In the wake of challenging times for the warehouse automation industry, there is newfound optimism as e-commerce and warehouse construction activity rebound from a period that some experts described as having hit ‘rock bottom.’ The resurgence in these sectors is expected to pave the way for increased demand for automation tools, according to insights from Interact Analysis, a prominent research firm specializing in global supply chain automation.
The confluence of renewed e-commerce growth and a strategic shift in supply chain management, characterized by the adoption of “just-in-case supply chains” – an approach emphasizing the maintenance of substantial inventories – is anticipated to drive a surge in warehouse construction activities in 2024. This, in turn, is poised to fuel heightened demand for automation tools, as noted in a recent update from Interact Analysis.
The research firm explained, “Many companies now factor in a greater degree of unpredictability, and this has a knock-on effect on warehouse construction, with companies requiring higher inventory and therefore more storage capacity.” Consequently, this trend is expected to contribute to an increase in warehouse construction during 2024 and 2025, ultimately translating into substantial growth in warehouse automation revenues by 2025.
The journey of warehouse automation has witnessed fluctuations over recent years. Initially, demand soared following the onset of the COVID-19 pandemic, driven by the rapid expansion of e-commerce and the corresponding need for warehousing space. This surge in demand was particularly pronounced in industries such as retail, manufacturing, logistics, and parcel delivery. However, this upward trajectory started to dip in 2022.
Interact Analysis attributed this downturn to several factors, including excess capacity that had been built during the pandemic, a decline in e-commerce growth rates, and a broader deceleration in the global economy. Despite these challenges, the industry still posted impressive numbers. In 2021, warehouse automation industry revenues reached $36.4 billion, marking a remarkable 30% increase compared to the previous year. This growth rate did slow down to 16.6% in 2022 but indicated a sector that remained robust.
The signs of optimism are now emerging as e-commerce enters a phase of post-pandemic stabilization. Paul Scriven, a representative from Interact Analysis, commented on this shift, saying, “Companies overspent on automation during the pandemic because they expected e-commerce to grow more than it did. Then, with interest rates rising and e-commerce rates slowing, we saw companies spend less on automation. However, now, we’re starting to see those investments pick up again.”
Major players in the warehouse operation space, including Amazon, Maersk, and DHL Supply Chain, are making substantial investments in technology. This strategic move is driven by the need to navigate labor challenges and manage the surging volumes of e-commerce, as reported by CFO Dive sister publication, Supply Chain Dive.
In conclusion, the warehouse automation industry is on the brink of a resurgence, fueled by the changing dynamics of e-commerce and supply chain strategies. As companies adapt to a new normal characterized by unpredictability, automation is set to play a pivotal role in enhancing efficiency, resilience, and competitiveness in the evolving landscape of warehousing and logistics.
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