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Rueben Scriven

Graduating from Durham University with a first-class degree in Biochemistry, Rueben is leveraging his background in science and computer modelling by joining our growing analyst team.

After a fairly sluggish first half, the warehouse automation market ended 2019, and the decade for that matter, on a high. Despite the political uncertainties of Brexit and the US-China trade war as well as a worsening macro-economic environment, the warehouse automation market remained buoyant thanks to the rise of e-commerce and the structural shifts in retail distribution operations which follow.

Dematic, the world’s largest warehouse automation systems integrator, had a record fourth quarter which led to its 2019 order intake surpassing $3 billion, although KION Group stated that the figure was unaudited. Similarly, Swisslog posted significant growth in the second half of the year with its orders growing by just under 40% in Q3 2019 compared with the same quarter in 2018. While Honeywell Intelligrated posted revenue growth of just under 14% in the third quarter despite announcing that their warehouse automation project business had slowed somewhat during the second quarter.

With the warehouse automation market ending 2019 on a high, we wanted to discuss some of the biggest trends we see impacting the market in 2020 and the opportunities they present.

The Proliferation of Piece Picking

Piece picking has always been one of the most difficult parts of the order fulfilment process to automate and often relies heavily on manual labour. During our research, we found that many retailers which currently use automated warehouse solutions are yet to automate the piece-picking process because the technology has yet to become effective enough. Several companies offer automated piece-picking solutions although to date the installed base has been limited to trials and niche applications.

However, developments in machine vision algorithms and advances in gripper technology is bringing us closer to wider adoption. We forecast the market for piecing picking robot solutions within warehouses will reach just under $1.3 billion by 2023 (Figure 1).

Looking to capitalise on this growing market, Berkshire Grey, a Boston start-up founded by former CTO of iRobot, last week announced it had raised $263 million during a Series B funding round led by SoftBank. Berkshire Grey uses mobile and fixed robots to offer an order consolidation and piece picking solution which can be thought of as a plug-and-play solution that can connect to both manual and automated warehouses.

Similarly, San Francisco-based OSARO – one of the leading players in machine vision software – announced it had raised $16 million in a Series B funding round. OSARO began deploying its piece-picking solution in Japan in 2018 and is targeting grocery distribution centres.

Australia’s Grocery Warehouse Automation Will Rival That of the US and Europe

One of the fastest growing areas for warehouse automation is the Australian groceries market which has seen some significant investments and partnerships announced in recent months.

In January 2019, Coles announced it was signing a $660 million deal with Witron to build two new automated distribution centres which are expected to go live in 2023. Two months later, Coles announced it was going to be spending $150 million over the next four years to double its home delivery capacity after signing a partnership with Ocado to provide automation technology. The transition to Ocado’s platform is expected to be complete by 2023.

5 months later in August, Woolworths Group, Coles main competitor, announced it would be installing Takeoff Technologies’ micro-fulfilment technology. Debate on whether a micro- or centralised-fulfilment operation has since ensued, echoing discussions had in the United States.

Rising labour costs and the growth of e-commerce have been the two key factors responsible for the uptick in investments in recent months. However, while significant investments have been made this year, we don’t expect such large transactions to continue and we forecast the market will re-adjust over the next five years.

Mobile Robot Demand Moves on Up

Demand for AGVs and AMRs continues to soar, led by the same drivers. Investment into the industry peaked in 2019 with major acquisitions such as Shopify’s $450m purchase of 6 River Systems in September and Teradyne scooping up AutoGuide for $165m a month later. 6 River and its peers have been rolling out pilots in the past few years and are now reaping the benefits of their customers rapidly moving to fleet-level deployment. We’re predicting industry revenues to soar by 60% and breach the $3bn mark this year.

Disruptions in the Fashion World

With the growing trend towards environmentally conscious consumerism, we’ve seen significant growth in the fashion rental industry which claims to be an environmentally friendly alternative to fast fashion and Rent the Runway, the largest fashion rental company, is now valued above $1 billion. The rental business model will put significant strain on existing supply chains given the number of returns which will need to be processed and it’s already proving to be a daunting challenge.

Pocket sorters have gained significant traction in the apparel industry as they require fewer touches and can handle returns very efficiently; ideal for the fashion rental business model. We identified around 20 warehouses in Europe and the US that have adopted pocket sorters and we expect this number to rise significantly in the coming years. Based on our research we estimate that as much as 30% of European greenfield apparel warehouses built in 2023 could use pocket sorters.

Final thoughts

As we enter the new decade, we’re faced with many unanswered questions; how long will the current economic expansion continue for? What will the US-China trade deal look like? Will the UK maintain a good trading relationship with Europe?

However, there’s one thing that we can be almost certain about; e-commerce will continue to grow and consumer’s expectations of convenience will carry on rising. For many retailers, automation will be the only way forward.

For more information on our Warehouse Automation research please visit our report page here, or contact us.

Posted by Rueben Scriven

Graduating from Durham University with a first-class degree in Biochemistry, Rueben is leveraging his background in science and computer modelling by joining our growing analyst team.