The global market for warehouse automation services is set to double by 2025, creating a “stable and lucrative” business for integrators and equipment makers, according to data from research firm Interact Analysis, released this week.
Growing demand for automation-related service contracts is in line with soaring demand for automation equipment, a market that topped more than $19.6 billion in revenue in 2020. Service contracts were worth $4.3 billion in 2020 and are expected to reach $8.7 billion globally by 2025. The increasing complexity of automation equipment and the pressure to avoid machinery downtime are driving the demand for service, according to the research.
“The research shows that the potential revenue generated from offering a lifetime service contract to an automation project is roughly equivalent to the original cost of the project. So, in broad-brush terms, a whole-life service contract could double the original revenue from the sale of the machinery,” the researchers wrote. “Furthermore, the research shows peaks and troughs in the service cycle, with the highs coming around the 5-, 10- and 15-year marks, corresponding to times when parts are likely to require replacement, and computers and control equipment to need upgrading.”
Automation service growth is strongest in the Americas and Europe, but is expected to catch up in Asian markets by 2024 due to changing market conditions and labor trends.
“In 2020, 80% of the revenues from automation machinery service contracts were generated in the Americas and in the EMEA (Europe, the Middle East, and Africa) region,” Jason dePreaux, principal analyst at Interact Analysis, said in a statement. “Historically, there has always been a much higher adoption rate of service arrangements in those two regions than there has been in the Asia Pacific (APAC) region–due to lower labour costs in Asia, expectations for maintenance to be included in the project sale, and robust in-house service capabilities by large e-commerce companies. But this situation is set to change. As worker expectations rise and wages level up in APAC, and other factors come into play, such as recent experiences with social distancing and the pandemic, we expect the region to be setting the pace where warehouse automation installations are concerned. Indeed we forecast that, by 2024, the rate of growth in the APAC service market will be faster than in the Americas or EMEA.”