Despite a Few Hurdles, Warehouse Automation Is Trending Up
Warehouse automation surges despite hurdles. Explore the trends, challenges, and future of material handling automation.
Craig Malloy, CEO of Vecna Robotics, shares the latest insights into warehouse automation. Delve into material handling technologies’ challenges, trends, and promising future.
Companies continue investing in automated material handling technologies, even if cost and implementation concerns put a crimp in more widespread adoption. The State of the Material Handling Automation Market in 2023 survey reveals the current trends in warehouse automation.
Automation is an effective remedy for what ails warehouse operators, particularly in addressing critical labor shortages and uncertain supply chains. But are companies making optimal use of automation?
Supply chain professionals are keenly aware of automation’s benefits, with 85% saying they plan to implement some form of automation in the next 12 months and about 40% reporting strong ROI from previous deployments, according to an extensive survey by Vecna Robotics and CITE Research. And respondents see automation as a positive for workers, with 70% saying it improves retention and more than half citing its ability to upskill workers and create new job opportunities.
Yet respondents also identified several obstacles that are keeping them from more widespread adoption, ranging from the costs of investing in automation to integration challenges.
Vecna Robotics and CITE surveyed more than 1,000 supply chain professionals across automotive, third-party logistics (3PL), consumer goods, manufacturing, e-commerce, and retail about the trends, challenges, and opportunities in warehouse automation. The results offer key insights that could help companies move toward the next stages of intelligent automation.
The Reasons for Investing in Automation
The biggest drivers for automation are labor shortages, cited by 25% of respondents, and supply chain disruptions, named by 22%.
Most warehouses are understaffed by 10% to 25%, with the most glaring gaps among material handlers (34%) and forklift drivers (31%). On the heels of the global pandemic, an estimated 4.5 million warehouse and transportation workers worldwide quit during the Great Resignation of 2021, and 490,000 jobs were still open in 2022.
Supply chain shortages have become a regular, if not always predictable, fact of business life in recent years. Various factors, including unreliable shipping capacities that have continued since the pandemic, materials shortages, geopolitical tumult, recessionary pressures, fluctuating consumer demand, and—not incidentally—worker shortages, have forced companies to develop contingency plans.
Other factors driving the push for automation are the rise of e-commerce and direct-to-consumer services, identified by 18% of respondents, reshoring manufacturing (15%), corporate directives (12%), and throughput problems with existing methods (8%).
Automation isn’t a single thing, nor is it necessarily a cure for every problem. But its ability to streamline material handling, storage, inventory management, and distribution, to name a few of its applications, can help companies navigate an uncertain workforce and supply chain.
See More: How Inventory Data Can Boost Retail Personalization
The Obstacles to Widespread Adoption
The biggest sticking point that keeps organizations from deploying more automation is money, with 41% citing budget and 40% naming cost/ROI concerns as obstacles to adopting automated solutions. Cost/ROI was also blamed for why organizations didn’t have more automation already, being identified by 54% as an obstacle to previous implementations. Incidentally, this is why many companies have gone all-in on as-a-service financing models that enable companies to adopt automation quickly and spread the fully burdened costs across a specified term.
Behind budget and costs were concerns related to implementing automation solutions, including training/change management (37%), integration (35%), internal processes (35%), and space or environment (30%). Also on the list were factors that might be born of resistance to change, including disruption (26%) and fear and uncertainty (25%).
Almost all of the barriers showed a negative correlation with facility size, with the barriers looming larger for smaller operations, with one surprising exception—cost/ROI. As the revenues of companies in the survey increased, cost/ROI was often cited as an impediment to adoption. Several reasons could be contributing to that trend:
- An emphasis on short-term ROI: Despite having bigger overall budgets, large companies may also be under greater pressure to deliver short-term returns/profits. Smaller companies could be freer to think long-term, seeing investments now as a competitive differentiator down the road.
- Capex constraints: Companies tied to dated capital expenditure (Capex) models may need to be expanded in how quickly they can adopt automation, as opposed to using operating expenditure (Opex) models that spread out the costs.
- Proof in the pudding: Large companies adopting automation will make large investments in it, so they likely want some measure of guarantee that it will pay off. New technologies must prove their value more effectively to win over organizations with strict financial discipline.
The survey results varied by industry, with 3PL being the least impacted by these obstacles and consumer goods the most impacted. However, large companies differed from average-size companies in several respects. Among facilities with more than 1 million square feet, the biggest obstacles were performance, implementation complexity, integration challenges, and training/change management.
Buying into New Tech
In addition to automated systems, companies are looking to invest in other technologies that would support automation. The five most cited in the survey include:
- 5G Wireless: In the short term, many companies are looking to take advantage of 5G’s speed, versatility, and security, with 41% saying they planned to deploy 5G this year. Manufacturing leads the way with 50% planning deployments.
- Technology Information Systems: Thirty-eight percent of warehouses plan to deploy Warehouse Management Systems (WMS) or Enterprise Resource Planning (ERP) in the next 12 months. Automotive (44%) and manufacturing (42%) plan to be the biggest adopters.
- Battery and Charging Technologies: Overall, 37% of facilities plan to implement battery and charging tech in 2023, with consumer goods the clear leader in adoption.
- Racking and Storage Equipment: More than a third (35%) of respondents plan to invest in new racking and storage this year. Consumer goods lead the way, at 41%, while retail trails the pack, at 15%.
- Material Handling Equipment (MHE): Flexible robotics for pallet-sized loads is still in the early innings of adoption —76% of companies have never deployed an Automated Guided Vehicle (AGV), and 70% have never put an Autonomous Mobile Robot (AMR) on the floor. However, 31% of facilities surveyed plan to deploy MHE in 2023, and 50% of extensive facilities plan to deploy AMRs. Interest in pallet-sized robotics is spread relatively evenly across industries, with automotive set to be the largest adopter, at 36%, and retail the lowest adopter, at 22%.
Warehouse Automation will Continue its Upward Trend
Despite a global economic downturn coupled with workforce and supply chain uncertainties, the adoption of automation is continuing apace. Overall, 70% of respondents in the survey said they were planning to invest in new material handling technologies this year. Although 26% of survey respondents said economic fears had postponed or delayed projects, 74% said the economic climate has had no impact on their automation plans. 15% said they are accelerating adoption.
The persistent tire-kicking and never-ending POCs (proof of concepts) that had plagued this market for years have started to erode because of the urgent need for this technology to scale quickly. The tailwinds are clear: for the remainder of this decade, warehouse capacity will grow by 6% per year (Marketwatch), and the U.S. labor force growth will be flat (Congressional Budget Office). Put plainly, “no decision” on warehouse automation is no longer an option.
With the global warehouse automation market projected to expand to $69 billion by 2025, companies will likely find new ways to apply automation. Case picking is one example. More than two-thirds of respondents use case picking—including 90% in the consumer goods industry—but it is almost entirely manual.
Material handling automation is going strong despite a few barriers, and the warehouse industry has good reasons to ensure its continued growth.
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