Warehouse automation market to see significant slowdown

by Inside Logistics Online Staff

Warehouse automation revenues could take a major hit in 2020 as a result of the COVID-19 pandemic, according to recent research by Interact Analysis.

New order intake of warehouse automation projects will likely decline by US$2bn in 2020. The impact on revenues is further compounded by customers delaying deployment and an inability to install and commission projects due to lockdown measures.

“Undoubtedly, when restrictions are lifted, projects will continue at full steam, however we believe that a large chunk of these projects will be delayed until 2021,” said Ash Sharma, senior research director with Interact Analysis.

“The impact of the virus on the warehouse automation market and the subsequent rebound we will see is largely linked to the speed and effectiveness of the containment measures that are put in place within individual countries to slow the outbreak, and the pace at which these measures are then reversed, when the virus threat recedes.”

Using modelling that takes into account the peak daily rate of infections, containment measures within each country, and the likely date business activities will return to normal in individual countries, the research found the new base figure for warehouse automation order intake will be in the region of $33bn this year.

Though this still represents a four percent increase over 2019, it is lower than the 10 percent rise that had been previously predicted for 2020, before the pandemic set in.

Surveys and interviews with vendors revealed that a significant proportion of projects due to be commissioned in 2020 will to be pushed back into 2021. The impact of this will be that revenues will decline from $29bn in 2019 to $23bn in 2020.

“Given the fact that the rate of spread and containment of the virus is very difficult to predict, there is some degree of uncertainty about this forecast. Taking into account the experience of other unstable scenarios we have modelled; we estimate that revenues could fall as low as $17bn or reach as high as $30bn this year,” Sharma said.

He expects 2021 will see a sharp rebound in both order intake and revenues. Long-term projections for the warehouse automation market are even higher as a result of the pandemic and the impact it will have on supply chains and also buying behaviour.

Interact Analysis expects increased growth over the next four years will more than offset the dip in revenues in 2020.

“We expect that the chaos caused by the virus will lead to acceleration in the adoption of e-commerce, particularly among a demographic that had been slow to adopt online purchasing – the older generation. Furthermore, there will be an acceleration in the trend towards automation and robotics in order to insulate companies against further supply chain disruptions in the future,” Sharma noted.

Because Asia-Pacific was hit with the virus first, it is expected to recover first as well, with automation project commissioning resuming earlier in APAC than other regions.

Conversely the impact in North America is more likely to be felt across the second half of the year and potentially into early 2021.

Analysis by sector reveals that general merchandising is seeing a massive short-term spike in e-commerce demand. This demand is largely being met by retailers taking on thousands of new workers.

Crisis management is also leading these retailers to pause their automation plans. However, in the mid-term, Interact Analysis notes they will boost demand for warehouse automation solutions as, for many customers, buying habits will have changed not only in the short term, but in the longer term.

The grocery sector will likely follow a similar path.

Apparel and durable manufacturing on the other hand are seeing much more severe and negative short-term impacts from the virus, due to a significant reduction in consumer spending. Apparel will likely see a slight increase to its e-commerce penetration as a result and durable manufacturing could likely see an acceleration of manufacturing re-shoring in the longer term, with automation solutions being the way forward on new production lines.