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.
The Port of Oakland has been awarded $50 million from the U.S. Department of Transportation’s Maritime Administration (MARAD) to modernize wharves and terminal infrastructure at its Outer Harbor facility, the port said today.
Those upgrades would enable the Outer Harbor to accommodate Ultra Large Container Vessels (ULCVs), which are now a regular part of the shipping fleet calling on West Coast ports. Each of these ships has a handling capacity of up to 24,000 TEUs (20-foot containers) but are currently restricted at portions of Oakland’s Outer Harbor by aging wharves which were originally designed for smaller ships.
According to the port, those changes will let it handle newer, larger vessels, which are more efficient, cost effective, and environmentally cleaner to operate than older ships. Specific investments for the project will include: wharf strengthening, structural repairs, replacing container crane rails, adding support piles, strengthening support beams, and replacing electrical bus bar system to accommodate larger ship-to-shore cranes.
Commercial fleet operators are steadily increasing their use of GPS fleet tracking, in-cab video solutions, and predictive analytics, driven by rising costs, evolving regulations, and competitive pressures, according to an industry report from Verizon Connect.
Those conclusions come from the company’s fifth annual “Fleet Technology Trends Report,” conducted in partnership with Bobit Business Media, and based on responses from 543 fleet management professionals.
The study showed that for five consecutive years, at least four out of five respondents have reported using at least one form of fleet technology, said Atlanta-based Verizon Connect, which provides fleet and mobile workforce management software platforms, embedded OEM hardware, and a connected vehicle device called Hum by Verizon.
The most commonly used of those technologies is GPS fleet tracking, with 69% of fleets across industries reporting its use, the survey showed. Of those users, 72% find it extremely or very beneficial, citing improved efficiency (62%) and a reduction in harsh driving/speeding events (49%).
Respondents also reported a focus on safety, with 57% of respondents citing improved driver safety as a key benefit of GPS fleet tracking. And 68% of users said in-cab video solutions are extremely or very beneficial. Together, those technologies help reduce distracted driving incidents, improve coaching sessions, and help reduce accident and insurance costs, Verizon Connect said.
Looking at the future, fleet management software is evolving to meet emerging challenges, including sustainability and electrification, the company said. "The findings from this year's Fleet Technology Trends Report highlight a strong commitment across industries to embracing fleet technology, with GPS tracking and in-cab video solutions consistently delivering measurable results,” Peter Mitchell, General Manager, Verizon Connect, said in a release. “As fleets face rising costs and increased regulatory pressures, these technologies are proving to be indispensable in helping organizations optimize their operations, reduce expenses, and navigate the path toward a more sustainable future.”
Businesses engaged in international trade face three major supply chain hurdles as they head into 2025: the disruptions caused by Chinese New Year (CNY), the looming threat of potential tariffs on foreign-made products that could be imposed by the incoming Trump Administration, and the unresolved contract negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX), according to an analysis from trucking and logistics provider Averitt.
Each of those factors could lead to significant shipping delays, production slowdowns, and increased costs, Averitt said.
First, Chinese New Year 2025 begins on January 29, prompting factories across China and other regions to shut down for weeks, typically causing production to halt and freight demand to skyrocket. The ripple effects can range from increased shipping costs to extended lead times, disrupting even the most well-planned operations. To prepare for that event, shippers should place orders early, build inventory buffers, secure freight space in advance, diversify shipping modes, and communicate with logistics providers, Averitt said.
Second, new or increased tariffs on foreign-made goods could drive up the cost of imports, disrupt established supply chains, and create uncertainty in the marketplace. In turn, shippers may face freight rate volatility and capacity constraints as businesses rush to stockpile inventory ahead of tariff deadlines. To navigate these challenges, shippers should prepare advance shipments and inventory stockpiling, diversity sourcing, negotiate supplier agreements, explore domestic production, and leverage financial strategies.
Third, unresolved contract negotiations between the ILA and the USMX will come to a head by January 15, when the current contract expires. Labor action or strikes could cause severe disruptions at East and Gulf Coast ports, triggering widespread delays and bottlenecks across the supply chain. To prepare for the worst, shippers should adopt a similar strategy to the other potential January threats: collaborate early, secure freight, diversify supply chains, and monitor policy changes.
According to Averitt, companies can cushion the impact of all three challenges by deploying a seamless, end-to-end solution covering the entire path from customs clearance to final-mile delivery. That strategy can help businesses to store inventory closer to their customers, mitigate delays, and reduce costs associated with supply chain disruptions. And combined with proactive communication and real-time visibility tools, the approach allows companies to maintain control and keep their supply chains resilient in the face of global uncertainties, Averitt said.
Bloomington, Indiana-based FTR said its Trucking Conditions Index declined in September to -2.47 from -1.39 in August as weakness in the principal freight dynamics – freight rates, utilization, and volume – offset lower fuel costs and slightly less unfavorable financing costs.
Those negative numbers are nothing new—the TCI has been positive only twice – in May and June of this year – since April 2022, but the group’s current forecast still envisions consistently positive readings through at least a two-year forecast horizon.
“Aside from a near-term boost mostly related to falling diesel prices, we have not changed our Trucking Conditions Index forecast significantly in the wake of the election,” Avery Vise, FTR’s vice president of trucking, said in a release. “The outlook continues to be more favorable for carriers than what they have experienced for well over two years. Our analysis indicates gradual but steadily rising capacity utilization leading to stronger freight rates in 2025.”
But FTR said its forecast remains unchanged. “Just like everyone else, we’ll be watching closely to see exactly what trade and other economic policies are implemented and over what time frame. Some freight disruptions are likely due to tariffs and other factors, but it is not yet clear that those actions will do more than shift the timing of activity,” Vise said.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index indicating the industry’s overall health, a positive score represents good, optimistic conditions while a negative score shows the inverse.
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.