Interact Analysis Sees Warehouse Automation Services Market Doubling by 2025

June 1, 2021

Service contracts will become a significant source of regular revenue for OEMs and integrators

In a new report on the warehouse automation service market, Interact Analysis has revealed that soaring growth in the warehouse automation equipment market is causing parallel growth in the market for service contracts – worth $4.3bn in 2020 and projected to grow to $8.7bn by 2025.

Interact Analysis’s research predicts that the global market for servicing of installed automation equipment will see year-on-year double-digit growth up to 2025, when revenues will top $8.7bn. This will be a stable and lucrative market for OEMs and integrators, affording higher profit margins than equipment sales. Currently, a significant number of end-users carry out service and maintenance in-house or use a third party. And there are also customers who consider it cost-effective to leave their machinery un-serviced. Interact Analysis’s work shows that the growing complexity of equipment and rising pressure to avoid machinery down-time, will mean that OEMs and integrators will significantly grow their share of the services market in the next five years.

Key Findings

Global Warehouse Automation hardware revenues were valued at $19.6 billion in 2020. $4.3 billion in additional revenue came from after-sales services performed by the OEMs and Integrators. The “big four” service categories are remote services, on-site services, spare parts, and modernizations and upgrades.

As the installed base of automation projects increases so too will the service opportunity. Moreover, the complexity of systems, increased cost of downtime, and dynamic customer requirements make regular service and upgrades more critical.

A significant potential market for servicing exists beyond the share that is attributed to Warehouse Automation OEMS and Integrators. This includes customers where the maintenance and operations of equipment is predominately done in-house or outsourced to third parties.

It is estimated that an additional $4.9 billion of potential after-sales service revenue existed in 2020.

There were just over 35,000 active projects estimated to be in situ at the end of 2020. While this is a significant installed base representing 23% of the 150,000 warehouses globally, it includes various levels of automation of which 60% are the more basic, semi-automated conveyance and sortation systems.

The Americas and EMEA generated 80% of OEM service revenues in 2020. This was driven not so much by a disparity in installed base opportunity, but rather the higher likelihood of customers in those regions engaging with OEMs for regular servicing of equipment, as compared to APAC end users.

The increasing complexity of computer-controlled warehouse automation equipment should afford a greater degree of diagnostic and troubleshooting ability on the part of hotline services.

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. 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.

In 2020, on-site service in various incarnations – site visits to identify and repair problems, preventive maintenance visits, and the deployment by OEMs of technicians to sites on a full- or part-time basis – accounted for 40% of service revenues. Upgrade services (modernization or alteration of existing systems, not replacement) accounted for 22%, and remote services, where customers have telephone hotline access to support, 19%. That figure of 19% belies the fact that basic hotline service packages have a very high take-up among end-users, some 80-90%. Additionally, on-site services will become more prevalent as automation solutions get more sophisticated.

Jason dePreaux, principal analyst at Interact Analysis says: “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. 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 eCommerce 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.”

Dan Gilmore, Chief Marketing Officer of Softeon commented, "Maintenance contracts in warehouse automation have historically been something of a tough sell, even before robot era. Many companies think it's cheaper to just pay for service as needed when something breaks, or they rely on internal maintenance staff to do the work.

That might change though in age of robots, as many come with advanced technology, such as LIDAR systems or sophisticated robotic arms and grabbers, that are beyond the skill sets of current company technicians, at least for now. A lot different than working on conveyor systems.

A key question of course is how much maintenance will actually be required for robotic systems. That is likely to vary by type of robot and probably even specific manufacturer.

Importantly, if a given robot is needed for a significant amount of warehouse throughput, then the issues that rise to the top of the importance list are how fast a service firm can respond - and if you should invest in spares to enable rapid swap out and in."

Bob Bova, President and CEO of AccuSpeechMobile added, "Warehouse automation and the expertise to configure and deploy the most impactful solutions is the largest reason AccuSpeechMobile has been installing voice automation solutions consistently since July of LAST year. The growth in both technology adoption and the services required for the quickest and most effective deployments will continue to expand as ecommerce grows and the difficulty to find workers continues."

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