Software Usage Survey 2024: Change on the horizon

The days when people manually pushed loaded carts across sprawling warehouses are slowly fading. Appearing in their place are automated, tech-powered facilities where software serves as the connective tissue for automation, robotics and other intelligent equipment. At the same time, repetitive tasks like picking are being managed by more robots; automated storage and retrieval systems (AS/RS) maximize vertical space; and autonomous mobile robots (AMRs) whisk orders around the fulfillment center.

Companies are responding to a persistent labor shortage and changing consumer demands. In fact, Modern Materials Handling’s 2024 Technology Study found that 23% of the magazine’s readers consider themselves innovators or early adopters of materials handling technology while 29% say they’re “cautiously embracing change” at this point.

The current economic conditions may be throttling some software investment pipelines this year. According to Modern’s readers, 33% say they’re “scrutinizing investments and moving forward cautiously,” another 27% are moving forward with new software investments and an equal percentage are putting off software investments for the time being.

These are just some of the key findings of this year’s survey, which took a deep dive into technology adoption, the impacts of the current economy, annual technology spending, usage plans and the adoption of cloud-based applications. The survey also explored the key challenges companies want to address and the types of materials handling software solutions currently in use/planned for purchase or upgrade.

Cautiously embracing change

This year’s respondents work in a variety of different industries, with 51% employed by manufacturers, 11% employed by a retailer/e-tailer, and 9% employed by a wholesaler. Some are corporate or divisional managers (24%), while 20% are vice presidents or general managers, 14% are supply chain managers, 11% are operations managers, and 8% are logistics or distribution managers. Nearly half (47%) of their companies have revenues of less than $49.9 million while 24% have annual revenues of $250 million or more.

Asked about their adoption of technology for materials handling procedures, 29% of respondents are cautiously embracing change; 25% say they’re generally among the last to adopt technology; and 23% are taking the wait-and-see approach. At the other end of the spectrum, 13% consider themselves innovators, and 10% say they are early adopters.

High interest rates, inflation and geopolitical tensions are all impacting corporate investment this year and the warehousing sector hasn’t been immune to these external forces. According to the survey, about one-third of companies are scrutinizing software investments and moving forward cautiously due to the current economic environment. Other companies are either holding off on such investments, moving forward with them or upgrading their existing software (versus buying new packages).

Over the past two years, more than half of companies have kept their use of materials handling software steady, while 40% say usage has increased, and 2% have decreased their use of such software.

Who’s using what?

Companies have implemented various types of software in their warehouses and DCs over the last few years. Warehouse management systems (WMS) remain the most-adopted applications in the warehouse, followed by labor management systems (LMS) and supply chain planning (SCP) and demand planning. Other popular warehouse applications include transportation management systems (TMS), warehouse execution systems (WES), asset tracking software and distributed order management (DOM) applications.

One noticeable uptick was the increased use of LMS—31% this year versus 25% in 2023—by companies that are likely looking for ways to optimize their available labor resources. In fact, the modern LMS has come a long way since replacing industrial engineers who used stopwatches and clipboards to conduct time-and-motion studies on the factory floor. Today’s LMS applications incorporate everything from self-scheduling capabilities that give workers more control over their schedules to advanced analytics capabilities beyond basic performance metrics.

Over the next two years, 29% of companies plan to evaluate, purchase or upgrade their LMS (compared to 15% last year), 25% will do the same with WMS, and 25% plan to evaluate, purchase or upgrade their WES (compared to 13% last year). Others will be looking more carefully at slotting software (15%), asset tracking (13%), TMS (13%) and supply chain management and planning software (10%) during that time period.

Companies face various challenges when adopting or implementing new materials handling software applications. One of the biggest concerns is total cost of ownership (46%) for the software, followed by compatibility with existing systems (46%), user acceptance (43%), and integration with existing software applications (41%).

Other common challenges that organizations face with software integrations include a lack of implementation resources, no funding, application performance issues, incompatibility with host/legacy systems and being able to substantiate return on investment (ROI).

The king of the mountain: WMS

Warehouse management systems continue to reign as the top software in use in the modern warehouse or fulfillment facility. According to the survey, 45% of respondents say they have had their WMS for 1 to 5 years, 24% for 15+ years and 19% for less than 10 years. Some newer users have only been using their WMS for less than a year, while 4% have had their WMS for 10 to 15 years.

The majority of readers (62%) have upgraded their WMS at some point within the last five years while 10% say they’ve never upgraded these systems, which tend to produce a fairly fast ROI. For example, 43% of companies realized their WMS ROI in less than 18 months; and 8% say it took less than 6 months to realize a return on their software investment.

Companies that plan to invest in WMS over the next two years want to leverage the systems’ real-time controls or use the platforms to manage new picking requirements or labor. Other reasons for adding a new WMS include the need to replace an existing system, manage inventory deployment or to handle slotting activities.

Managing the complexities of transportation

Transportation management systems are another well-used software solution for the modern fulfillment facility, and these platforms also tend to produce a fairly fast return on investment. The survey found that most TMS solutions have been in place anywhere from one year (10%) to 15+ years (8%). The majority of users have had these systems in place anywhere from 1 to 5 years.

Most of the survey respondents (58%) are using TMS solutions they upgraded less than five years ago, although 25% say their systems haven’t been upgraded in the last five years. In terms of ROI, the majority of companies say their TMS paid off in less than 18 months. And 8% of companies say it took more than 18 months to realize an ROI from this investment.

Companies are also using SCP applications in their warehouses, where these platforms are used to manage orders, inventory, demand planning, manufacturing and procurement. Forty-two percent of respondents use SCP for collaborative forecasting, planning and replenishment; and 42% use these platforms to manage e-commerce fulfillment.

Software continues to move into the cloud

Like most types of software, supply chain and logistics applications continue to move further into the cloud. According to the survey, 72% of companies are either already using or currently evaluating cloud-based applications. And 8% say cloud is “not an option” for them while 19% are unsure of their interest in the cloud.

The reasons for using cloud-based applications vary, with 46% of companies viewing this software delivery model as more cost effective than on-premises options. Companies also see the cloud as an access point for analytical data, a more secure software option, and a way to get everyone in the enterprise working from a single source of truth.

Half of respondents (50%) say they are using or planning to evaluate cloud-based applications for WMS, TMS, LMS, slotting or order management, while 46% to monitor systems, manage information or predict system failures for their automated warehouse equipment. Also, 42% are using or adopting cloud to manage or collect data about their lift truck fleets.

Emerging tech trends

Some of the new technologies that warehouse operators are investing in are artificial intelligence (AI), the Internet of Things (IoT), blockchain and machine learning. The survey revealed some wide disparities between the “early adopters” and the “wait-and-see” crowd when it comes to these emerging technologies. All in all, it appears that warehousing operations are slowly adopting these and other technologies as the business use cases increase and as more vendors add these capabilities into their solutions.

Asked about their expected supply chain software spending over the next 12 months, readers plan to continue investing in more solutions that help them work better, smarter and faster in the fulfillment environment. However, economic factors and other outside forces may continue to keep spending at bay as companies work to do more with less.

Including license, integration and training, the majority of readers (86%) say their companies will shell out $500,000 or less on software over the next 12 months. Ten percent of companies plan to spend anywhere from $500,000 to $4.9 million on new software programs while 2% will be investing $5 million or more. On average, companies are planning $544,450 in supply chain software purchases over the coming 12 months, down from $743,137 in 2023 but significantly higher than the prior year’s expected investment of $436,830.