Of all the supply chain technologies on the market today, none arguably is as hot as robotics. Demand for and investment in robotics reach new heights every day. According to the Association for Advancing Automation, orders for workplace robots in the United States were up 40% year-over-year in the first quarter of 2022.”1
Gartner’s research—such as our annual “Supply Chain Technology User Wants and Needs Survey” (UWAN)—supports this finding, and we expect this trend to continue at this pace for at least the next three years.
For 15 years, the Gartner UWAN survey has explored various digital and technology topics from a business user’s perspective. Research for this year’s study was conducted in Q4 2021 and had around 350 respondents that spanned geographies, industries, and company sizes.
One question asked in the study was, “Does your organization currently utilize or plan to use cyber-physical automation2 in your manufacturing or warehouse operations?” An astounding 96% of respondents said that they either have automation or plan to use it in the future. While we thought this number would be high, we didn’t expect this level of interest in automation given the respondents’ diversity in terms of geographical location and company size.
This high level of interest was also seen in a separate study focused on robotic buying trends that we conducted with Peerless Research Group on behalf of Modern Materials Handling, Logistics Management, and Supply Chain Management Review. Fifty-two percent of survey respondents said they currently use or plan to use robots.3
In a follow-up question for our UWAN survey, respondents were asked to choose between the following two options for their primary motivation for investing in automation: reducing labor costs or addressing labor–availability issues. Again, we were surprised at the high percentage (66%) of companies that said that labor availability was their primary reason for investing in automation. In Q4 2019, the numbers were reversed, with 53% of respondents saying that labor cost reduction was their primary motivation.
The latest survey findings are affirmed by over a thousand conversations with Gartner clients during 2021 and 2022. Companies say they are struggling to find and keep people even after increasing hourly pay dramatically over the last 18 months. For example, one Latin America–based Gartner client said even though their hourly labor rates are low, they are considering automation because they have such a high annual workforce turnover rate—upwards of 300%.
Exponential growth ahead
For those companies that have already implemented robotics, we wanted to explore their future investment plans. First, we wanted to know if companies planned to increase the size of their existing robotic fleet, and 86% of respondents said yes, they do. Second, we wanted to know if companies were exploring new robotics use cases, and an astonishing 92% of companies said they are exploring new use cases.
One of our customers is a good example of this phenomenon. The customer originally implemented autonomous mobile robots (AMRs) for basic unit-load transport. Looking at their operations, the customer then saw a possible opportunity to use AMRs to replace humans hauling dunnage. They did a simple proof of concept and found that they could repurpose some of their AMRs to take over what was seen as an unproductive use of their valuable and constrained human workforce.
Combined, we believe these trends (see Figure 1) will drive exponential growth in what Gartner refers to as “intralogistics smart robotics” over the next five years. An intralogistics smart robot (ISR) is “the class of smart robots that orchestrate and perform work within the four walls of a site and can be mobile or stationary, operating autonomously or collaboratively with humans or other robots.” We believe this growth will manifest in four ways:
[Figure 1] Gartner research shows high interest in intralogistics robots
Enlarge this image
1. Net new customer growth: As noted above, 96% of companies in our UWAN study are investing or plan to invest in automation. Additionally, nearly 30% of respondents to the robotics study said they plan to invest in robotics for the first time. This is also consistent with the demand we see from Gartner customer inquiries where a very high number of customers are actively looking at or piloting robots for the first time.
2. Robot fleet expansion: The second wave of growth will come from customers expanding their fleets of robots. As mentioned above, over 80% of companies that already have invested in robots plan to expand their fleets. For example, one Gartner customer said it started with a limited deployment of about 10 robots, but now plans to grow its fleet to 1,000 robots over the next 18 to 24 months. This expansion could come in two steps. First, companies might just increase the number of robots needed to perform certain tasks within a single facility. Larger companies will then expand their use of robots across facilities. We see this with several third-party logistics providers (3PLs) that have robust processes for socializing robots across their organization. They start in one site then look to deploy the same robotic solution across multiple sites over time with similar needs.
3. Expanding robotics use cases: As companies mature their use of robotics, they will continue to explore new use cases where robotics can add value. I was on a panel discussing robotics, and one panel member was from a very well-known 3PL. He said the company was working on hundreds of robotics initiatives across its global operations. While use–case expansion could be with a single key supplier, it’s more likely that users will branch out across other types of robots and vendors. Gartner believes that within 10 years the majority of medium to large companies will have heterogenous fleets of robots doing different things. A company might have one type of robot for collaborative picking, another type for heavy payload transport, and maybe another for single-item picking. For example, we have clients that have deployed goods-to-person systems—such as AutoStore or Exotec—and are now exploring “goods-to-robots” where instead of a human doing the picking, a robot picks individual items from a tote leveraging vendors like Righthand Robotics or Berkshire Grey.
4. Recurring revenue growth. Finally, most robotics solutions have a recurring revenue component that typically scales based on the number of robots that a company uses. This recurring revenue stream generally includes the annual cost of the fleet management software plus support, maintenance, and upgrades for the software, as well as robot hardware maintenance and support. Business growth will also be fueled by the compounding effects of this recurring annual revenue stream.
Combined, these factors make robotics a very strong growth market for the next decade. This growth will be good for the robot providers, but it will also be good for robot buyers. Buyers have the need and desire for automation, and their options expand as innovation continues. However, in the end, the most important factor is that our research finds that robotic automation is good for buyers because, compared to other types of automation, it typically has a faster time to value, a quicker return on investment (ROI), shorter payback times, and offers more flexibility, scalability, and lower risk.
1. Lucas Manfredi, “US robot orders surge 40% as labor shortages, inflation persist,” FoxBusiness (June 1, 2022): https://www.foxbusiness.com/technology/robot-orders-labor-shortages
2. According to the National Science Foundation, cyber-physical systems or automation involves “integrating sensing, computation, control, and networking into physical objects and infrastructure, connecting them to the Internet and to each other.”