Warehouse automation market set to grow, despite short-term pain ahead

It’s increasingly common to find robots at work in warehouses and distribution centers around the world, and the trend is expected to continue as shippers, third-party logistics service providers (3PLs), and others look for ways to increase productivity and efficiency in their logistics operations. But we’re living in tough economic times, and a recent report shows that the heavy investments companies made during the pandemic years are likely to slow a bit before picking up over the longer term. A host of factors are converging that may cause companies to scale back on projects this year and next, according to a January report from supply chain research firm Interact Analysis.

“There are four major factors having an impact on the market in the short term—the Ukraine-Russia war, lower investment by Amazon, changes to commodity prices, and rising inflation rates,” the company wrote in the fourth edition of its Warehouse Automation report, released early last month. 

It added that those activities were expected to “stunt growth” across the market in both 2022 and 2023. This has been especially true in Europe, where the war is the leading cause of stagnation. 

“Europe invested heavily in automation in the wake of the Covid-19 pandemic and subsequent labor shortages, but since the war in Ukraine, this trend has started to slow in some parts of the continent,” the researchers wrote. “The conflict has also indirectly influenced rising interest rates and inflation. As consumer spending slows, retailers will likely tighten their purse strings and potentially postpone large-scale automation projects until a more stable economic environment has been reached.”

Despite those concerns, the long-term outlook calls for a compound annual growth rate (CAGR) of between 10% and 12% for warehouse automation investment in Europe through 2027, a rate just slightly below the expected global growth rate of 13% during that time.

The Amazon factor is an even bigger one in the short term, and it underscores the slowing of the economy as 2023 rolls on. The analysis shows that the online giant was expected to reduce its warehouse automation spending by 30% last year and 20% this year, driven by a scaling back of its planned fulfillment center expansion. 

All of this may point to a bit of belt-tightening in the year ahead, but it doesn’t eliminate the need for productivity-enhancing technologies that can address labor shortages, improve quality and accuracy, and free up workers for more value-adding tasks. Some projects may be delayed, but they won’t be scrapped. The warehouse automation trend is here to stay. This is especially true when it comes to rising demand for autonomous mobile robots (AMRs), which the report says have “become the most significant trend in the automation market” over the past few years.

“By 2027, [mobile robots] will account for 30% of total warehouse automation revenues, equating to around $14 billion,” according to Interact Analysis Research Manager Rueben Scriven.

You need look no farther than the pages of our February issue for evidence of that trend. Our applications stories, which often highlight robotics projects from around the world, feature a report on an autoparts maker that drastically reduced the amount of time workers spend physically moving parts around with the help of AMRs. With robots handling the conveyance tasks, workers now spend their time making auto parts instead of moving them around an 800,000-square-foot facility. And a feature story on picking highlights the growing integration of robotics into that vital warehouse process. In one example, AMRs are helping drive a threefold increase in productivity, while also reducing picking errors for an aircraft manufacturer based in France. In both cases, the projects benefit from the flexibility of AMRs, which can be scaled to meet demand and don’t require costly infrastructure investments.

This doesn’t mean AMRs will replace long-term demand for fixed systems, though. The Interact Analysis report emphasizes that there will be plenty of room for both over the next five years.

“Although mobile robots are thought to be displacing fixed automation alternatives, this isn’t necessarily the case,” Scriven said. “They are often opening up new market opportunities [that] would otherwise have remained manual. This type of technology is best suited to situations that require flexibility and scalability, whereas fixed automation is more appropriate in scenarios where increased throughput is the main goal.”