The Innovator’s Dilemma in Today’s AS/RS Market

Within the current AS/RS market, I see many of the defining characteristics described by Clayton Christensen in The Innovator’s Dilemma. To be clear, I do not believe great companies are poised to fail from these innovations (the subtitle of Christensen’s book). However, I do see some of the characteristics of disruptive innovations in place and factors in play. Actually, the newer innovations are probably better aligned with what Christensen calls sustaining technologies, because the features and functions address the needs of current customers. But some of the dynamics align with those of disruptive technologies, and these dynamics explain my view on the likely path and rate of progression within the bin/tote handling segment of the AS/RS market.

The Latest and Greatest

I recently authored two Logistics Viewpoints blogs about the innovations within today’s AS/RS market – The Cutting Edge of Fulfillment Automation and The Micro-Fulfillment Center Automation Race. These articles discussed some of the newcomers to the market – such as Exotec, Attabotics, and Alert Innovation. The systems offered by these companies promise the combination of high throughput, flexibility/agility, scalability, and storage density. Most notable is the free movement of the bots that removes constraints associated with lifts in more traditional shuttle systems.

These performance features are all of high value to today’s fulfillment operations – the main reason that I consider these to be examples of sustaining, rather than disruptive technologies. However, I expect user adoption to be inhibited by the natural hesitancy of fulfillment operations to adopt new technologies. Many companies with current needs will simply opt for proven technologies that will meet operational goals and investment return metrics. Traditional systems with large installed bases and a history of success, such as those offered by Knapp, Dematic, SSI Schaefer, and AutoStore, offer a proven solution with a lower perceived risk.

The Tried and True

Exotec and Attabotics both have existing customers and appear to be growing rapidly, even though it’s off of a small base. However, absolute sales volumes are small compared to more mature alternatives such as the traditional shuttle systems or AutoStore’s Redline. Simply put, the proven reliability, established capabilities, and operational scale of these options better align with the needs and risk profile of most companies. I expect the proven reliability and scalability of these solutions to appeal to many prospects. This can be seen in the e-grocery adoption of AutoStore, Knapp’s shuttle through the Takeoff Technologies partnership, and Dematic’s Micro-Fulfillment offering. But in some ways this time is different, due to the amount of capital being spent on warehousing and fulfillment technologies and the sense of urgency in the market – likely driven by the competitive pressures from Amazon’s aggressive moves.

Fierce Competition and the Amazon Effect

The transition from traditional retail stores to e-commerce is occurring rapidly with profound effects on the retail landscape. Amazon’s aggressive moves are further propelling this trend. These changes are driving investment in warehouse automation, including AS/RS systems. And these changes are also occurring in an aggressive capital investment environment driven by low interest rates and a search for higher yields. Investments are providing the capital for start-up companies and new product development that I expect to accelerate time to market and market adoption of new fulfillment systems. I expect the established shuttle systems and AutoStore to capture most of the market growth opportunities in the near future. Exciting, new solutions are not necessarily the best investment choice for a given use case. But three to five years out, the fulfillment landscape could look very different – with lots of bots traveling in 3 dimensions.

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