The materials handling industry faces some major challenges as production resumes. While the logistics sector is expected to struggle in 2020, conveyors and AGVs took less of a hit, driven by demands for increased automation.

In two articles - "The factory of the world is ill: Coronavirus in China disrupts production and supply chains around the world” and “Uncertainty surrounds industrial automation market in 2020” - Omdia has discussed the general impacts of the coronavirus (COVID-19) on the manufacturing and industrial automation markets.

However, as manufacturers begin to resume production, the materials handling industry faces some major challenges. With long periods of economic inactivity and a business model that is based on high volumes, the logistics sector is expected to struggle in 2020. Because of the virus, it is likely that there will be extra checks and paperwork required for many products and people to cross international borders. The result is higher barriers to entry into different markets, reducing volumes and increasing costs.

With abysmal traffic and lead times in logistical hubs, capital expenditure (Capex) on infrastructures and facilities will be limited in 2020. Therefore, Omdia has forecast a downward revision to the materials handling sector for this year. The Q1 2020 forecast of the Omdia Machinery Production Market Tracker shows that the global materials handling sector will contract by 12.7% in production revenue in 2020, compared to the previous forecast produced in Q4 2019. Although still contracting, conveyors and automated guided vehicles (AGVs) took lesser of a hit because it is driven by the widespread implementation of automation of storage facilities, factories and airports.

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Challenges for the materials handling sector

Emission reduction

The logistics sector, especially freight shipping, has undergone “green” transformation in recent years. In 2018, the International Maritime Organization (IMO)—a UN agency with 174 countries as members—agreed to reduce carbon emissions from ships by 50% by 2050, compared with 2008, while pursuing efforts to phase out carbon emissions. This would have increased the sales of new machinery, especially port equipment like cranes, hoist, and industrial trucks. However, uncertainties in trade and geopolitical issues have hurt the sector; including:

  • The US-China trade war
  • The British exit from the European Union
  • Weak global trade in 2019
  • The trade dispute between South Korea and Japan

Strong secondhand markets

In recent years, a reduction of Capex in the shipping industry has affected the cranes and hoist sub-sector, which accounted for approximately 27% of this market. The large secondhand markets of cranes and hoists, and industrial trucks in Asia Pacific are challenging the sales of new machinery sales such as bridge and gantry cranes. The region is a highly price sensitive one where its main concern is to get the job done via with old or new machinery. This situation will cause a problem for machinery production as it takes away overall market for new machines.

Adoption of automation and AGVs

One of the main problems facing the manufacturing sector is a shortage of labor to operate the factories, this has been exacerbated in Asia by COVID-19 and the extended Chinese New Year holiday. While there are few viable solutions in the shipping and port sectors, manufacturers in the logistics and warehousing sectors have started to take automation more seriously in realization to prevent labor shortages and rising wages. In the materials handling market over the medium-term, Omdia forecasts that global manufacturers will adopt more high-tech solutions, such as smart conveyors and AGVs, even in labor-intensive factories and storage facilities.

Omdia will continue to assess the situation and provide further analysis on the impacts of the outbreak on the machinery production market.