The state of material handling automation

Latest warehouse automation trends reveal the market has been on a tear in recent years, driven by the need to augment operations with flexible automation to weather the next supply chain shock and address critical labor shortages.

To analyze the current state of the material handling automation market, Vecna Robotics partnered with CITE Research to survey over 1,000 supply chain professionals across industries including automotive, third-party logistics (3PL), consumer goods, manufacturing, e-commerce and retail to uncover the key trends, challenges, and opportunities in the market.

You can read the entire report here (PDF), but the research provides this quick snapshot of the state of the market:

Warehouses are facing a significant labor shortage. The majority of the market is 10-25% understaffed, with material handlers and forklift drivers to move pallets representing the largest labor gaps at 34% and 31% reporting difficulties in filling these positions, respectively.

Automation is here to help. Most supply chain professionals view automation as a positive for workers, with 70% highlighting improved retention and over half recognizing it as a means to upskill employees and create new job opportunities.

Autonomous pallet moving has just started to scale. Automation remains largely untapped, with 76% of companies having never deployed an automated guided vehicle (AGV) and 70% never implementing an autonomous mobile robot (AMR). Nevertheless, larger facilities are embracing automation, with 50% of those exceeding one million square feet having introduced AMRs. E-commerce leads the adoption rate at 39% with automotive closely behind at 38%.

Case picking is everywhere. The majority of respondents (78%) are already using case picking in their operations, with a whopping 90% using it in the consumer goods industry, and yet this is still almost completely manually performed today.

By 2025, the global warehouse automation market is projected to expand to $69 billion. The following data will help explain the drivers, barriers and financial considerations of adopting automation. In addition, the data informs how to achieve automation at scale to offset increasing product demand and global supply chain disruptions while keeping existing workers happy.

To deploy or not to deploy? That is the question

As many problems cripple the material handling industry, companies are turning to automation to help, with 85% of respondents planning to deploy some form of automation in the next 12 months.

Drivers for automation adoption

Unsurprisingly, the primary drivers for this adoption are the labor shortage (25%) and supply chain disruption (22%). Smaller facilities are particularly impacted by the labor shortage, while larger facilities are driven to automation due to supply chain disruption. Among industries, retail and e-commerce are most affected by the labor shortage and supply chain disruptions.

Barriers to automation

While it’s no secret that automation is gaining steam, with 4 in 10 reporting a strong return on investment (ROI) from previous deployments, there still remain a number of obstacles to adopting automation. Let’s dig into these.

In today’s volatile economy, cost concerns are at the top of the list of obstacles to implementing automation solutions, with budget (41%) and cost/ROI (40%) being the most significant. Cost/ROI was also the main obstacle to adopting automation efforts previously, with 54% of supply chain professionals stating that it has hampered their implementation plans.

Digging into the data, we discovered that all barriers to automation adoption show a negative correlation with facility size, except for cost/ROI. Surprisingly, the larger a company’s revenue, the more budget and cost/ROI become obstacles to adoption, which could reflect the following:

1. Long-term strategic vs. short-term ROI: decision-makers at larger firms may be under more pressure to show short-term returns to their business unit vs. smaller companies that have more runway to consider automation as a strategic long-term investment and competitive differentiator.

2. Capex vs. Opex models: dated capex cost models are delaying rapid adoption of automation at scale.

3. Prove value: new technologies have to do a better job at proving value (no science projects please!) in environments with more financial discipline and in order to compete with other types of tech investments.

When it comes to adopting automation at scale, the barriers remain widespread. Cost/ROI remained the top barrier (44%) but was followed closely by training/change management (43%). Implementation complexity (39%), integration challenge (38%), and operational fit (38%) also represented significant barriers to adopting automation at scale.

Interestingly, facilities exceeding one million square feet behaved differently than the average-sized facility with their main barriers to adoption being performance, implementation complexity, integration challenges, and training/change management.

Our analysis also reveals that the 3PL industry is the least affected by these obstacles, while the consumer goods sector is the most impacted.

Getting to scale

So, how does automation become mainstream? Let’s look at what is affecting automation adoption at scale.

The economic downturn is not significantly impacting adoption. 74% of automation projects are not impacted by fear of economic downtown. In fact, 15% are accelerating adoption. However, 26% of respondents reported that automation

projects have been postponed or delayed indefinitely due to economic headwinds.

Larger companies require a corporate strategic imperative to drive automation projects. Around 50% of companies with $1 billion or more in revenue rely on a corporate strategic imperative to adopt and scale automation.

Increasing product demand and global supply chain disruptions are causing automation adoption at scale. Respondents cited increasing product demand (30%) and global supply chain disruptions (26%) as the largest factors in adopting automation at scale. Tightness in access to skilled labor (13%) and reshoring of production back to North America (11%) are less impactful.