Supply Chain Software Should Benefit from the Tariff Roller Coaster; Material Handling Solutions Might Not Fare as Well

Tariffs are taking companies on a roller-coaster ride. One minute they’re in, the next they’re paused, so it’s impossible to predict and seemingly impossible for organizations to build a state of resilience. Whatever level of tariffs becomes the new norm, the impacts on supply chains and the solution providers that serve them are becoming more apparent.

For software providers, volatility is more often than not great for business. As uncertainty goes up, organizations need more visibility, more analytical capabilities, and platforms that can bring in more data inputs to provide the most holistic picture of the potential effects. While the same can’t be said for hardware providers (devices, automation, etc.) that are facing potentially significant cost pressures and shaky consumer confidence, underlying industry fundamentals are hard to ignore.

Software providers are focusing on the positives of the disruption:

• As soon as the tariffs were announced, big data analytics provider Palantir started promoting its Palantir Foundry and Artificial Intelligence Platform (AIP) that can bring together disparate data sources for unified insights. The Ontology System brings together areas across a business, including logistics, inventory, finance, and compliance, to assess the full impact of a new tariff on operations and then allows the user to action changes that automatically update across business functions.
• Startup freight broker Nuvocargo has seen a stark increase in demand for services since tariffs were announced, as companies have turned to the company’s AI-powered digital platform to help with cross-border freight forwarding between Mexico and the United States. The additional administrative tasks required as tariffs change is arguably a greater cost to businesses than the actual tariffs themselves, so establishing strategic partnerships with experts like Nuvocargo is the only way that businesses can react in time.

While supply chain software and Information Technology (IT) services may be able to see the benefits of the current situation, the same can’t be said for warehouse hardware and automation providers. Already, System Integrators (SIs) for warehouse automation, in particular, have reported slowing deal cycles and delays to existing projects. Most are now scrambling to get deals done as fast as they can due to uncertainty around continued demand and shocks to pricing of key equipment.

In the short term, fixed automation is likely to see a bigger impact than mobile automation solutions, due to the higher amount of infrastructure such as steel racking that is required for installation. For more price-sensitive customers that are just dipping their toe into the world of automated picking solutions, simple, scalable Autonomous Mobile Robot (AMR)-based solutions from Brightpick and Locus Robotics will be a more attractive option.

Should tariffs have a significant impact on consumer confidence as well, it’s likely that productivity and workflow solution providers will see a similar impact on their sales as they did in 2023. As is outlined in ABI Insight “A Drop in the Sales of Handheld Devices in Warehousing Will Require Both Product and Software Differentiation to Spur New Business,” Zebra, Honeywell, and DataLogic all saw double-digit percentage drops in revenue, attributed to a “soft goods economy” and delayed Capital Expenditure (CAPEX) investments due to macroeconomic uncertainty.

As highlighted in recent ABI Research reports, supply chain solution providers have been turning their attention away from groundbreaking innovations, and more toward supporting implementation through flexible, scalable approaches. Such an approach will have to be leaned on when making deals in an environment where cost pressures increase, and discretionary spending is pressed.

System Integrators (SIs) also have the ability to benefit from the current environment through who they select to partner with to deliver material handling systems. If one system provider is more impacted by tariffs due to the nature of their inbound supply chain, SIs need to be reactive and identify alternative providers that are better shielded from tariffs. Piecing together the right providers for each project will enable SIs to limit price pressures and remain competitive.

It’s also imperative to identify the industries that will hold more buying power through this type of disruption. Companies are likely to shift more of their logistics and warehousing to Third-Party Logistics (3PL) providers to tap into inbound expertise and processing capabilities. Many automation providers have already tapped 3PL providers as the next big growth industry for warehouse automation, and if such companies see a surge in new business, this may accelerate the trend.

End users should also see the benefits of shifting their sights to more homegrown or regional technology providers. While North America has typically played host to a lot of innovation on both the software and mobile automation side, and Europe has led in terms of SIs and fixed automation solutions, the industry is relatively well balanced, and there is no shortage of providers to choose from closer to home. And this is an important factor to consider in the long term. Data sovereignty is a growing regulatory focus and something that regional providers will have specific expertise on, shielding companies from any incoming regulation. And on the hardware side, there is both a greater degree of predictability when working with regional providers and unique implementation expertise that can help smooth deployments.