Several market intelligence reports from commercial research organisations have recently given an optimistic view of growth in the warehouse automation market, which is excellent news for AMHSA members and other automated material handling system and software suppliers.
Interact Analysis, for example, interviewed and surveyed over 40 of the leading warehouse automation system integrators, suppliers and end-users over a six-month period. The research team’s report forecast that the global warehouse automation market will grow at a Compound Annual Growth Rate (CAGR) of 12.6% to reach $46 billion in 2023, although a temporary dip in revenue growth is predicted between 2020 and 2021.
The best growth is expected in the Asia-Pacific region (13.7%), with India’s warehouse automation market forecast to grow at an impressive 14.9%. The dip in the growth rate in the short term is attributed to businesses delaying capex projects in the face of political and economic uncertainty due to factors such as US-China trade tensions and slowing consumer demand in Europe.
Other stand-out figures in the Interact Analysis research include a CAGR of 98.7% for piece-picking warehouse robots – a rise made possible by continuing advances in machine vision, gripping systems and mobile navigation technology – and growth rates of 61.5% for AMR-based goods-to-person systems and 28.5% for ultra-high-density storage systems.
E-commerce drives growth
The Interact Analysis researchers attribute the double-digit growth in the warehouse automation market over the past few years to the rise of e-commerce and omni-channel retail, combined with labour availability issues resulting from record low unemployment levels in Europe and the US.
Consumer expectations of rapid, accurate and cheap delivery for goods ordered online have led many retailers to invest in intralogistics automation to reduce the time required for order processing and to respond to the complex nature of their distribution channels. Labour shortages in the logistics sector – fuelled by Brexit in the UK – have made operations even more difficult, especially in the e-com sector, where demand is more susceptible to huge seasonal peaks that are difficult to predict. The challenge posed by consumer demand for speed at the lowest cost in e-com deliveries will ultimately drive the growth in warehouse automation in the mid- to long-term.
5G is key
Another report by market research firm, LogisticsIQ, predicts that the next-generation supply chain market will be worth over $75 billion by 2030. The ‘next-gen’ supply chain encompasses not only robotics and automation, but technologies such as Artificial Intelligence, Internet of Things, blockchain, Augmented Reality, cloud computing, drones, 3D printing and wearables. Companies are seeking to leverage the IoT in their supply chains through the use of smart sensors and communication devices to enable real-time asset tracking, inventory management and predictive analytics. The rollout of 5G, beginning now, will make this possible by powering high-speed and high-quality mobile networks to cater for the increased number of smart devices in the supply chain.
Service revenue to rise
The Interact Analysis research points to another reason for system integrators to celebrate the forecast growth in warehouse automation: the resulting growth in (more profitable) service operations. Many warehouse operators are persuaded by the advantages of awarding their system integrator with a service and maintenance contract to ensure maximum system performance and availability. The ongoing and predictable nature of service contracts make them a valuable income stream for system suppliers.
As the number of installed systems increases, so the contract revenues increase. What’s more, the profit margins for maintenance are typically higher, compared to system sales, thereby improving overall profitability. This positive effect is more pronounced in the UK, where service contracts are more common, compared to markets such as Germany and the USA. The growth in e-commerce also has an effect here, as the competitive nature of this market leads online retailers with higher order throughputs to invest more in maintenance in order to minimise the downtime of their systems.