The good times are rolling at Hytrol

Earlier this week, I spent a day in Little Rock at Hytrol’s Executive Summit & Sales Meeting. Nearly 150 integration partners gathered to talk about conveyors, sortation, systems integration and how to win in the marketplace.

During a week that followed discouraging employment numbers and talk of a double dip, Gregg Goodner, Hytrol’s president, was both realistic and optimistic.

The realism: Gas prices and high unemployment are weighing on the consumer and manufacturers like Hytrol are dealing with higher prices on parts, components and raw materials. Both are a potential drag on the economy.

The optimism: Good things are happening for Hytrol. Sales are up 40% compared to the same period in 2010, incoming orders are up 38% and 48% of Hytrol’s partners are ahead of last year. That pace of improvement may not be sustainable, but the outlook for materials handling in 2011 and 2012 looks good. “Beyond 2012, I can’t tell you, but we are definitely in a growth mode,” Goodner told me. Over lunch, we discussed five trends.

What’s driving the growth: It is an odd time. Unemployment is over 9% and gas is nearly $4 a gallon, yet the materials handling industry is doing well. What’s up? Goodner sees a couple of dynamics at work. One is that despite the recession, some industries continue to prosper and invest. As Jim Cramer likes to say, there’s always a bull market somewhere. Another is that many companies postponed projects that had been on the books as far back as 2007. “There is some equipment out there that’s just worn out and needs to be replaced,” Goodner says. And, there’s the labor factor. Many companies have gotten used to getting by with less. They are automating now so that they can meet future demand without adding to their labor. Likewise, industries like food and beverage, that have traditionally just thrown more labor at the problem when business improved, are now turning to automation to pick up that slack. “Many of the companies we talk to are looking for ways to take labor out of their operations,” says Goodner.

The industry is going global: Over the last few years, several European automation suppliers have increased their US presence. Meanwhile, North American solution providers are looking overseas to increase their sales. Hytrol is among them. Currently, sales outside North America account for about 7% of Hytrol’s sales, a figure that Goodner wants to grow. While many providers are looking to India and China, Hytrol is focused on Latin America. “To compete in China and India, we would have to have a local manufacturing presence,” Goodner says. “Latin America is contiguous to the US. We can ship components to South America and work with local partners to assemble them. We can learn a new model closer to home and then see how that might apply in other geographies.”

New competitors create new opportunities: Just as North American materials handling manufacturers are looking abroad for growth, European and Asian suppliers are looking to our shores to expand their businesses. “America is still the largest consumer in the world,” says Goodner. “Offshore manufacturers come here because of that consumption and demand.” Hytrol sees these European and Asian companies as potential partners, not competitors. “They will manufacture AS/RS cranes overseas,” says Goodner. “But we can provide the conveyor and sortation solutions to complement automated storage solutions.”

3PLs are an opportunity. Third party logistics providers have traditionally invested in lift trucks, floor storage and pallet racks, not automated materials handling systems. That’s because 3PL contracts are typically short lived. The expansion of the Panama Canal may change that dynamic. “We think it’s going to open up opportunities for small, regional DCs on the east and gulf coasts to handle the product in those containers,” says Goodner. “That’s an opportunity for cross docking, which relies on conveyor and sortation.”

Talent is a challenge: It’s not all wine and roses. Goodner says that for the first time, Hytrol is challenged to find engineering talent willing to come to Jonesboro, Arkansas. It would be easy to write this off as an Arkansas thing, but other materials handling companies in other areas of the country are reporting similar challenges. “I think there are fewer students going into industrial and mechanical engineering,” says Goodner, who is involved with both the University of Oklahoma and the University of Arkansas. “And, many of the students coming out of those programs want to go to work for large companies or for Internet companies, not materials handling companies. That’s something we have to address.”

Bottom line, the world has changed since 9/11 and the recession of 2008. “I think the way people do business has probably changed for a very long time,” Goodner says. “We think we’re changing the way we do business and how we and our integration partners penetrate the market, but there are a lot of opportunities for companies that can change their business models as well.”