Warehouse automation survey: Levels and total cost of ownership (TCO) concerns on the rise

The results of our annual automation survey are in, and while the spend level finding isn’t in overdrive mode like last year, this year we found higher “in use” levels across many of the automation, robotics, software and equipment categories our survey examines.

Companies also are putting a high priority on system maintenance and uptime to help meet tougher service levels amid continued labor availability challenges. The heightened concern we found last year around service parts availability declined in importance, while issues like total cost of ownership (TCO) and service response time gained.

Overall, this year’s findings point to operations becoming more automated, with some significant plans for future investments, and a strong emphasis on having systems and services that operations can count on to fill orders faster and more efficiently.

Modern Materials Handling’s “2023 Automation Solutions Study” was in the field during November 2022 and garnered 150 usable responses from professionals involved in materials handling and fulfillment operations.

Our 2023 survey shows anticipated spending levels for the year ending 2022 are down from our previous automation survey, also conducted in late November. The average estimated spending level came in at $1.57 million, down from a $2.02 million average last year, and almost identical to the $1.579 million average two years ago.

Spend insights

We ask the spend level question by asking respondents to pick ranges their anticipated spending will fall into for the year that’s ending. Since the survey was fielded in late November, this looks at 2022 for the 2023 report.

Though the average did drop compared to the previous year, some will spend far more than the average, including 15% who indicated their spend will exceed $5 million, and 12% who indicated it would fall between $2.5 million and $4.99 million.

The survey also compares the current spend level with the amount to be spent in the coming year, asking if spending in the coming year will increase, decrease, stay the same, or whether it’s “too soon to tell.” This year, 36% said spending will increase, down from 53% the year before; while 13% foresee a decrease, which is 6% higher than last year. However, the “too soon to tell” response grew from 13% last year to 21% this year, and 31% expect it to stay the same.

Perhaps the biggest trend this year was that respondents reported higher in-use levels for many automation categories, as well as most conventional equipment categories. For example, the in-use level for automated storage and retrieval systems (AS/RS) reached 44%, up from 32% last year, while those using conveyor and sortation climbed to 60% this year, up from 50% last year.

Since the Covid pandemic hit, we’ve asked about its impact on DC automation plans. The good news here is that more respondents are saying the pandemic is not changing purchase plans. This year, 52% indicated the pandemic is not changing plans, up from 43% last year and 24% two years ago.

The average annual revenue size for respondent companies stayed steady this year—at $704 million compared to $710 million the year before. There is a mix of small, medium and larger companies among the response base. The largest percentage (47%) of respondents are in warehouse operations, 22% are at corporate headquarters, 23% are at manufacturing sites, and 5% at a warehouse supporting a manufacturing site.

Parts worries decline

While evaluation priorities tend to stay fairly stable year to year, this year saw some shakeup in terms of “very important” criteria. System uptime and reliability tied with TCO and maintenance costs as the top factors deemed very important, at 86%, with system uptime down 3% from last year, with TCO increasing to 86% from 72% a year ago.

Another change was that parts availability and risk of obsolescence, which was the third leading criteria a year ago, with 80% citing it as very important, dropped to be being the fifth leading factor this year, with a 66% response.

Service and support response timeliness came in as the third-leading factor deemed very important when evaluating automation, while integration and compatibility concerns came in fourth, up 6%. Further down on the list of leading factors, having a strong warranty offering grew in importance (up 5%), as did energy efficiency (up 10%).

Each year we ask to what extent key processes are automated. Readers reported substantial gains in multiple areas compared to last year. For example, 29% say reporting is automated, up from 22% last year. Conveyance is automated for 25% this year, up from 18%, while labeling is automated for 22%, up from 14%. Other processes that drew higher response rates for being automated this year include retrieval, storage, picking and packaging.

In a related question, the survey asked whether the process is currently fully automated, partially automated, or “currently manual, but with plans to automate,” or whether it’s considered “mostly/fully manual, with no plans to automate.” For example, for “picking” this year, 11% say it’s fully automated, 45% consider it partially automated, and 19% say it’s currently manual, but they have plans to automate it.

Among the processes that are currently manual, but with the higher percentages in terms of plans to automate, the leading areas are storage (30%), followed by retrieval (24%), replenishment (21%) and picking (19%).

In terms of DC operational areas to improve within the next two years, the top four areas this year are picking rate and efficiency (64%), warehouse capacity utilization (60%), order cycle time (60%), followed by labor reduction (58%). Hitting order cycle time goals grew by 5%, but the process with the biggest percentage gain was packaging, cited by 43% for improvement this year, up from 27%.

Automation levels climb

When it comes to the order fulfillment processes of picking and packing orders, our annual survey asks respondents to describe their level of automation on a spectrum from highly automated to mostly or entirely manual. Not surprisingly, the trend is toward more automation.

Those saying picking and packing are “highly automated” reached 11% this year, up from 6%, while those calling these steps mostly/all manual fell to 38%, down from 42% last year, and 47% the year before. Those saying they have a mix of automated and manual pick and pack processes edged up by 1%.

In terms of order fulfillment activities, most companies (71%) currently use warehousing and storage; 72% do individual pick, pack and ship for wholesale distribution fulfillment; and 65% execute full and mixed pallet load fulfillment.

Sixty-two percent currently have case and mixed-case fulfillment, while 60% are doing order customization, repacking and value-added services (VAS). We also found 61% perform individual pick, pack and ship for e-commerce, down a bit from last year, but staying above 60% for the second straight survey.

When we followed up on which of these activities respondents are looking to improve or implement over the next 24 months, the growth activities versus last year include customization and VAS (up 3%), individual pick, pack and ship for e-commerce fulfillment (up 2%), individual pick and pack for wholesale distribution (up 2%), case and mixed-case fulfillment (up 1%), and warehousing and storage (up 1%). Since handling eaches or split cases tends to be labor intensive if done manually, these trends are consistent with greater need for automation.

The rise of robotics

One of most noticeable findings this year is markedly higher levels of current automation use across several categories. The percentages for two-year plans are generally down, but when it comes to current use levels, the findings were in many cases significantly higher.

As mentioned previously, conveyor and sortation use is up 10% compared to last year’s level, while use of AS/RS shot up by 12%. Other categories that reflected higher in-use levels include collaborative autonomous mobile robots (AMRs), in use by 32%, up from 23%; automated packaging, in use by 33%, up from 22%; picking robotics, now at 32%, up from 22%; shuttle systems and robotic storage, up by 11% to hit 37% this year; and weighing, cubing and dimensioning, up 9%.

About the only category that saw a drop in current use versus last year is automatic guided vehicles (AGVs), in use by 39%, down from 49%. The silver lining for AGV fans: When it comes to plans over the next 24 months, 69% of respondents said they have plans to either upgrade or implement AGVs.

Overall, the percentages for two-year upgrade/deployment plans were lower than last year, but several categories came in at higher than 60%. The top five categories for two-year plans this year are A-frame picking systems, with 73% indicating plans to deploy or upgrade; AGVs, with 69% having plans; robotics picking solutions, with 68% having plans; AMRs, with 67% having plans; and robotic palletizing, at 65%.

Of course, each year brings a change in the respondent mix, so some year-over-year variation is natural. It should also be noted that we don’t ask the extent of current use—some respondents may be piloting a new type of system versus rolling it out at scale. But even so, our findings point to increasing use of automation over the past year.

This year’s survey also found higher in-use levels for multiple types of conventional equipment, which is consistent with many operations using a mix of manual and automated processes.

For example, this year, in-use percentages grew for lift trucks (up 2%), and dock equipment (up 2%), with larger gains for palletizers, pallets, totes/containers (up 10%), and also hoists, cranes, and monorails (up 12%). The in-use percentage for racks and shelving did decline 2% compared to last year, but when it comes to plans to upgrade or deploy conventional equipment over the next 24 months, interest in rack and shelving was up by 2%. All the other categories were down a bit versus last year, in terms of two-year plans.

Data capture evolves

Of all the automatic identification and data capture (AIDC) technologies we ask about, once again this year, bar code scanners lead in use, at 67%, which is 1% higher than last year. But the survey found other AIDC technologies are growing faster.

For example, last year we found 21% were using voice-directed picking, but this year, the in-use finding for voice jumped to 39%. Likewise, use of radio frequency identification (RFID) systems jumped 10% to reach 49% for current use, while use of heads-up displays and/or vision technology increased from 26% to 43% this year.

Again, some of these newer technologies may simply be in a trial phase at some companies, and vision can be construed as including machine vision, not just “smart glasses.” Nevertheless, the survey points to companies layering in newer technologies to supplement bar coding, or deploying technologies like lights and voice as user interfaces for fulfillment solutions.

When it comes to upgrade or deployment plans for data collection tech over the next 24 months, subcategories on the rise include voice (61% have plans), heads-up displays and/or vision (57% have plans) and pick- or put-to-light technologies (55% have plans).

Software trends

The higher “in-use” findings from our 2023 survey also extend to supply chain execution (SCE) software, and to a certain extent, planning solutions are other types of enterprise and supply chain management applications we ask about.

For example, under SCE categories, warehouse management system (WMS) use edged up to 67% from 62%. Even bigger “in-use” rises were seen with computerized maintenance management systems, up 13% to reach 48% this year; yard management, up 13% to hit 46%; labor management, up 12% to reach 57%; and warehouse execution system (WES) software, which was up 11% to reach a 53% current use level.

Some execution software categories such as transportation management or parcel rating were up only modestly. However, when it comes to plans to enhance or deploy over the next two years, parcel rating solutions was one of the few niches that saw a significantly higher percentage than last year, with 56% having parcel rating plans, versus just 38% the year before.

Among the supply chain management (SCM) areas we ask about, including enterprise resource planning (ERP) systems, ERP was the bigger gainer for current use level. This year, 77% said ERP was in-use, compared to 59% a year ago. Most other SCM niches stayed fairly level, in terms of current use, though customer relationship management (CRM) was up 4%.

For upgrade and deployment plans over the next 24 months, the heightened response was for distributed order management (DOM) solutions, with 51% indicating plans, up from 38%. Additionally, 28% have plans around order management system (OMS) solutions, 7% higher than last year.

Integrators shine

Our annual survey asks about who respondents turn to for solutions, and also for maintenance and spares. While partner choices aren’t shifting dramatically, this year’s findings continue to show momentum for systems integrators, though distributors/dealers are gaining favor. It may be that as end-user organizations deploy more systems and seek to tie them together, they need partners with deep integration expertise, adept at making diverse systems work well together.

When asked who do you typically purchase order fulfillment solutions from, the leading answers were distributors (68%, up from 62%), direct from manufacturer (61%, down from 66%), and systems integrators (now at 53%, up from 50%). Systems integrators have moved from 38% on this question two years ago to their present level, while dealers/distributors have seen a steadier rise.

As parts for future purchases, integrators also did well, with a 47% response this year, down 1% from last year on this question, but still the leading answer ahead of distributors (39% this year), followed by direct from manufacturer (32%).

As to suppliers for spares, the leading source remains direct from manufacturer website, at 71%, down slightly from 74%. Direct from a distributor came in second (69%), followed by from a systems integrator or its website, at 33%, up from 24%.

In terms of who handles repairs, internal maintenance crew was the leading answer again, at 74%, up from 67%. A contract with a third-party was the second leading answer at 45%, up 1%, while “service contract with OEM” came in third at 33%, down from 40%.

Driving factors

When we asked those with automation plans to rank the top reasons for evaluating or purchasing equipment, automation or software—ranking them in order of importance—the top drivers are the need to fill orders faster to meet service levels, followed by an increased level of piece picking driven by e-commerce, and slightly lower in aggregated ranking, the inability to find and retain reliable DC associates.

Other reasons such as “enabling new go-to-market opportunities” and “keep up with competition who are automating” also gained versus last year, but “tighter order cycle times,” “more piece picking,” and the “challenge of finding enough labor” were the top pain points.

Automation is seen as a way to offset these challenges, which is why most analysts predict a healthy long-term future for the warehouse automation market, even if automation budgets don’t escalate dramatically every year.