The Current State of Robotics and Warehouse Automation

Thoughts From MODEX, 2018

At ScaleVP, we’ve been doing quite a bit of thinking around warehouse automation. There are many vectors of innovation happening in the space, and perhaps in no place does this become more apparent than at MODEX, one of the year’s largest manufacturing and supply chain conferences. With close to 1,000 companies exhibiting on the premises, panels of industry experts, and crowds of supply chain executives, the buzz around emerging technology is palpable.

Warehouses are the physical backbone of the global supply chain, and perhaps at no point in history - with seemingly relentless pressure from Amazon, Walmart, and other e-commerce powerhouses - has the labor force and infrastructure been driven to change so rapidly. Automation solutions, especially in robotics, are emerging in many areas across the supply chain - from autonomous mobile robots (“AMRs”) like Locus Robotics, to highly specialized end effectors in the likes of Soft Robotics that enable human-like dexterity in nuanced picking and packing processes where labor has traditionally been unsubstitutable. [In full disclosure, ScaleVP is an investor in both of these companies]. The specificity of warehouse environments - their layout, design, number and types of SKUs processed - begets the diversity of many robotics solutions that are beginning to hit the market today to address these needs.

Below we touch on a few bits of thinking from the show, and more broadly, around innovation happening in the market. Some of these thoughts were synthesized through conversations we had at the conference, and others are more general observations around activity within the space. They are in no particular order of importance.

  • The margin for automation in modern warehouse environments is only widening. In perhaps no place is this more evident than in the e-commerce category, where demand has grown at double digit percentages for nearly ten consecutive years and labor markets are at their tightest point in history. For automation vendors entering the space, the market is in a land grab state.

  • A new generation of more flexible automation players is emerging. This is especially true in the robotics category, where vendors are starting to demonstrate meaningingful efficiency gains above incumbent solutions within existing warehouse environments. These innovations are happening across the stack - from autonomous mobile robots, to robotic arms and vision systems, to robotic grippers and end effectors.

  • Companies and institutional investors are taking notice, driving heavy external capital investment, as well as internal spend in sales and marketing (both around brand messaging and communicating the capabilities of more flexible, cost-effective solutions).

  • With that, the category is still in an early transitional state. Buyers are enthusiastic about innovative solutions hitting the market, but continue to maintain a healthy level of skepticism and tend to prolong testing of new technologies to develop the highest level of confidence in their purchasing decisions. Proof of concepts therefore, especially during introductory stages, become delicate. Managers have invested heavily in this category before, configuring (and reconfiguring) entire warehouse floor plans around a proposed automation solution, only to yield efficiency gains that were in some cases underwhelming. The wave of more flexible, cost-effective robotics represents a step-functional change from solutions that have long been in the market, and as such, there is a rigorous expectation of proving ROI prior to purchase. This can require a heavy amount of time and resources on the vendor side.

  • Operations managers are recognizing the need to optimize, though this is not a market that has traditionally moved quickly to adopt new technology. Shifts of this sort have historically taken time and have necessitated proof of effectiveness, especially given the scale of investment required. But now that many leading 3PLs and e-commerce brands are publicly coming forward with testimonials around the efficacy of new robotics solutions in the market, it is likely just a matter of time before we begin to see a true wave of transition in buying behavior and more widespread adoption of technology.

There is a lot happening in the warehouse automation category, and the right forces are in place to drive change. On the demand side, managers are recognizing the need to optimize, and on the supply side, there is an influx of new, compelling technology hitting the market. We fully understand that the market is still in the early phases of transition, but we also recognize that the opportunity for disruption within the category is massive. From here, it will come down to execution.