten our receivables as interest rates rise, etc.,” Scott Hennie of MH Equipment – Engineered Solutions said.
Keep an eye out for the Economic Forecast issue of The MHEDA Journal in Q1 2024. We’ll go more in-depth with statistics, insights and predictions from experts on the economy for the following year.
