Systems Integration in Material Handling
Unlike the independent and nonprofit FFRDCs that the federal government uses to provide ongoing program management continuity, material handling systems integration in the private sector takes the form of a mosh pit of different business models.
Vertical Systems Integrators
Vertical systems integrators manufacture a majority of the equipment used in the project. The major conveyor companies in the US now fit into the vertical integrator model, where they provide the design, engineering, installation, and commissioning of the system. These companies will provide equipment manufactured in their own factories, internally developed software, engineering, project management, and commissioning support services. Very few companies can provide all of the potential equipment used in a complex system. They will outsource equipment platforms; conveyor equipment that they do not manufacture; controls devices such as photo eyes, scales, and sensors; the motors that drive the systems; the mechanical and electrical installation; and other materials and services.
Dealer integrators do not manufacture equipment. They sell to their customer the project management, design, engineering, procurement, installation, and commissioning of the material handling system. There is a broad assortment of dealer integrators. Some are simply sales organizations that provide project management and outsource all the other functions. Some dealer integrators support internal talent for design engineering and procurement. Some dealers can also provide the control software. Few dealer integrators provide the actual installation of the equipment, outsourcing the installation to contractors that specialize in mechanical and electrical trades.
Some dealer integrators may provide robust procurement services to their customers—the integrator shops the hardware for the system across multiple suppliers to obtain the best price for the customer. This approach allows transparent cost management—the dealer procures the equipment on a cost-plus basis, allowing the customer to choose the hardware manufacturer based on either price or brand preference. Other dealer integrators supply equipment from favorite vendors. This opaque pricing structure may hide financial arrangements between the recommended manufacture and the integrator.
Consulting Engineering Integrators
In this model, the client hires an engineering firm to assist in the design of the complex material handling system. The engineering firm provides a client-focused, collaborative pair of hands service, and the integrator performs the role of program manager. These integrators provide the design, engineering, controls engineering, procurement support, installation management, and commissioning support. The integrator will specify all of the subsystems, conduct contract bidding to vendors for the subsystems, and make selection recommendations to the client, and the client enters into a purchase agreement directly with the selected vendors.
The consulting integrator is the closest example to the nonprofit FFRDC model that the government uses for developing complex systems. This type of integration is highly collaborative among the client, the integrator, and the suppliers. Skilled consulting integrators fill the domain knowledge gap between the client and the various equipment suppliers. These integrators usually have a broader knowledge of current supply chain management practices, with a greater understanding of the functionality of the different enterprise management systems, warehouse and manufacturing operations practices, building architecture and construction, and equipment installation.
Note: Just as a reminder given the nature of this series, I am a logistician and IANAL (I am not a lawyer).