EP 591: Making Digital Transformation in Warehousing Work
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The New Warehouse Podcast hosted by Kevin Lawton is your source for insights and ideas from the distribution, transportation, and logistics industry. A new episode every Monday morning brings you the latest from industry experts and thought leaders. And now, here's Kevin.

Hey guys, it's Kevin with the New Warehouse Podcast here and we are at ProMat 2025. And joining me today, we have Craig Henry with Murr Electronics and Doug Shukart of Beckhoff. And they're representing the solutions community, MHI Industry Group. Obviously, MHI puts on ProMat. So we're going to get some inside information from them. We're going to talk a little bit about digital transformation. But first, I'll ask you both, how's the show so far?

Good. Yeah, definitely good foot traffic, good conversations, solving customer or industry problems. Nice. Solving industry problems. I like that. What about you? You solve your problems too? Yeah, I'm trying to solve some problems. One of the problems is my knees are killing me. I think I've run 35,000 steps so far.

But again, exhausting is usually how these things go. But the good side of it is it is 30 sales calls in three days and then great interaction in the events after hours. Promat is the center of the world when it comes to a trade show for this industry, as you know. It's the Mecca. It is the Mecca. And I think it's fantastic. I don't miss it. And

when every year I've got to come to this. Definitely, definitely. And, you know, obviously we're here and we see a ton of technology, right? A lot of digital solutions here. We want to talk a little bit about digital transformation. So, I'm interested to hear from both of you, what would be your definition of digital transformation? Well,

Well, I would say digital transformation, you know, in the past companies were kind of blind because everything was just discreet wire. They didn't have a lot of data that told them what was happening down on the fulfillment operation or distribution operation and, you know, peak seasons and so forth, trying to optimize and need a lot of data. There's a lot of focus nowadays on AI. Right.

But all that requires a digital transformation to get that big data and then come up with solutions to use that big data to improve, optimize, and be able to better see what's happening in operations. Yeah, absolutely. Yeah, what Doug said.

Yeah. I'm not going to do it. I'm going to contribute. No, seriously, the digitalization is super important because we don't know what we don't know. Right. And it's about visibility. You're going to turn on the lights in the corners where you've never looked before, and then you're going to now understand if you use the tools, and you can use AI or you can just examine what's going on,

through regular diagnostic methods, what is really happening in the industry. And we're going to eke out more efficiency, more throughput, more utilization, all these pieces. And the other side of the coin is if you don't do it and just say, you know what, we're going to just do things the way we've always done things. Statistically, companies that are doing that are not staying around. It is that significant a difference. Definitely falling behind. Yeah. Digitalization,

isn't just to make things digital because it's techie. It is to see what you couldn't see before. And something that came up in a talk yesterday, I did something about on AI for the conveyor group. And

a gentleman in the audience he asked a question and he was like well i have this customer and i want to be able to sell them on this and i want to know how long it's going to take and should i do a pilot and how how long in this and he wanted a lot of his answers and my my answers to him was i'm sorry but you just don't know what you don't know yeah but you got to start and although that was painful to hear i'm sure because maybe it does take a month maybe it takes a year we don't know how long it's going to take to analyze something uh simple or complex but

But you have to go and learn and find out what you don't know. And it's as simple as that. And there are so many great tools here, but you have to have a strategy. Yeah, yeah, absolutely. And so if we look at this show here, and you just mentioned the conversation you had yesterday, definitely. But I'm curious, Doug, too, maybe some of the conversations you're having on the floor here. And what are people really maybe struggling with or they're seeing as a challenge when it comes to kind of making this transformation?

Well, I think part of what Craig said there, they're grappling with like, what do I do? How do I get started? You know, what's the first step?

And again, it's start gathering the data. You don't always have to have a use case. You don't always have to know how you're going to use that data. Sometimes the data actually directs you as to what you're going to do with it because you'll see some trend in the data that might give you some idea of what you might be able to do, how you might be able to optimize some area of your operation where you're seeing a lot of issues, lower throughput, a lot of faults.

So I think that's the first thing is to make sure that you have a system that

that can collect that data and analyze that data. Once you start analyzing the data, then I think you can come up with some strategies. Sometimes those strategies are fairly clear. But I think the other one that's like low-hanging fruit, if you will, is predictive maintenance. Everyone is looking to provide better predictive maintenance. It is obviously a much better strategy than waiting for failure and having a lot of downtime. I would say so, yeah.

So, you know, collecting data and starting to predict when an event is going to happen and resolving that issue in advance. That's probably the easiest one. And I say easy. I'm not saying it's easy because you still have to figure out, okay,

what's the life of a product or what's the data that's telling me that something's about to fail? Is it higher vibration? Is it use of more energy? And really it can be all of those things, but you do have to analyze that data and start looking at the trend. If you weren't seeing a lot of vibration in this area before and all of a sudden you have a significant amount of vibration or all of a sudden you're using a whole lot more energy, it is indicative of something.

Interesting, interesting. Yeah, and I think it's, you have to get started, right, like you said earlier, right? But having a system to collect that and start to see those things, right, it kind of unlocks a lot, right, in a sense. And some of that is that predictive maintenance, right? And obviously, we don't want downtime. You know, if we think about operations, you know, downtime is probably one of the

The worst words that could come up, certainly, right? So when you start to get a harness on this data, right, and you put some kind of system in place, you know, one of the things is predictive maintenance and being able to see, like, what's going on. But what else does that open up in terms of, like, opportunity, right? Maybe there's opportunities to get visibility into things that were kind of there but you didn't really see before. Well, I think this jumps into...

You know, the operational effectiveness, the OEE of equipment is more than just one metric. Right. You may find, you look at data and you say, okay, I've got bots working in my warehouse here and they're operational 36% of the time. Why is that? Hmm.

I want 90 plus, you know, or I have these kinds of failures and you do root cause analysis and find these things out. There's no end to what you can discover about the operation. I think when you step back and look at the 10,000 foot view, it really gets down to Peter Drucker's

he said it very clearly that if you can measure it, you can manage it. Right. But if you can't see it, you can't manage it. It's out of your control. And the biggest problem in our industry is labor. Right.

labor is expensive. It's more expensive than ever. It's harder to find. We're understaffed all over the place. So automation now isn't just going to be here for, hey, that we found a place where we can squeeze a little more out. We have to do something with mechanization and automation as well. So that's layered on top of the digital story. So you want to put them together, I think, which is really not answering your question, but I'm just saying it's

that's also a layer where you can get more throughput, more speed, more safety, more maybe another shift that you didn't have. There's all kinds of opportunity there. We're in a time right now that's a renaissance, in my opinion.

in this industry. It is astonishing to me, having been doing this for decades, that supply chain and logistics is the hottest market on earth. I never thought that would happen. I would say, oh no, it's this other tech here and it's that. It really is. There's a Key Vision company that's here in their annual report and they say they have one growth area, one growth market. It's not automotive. It

It's not CPG. It is logistics. Nice. And that's where they expect double-digit growth. I like that. I'm kind of wandering off. We all like that. We like that. Everybody here likes that, right? Likes that, yeah, for sure. Definitely, definitely. And only by the grace of God do I find myself in this industry. I stumbled into it a while back, and I've loved it, and I've stayed in it.

Absolutely. And I think that's an interesting point there that you said that, you know, you have some bots and they're only like 36% utilization, right? What's happening? And some of the conversations I've been having this week, right, is talking about, you know, where there's some implementations of these automation projects or bots, whatever the case may be. And then ROI is just not getting realized, right? So I'm curious, do you guys think that, you know, sometimes maybe...

these operators or these companies, they're, they're going in, in the wrong order, right? They're not getting like that initial digitization in place, maybe getting that data visibility that we talked about. And that's, what's leading to that. What are your thoughts on that? Well, I do have a thought on the order because, um,

you have to have systems that support gathering the data to have digitization. So if you aren't thinking about the automation equipment and the types of systems that support digitization, you're going to probably get into a situation right away again where you're like, well, now I want to do this, but

I don't have a field vessel support carrying this data. I have to put a separate communication path for the data. I don't have a PLC that supports putting a database on it and collecting the data and doing analytics of the data at the edge. I have to

put a separate edge device somewhere or I don't have the right communication to the cloud to be able to do separate analytics in the cloud if it requires that with some type of learning model or whatnot. So I think that's a part of it that people have to really kind of step back and look at their systems because otherwise

you can add a bunch of sensors, but you're going to add a lot more complexity. What are you adding those sensors? How are you collecting the data that you're trying to gather? Plus, if you're specifying the right systems, you also can get some of that data directly from

the sensors that you already have from the motors that you already have there are servo motors available in the market today for instance where you uh they're sending across the encoder humidity vibration temperature all that data automatically coming through but again if you don't have a field bus that can support the data because it has a negative impact on the throughput

then you're not going to be able to take advantage of that. So that's where EtherCAT really shines in the industry because you have a significant bandwidth for collecting that data. And of course, you could do it through a separate network, but it just adds a lot more complexity.

Yeah, yeah. What do you think about that? I think that's exactly right. And I think with our companies, Peckhoff and Merr, we both are preaching this get your signals as quickly as you can to IO-Link, to EtherCAT, to Profinet, to whatever network is intelligent so that you can make real the dream of the digital twin. The missing piece...

Well, I told this joke yesterday during my presentation. It didn't go over very well. It's probably not going to go over well here, but we're going to give it another shot. So Steve Martin, back in the day, he did a bit where he said, read my new book, How to Live Like a Millionaire. Step one, get a million dollars. Yeah.

We expect that all of this stuff's already in place, that Doug just described, but we don't have that in place. We have these black boxes, the field devices are invisible, but we're expected to somehow do predictive maintenance on those devices. And the thing that makes it really difficult is

The thousand different people that did a thousand different programs and PLCs, we can't get access to that. We don't want to change that. The great thing about these networks, as he mentioned, you can sniff that stuff. You can get that if you put in that infrastructure. And there's a place, and I'm coining a phrase called the missing middle. The forgotten middle, really, is the way to put it. The forgotten middle is this place is going to do all this benefit if you put it in those networks. And consider doing...

simplified wiring that might cost you a little more but will pay back big time in that respect. So I think that is a key nugget right there. Yeah, absolutely. That Doug came up with and I wish I had come up with. Because with that and that bad joke, I'll never be on the show again. I'm sure. I'm quite certain. No, no. I think the joke landed. What do you think? Was there a joke? Well done. And check, please.

So, I mean, I think that's a great point there, too. And I think your last point as well there, you know, while maybe it's more of an upfront cost, right, the long term, right, is going to pay off those dividends. So, I mean, I guess because it's hard to see, too, I think sometimes, right? I mean, you know. Which part? The data and everything. I mean, it's essentially invisible, right?

It's kind of like floating around us, right? I don't believe in electricity anyway. It's magic to me. I'm a mechanical engineer, so it's all... But anyway, go ahead. Go ahead. Yeah, yeah. How do we get these lights on? I don't know. It just happens. I flick the switch. That's all I know. So, I mean, it can be hard sometimes to see that and kind of maybe think about, like, oh, we need to make that investment in that. And what does that actually mean for the long term? So, I guess, how do you kind of...

combat that challenge a little bit and how do you kind of convince people advise people that they need to spend that upfront cost I want to take this one are you okay with that fair enough so there's two things one

I think everyone should strategize before they digitalize because just being digital alone, although you can probably stumble into a lot of great things, you need to understand what your business is about, what your dashboard is about. Not everyone is optimizing or trying to make the best out of the same factors in a business. Is it profitability? Is it customer service? Is it quality?

where is it that you're going to find yourself in the place in the market that your competitor is not? So you have to have a strategy and then just do industrial engineering 101. But then when you get to, okay, we need to find out about this. We need to optimize these things

Then go get the tools and get all the data from those areas. Develop the right dashboards and have these projects whereby you can make that big leap forward. Not the two or three percent, but boom, we have a 30% increase because we identified this is the place where we can, it's in a sense, a bottleneck. It's essentially a bottleneck, not necessarily for throughput, but a bottleneck for the industry. So you have to get that strategy right.

And then keep in mind, there's a gentleman named Brian Lee. I saw it manifest. And he said something really, I was amazed by this. If you think about it, in the 1600s, everyone still had to get their food. Everyone had to get their goods. The person who made it

brought it or the person who wanted it bought it. We have created all these problems. Yeah. He said all this complexity of making something in Vietnam and shipping it to wherever by various means and then distributing it through distribution centers. It's this complexity we have created. Yeah. So let's get back to some simplicity. Hmm.

And not try to make it complicated, even though we have these complex technologies around. And I know that's a hard thing. It's easy to say, but in that implementation, I always encourage people to find people like Doug, who know what they're doing, and get them, trusted advisors, to go in and help you do that. But you have to ask the right questions as a company. You can't just say, give me some of that cool technology stuff. And I know that's not what people are saying, but still...

That's a place where if you can be as informed as you can about what it is you're doing and then go and get to people who have that technology and get them to implement it for you with your very crisp, clean, this is what I want it to do. I think that's how you win.

And I agree 100%. The only caveat I would give to that is you do have to make sure you have the right control platform first. Then you can plan or strategize your digitization. But if you don't do the control platform first, then you may not have the... Exactly. You can't go to NASCAR with your bicycle. Exactly. You're never going to get there. Exactly.

Definitely, definitely. I think really great advice here from you both and very insightful too to look at this digital transformation, really how to navigate it and I think understand it too as well. And obviously you guys are with the solutions community, right? And part of the goal of the solutions community is to educate on some of these things and help people navigate this. So tell us a little bit about how do people tap into the resources that the solution community puts out there?

For one thing, things like this. I mean, Kevin, you're doing a great job with podcasts like this. Sometimes you get a tough guest. I'm sorry, I said that out loud. Sometimes you get a tough guest, you know. I'm sorry. But seriously, like speaking on the industry, speaking on topics that are relevant to people in the industry and relevant to, you know, either important topics or, you know, issues facing the industry and how those issues can be solved.

So it can be podcasts. We're doing a lot of white papers in the different work groups, including the solutions community. We're also coming together. A lot of times we're competitors, but we're coming together in a bipartisan. Can we say that? We're bipartisan. We're very bipartisan. Sure. Coming together and...

In that sense, making sure that when we're at the solutions community, we're peers. We're working together to solve problems for the industry. We're not really competitors when we're there working together on that. Right, right. We're working the category and, you know, the rising tide is going to raise all ships, right? And I think that's, you're exactly right. I don't have time to be at odds with competitors. I think may the best man win is how this whole system works.

So, yes, to get back to the community, we are, I'm so impressed by MHI. This organization is well-funded, well-managed. Everyone who's everyone is involved in it and want to contribute. My contribution, questionable, but, I mean, we all know. Well, the jokes. Do you have, like, the evening gig where you do stand-up? No, I don't do stand-up. You should. You heard the joke earlier. Yeah.

Well, the other ones I laughed at. That was the only one I didn't laugh at. The other ones I didn't. Listen, before this goes over the edge, I think if people go to mhi.org and also a lot of links here at ProMat and coming to the show, it's not expensive to come to the show. If you have any interest and you're out there and you're not exhibiting and you're not one of these technology providers, come out.

There's dozens and dozens of people who I'm sure would be excellent at solving this as well. And certainly we can help. Maybe there's an email or a phone number that you could give for us. I may or may not answer based on if I'm in Germany. I'll give them your phone number. Okay.

But we would love to help, honestly. Yeah. And the whole organization here is terrific, and I'm so glad you're part of it, Kevin. Yeah, absolutely. We've been doing this for a while, and you're the only one I know that's doing, like, warehouses are sexy. That is a great tagline. Definitely. Well, I think we just said that. Logistics has become sexy, right? I don't know if I used the word sexy, but it was implied. You didn't, but it was implied. I was getting what you were picking up. Especially the way you said it. Yeah. The way I said it was, you know.

So really appreciate you both coming by and we'll definitely put contact information for you both in the show notes so people can find it and also that link to the solutions community so they can learn how to tap into those resources as well. And I think it's great to hear that you guys are collaborative in that sense, even though maybe you may be buying for same customers at certain times.

But I think based on what we talked about today, right, that gap is still there. And the industry needs to work together to kind of close that gap and bring the industry up together as well. And it's great that you guys can do that and help build that. So thank you so much for joining me here in the booth. And great to talk to you here at ProMat 2025. You've been listening to The New Warehouse Podcast with Kevin Laughton. Subscribe and check us out online at thenewwarehouse.com.

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