Across the industrial world, companies are betting big on robotics and automation. For many, automated systems will account for 25 percent of capital spending over the next five years, results from the 2022 McKinsey Global Industrial Robotics Survey show.1 Industrial-company executives expect to see benefits in output quality, efficiency, and uptime. However, many remain wary of the challenge, with the cost of hardware and a lack of internal experience at the top of their list of concerns.
Among the industrial sectors surveyed, the biggest spender on automation over the next five years is set to be retail and consumer goods, with 23 percent of respondents from that sector planning to spend more than $500 million (Exhibit 1). That compares with 15 percent in food and beverage and 8 percent in automotive. For logistics and fulfillment players, automation will represent 30 percent or more of their capital spending in the next five years—the highest share among industrial segments surveyed.
With billions of dollars expected to be outlaid for automation over the coming years, industrial companies need to ensure that they get implementation right. Many are daunted, the survey results show, and this state of affairs offers a market-winning opportunity for technology providers. The most successful providers will be the ones that can help industrial companies overcome challenges, including those related to technology selection, implementation planning, and acquisition of the skill set required for rollout on a larger scale.
Among the industrial sectors surveyed, the biggest spender on automation over the next five years is set to be retail and consumer goods.
Some aspects of productive activity are more amenable to automation than others are, with routine tasks at the head of the line. Activities such as picking, packing, sorting, movement from point to point, and quality assurance are already automated to some extent, and these will continue to see heavy investment over the coming years. Conversely, activities such as assembly, stamping, surface treatment, and welding, all of which require high levels of human input, are less likely to be automated in the short to medium terms (Exhibit 2).
Where operations can be automated, the benefits include the abilities to work faster and at a higher capacity, as well as to provide high quality (Exhibit 3). In addition, there are upsides in cost, operational uptime, and safety. On the other hand, environmental and sustainability factors are likely to be less positively affected.
A standout message from the survey is that automation is not easy. Participants report that the primary challenges to adoption include the capital cost of robots and a company’s general lack of experience with automation, cited by 71 percent and 61 percent of respondents, respectively. Some say that business confidence in technology is low, leading to challenges around conviction and funding. Moreover, respondents’ expectations of production and reliability gains through automation are offset by the belief that such gains will eliminate jobs and may affect existing contracts. In fact, that is not the case since automation typically leads to changes in workplace roles rather than the creation of redundancies.
Many companies currently operate a hodgepodge of legacy technologies and anticipate challenges in implementing a single set of solutions backed by integrated and interoperable programming and platforms for robotics and automation. Of survey respondents, 42 percent cite challenges with finding holistic, end-to-end solution providers across geographies for the scope of robotics technologies of interest to them. Companies are responding to such issues with increased partnerships across legacy-system integrators and robotics start-ups and disruptors that offer cutting-edge innovations.
Survey participants are also concerned about fitting robotics into existing spaces and the potential inability of machines to interface with products. Concerns about safety and cyberattacks also feature as potential areas of jeopardy.
Despite significant capital commitments, many companies are struggling to translate their intentions for robotics and automation into actions, with challenges related to knowledge and return on investment being particularly difficult hurdles. In retail and consumer goods, approximately 60 percent of respondents (14 out of 24) cite those two factors as barriers to progress (Exhibit 4). Other headwinds include a lack of technological readiness from a capability lens and system reliability.
The challenges that industries face present robotics and automation providers with a significant opportunity to help build the capabilities required to automate at scale or provide support for this effort. However, those vendors will need to provide convincing answers to the questions raised by their customers and work hard to differentiate themselves from their competitors.
Customers would most like to see differentiation in price, scale, and innovation. Other salient buying factors include the quality of the product build, ability to offer an integrated solution, and provision of reference cases that show successful rollouts. Moreover, vendors should be able to offer solutions that are cost efficient, rapidly deployed, reliable, safe, and scalable. And they need to be able to move quickly from prototype to scale within the customer’s organization.
One reliable route to differentiation is to enhance software and hardware sales with full-service models. Such models would offer not only installation and integration but also maintenance and support through the product life cycle. Indeed, 62 percent of survey respondents agree that most customers favor robotics and automation providers that can provide full-service models for implementation.
Automation providers that can move toward robotics as a service and act as a single point of contact for maintenance (for both hardware and software) will create a distinctive competitive advantage. Survey respondents also value variable cost models, such as cost per pick.
Drilling down into maintenance and service models, 55 percent of surveyed industrial players would prefer that a system integrator act as a single point of contact and provide both hardware and software maintenance. Meanwhile, 52 percent desire a convertible model in which system integrators gradually hand over responsibilities to in-house teams. Additional common preferences are the abilities to work with OEMs for hardware and integrators for software and to contract with a local third party for all maintenance needs.
To offer the right service at the right time in the right way is a big ask for robotics and automation providers. However, given the need for industrial companies to boost productivity, create stable supply chains, and find an alternative to the overheated labor market, the effort is likely to be justified by the reward. The providers that effectively help companies realize benefits from robotics and automation and scale the technologies across markets are likely to emerge with strong revenues and a positive business trajectory. The productivity gains and capacity flexibility arising from automation could also significantly improve operational resilience, which is critical during a time of increased disruptions.