2025 turned out okay in the end, but the projected bright outlook for 2026 is cause for concern as economic uncertainty may increase volatility swings, according to a report sponsored by Exotec and released by STIQ Ltd.
For instance, delays affected North American projects more.
Retail and e-commerce customers have been a key market driver in the goods-to-person (G2P) solutions sector, however, many of these customers may have prioritized supply chain clarity above warehouse automation projects.
Other sectors such as food and beverage and pharma appears to have performed better and replaced some of the retail and e-commerce shortfall.
In January, there was plenty of optimism for a great year as many customers seemed to have settled into accepting the new tariff rates. However, subsequent events such as Supreme Court ruling and the Iran war are likely to have impacted this sentiment.
Capex limitations and project delays also led to increased scrutiny of projects and ROI assumptions with some customers shaving project sizes marginally. Such delays also appeared to have contributed to bloating of sales pipelines (similar to early COVID days. Some system integrators and OEMs appears to have ‘right-sized’ their organizations with a smaller number of companies struggling.
“While many companies now appear to have accepted that uncertainty will continue in the short- to medium-term, it is also likely this will cause a higher-than-usual degree of volatility,” the report says. “This may affect the cash position of some of the less financially solid companies potentially leading to growth in M&A activity as solid companies consolidate.”
Key takeaways:
· G2P storage and retrieval solutions target the largest element (52%) of warehouse costs in manual warehouses. In a 2017 study, researchers found that just over 50% of warehouse activity costs are typical fulfilment processes associated with G2P solutions.
· There is increasing competition for warehouse labor, which is pushing up salaries. Meanwhile, automation can offer a cost-effective risk mitigation tool, potentially bringing down temporary staffing costs for warehouse operators. Some sectors, such as factories/manufacturing, often push harder for shorter project lead times but also frequently have longer ROI expectations compared to warehouse operators.
· A growing range of software solutions are pushing up the bar for automation and competing for attention at the lower end of G2P solution throughput. More mature customers, such as larger 3PLs, often have internal capabilities and resources, and are able to streamline processes to push up pick rates where reasonable ROIs for automation can be difficult to achieve.
· The trend is toward more brownfield opportunities for warehouse automation. Retailers, including e-commerce, has been and remains a key customer demographic for G2P solutions market by value. 3PL presents a large proportion of the G2P solution market but is often intertwined with and overlaps retail, as the latter frequently uses 3PLs for fulfillment services.
· Interest for automating online grocery fulfillment has declined. However, grocers remain very active buyers of warehouse automation, but primarily for case and pallet handling.
· Chinese online retailers are setting up warehouses internationally often with core material handling equipment and G2P solutions sourced from China.
· Maintenance may be a barrier to adopting G2P solutions, especially among smaller customers often not yet on a serious automation journey.
