Challenges faced by material handling companies

Sep 5, 2017 · 4 min read
AGVs in port logistics applications

Material Handling is an essential and significant component of any productive activity. It is something that goes on in every plant all the time. It entails the following:

· Providing the right amount of the right material

· In the right condition

· At the right place

· At the right time

· In the right position

· And for the right cost

· By using the right method

In order to achieve these objectives, the material handling companies face various challenges.

The top 5 challenges faced by material handling companies are mentioned below:

Labor Costs

In general, hundreds and thousands tons of materials are handled daily requiring the use of large amount of manpower while the movement of materials takes place from one processing area to another or from one department to another department of the plant. The forklift operator accounts for 96% of the operating cost over the vehicle life. Whereas, with an automated tugger solution replacing manned forklift travel, the vehicle can operate for approximately $3 per hour, 24/7. Moreover, high turnover rates results in expensive training regimen as operators come and go. The cost of material handling contributes significantly to the total cost of manufacturing. In the modern era of competition, this has acquired greater importance due to growing need for reducing the manufacturing cost. The importance of material handling function is greater in those industries where the ratio of handling cost to the processing cost is large. Today, material handling is rightly considered as one of the most potentially lucrative areas for reduction of costs. Almost every item of physical commerce is transported on a conveyor or lift truck or other type of material handling equipment in manufacturing plants, warehouses, and retail stores. These operators use material handling equipment to transport various goods in a variety of industrial settings including moving construction materials around building sites or moving goods onto ships. There is a shortfall of skilled labor to perform manual material handling. Companies are facing the challenge of solving truck driver shortage. High labor wages (in part due to low availability of labor) and medical costs add to skyrocketing costs of labor.

Material Management

When manufacturers don’t have full visibility to their inventory, they face the problems of either running out of stock at the wrong time or carrying too much stock and thus decreasing cash flow while increasing expenses to warehouse extra materials. Inventory shortage can lead to unfulfilled orders and unhappy customers. Figuring out where to store inventory to meet demand quickly — while staying within profitability margins — is a growing challenge as the retail marketplace struggles to balance online and in-store sales channels. Today, fifty percent of manufacturing expenses are tied up in materials, reinforcing the critical nature of efficient materials movement and management.


Downtime due to equipment damage can have devastating result. There are numerous costs associated with downtime. These not only include upfront and visible costs, but also hidden costs, such as overtime, loss of revenue, emergency service calls. Machinery that continuously breaks down has an extremely negative impact on the business. New survey of auto industry manufacturing executives shows stopped production costs an average $22,000 per minute. Manufacturers say they need better machine maintenance. While one minute of stopped production, or downtime, costs an average of $22,000, some survey respondents cite the figure to be as high as $50,000 per minute. With such high costs at stake, keeping production machinery operating smoothly is critical to a factory’s bottom line. Ensuring that all the machines are regularly serviced is an effective tool in preventing downtime. For most manufacturers down time is the single largest source of lost production time. It can be triggered due to material issues, a shortage of operators, or unscheduled maintenance.


Forklifts cause about 85 fatal accidents per year; 34,900 accidents result in serious injury; and 61,800 are classified as non-serious. Fatal forklift accident causes and where they occur:

· Crushed by vehicle tipping over — Mining

· Crushed between vehicle and a surface — Construction

· Crushed between two vehicles — Manufacturing

· Struck or run over by a forklift — Transportation

· Struck by falling material — Wholesale trades

· Fall from platform on the forks — Retail trade

Implementing a forklift safety program and effective training can prevent many of these accidents. Training can also prevent or reduce the severity of an accident related to the stability of a lift truck traveling with an elevated load.


Lower unemployment rate coupled with ever-higher hourly compensation makes it difficult for materials handling executives to retain best workers. Variable labor is a cause of concern in manufacturing as well as distribution facilities, which operate on extremely thin margins. 25% annual personnel turnover in warehousing and distribution has a negative impact on productivity.


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