Dematic Rolling Along

October 6, 2006
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GRAND RAPIDS — A year ago, Dematic seemed to be the latest in a series of tragic manufacturing headlines.

Hampered by a 40 percent recession in its principal market, the materials-handling company was implementing capacity cutbacks, closing a plant in Wyoming, and restructuring the company as a whole. In June, corporate parent Siemens pulled out of the then-Siemens Dematic, selling its shares to European private equity group Triton and to Dematic management. Naturally, concern continued to spread within the community for the company’s future in West Michigan.

“One thing we can say: We’re engineers focused on innovation and next-generation products, taking care of our customers,” said Dematic President and CEO Prashant Ranade. “We have not done a good job communicating how well we are doing.”

In the last 12 months, the company has seen solid growth in sales volume and profitability. At the close of its fiscal year last week, Dematic had one of its healthiest backlogs in years. It added over $400 million in new U.S. business in 2005.

“We have the largest market share in our industry, and when the market went down, we suffered,” Ranade said. “We had to take some unpleasant actions, but our team did a great job of improving efficiency and aligning our resources to the market. We are ready to serve our customers.”

As it cut away excess capacity — manufacturing and otherwise — the company invested aggressively. For the first time in two decades, it upgraded its corporate offices, a $1 million investment. It funneled millions of dollars into research and development, most of that at the Grand Rapids-based Technology Center, producing the C-L100 & C-L200 Package Conveyors, a $50 million project that has already dramatically changed that section of the business. Launches planned for this week include the S-L 300 sorter and a new version of its order fulfillment software.

Within the plant, a $750,000 roller-making machine went active this month — a proprietary technology capable of producing one of the galvanized steel rollers that make up the conveyor lines every 1.8 seconds. The center was granted 12 patents last year, and filed for 16 more.

“And it’s all happening here in Grand Rapids,” said IT Product Manager Raghunath Thirikodu.

Now affiliated with Germany’s Dematic GmbH & Co. KG, the company today looks a lot like the Rapistan that launched in Grand Rapids in 1939. While other manufacturers have looked to low-cost countries or other outsourcing models, Dematic has worked to vertically integrate itself.

Regional engineering assets do exist to service the company’s 5,000 U.S. customer sites, but the entirety of the customer service operation is housed at the corporate office on Plymouth Avenue. Virtually all of the company’s manufacturing is accomplished within the adjacent 800,000-square-foot, 340-employee manufacturing facility.

“We had a consultant come to us who said, ‘How about you buy rollers in China?’” Ranade said. “We looked into it, and found that by investing in our facility, we could not only make rollers at a competitive price, but have a lot more flexibility doing it.”

Starting with the C-L 100 and S-L 300 lines, Dematic is no longer assembling its products at customer sites. Lines are now assembled and tested at the Plymouth Avenue plant, then shipped in pieces for easy installation at the customer site. The result, according to the technology center’s Stefan Jockusch, is a product that is “more expensive, but much less costly.”

The new lines have also set new design standards for ease of use and maintenance, energy efficiency and noise regulation, and are the industry’s fastest. With a sorting rate of 300 cartons per minute, the S-L 300 is 20 percent faster than the industry standard.

Advancements in the company’s other segments have been no less dramatic. Its software package is easy enough for most high school graduates to learn in four hours of training, but can still deliver sophisticated benchmarking data. And the logistics segment is rapidly adopting new technologies.

The highly publicized RFID technology is likely still five years away from widespread adoption, said Manager of IT Logistics George Feigley, but he is seeing large-scale migration to other new technologies, particularly pick-to-voice and pick-to-light.

One large customer, New York-based PepsiCo, was recently featured in The Wall Street Journal for its use of Dematic’s pick-to-voice system. The efficiency payback was immediate. At Wal-Mart, for example, where the beverage maker had been unable to keep up with supply chain pressures, loading-dock time decreased from two hours to 15 minutes.

Although Dematic will not likely invest in offshore manufacturing in the foreseeable future, it has proven one of the region’s more global companies. There are three countries represented within the management team alone, and dozens among its 400 local engineers.

“We have the largest engineering concentration of anywhere in the industry,” Ranade said. “The local base here is important, but our talent pool is not limited to any area.”

Dematic does have a global market, with counterparts in both Europe and Asia. As its U.S. base expands into these other markets, Ranade believes Dematic can be an asset, as it was recently for a large West Michigan customer looking to expand into Eastern Europe.    

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