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Ash Sharma Administrator
Senior Research Director – UK
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Ash has spent close to 20 years in technology research on several sectors, including industrial automation and smart manufacturing, smart home, solar power and energy storage, drones and robotics, medical technology and building automation. Ash is Senior Research Director for our robotics & warehouse automation research, amongst other topics.

Warehouse automation revenues could take a major hit in 2020 as a result of the COVID-19 pandemic, according to our recent research. Our latest analysis shows that new order intake of warehouse automation projects will likely decline by $2bn in 2020 (detailed forecasts and analysis were released to subscribers this week). 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. 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.

Our latest modelling which takes into account the peak daily rate of infections, the containment measures within each country, and the likely date business activities will return to normal in individual countries, shows that the new base figure for warehouse automation order intake will be in the region of $33bn this year. Though this still represents a 4% increase over 2019, it is lower than the 10% rise that had been previously predicted for 2020, before the pandemic set in. Based on surveys and interviews with vendors we expect a significant proportion of projects that were due to be commissioned in 2020 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.

Long-Term Outlook for Warehouse Automation More Positive

It’s not all bad news, however. 2021 will see a sharp rebound in both order intake and revenues. In the long term our 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. Our base case scenario predicts that increased growth over the next four years will more than offset the dip in revenues in 2020. As we recently wrote in a separate article, we expect that the chaos caused by the virus will lead to acceleration in the adoption of e-commerce, particularly amongst 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.

The Good, the Bad and the Ugly

The degree to which the COVID-19 pandemic will impact the warehouse automation industry will vary considerably by region and by vertical sector. Whilst the virus does not respect borders, the scale of the outbreak is largely dependent on how strict the containment measures are which each country introduces, and how quickly they can do this. Infections have been spreading across the globe in waves, starting in APAC, then moving to Europe and currently accelerating in North America. As a consequence, China and the rest of APAC will likely be the ones to exit the crisis first. The result is that normal business operations and hence automation project commissioning will resume 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. We expect that installations In China will resume much more rapidly and systems integrators there will have a greater ability to keep these projects on track for 2020.

No industry is immune from the impact of COVID-19. Different warehouse sectors feel the effects in different ways. General merchandising, for example, 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, we expect they will provide greatly increased 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 and trajectory to general merchandising. 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 reshoring in the longer term, with automation solutions being the way forward on new production lines.

This unprecedented and complex situation will mean the forecasts of industry analysts such as ourselves will have to be updated on a regular basis. We will be doing our best to track developments, survey companies and update our analysis regularly, in order to provide as accurate an outlook as we can. We will keep you posted.

More detailed analysis and forecasts showing the potential impact on COVID-19 on the warehouse automation industry are available to subscribers of our research. For more details please contact us.

Updated 19th May 2020

It has been just over one month since our initial assessment of the impact of COVID-19 on the Warehouse automation industry and much has changed as the situation continues to develop. Taking into account the latest information around social distancing regulations and plant shutdowns as well as updating our survey of vendors has allowed us to update our forecast models. 

Our latest forecast for 2020, whilst still lower than we had forecast prior to the pandemic has actually improved slightly compared to our March update. We are now predicting a 5% increase in order intake compared to 2019 (compared to 4.1% in our last forecast). Due to delays in installations and project commissioning we are still predicting a decline in warehouse automation revenues this year; however, the decline is now predicted to be only 10% rather than the 23% we had predicted back in March. Our assumptions are that installations will continue more or less unchanged in China and that Europe is getting back on track as well, despite the virus not yet being fully under control. 

We are still predicting a large rebound in revenue growth in 2021, but not quite to the same extent in percentage terms due to a greater amount of project completions this year. Our long-term view has also improved somewhat with order intake now predicted to reach $52 billion in 2023 up from the $48 billion we had predicted prior to the pandemic. The trends and assumptions previously written about above such as the increased penetration of ecommerce and shifts in supply chains to allow more local manufacturing remain true. 

Other trends becoming increasingly apparent are the accelerated shift towards micro fulfilment as retailers seek to use their brick and mortar stores to allow for curbside collection both as a strategy to mitigate enforced store closures and also to ease pressure on the strained delivery networks as a result of the sudden spike in ecommerce orders. 

Demand for automation solutions will be most robust within the grocery, food and beverage, parcel delivery, and parts of the general merchandise verticals. Our view is the apparel vertical has weakened further, along with parts of the general merchandise market particularly department stores are showing dampened demand due to extremely challenging market conditions as a result of the pandemic. 

Below is a chart which shows the changes to our forecast in the last six weeks, we will be continuing to update clients as the situation unfolds and the impact on the industry changes. 

 

Posted by Ash Sharma

Ash has spent close to 20 years in technology research on several sectors, including industrial automation and smart manufacturing, smart home, solar power and energy storage, drones and robotics, medical technology and building automation. Ash is Senior Research Director for our robotics & warehouse automation research, amongst other topics. Read more