Warehouse automation market set to grow, despite short-term pain ahead
Geopolitical woes, inflation, and rising commodity prices will dampen investments this year, but long-term demand for robotic solutions on the warehouse floor will prevail, report shows.
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
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.”
The bottom line: Despite some shifting and potential speed bumps ahead, logistics will continue to get smart with automation.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.