Capital markets activity for inventory and warehousing solutions has exceeded expectations in 2020 and is on track to more than double in 2021, with more than $90 billion in announced transactions thus far.
This is mostly due to pandemic-related changes in 2020 and 2021 in these industries. Contrary to most industries, inventory technology sectors have seen an increase in adoption over the last few months, increasing competition for retailers, e-commerce companies, wholesalers, and distribution firms.
In 2021, deal count has already exceeded previous years in both deal count and average deal size and could double by the end of the year. In this report, J&A provide an analysis of the reasons behind these trends, as well as a profile of key players in these industries.
Supply Chain Technology
Companies in the supply chain management industry industry and similar sectors are increasingly using a combination of technologies like artificial intelligence (AI), machine learning, and predictive analytics.
By doing so they can automate warehouse operations, improve delivery times, proactively manage inventory, optimize strategic sourcing relationships, and create new customer experiences. This increases customer satisfaction, reduces attrition, benefits the top line, and boosts income margins.
Inventory Management and Warehousing
Developments during the COVID-19 pandemic in 2020 and 2021 have increased the need for all businesses to integrate warehousing and inventory tracking technology. This trend has accelerated in 2021 and is not expected to slow down, even after business operations normalize once the virus is controlled.
Recent advancements in inventory management systems readily offer real-time tracking of inventory levels, orders, and deliveries, providing instant error detection, efficient actionable feedback, and quicker response times. Radio Frequency Identification (RFID) chips, sensors, and asset-tagging technologies are leading spaces attracting investor interests.
Innovations in warehousing revolved around improving warehouse efficiency through the application of robotics and other automation software; wearable augmented reality-based devices; and third-party warehousing services targeting individual retailers. The sector also saw the rise of warehousing marketplaces in recent years, adding alternatives to the handling of excess inventory and excess warehouse space.
The supply chain management industry industry has over 2,000 technology firms in diverse verticals. Two of the most active verticals are inventory management systems and warehousing software. Other verticals include business productivity software for supply chain, logistics, media technology, and application software. The most crowded markets in 2020 are transportation logistics services ($39 billion raised), quality management software ($32 billion raised), and logistics service providers ($82 billion raised).
Public companies, such as Amazon, Oracle, Uber, and FedEx, are the most active companies involved in capital placements and M&A activity in this space. Private companies like Grab, Instacart, and Aurora are involved in smaller series funding in comparison. Forecasts show that players like these will continue being involved in PIPE transactions, series A to D funding, and acquisition activities.
- 2021 has been a record-breaking year for logistics software and supply management technology firms.
- Forecasts suggest more than $180 billion will be raised by the end of 2021, doubling the capital raised in 2020.
- With roughly the same number of deals forecasted for 2021 as were done in 2020, forecasts suggest 2021 will double the capital invested.
- $90 billion has been raised in 2021; $91 billion was raised in all of 2020. This upsurge in deal size is due to COVID-19 trends expected to require logistics technology for businesses to integrate or implement.
- J&A does not expect that the deal count in this space will increase in 2021; deal counts in 2020 and previous years have consistently increased by an average of 25% since 2011.
The Future of Inventory Management and Warehousing Technology
The COVID-19 pandemic has affected the way many businesses operate their in-house warehousing capabilities and outsourced technologies. J&A expects the trends set by this influence will grow for at least half a decade once the pandemic is officially contained. Most players in the industry have and will continue to buy strategic smaller entities to tap into new sectors and integrate the technologies offered by them.
Source: Pitchbook, Accessed August 20211