Tune in to our fireplace chat with Plus One Robotics CEO & Co-founder, Erik Nieves have been we dug into the present demand for robotics in warehouses – and a number of the obstacles Plus One is working to beat with regards to the advanced strategy of choosing and packing packages.
Jeremie Capron:
My title is Jeremie Capron. I am the director of analysis right here at ROBO World. And in the present day we’re going to deal with one of the thrilling areas of robotics and AI, one thing that our analysis crew may be very keen about. That’s logistics and warehouse automation.
And we consider that this can be a crucial subject for buyers, not solely as a result of it has already began delivering spectacular funding returns, but in addition as a result of it touches on so many essential elements of the robotics revolution. And we’re going to be speaking about a number of the enabling applied sciences that make logistics automation doable, just like the sensing, the computing, the AI. And likewise about what’s taking place by way of companies adopting this know-how throughout a big spectrum of industries.
And to try this, I am actually thrilled to be joined in the present day by a really particular visitor. Erik Nieves is a founder and the CEO of Plus One Robotics, which is among the most superior robotics and laptop imaginative and prescient firms within the subject of logistics in the present day. And earlier than founding Plus One, a number of years in the past, Erik was know-how director at Yaskawa, which is among the most profitable industrial robotics firms on this planet, the place he labored for, I consider practically 20 years.
Erik Nieves:
25.
Jeremie Capron:
I believe Erik is a thought chief in robotics and he has a really deep technical experience, but in addition I believe Erik is a outstanding communicator. And over the ten years or in order that we have identified one another, I’ve discovered an incredible quantity from Erik as we researched and make investments on this planet of robotics. So I hope in the present day you too can be taught one thing, and fairly certain you’ll. So for that, I am very grateful. So Erik, thanks and welcome. And the place does this webcast discover you in the present day?
Erik Nieves:
Nicely, good morning. You’re beamed into San Antonio, Texas, which is the place Plus One is headquartered. And I have been wanting ahead to this webinar for a while. I respect the chance to talk to the group on simply kind of the place we’re with warehouse automation and the place this all ends. So wanting ahead to it this morning. Thanks, Jeremie.
Jeremie Capron:
Nice. So earlier than we begin drilling into it, I needed to indicate members how we see logistics as a bit of the funding thesis across the robotics revolution. And as a few of you realize, our objective at ROBO World is admittedly to offer publicity to one of the best at school firms from around the globe throughout your complete worth chain.
So we’re not solely robotic producers or suppliers of turnkey resolution for the manufacturing functions and so forth, however actually we’re a broad vary of very enticing software domains of which logistics is a really important one. And you may see on the left hand facet right here, we’re additionally offering publicity to the enablers, the applied sciences that make robots and autonomous methods doable, just like the sensing, just like the actuation, the computing and so forth. And general, logistics and warehouse automation represents about 13% of the ROBO index portfolio in the present day.
And in order that is among the most essential sectors by way of publicity within the ROBO portfolio. And if you happen to have a look at historic efficiency, this is a chart that my colleague Brad, put collectively a couple of week in the past that shows the efficiency of the ROBO index in blue. And you may see because the inception, nearly 10 years in the past now, the returns that reached nearly 300% on the highs of final yr after which main pullback up to now this yr. However you may see an orange, the logistics and warehouse automation subsector has been actually outperforming fairly considerably and likewise constantly.
And naturally, throughout the pandemic with so important enthusiasm across the booming e-commerce and the way these firms may assist with provide chain points and the large volumes going by provide chains. You may as well see the numerous pullback, which we view as a serious alternative. The sector has pulled again greater than the 35% from the best attain final yr. So pardon me for this facet be aware right here. I wish to go straight into Plus One and ask Erik in regards to the genesis of Plus One. After your lengthy profession at Yaskawa, why did you resolve to start out a brand new firm?
Erik Nieves:
Nicely, I used to be at Yaskawa for about 25 years. I joined them in 1990. And the robotics trade was very listed to the automotive sector, and we’ll really see that in a number of the information. However round 2010, actually 2008 when the disaster was as unhealthy because it was, the robotic trade was actually struggling as a result of it was so tightly coupled to the automotive sector.
And I used to be tasked together with my colleagues on the advertising facet, “Please go discover one thing else for robots to try this wasn’t tied to a automobile a part of some type.” We kissed numerous frogs. I imply, we checked out aerospace. In case you can automate the constructing of automobiles, why not automate the constructing of airframes. And you may, it is simply not that many robots. The lengthy life cycle of the product sort of retains you from that. We checked out medical lab automation, no person needed to be dealing with blood samples anymore.
However all of those have been kind of area of interest. And in the long run there have been solely two sectors that actually mattered that have been going to undertake robotics at scale. And that was electronics meeting and provide chain. And you possibly can argue that electronics meeting is a much bigger alternative and it is extra akin to what robotic individuals are used to coping with. It is excessive quantity, it is repeatability, it is precision, it is engineers speaking to engineers.
However from our perspective it did not a lot matter as a result of it was going to remain in Southeast Asia it doesn’t matter what you probably did. And I nonetheless argue that that is true. So logistics although is by definition all the time native. And so I spent a while even inside Yaskawa attempting to pivot 100 yr previous Japanese industrial to constructing merchandise that have been going to be related within the warehouse.
Ultimately, all of us discovered that the warehouse just isn’t actually a robotic drawback. It is a notion and greedy drawback. It is imaginative and prescient and it is actuation on the finish of issue. The arm is the arm is the arm. So I made a decision to separate from Yaskawa in 2015 and established Plus One in consequence.
Jeremie Capron:
I am going again to this chart I confirmed earlier that actually sort of spotlight the growth within the logistics automation enterprise, the businesses which can be represented in that subsector of the ROBO World portfolio are the likes of Zebra Applied sciences and Daifuku in Japan, and extra just lately GXO Logistics. And a few a lot smaller much less identified firms which can be in Switzerland like Kardex, the automated storage retrieval methods or-
Erik Nieves:
AutoStore.
Jeremie Capron:
… AutoStore that went public final yr. So what’s it that actually triggered that inflection by way of the adoption of automation know-how by the logistics trade?
Erik Nieves:
The primary inflection level clearly is our continued push of extra of our commerce logging on. In a way, you may consider, we have been the robots doing the order achievement ourselves. After we would go to the big-box retailer to the grocery or what have you ever, we did our personal choosing, we did our personal sortation, and we did our personal supply. And e-com modified that. We simply began click on to ship, and that meant any individual else was having to choose our orders and pack them and ship them to our doorstep.
In order that was already taking place. COVID simply accelerated the inevitable, the place earlier than grandma would nonetheless go to the grocery retailer as a result of she did not wish to must mess with a pc to get her supply. She figured it out. And COVID is, lets say, now come and gone. Grandma’s not going again to the shop to purchase a 40 pound sack of pet food and must lug it into her trunk. That is by no means going to occur.
So we now have introduced on an entire new class of on-line shoppers and there is simply no stepping again from that. The person who’s going to be lugging that 40 pound sack of pet food from now and ceaselessly, is the FedEx or UPS supply individual that’s displaying up in your porch. And so all of that conspired to seeing this actual spike in volumes, concurrently we have been so constricted in labor. And the expansion of the market, outstripped labor’s availability and the result’s burgeoning marketplace for automation within the warehouse.
Jeremie Capron:
And what in regards to the technical facet and the know-how? As a result of I am going again 10 years in the past and visiting the commerce exhibits just like the IMTS in Chicago the place I am at in the present day, and seeing very spectacular excessive velocity, excessive accuracy industrial robots that have been spectacular by their such efficiency. However on the finish of the day have been very dumb robots and unable to do something out of the peculiar of the commercial or the manufacturing plan. Which means, that if there was a change within the half that was speculated to be picked and even simply location by a number of millimeters, the robotic was caught. And in the present day, we have seen some large advances to the purpose the place the holy grail of robotics from 10 years in the past, which was a random object choosing functionality, we now have that. So what’s occurred that is enabled that over the previous couple of years?
Erik Nieves:
I might say that is possibly instructive right here. So this kind of speaks to the dichotomy that you just’re referring to. We stated that robotics was tied to the automotive sector and you may see that on this information the place the darkish blue is automotive and light-weight is non-automotive. Beginning 2018, the automotive trade was successfully flat. However the non-automotive orders continued to develop.
Now, the automotive orders are those that you just’re desirous about, the place the robotic is simply sturdy and dumb. You do not want laptop imaginative and prescient, you do not want AI to identify weld the automobile physique. And we have been efficiently doing that now for 40 years. The nice factor is, spot welding calls for numerous robots. It is 200, 300 robots in a facility to try this sort of labor. However it was additionally doable as a result of the robotic did not actually need to know way more than its personal repeatability and endurance. It may lug that 200 pound gun all day day-after-day to inside a half a millimeter repeatability and that is what the method required. So there was no sensing.
However get outdoors of automotive, you may’t afford to construction the world this manner. The worth to quantity curve means you are going to must take care of issues as they’re, not as you ought. The automotive sector I might argue is among the only a few that has sufficient worth and quantity to make it a structured setting. You are going to do the identical factor the identical method for the following 4 to eight years.
However in non-automotive, and that mild blue line, sure, that is robots at Flippy doing burgers and fries. It is some development robots, however numerous it’s in that 13% you talked about which is in logistics automation. And in that house, the repeatability just isn’t the rule. Variability is the rule. I do not know what is going on to come back down the road subsequent, and I certain do not know what is going on to come back down the road subsequent week. So it is predicated on variability. That is a part of the rationale it has taken such a very long time for warehouse automation to actually mild up, as a result of to do it you wanted sensing.
In manufacturing the usage of sensors is proscribed, the usage of information is much more restricted. However in warehouse automation, you want numerous subtle sensors, these at the moment are 3D sensors, and also you want the information to drive the AI studying. So it’s a must to generate that in a just about on each cycle. After which the very last thing that I say in regards to the constraints which have traditionally been on warehouse automation, is it has been an in a legacy market that hasn’t had numerous automation instruments to bear.
What does that imply? They have no technicians or engineers on workers to run the kind of gear that manufacturing has been utilizing for a very long time. So these manufacturing and warehouse automation are usually not the identical factor. And the variations are these. The primary one is variability, which suggests it’s a must to have sensing, and it is a legacy market that simply hasn’t had the suitable experience. However the cause it is now 13% of the ROBO portfolio is as a result of the acceleration that we’re seeing.
Nonetheless in the present day, solely about 10% of operations are automated in any respect. And that doesn’t even full automation, that may be semi-automated. Given the expansion, there’s one million jobs left hanging in three years time. There may be not a warehouse in America that does not have a “assist needed” signal outdoors. All of them are short-staffed and their churn is the best on the market. It is quick meals churn.
The attrition charges at Amazon final yr have been practically 160%, which suggests you probably have a activity that wants doing, you are going to have to seek out our bodies for that activity. Not for one shift, not for 2 shifts, however in all probability for six shifts as a result of that job’s going to churn that many instances. So the place does that go away you? It leaves you automation as your path ahead.
Jeremie Capron:
Can I interrupt for a second right here?
Erik Nieves:
Yeah.
Jeremie Capron:
I believe the staffing is a large concern for certain. There’s the attrition drawback, however there’s additionally the issue of the job itself. And it is one thing that I actually like about Plus One is your motto, which I consider is, robots work and other people rule.
Erik Nieves:
That is proper.
Jeremie Capron:
So I am curious, if you happen to may simply contact on that for a minute. Once you automate a warehouse, what precisely occurs to the construction of employment inside the enterprise of a warehouse?
Erik Nieves:
Yeah. You are proper that given what we simply talked about, that they are all short-staffed, this isn’t a zero-sum sport. It is not robotic in, particular person out. No robotic ever deployed in a warehouse resulted in a pink slip. We do not have sufficient individuals displaying up on the entrance door anyway. So actually what automation is, is a leverage play in order that the staff you do have, these FTEs might be much more productive and beneficial.
Erik Nieves:
Consider it like this. And we’ll see a few of an instance of our work at FedEx. If my job is to maneuver packages from proper to left, 25 to 30 instances a minute for the following six hours, that is not a fascinating activity. However it’s one which it is a job that wants doing. So if as a substitute we will say to a kind of operators, “Hey, look, the place earlier than you have been liable for 1,500 picks an hour, I will make you liable for 6,000 picks an hour.”
At first their hair would go on hearth as a result of they know they can not try this. However if you inform them, “And the way in which we will do that’s I am making you liable for this line of robots now that is going to be choosing at 1,500 an hour.” Warehouse automation is a leverage play, not a labor substitution play. So all people that confirmed up nonetheless will get to remain, they only develop into extra productive within the duties that they have been liable for by leveraging the instruments, and so they transfer up scale in worth to the group. They normally get a pay increase out of the factor. So it isn’t a bone of competition when the robots present up in any of those amenities.
Jeremie Capron:
Received it.
Erik Nieves:
Yeah. And that is the rationale we are saying robots work, individuals rule. So you are going to discover these robots, they’re both going to be doing choosing or they are going to be palletizing of some sort. However in fact the largest one and a considerable portion of the worth up to now within the house is these cellular collaborative robots, the AMRs.
And there is two lessons of AMRs. You’ve got these, which Locus is a transparent chief. After which you could have Shopify buying 6 River. And this one, which is MiR that was acquired by Teradyne. And Fetch, which was acquired by Zebra. Within the curiosity of full disclosure, you talked about Zebra earlier. They’re an investor in Plus One ClearPath. All of those robots are successfully wanting on the mobility drawback within the warehouse. And attempting to both get rid of the variety of of us that must be liable for driving forklift or hauling carts or one thing, after which letting them do extra worth added duties.
On the left, that was 22,000 AMRs offered, or deployed relatively, within the US final yr. That did not depend a single considered one of these robots on the suitable, as a result of these weren’t offered. These are Amazon’s proprietary AMRs. And there have been extra of those deployed than the whole lot of those on the left. And that is as a result of Amazon simply adopts automation at a unique tempo than anybody else. And that sort of speaks to this market.
We speak in regards to the market is prime heavy in warehouse automation. There’s actually three totally different ranges. You have acquired a stage right here, which is kind of the place the DHL and FedEx exist. They’re adopting robotics of their operations, they’re scaling them out, et cetera. They deploy robots by the robotic arms 20 and a few odd at a time. DHL deploys Locus robots a thousand at a time. Then you could have kind of down market. Take into consideration the 3PLS, direct to shopper manufacturers, et cetera. These of us are shopping for robots by every or the pair. So you may say that the market is prime heavy. However then you could have Amazon that is above each of those who’s deploying robots by the a whole lot, and AMRs by the 1000’s themselves. So it truly is kind of a three-tiered market the place Amazon is sui generis, they’re their very own factor. Any ideas, questions on that?
Jeremie Capron:
No, I believe it is actually fascinating that Amazon itself primarily builds and ships and deploys extra robots that your complete impartial AMR trade. And but the AMR enterprise would consider is a incredible one now, as a result of the pie is rising so quick. And naturally Amazon has numerous competitors, and it raises the bar for everyone else to primarily mimic or attain the identical sort of productiveness and efficacy ranges of their warehouses and provide chains. So on the finish of the day, I believe the AMR enterprise must be a fairly good one for the years to come back and would you apply on that?
Erik Nieves:
I agree. In case you are in a warehouse, the duties to be performed, the labor within the constructing, might be regarded as three various kinds of labor. First is the mobility labor. These are of us which can be both driving a forklift, or they’re pushing a dolly, or they’re hauling a cart or one thing related to a wheel. In order that’s one class of labor. The second class of labor is individuals which can be strolling, the ambulatory class of labor. And these would be the ones strolling up and down shelf stacks or what have you ever. After which the third class is static labor. These are individuals which can be at a station of some sort, possibly they’re at a packing station, possibly they’re at an induction lane, et cetera.
The cellular class of labor is the smallest, nevertheless it’s additionally the one that’s accelerated the furthest in its adoption of robotics. And there is a few causes for that. Considered one of them is the physics of the issue is kind of simpler. A cellular robotic has two and a half levels of freedom, ahead, again, left, proper, flip. And it is all the time wheels on a flat ground. You sort of perceive the morphology of the robotic. Now you’ve got acquired agility and a few of us attempting to place legs on robots. We’ll see the place that goes.
However the preponderance are going to be wheels. The AMR drawback technically is admittedly simply the kind of coordination among the many fleet of those robots, kind of deconflicting them, and charging. You need to do alternative charging and that sort of factor. However AMRs lend themselves to the warehouse proper now as a result of one, it is a two-way door. I can put AMRs in and in the event that they work nice, my effectivity goes up. If they do not work, I am going to park them for a minute and I am going to simply have individuals return to doing what they have been doing. So the kind of disaster hole is minimized on AMRs.
Second, AMRs, nearly from the very starting, lent themselves to an OpEx mannequin. You do not purchase a Locus robotic, you rent it. It is on some kind of efficiency OpEx mannequin and that made the ROI straightforward for these of us to deploy. So I do consider that AMRs will proceed to steer the tempo in adoption available in the market. However it’s true that the manipulation class, individuals whether or not they’re strolling or staying in a station which have stuff of their palms, is by far the larger class of labor within the warehouse.
However it’s a tougher drawback. It is not as simply a two-way door and it is extra CapEx intensive. There’s extra stuff to ship. And so it hasn’t classically lent itself to OpEx fashions as readily as AMRs have. We are going to see that change over time. However in the present day that could be a truism, and AMRs are going to steer the tempo actually for some time and we applaud that.
Jeremie Capron:
So I believe we will transfer on to the manipulation facet and what Plus One is fixing. However I might like to focus on that, you look again a decade in the past which is when Amazon acquired Kiva, which was the muse of their AMR resolution for his or her distributions facilities. It is taken the enabling applied sciences to succeed in the extent the place you possibly can make these sort of autonomy doable on the bottom ground.
It took some time, and when you concentrate on what these applied sciences are, the sensing, the movement management, and the movement planning, the computing, and as you stated, the fleet administration. All of those primarily converged about 10 years in the past. Is it honest to say that now the enabling applied sciences for manipulation are at this level the place they’ve reached the extent of efficiency capabilities and a low sufficient worth level that now we will transfer on to automating and manipulation facet?
Erik Nieves:
Sure, we will. However earlier than we try this, since you talked about the Kiva acquisition, I ought to inform you, we checked out these markets and the way in which that they are structured. The warehouse automation market may be very leery of [that happening] once more. So what meaning is nobody main consumer goes to be single-threaded. They’ll have a number of suppliers of the applied sciences that you just see, whether or not it is AMRs or manipulation. They are not going to be single-threaded as a result of they do not wish to be fired sometime if their provider of alternative will get wolfed up or rolled up. And that performs out.
I imply you see now, these massive gamers would require escrow agreements or one thing to kind of fulfill themselves that they’ve put themselves able to proceed to achieve success within the face of [that kind of] acquisition once more. So right here we’re 10 years later, Jeremie. And that transaction remains to be having ripple results on this trade, proper?
Jeremie Capron:
Proper.
Erik Nieves:
However as for manipulation, sure. We stated it was a notion and greedy drawback. If I decide up my cellphone off of my desk, I want my eyes, my arm, and my hand in that order. And of the three, the arm is the one one which’s an engineered commodity you may simply go purchase. I got here from that world. That is what Yaskawa, and Fanuc, and ABB, and KUKA, and Common. That is their world. So what was wanted was low price, dependable 3D sensing and greedy.
Now, on the sensing facet, so we’ll simply bounce up right here. That is, and I am going to cease this so you may get a really feel for what’s taking place right here. Okay. So these are robots at FedEx. So these are robots deployed in Memphis. This was a job of an individual at a station, and their life was get all these packages out from the suitable and put them on the left conveyor. And had to try this 25 to twenty-eight instances a minute for the following six hours.
Individuals do not wish to do that anymore, excessive churn job. So carry automation to bear. However you may see the arm is simply a typical industrial robotic. That is a typical Yaskawa robotic you’d see in an automotive plant. However what’s totally different is these sensors right here. So this can be a 3D low-cost, high-fidelity 3D sensor. Plus One did not make that sensor, Intel did. These are the Intel RealSense cameras and so they’re used lots in AMRs and in choosing robots like ours.
So the know-how was the sensor and the AI that is evaluating the sensor information. And that is what you see taking place right here, is the robotic has to take and decide and place. And what the imaginative and prescient system is doing is evaluating that whole decide bowl as we name it, which parcels can be found for decide, which means not occluded and that sort of factor. After which its job is simply going to be to place them out one by one. However have a look at this, as a result of this occurs every so often. I am going to cease it right here.
A few half a % of the time, the imaginative and prescient system will see a scene and never perceive what it is speculated to do. And this is an instance of that. It is wanting and it says, “You understand what? I do not see any single parcel that is utterly unoccluded. What am I speculated to do right here?” And it doesn’t cross confidence threshold.
The AI says, “I am undecided.” When that occurs, the robotic raises its hand over the cloud. It is aware of sufficient to cellphone a buddy, and that buddy occurs to be in San Antonio. And a human being, what we name a crew chief, then takes, and with their mouse tells the robotic, “Yeah, go decide up this one. I do know it is occluded, however you may decide it up there.” Similar state of affairs right here. It is like, the place does one package deal finish and one other start?
That is the kind of factor that supervised autonomy lends itself to. And we’ll have a look at this. That is an AI torture chamber. They’re all flat, related, shiny, reflective, occluded. The AI goes to fail. And when it does… Jeremie, you instantly knew which one the robotic ought to go get. So the human tells it, “Go decide up that one from there.” And that’s the notion of supervised autonomy. These are the applied sciences which have come to bear. It is the sensing to generate the purpose clouds, the illustration of the world. It is the AI to kind of decide from these photographs what’s legitimate and what is not. After which it is the greedy.
Now, for our world, vacuum is sufficient. As a result of I take care of parcels. If I have been doing every’s out of an auto retailer, it would not work and I would wish a unique sort of gripper. One which articulates, sort of like RightHand Robotics or Gentle or any individual else. However that is the notion of the applied sciences coming collectively on the proper time. That is simply one other instance. It is a commonplace robotic with a typical vacuum gripper, however its 3D sensing permits it to do choosing and inserting principally depalletizing actual time.
Jeremie Capron:
And so inform us about your prospects that at the moment are deploying these methods. I believe they went by an experimentation section. And it appears to me, simply a number of the main bulletins available in the market, that the largest gamers, you talked about FedEx, UPS, DHL over in Europe, and doubtlessly postal providers around the globe. The place are we at by way of the adoption? Are you seeing any acceleration right here?
Erik Nieves:
For certain.
Jeremie Capron:
And likewise would love so that you can speak about how they consider the return on funding after they purchase a brand new tech.
Erik Nieves:
Yeah, glad to. To provide you only a sense of scale, this can be a dwell view of the picks taking place on this planet as we communicate, utilizing Plus One’s know-how throughout the globe. So the place it is over half one million picks up to now, by the tip of the each day, there might be two commas in that quantity. It is over one million picks a day. And we’re actually excited at Plus One. As a result of someday in October, we will surpass a half a billion picks all time.
And that is simply far and away, the chief in precise manufacturing. And the rationale for that’s precisely what you are saying. It is that the highest of this market is rolling out this know-how. So I can inform you, FedEx is public in regards to the work they do with us. That they had a imaginative and prescient companion, it wasn’t working. Plus One got here in, the human-in-the-loop made an enormous distinction. We deployed 4 robots there initially, and now it is far more than that.
It is the identical in e-com and it is the identical throughout all parcels. What’ll be fascinating, and that is one thing that can occur I anticipate earlier than this calendar yr is completed, is the US Postal Service. As a result of the postal service put out an RFI for two,000 methods, and since then put out an RFP for a portion of that for about 400 robots. That call is due anytime now. And that can instantly drive massive acceleration within the variety of deployed methods globally. So we’re keen. At Plus One, we’re assured that we’re in a superb place to win a few of that enterprise. We’ll see if they will be multi-threaded the way in which others are, or if will probably be single sourced.
However both method, the adoption fee of robots in parcel dealing with is certainly up into the suitable. And it must be, as a result of there’s not sufficient labor obtainable. Take into consideration Memphis and Louisville, the 2 busiest airports in America in a single day. Nicely, meaning they should have a ton of individuals to come back deal with all of that quantity. And there is simply not sufficient rooftops in these metropolitan areas. At this time, FedEx is busing individuals in from Little Rock, Arkansas to do types at night time. That is two hours every method simply to have the ability to type packages. It is not sustainable. Automation they perceive is their solely path ahead.
Jeremie Capron:
Received it. I wish to bounce in with possibly a bit of little bit of a unique query. As a result of as you realize, our group right here on the webcast is primarily individuals in funding, administration, enterprise. I am curious, now that you’ve got raised I believe over 40 million in the present day at Plus One, so you’ve got interacted with the funding group. For a number of years, what’s your impression of how buyers strategy the world of robotics and AI? Something that shocked you maybe?
Erik Nieves:
Certain.
Jeremie Capron:
Something that buyers ought to suppose extra about?
Erik Nieves:
Nicely, the early questions again in 2017 after we have been first beginning was, “Hey, is that this a large enough drawback? What is the TAM related to warehouse automation? Or at the least the totally different functions inside the house.” These questions are largely behind us now. Everyone has kind of reconciled themselves to, logistics is extra than simply trucking. And that inside the 4 partitions of the warehouse there may be nice alternative. And in order that’s not the constraint it as soon as was.
The questions that you just get now are actually about enterprise mannequin, Jeremie. As a result of the funding group, numerous them and notably within the progress stage funds, are actually listed to SaaS metrics. And so the enterprise mannequin that they like, that they offer one of the best valuation, a number of on, et cetera, is what’s your recurring income. Nicely, that is fairly orthogonal to numerous the way in which that automation has classically occurred. Even inside warehouse automation, T-MATIC does not promote you a system on a efficiency foundation and you purchase productiveness. And you’ve got this ongoing relationship with them on a month to month foundation.
No, it has been, like all system integration, classically it is out and in in 26 or 30 weeks, and this is progress funds alongside the way in which. I am going to see you when you could have your subsequent challenge. However that is not “SaaS y”. That is not recurring. Even when that very same buyer comes again a yr from now and says, “Okay, now I am prepared for the following facility.” That promoting movement to the funding group, feels bespoke. And they also do not actually provide you with credit score for a similar buyer coming again and shopping for once more. They need that to be contracted recurring income.
It’ll take a while earlier than this market does that. I am undecided frankly that it ever will utterly. And once more, it goes again to the market being bifurcated. In case you’re on the prime of this market, chances are high you money flush and you’re on the lookout for locations to take depreciation schedules left, proper, and heart. And an OpEx mannequin just isn’t in your pursuits. Down market, when you could have the 3PLs and the DTCs, they’re extra capital constrained and the CapEx {dollars} are going for use for his or her community, amenities, et cetera. They usually do not wish to tie it up with gear.
They’re extra open to RaaS, robots as a service, or some kind of working expense mannequin. However this market, I might argue is rarely going to pivot to appear to be a SaaS world. You’re nonetheless going to have or not it’s kind of this two-headed beast. And at the least from Plus One’s perspective, you higher be ready to interact with each of them, otherwise you’re simply reducing out two substantial apportion of the market. So to the buyers, I might say, be desirous about whether or not SaaS is the suitable method to consider warehouse automation or not.
Jeremie Capron:
Nicely, there isn’t any denying that the SaaS mannequin offers solutions to numerous the uncertainty to the enterprise of investing, and it makes buyers’ jobs lots simpler. However I believe we additionally went by a section of just about exuberance across the SaaS fashions, the place we noticed evaluations of something SaaSy as you described it. Explode on the way in which up, and extra just lately explode on the way in which down. And so I believe there was actually exuberance round that.
I believe additionally the robotics as a service mannequin that you just described, in all probability has numerous potential maybe beginning by a number of the items of the providers that you just provide. You talked about the supervision of robots by-
Erik Nieves:
Crew chief.
Jeremie Capron:
… crew chief that would definitely lend itself to such a mannequin. So I am curious if you happen to’re seeing every other, maybe components of the issues you are fixing by your prospects that would comply with such a mannequin.
Erik Nieves:
Certain. So once more, our customers will usually purchase the imaginative and prescient system and that’ll be a CapEx deal. As a result of of their view, the eyes of the robotic are an extension of the robotic, and the robotic was CapEx. So the eyes ought to likewise be CapEx. And we’ll see you subsequent yr for 18% upkeep on that software program. So it is a typical enterprise software program transaction.
However the human-in-the-loop piece, that could be a subscription. At all times has been. So that is the recurring income piece for Plus One, is of us subscribing to the uptime that Yonder, that is what we name the human-in-the-loop service, offers. And so that can proceed to be an essential a part of our enterprise mannequin.
So there’s recurring simply from, “Here is a portion of our deliverable.” I like to consider Yonder as a managed service, and that managed service as a subscription. Then you definitely’ve acquired the oldsters that simply purchase the entire resolution, robotic, gripper, security, set up, all of that as a service. So there’s your RaaS mannequin. That is going to be a portion of the market. And Yonder, the human-in-the-loop is included in that efficiency contract. After which you are going to have the oldsters which can be simply straight CapEx.
It’s true. We do have installations the place they’re utilizing our imaginative and prescient system and do not want the human-in-the-loop. It has to do with the variability of the enter stream, et cetera. So in that case, it is CapEx and I am going to see you subsequent yr for the upkeep settlement. And that is the recurring piece.
Jeremie Capron:
Received it.
Erik Nieves:
Yep.
Jeremie Capron:
Okay. Nicely, I believe it is time for us to open the decision to questions from the viewers. So be happy to make use of the field on the backside of your display, the Q and A field, to ship over your questions. I see that we now have one already that is are available in across the share of doubtless economically beneficial warehouse automation that has been achieved up to now. I believe you touched on that a bit of bit, there’s numerous estimates on the market available in the market. What do you suppose, Erik?
Erik Nieves:
There’s numerous headroom to go on this enterprise. Warehouse automation is a nascent trade, I might argue. So for that million plus picks a day, that does not scratch the floor of the quantity of picks that occur on this planet. So I am going to provide you with a way of that right here.
We talked in regards to the three lessons of labor, the individuals on wheels, the individuals which can be working up and down the cabinets, after which the individuals which can be standing nonetheless. That is them. So that is practically one million and a half FTEs which can be at a station in warehouses in US and Western Europe.
This pie chart is what they’re doing. 46% of them are loading some sort of conveyor, 14% of them are breaking pallets aside, 13% of them are constructing pallets, 13% are doing what are known as packout operations, and there is the ten% that is G2P, goods-to-person choosing, Alloy, Amazon Kiva. That is solely 10%. After which the 4%, which goes to proceed to develop, is the returns processing.
So there’s one million and a half individuals doing this proper now, and there is solely one million picks on this planet. That tells you there’s a lot to go. For us in particular, we do parcel, we do induction onto the conveyor, and we do depalletizing. And that is about 60% obtainable software house to the kind of work that we do. However that ought to provide you with a way of scale as to the place the TAM is but to go on this house.
Jeremie Capron:
I see. We’ve got a remark from Michael across the RaaS mannequin. And I believe it is a honest level that he raises that RaaS might be very enticing to the consumer by way of not having stranded price danger in a downturn state of affairs.
Erik Nieves:
Certain.
Jeremie Capron:
I believe it goes again to the start of a dialog and whether or not robotics trade first flourished or within the auto trade, which is as cyclical as it may be. And the place it is true that the very first indicators of decelerate and demand, the CapEx price range have been simply trashed and really shortly robotics firms felt the ache. What do you concentrate on that, Erik?
Erik Nieves:
One hundred percent true that robotics traditionally, automotive will get a chilly, robotics will get a flu. It’s a main indicator of softness within the robotics marketplace for every part you simply talked about, Jeremie. So sure, that was a part of the impetus for us at Yaskawa looking for one thing countercyclical to the automotive house.
The remark is correct that RaaS lowers numerous barrier to entry. That is why it is working so effectively for AMRs. As a result of hey, if in the long run these robots labored effectively for me from January by August and now I do know I will surge, I will name the AMR supplier and say, “Hey, I want one other dozen robots to indicate up subsequent week. Add them to my invoice. And nice.”
And the flip facet, come February. February now, not January. As a result of the place the surge used to finish on the finish of December, that is not true, as a result of January returns once more. You need to take care of all that. However come February, that very same operator can name up their AMR of alternative and say, “Hey, thanks. These labored nice. I am again now to regular state quantity. Come get your robots.” So sure, the OpEx strategy has actual advantages and such. I am simply telling you, not all customers need it.
And there’s a distinction between AMRs and manipulation methods. Simply consider the COGS. Consider the COGS concerned in an AMR versus the COGS of a conveyor induction system with a robotic and conveyors and security and all this different stuff. It is simply extra stuff. And if you are going to subscribe to all of that, then any individual’s acquired to finance that. That is a consideration additionally. However once more, down market, the 3PLs do the entire thing on RaaS. However I am telling you, I couldn’t stroll into Memphis in the present day and say, “I’ll solely do conveyor induction for you on an OpEx mannequin.” They’ll inform us, “We cannot be doing that.”
Jeremie Capron:
Mm-hmm. Nicely, as we glance throughout the varied functions of robotics and automation, and I am desirous about the healthcare sector right here, the place we have seen significant pickup by way of the leasing mannequin for issues like massive costly surgical robots, but in addition cheaper options round pharmacy automation for instance. Clearly the hospitals additionally respect the OpEx mannequin. In order that’s only one thought.
And one other one is that actually proper now, if you happen to have a look at the value motion within the public fairness market and notably the one which I confirmed you round logistics automation sector that is actually been certain during the last six to 9 months, I believe it is clear that buyers will simply rush out of these firms on the first indicators of potential downturn or recession. And right here we’re with our rate of interest curve inverted, and the standard habits has occurred once more and people shares have been offered off. I simply wish to level out that traditionally, these have been one of the best instances to become involved. I see we now have yet one more query. It comes from Dean. What number of FTE is forklift drivers within the US?
Erik Nieves:
Ooh.
Jeremie Capron:
That is a superb query. I haven’t got the reply on the highest of my head.
Erik Nieves:
I do not both. However boy, there are certain numerous of us attempting to sort out that drawback. So all the massive MHE firms try to do automated forklift of some sort. Seegrid is doing automated pallet jacks. Fox Robotics, automated fork vans. Phantom doing successfully Plus One for forklifts, which means they’ve a distant driver. So there isn’t any lack of individuals attempting to sort out that state of affairs. And never simply inside the 4 partitions of the warehouse, as a result of the marshaling yard additionally presents itself as a chance for automated driving. So consider the marshaling vans that transfer the 53 foot dry vans round. There’s firms Outrider, ASCE, et cetera, which can be attempting to automate that as kind of a stepping stone to automated, autonomous autos on public roads.
Jeremie Capron:
And I see a be aware from Aaron. Thanks, Aaron. That in response to the Bureau of Labor Statistics, 700,000 individuals are employed as materials transferring machine operators final yr. In order that’s positively is a big pool. And I do know that on prime of the businesses you talked about, Erik, the massive gamers within the forklift market in fact are paying numerous consideration. So I am desirous about considered one of our portfolio firms, KION that owns T-MATIC, but in addition have an enormous… I believe is the second largest truck carry supplier on this planet. They’re working actually laborious on this drawback. And about 5 years in the past or so, they actually bifurcated the choices to incorporate electrical forklift. So you could have the electrification that is already effectively on the way in which, and the following step might be the autonomy.
Erik Nieves:
Mm-hmm. Agreed.
Jeremie Capron:
Okay. Nicely look, Erik, the rest you wish to talk about or current in the present day earlier than we wrap it up? We’re getting near the tip of the hour now.
Erik Nieves:
No, I might simply say that every part that we have talked about right here this morning, you may simply lather, rinse, repeat, for development, AgTech, et cetera. The central conceit that I make is that for manufacturing, AI’s position goes to be restricted. We have been efficiently constructing automobiles for a very long time. For out of doors of producing, AI is a crucial device and I argue inadequate. That the speed of change of the true world is such that you’ll must have a human-in-the-loop.
And that’s the secret sauce, is AI plus supervised autonomy. And that is not simply constrained to warehouse automation. So after I take into consideration AgTech, after I take into consideration development tech, et cetera, these are the issues that I am . I get requested usually, “So what is the position of AI in these rising markets and the way ought to buyers take into consideration that?” And I suppose I have a look at it otherwise.
And that’s I consider an trade for, would that trade be benefited by complete immigration reform with a guestworker program? And if the reply is, sure, that will relieve numerous labor constraint and permit the trade to develop, then it’s a must to have a look at robotics. The Economist did a particular report quite a few years in the past about robotics and known as them immigrants from the long run. And that is actually the way in which that I have a look at it’s, would this trade be benefited by immigrants? As a result of complete immigration reform is additional away from us in the present day than it is ever been. So robotics is the one method ahead, and that is true writ giant throughout quite a few sectors.
Jeremie Capron:
Thanks, Erik.
Erik Nieves:
You guess.
Jeremie Capron:
Nicely, it is time to wrap up right here. And I wish to remind everybody, if you wish to be taught extra about investing in robotics, automation, AI, you may go to our web site roboglobal.com. We share a few of our analysis on firms and the ROBO, the THNQ, and the HTEC portfolios. So thanks very a lot, Erik, for sharing with us in the present day. Good luck to Plus One and to you all who joined us in the present day for this name. And we sit up for talking with you once more quickly.
Erik Nieves:
Be effectively. Thanks, Jeremie. Take care all.
Jeremie Capron:
Bye.
