How Robotic Applied sciences Sort out Materials Dealing with Challenges in Warehouses



 

Tune in to our fireplace chat with Plus One Robotics CEO & Co-founder, Erik Nieves had been we dug into the present demand for robotics in warehouses – and among the obstacles Plus One is working to beat with regards to the complicated strategy of selecting and packing packages.


Jeremie Capron:

My identify is Jeremie Capron. I am the director of analysis right here at ROBO International. And right this moment we’re going to concentrate on some of the thrilling areas of robotics and AI, one thing that our analysis crew could be very obsessed with. That’s logistics and warehouse automation.

And we consider that it is a crucial subject for traders, not solely as a result of it has already began delivering spectacular funding returns, but additionally as a result of it touches on so many vital facets of the robotics revolution. And we’re going to be speaking about among the enabling applied sciences that make logistics automation potential, just like the sensing, the computing, the AI. And in addition about what’s taking place by way of companies adopting this expertise throughout a big spectrum of industries.

And to try this, I am actually thrilled to be joined right this moment by a really particular visitor. Erik Nieves is a founder and the CEO of Plus One Robotics, which is likely one of the most superior robotics and laptop imaginative and prescient firms within the subject of logistics right this moment. And earlier than founding Plus One, a number of years in the past, Erik was expertise director at Yaskawa, which is likely one of the most profitable industrial robotics firms on this planet, the place he labored for, I consider almost 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 additionally I believe Erik is a outstanding communicator. And over the ten years or in order that we have recognized one another, I’ve realized an amazing quantity from Erik as we researched and make investments on this planet of robotics. So I hope right this moment you can even be taught one thing, and fairly positive you’ll. So for that, I am very grateful. So Erik, thanks and welcome. And the place does this webcast discover you right this moment?

 

Erik Nieves:

Properly, good morning. You might be 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 admire the chance to talk to the neighborhood on simply type 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 wished to point out members how we see logistics as a bit of the funding thesis across the robotics revolution. And as a few of you understand, our objective at ROBO International is admittedly to offer publicity to the most effective at school firms from all over the world throughout the complete worth chain.

So we’re not solely taking a look at robotic producers or suppliers of turnkey resolution for the manufacturing purposes and so forth, however actually we’re taking a look at a broad vary of very engaging software domains of which logistics is a really vital one. And you’ll see on the left hand facet right here, we’re additionally offering publicity to the enablers, the applied sciences that make robots and autonomous programs potential, just like the sensing, just like the actuation, the computing and so forth. And total, logistics and warehouse automation represents about 13% of the ROBO index portfolio right this moment.

And in order that is likely one of the most vital sectors by way of publicity within the ROBO portfolio. And if you happen to have a look at historic efficiency, here 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’ll 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 thus far this yr. However you may see an orange, the logistics and warehouse automation subsector has been actually outperforming fairly considerably and in addition constantly.

And naturally, through the pandemic with so vital enthusiasm across the booming e-commerce and the way these firms may assist with provide chain points and the great volumes going by way of provide chains. You may also see the numerous pullback, which we view as a serious alternative. The sector has pulled again greater than the 35% from the very best attain final yr. So pardon me for this facet word right here. I need 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 determine to begin a brand new firm?

 

Erik Nieves:

Properly, I used to be at Yaskawa for about 25 years. I joined them in 1990. And the robotics business was very listed to the automotive sector, and we’ll really see that in among the information. However round 2010, actually 2008 when the disaster was as dangerous because it was, the robotic business 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 and marketing facet, “Please go discover one thing else for robots to try this wasn’t tied to a automotive a part of some type.” We kissed a number of frogs. I imply, we checked out aerospace. When you can automate the constructing of vehicles, why not automate the constructing of airframes. And you’ll, it is simply not that many robots. The lengthy life cycle of the product type of retains you from that. We checked out scientific lab automation, no person wished to be dealing with blood samples anymore.

However all of those had been type of area of interest. And ultimately there have been solely two sectors that actually mattered that had been going to undertake robotics at scale. And that was electronics meeting and provide chain. And you could possibly argue that electronics meeting is an even 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 at all times native. And so I spent a while even inside Yaskawa attempting to pivot 100 yr previous Japanese industrial to constructing merchandise that had been going to be related within the warehouse.

In the long run, all of us realized that the warehouse is just not actually a robotic downside. It is a notion and greedy downside. 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 consequently.

 

Jeremie Capron:

I am going again to this chart I confirmed earlier that actually type of spotlight the growth within the logistics automation enterprise, the businesses which can be represented in that subsector of the ROBO International portfolio are the likes of Zebra Applied sciences and Daifuku in Japan, and extra not too long ago GXO Logistics. And a few a lot smaller much less recognized firms which can be in Switzerland like Kardex, the automated storage retrieval programs 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 expertise by the logistics business?

 

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 had been the robots doing the order success ourselves. Once we would go to the big-box retailer to the grocery or what have you ever, we did our personal selecting, 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 anyone else was having to select 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 need to need to mess with a pc to get her supply. She figured it out. And COVID is, let’s imagine, now come and gone. Grandma’s not going again to the shop to purchase a 40 pound sack of pet food and need to lug it into her trunk. That is by no means going to occur.

So now we have introduced on an entire new class of on-line customers 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 endlessly, 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 had 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 expertise? 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 right this moment, and seeing very spectacular excessive pace, excessive accuracy industrial robots that had been spectacular by their such efficiency. However on the finish of the day had been very dumb robots and unable to do something out of the atypical of the economic or the manufacturing plan. That means, that if there was a change within the half that was imagined to be picked and even simply location by a number of millimeters, the robotic was caught. And right this moment, we have seen some great advances to the purpose the place the holy grail of robotics from 10 years in the past, which was a random object selecting functionality, we now have that. So what’s occurred that is enabled that over the previous couple of years?

 

Erik Nieves:

I’d say that is possibly instructive right here. So this type of speaks to the dichotomy that you just’re referring to. We mentioned 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 business was successfully flat. However the non-automotive orders continued to develop.

Now, the automotive orders are those that you just’re serious 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 automotive physique. And we have been efficiently doing that now for 40 years. The great factor is, spot welding calls for a number of robots. It is 200, 300 robots in a facility to try this sort of labor. However it was additionally potential as a result of the robotic did not actually need to know rather more than its personal repeatability and endurance. It may lug that 200 pound gun all day on daily basis 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 fashion. The worth to quantity curve means you are going to need to take care of issues as they’re, not as you ought. The automotive sector I’d argue is likely one of the only a few that has sufficient worth and quantity to make it a structured surroundings. You are going to do the identical factor the identical manner 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 a number of it’s in that 13% you talked about which is in logistics automation. And in that house, the repeatability is just not the rule. Variability is the rule. I do not know what is going on to come back down the road subsequent, and I positive 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 a number of refined sensors, these at the moment are 3D sensors, and also you want the information to drive the AI studying. So you must 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 a number of automation instruments to bear.

What does that imply? They haven’t any technicians or engineers on employees to run the kind of tools that manufacturing has been utilizing for a very long time. So these manufacturing and warehouse automation should not the identical factor. And the variations are these. The primary one is variability, which implies you must have sensing, and it is a legacy market that simply hasn’t had the appropriate experience. However the motive it is now 13% of the ROBO portfolio is as a result of the acceleration that we’re seeing.

Nonetheless right this moment, 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 1,000,000 jobs left hanging in three years time. There’s not a warehouse in America that does not have a “assist wished” signal outdoors. All of them are short-staffed and their churn is the very best on the market. It is quick meals churn.

The attrition charges at Amazon final yr had been almost 160%, which implies when you have a process that wants doing, you are going to have to search out our bodies for that process. Not for one shift, not for 2 shifts, however most likely for six shifts as a result of that job’s going to churn that many instances. So the place does that depart you? It leaves you taking a look at 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 big difficulty for positive. There’s the attrition downside, however there’s additionally the problem 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. While 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 recreation. It isn’t 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 invaluable.

 

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 process. However it’s one which it is a job that wants doing. So if as a substitute we are able to say to a type of operators, “Hey, look, the place earlier than you had 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 fireplace as a result of they know they cannot try this. However whenever you inform them, “And the best way we’ll do that’s I am making you liable for this line of robots now that is going to be selecting at 1,500 an hour.” Warehouse automation is a leverage play, not a labor substitution play. So everyone that confirmed up nonetheless will get to remain, they only develop into extra productive within the duties that they had been liable for by leveraging the instruments, they usually transfer up scale in worth to the group. They normally get a pay elevate out of the factor. So it is not a bone of competition when the robots present up in any of those services.

 

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 selecting or they will be palletizing of some type. However after all the largest one and a considerable portion of the worth thus far within the house is these cell collaborative robots, the AMRs.

And there is two courses of AMRs. You have got these, which Locus is a transparent chief. After which you’ve gotten 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 downside within the warehouse. And attempting to both eradicate the variety of of us that need to 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 quite, within the US final yr. That did not rely a single one among these robots on the appropriate, 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 type of speaks to this market.

We speak in regards to the market is high heavy in warehouse automation. There’s actually three completely different ranges. You’ve got received a stage right here, which is type 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’ve gotten type of down market. Take into consideration the 3PLS, direct to client manufacturers, et cetera. These of us are shopping for robots by every or the pair. So you may say that the market is high heavy. However then you’ve gotten Amazon that is above each of those who’s deploying robots by the a whole bunch, and AMRs by the 1000’s themselves. So it truly is type 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 attention-grabbing that Amazon itself primarily builds and ships and deploys extra robots that the complete unbiased AMR business. And but the AMR enterprise would consider is a unbelievable one now, as a result of the pie is rising so quick. And naturally Amazon has a number of 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 reasonably good one for the years to come back and would you apply on that?

 

Erik Nieves:

I agree. If you’re in a warehouse, the duties to be finished, 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 stands out as 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 type, possibly they’re at a packing station, possibly they’re at an induction lane, et cetera.

The cell 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. One in every of them is the physics of the issue is type of simpler. A cell robotic has two and a half levels of freedom, ahead, again, left, proper, flip. And it is at all times wheels on a flat ground. You type of perceive the morphology of the robotic. Now you’ve got received 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 downside technically is admittedly simply the type of coordination among the many fleet of those robots, type of deconflicting them, and charging. It’s important 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 had been doing. So the type 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 type 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 out there. 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 fingers, is by far the larger class of labor within the warehouse.

However it’s a tougher downside. It isn’t 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’ll see that change over time. However right this moment that may 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’ll transfer on to the manipulation facet and what Plus One is fixing. However I might like to spotlight that, you look again a decade in the past which is when Amazon acquired Kiva, which was the inspiration of their AMR resolution for his or her distributions facilities. It is taken the enabling applied sciences to achieve the extent the place you could possibly make these sort of autonomy potential on the bottom ground.

It took some time, and when you consider what these applied sciences are, the sensing, the movement management, and the movement planning, the computing, and as you mentioned, 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 are able to transfer on to automating and manipulation facet?

 

Erik Nieves:

Sure, we are able to. 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 best way that they are structured. The warehouse automation market could be very leery of [that happening] once more. So what which means is nobody main consumer goes to be single-threaded. They are going to 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 need to be fired sometime if their provider of alternative will get devoured up or rolled up. And that performs out.

I imply you see now, these massive gamers would require escrow agreements or one thing to type of fulfill themselves that they’ve put themselves ready 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 business, proper?

 

Jeremie Capron:

Proper.

 

Erik Nieves:

However as for manipulation, sure. We mentioned it was a notion and greedy downside. 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 value, dependable 3D sensing and greedy.

Now, on the sensing facet, so we’ll simply soar up right here. That is, and I am going to cease this so you will 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 appropriate 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 need to do that anymore, excessive churn job. So deliver automation to bear. However you may see the arm is simply a regular industrial robotic. That is a typical Yaskawa robotic you’d see in an automotive plant. However what’s completely different is these sensors right here. So it is a 3D low-cost, high-fidelity 3D sensor. Plus One did not make that sensor, Intel did. These are the Intel RealSense cameras they usually’re used loads in AMRs and in selecting robots like ours.

So the expertise 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 total decide bowl as we name it, taking a look at 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 separately. However have a look at this, as a result of this occurs every now and then. 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 imagined to do. And here is an instance of that. It is wanting and it says, “You already know what? I do not see any single parcel that is utterly unoccluded. What am I imagined 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 pal, and that pal 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.” Identical situation 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 type of decide from these photos 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 had 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, type of like RightHand Robotics or Comfortable or anyone 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 normal robotic with a regular vacuum gripper, however its 3D sensing permits it to do selecting and putting mainly depalletizing actual time.

 

Jeremie Capron:

And so inform us about your prospects that at the moment are deploying these programs. I believe they went by way of an experimentation part. And it appears to me, simply taking a look at among the main bulletins out there, that the largest gamers, you talked about FedEx, UPS, DHL over in Europe, and probably postal companies all over the world. The place are we at by way of the adoption? Are you seeing any acceleration right here?

 

Erik Nieves:

For positive.

 

Jeremie Capron:

And in addition would love so that you can speak about how they give thought to the return on funding after they purchase a brand new tech.

 

Erik Nieves:

Yeah, completely happy to. To present you only a sense of scale, it is a reside view of the picks taking place on this planet as we converse, utilizing Plus One’s expertise throughout the globe. So the place it is over half 1,000,000 picks thus far, by the top of the everyday, there can be two commas in that quantity. It is over 1,000,000 picks a day. And we’re actually excited at Plus One. As a result of someday in October, we’ll 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 expertise. So I can inform you, FedEx is public in regards to the work they do with us. That they had a imaginative and prescient accomplice, 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 attention-grabbing, and that is one thing that may occur I count on earlier than this calendar yr is finished, is the US Postal Service. As a result of the postal service put out an RFI for two,000 programs, and since then put out an RFP for a portion of that for about 400 robots. That call is due anytime now. And that may instantly drive massive acceleration within the variety of deployed programs globally. So we’re keen. At Plus One, we’re assured that we’re in a great place to win a few of that enterprise. We’ll see if they will be multi-threaded the best way others are, or if it will likely be single sourced.

However both manner, the adoption price of robots in parcel dealing with is unquestionably up into the appropriate. And it needs to be, as a result of there’s not sufficient labor accessible. Take into consideration Memphis and Louisville, the 2 busiest airports in America in a single day. Properly, which means 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. In the present day, FedEx is busing individuals in from Little Rock, Arkansas to do types at night time. That is two hours every manner simply to have the ability to type packages. It isn’t sustainable. Automation they perceive is their solely path ahead.

 

Jeremie Capron:

Received it. I need to soar in with possibly slightly little bit of a unique query. As a result of as you understand, our neighborhood 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 right this moment at Plus One, so you’ve got interacted with the funding neighborhood. For a number of years, what’s your impression of how traders method the world of robotics and AI? Something that stunned you maybe?

 

Erik Nieves:

Positive.

 

Jeremie Capron:

Something that traders ought to suppose extra about?

 

Erik Nieves:

Properly, the early questions again in 2017 after we had been first beginning was, “Hey, is that this a sufficiently big downside? What is the TAM related to warehouse automation? Or at the least the completely different purposes inside the house.” These questions are largely behind us now. Everyone has type 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 neighborhood, a number of them and notably within the development stage funds, are actually listed to SaaS metrics. And so the enterprise mannequin that they like, that they offer the most effective valuation, a number of on, et cetera, is what’s your recurring income. Properly, that is fairly orthogonal to a number of the best way that automation has classically occurred. Even inside warehouse automation, T-MATIC would 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 here is progress funds alongside the best way. I am going to see you when you’ve gotten your subsequent mission. 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 neighborhood, feels bespoke. And they also do not actually offer you credit score for a similar buyer coming again and shopping for once more. They need that to be contracted recurring income.

It may 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. When you’re on the high of this market, likelihood is you money flush and you might be searching for locations to take depreciation schedules left, proper, and heart. And an OpEx mannequin is just not in your pursuits. Down market, when you’ve gotten the 3PLs and the DTCs, they’re extra capital constrained and the CapEx {dollars} are going for use for his or her community, services, et cetera. They usually do not need to tie it up with tools.

They’re extra open to RaaS, robots as a service, or some type of working expense mannequin. However this market, I’d argue is rarely going to pivot to appear to be a SaaS world. You might be nonetheless going to have or not it’s type of this two-headed beast. And at the least from Plus One’s perspective, you higher be ready to have interaction with each of them, otherwise you’re simply chopping out two substantial apportion of the market. So to the traders, I’d say, be serious about whether or not SaaS is the appropriate manner to consider warehouse automation or not.

 

Jeremie Capron:

Properly, there is not any denying that the SaaS mannequin offers solutions to a number of the uncertainty to the enterprise of investing, and it makes traders’ jobs loads simpler. However I believe we additionally went by way of a part of just about exuberance across the SaaS fashions, the place we noticed evaluations of something SaaSy as you described it. Explode on the best way up, and extra not too long ago explode on the best way down. And so I believe there was actually exuberance round that.

I believe additionally the robotics as a service mannequin that you just described, most likely has a number of potential maybe beginning by among the items of the companies that you just provide. You talked about the supervision of robots by-

 

Erik Nieves:

Crew chief.

 

Jeremie Capron:

… crew chief that will surely lend itself to such a mannequin. So I am curious if you happen to’re seeing some other, maybe components of the issues you are fixing by way of your prospects that might comply with such a mannequin.

 

Erik Nieves:

Positive. So once more, our customers will sometimes 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 may 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 may proceed to be an vital 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. You then’ve received 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. Properly, 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 screen, the Q and A field, to ship over your questions. I see that now we have one already that is are available across the proportion of probably economically invaluable warehouse automation that has been achieved thus far. I believe you touched on that slightly bit, there’s numerous estimates on the market out there. What do you suppose, Erik?

 

Erik Nieves:

There’s a number of headroom to go on this enterprise. Warehouse automation is a nascent business, I’d 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 offer you a way of that right here.

We talked in regards to the three courses 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 almost 1,000,000 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 type of conveyor, 14% of them are breaking pallets aside, 13% of them are constructing pallets, 13% are doing what are referred to as packout operations, and there is the ten% that is G2P, goods-to-person selecting, Alloy, Amazon Kiva. That is solely 10%. After which the 4%, which goes to proceed to develop, is the returns processing.

So there’s 1,000,000 and a half individuals doing this proper now, and there is solely 1,000,000 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% accessible software house to the kind of work that we do. However that ought to offer you a way of scale as to the place the TAM is but to go on this house.

 

Jeremie Capron:

I see. We’ve a remark from Michael across the RaaS mannequin. And I believe it is a honest level that he raises that RaaS might be very engaging to the consumer by way of not having stranded value threat in a downturn state of affairs.

 

Erik Nieves:

Positive.

 

Jeremie Capron:

I believe it goes again to the start of a dialog and whether or not robotics business first flourished or within the auto business, 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 had been simply trashed and really rapidly robotics firms felt the ache. What do you consider 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 little thing 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 a number of barrier to entry. This is the reason it is working so nicely for AMRs. As a result of hey, if ultimately these robots labored nicely for me from January by way of 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 point out 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 now not true, as a result of January returns once more. It’s important 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 method has actual advantages and such. I am simply telling you, not all customers need it.

And there’s a distinction between AMRs and manipulation programs. 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 anyone’s received 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 right this moment and say, “I’ll solely do conveyor induction for you on an OpEx mannequin.” They are going to inform us, “We can’t be doing that.”

 

Jeremie Capron:

Mm-hmm. Properly, as we glance throughout the varied purposes of robotics and automation, and I am serious 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 additionally cheaper options round pharmacy automation for instance. Clearly the hospitals additionally admire 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 worth 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 traders 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 everyday conduct has occurred once more and people shares have been offered off. I simply need to level out that traditionally, these have been the most effective instances to get entangled. I see now we have yet another query. It comes from Dean. What number of FTE is forklift drivers within the US?

 

Erik Nieves:

Ooh.

 

Jeremie Capron:

That is a great query. I haven’t got the reply on the highest of my head.

 

Erik Nieves:

I do not both. However boy, there are positive a number of of us attempting to deal with that downside. So all the large MHE firms are attempting to do automated forklift of some type. Seegrid is doing automated pallet jacks. Fox Robotics, automated fork vehicles. Phantom doing successfully Plus One for forklifts, which means they’ve a distant driver. So there is not any lack of individuals attempting to deal with 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 possibility for automated driving. So consider the marshaling vehicles that transfer the 53 foot dry vans round. There’s firms Outrider, ASCE, et cetera, which can be attempting to automate that as type of a stepping stone to automated, autonomous autos on public roads.

 

Jeremie Capron:

And I see a word from Aaron. Thanks, Aaron. That in accordance with 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 high of the businesses you talked about, Erik, the large gamers within the forklift market after all are paying a number of consideration. So I am serious about one among our portfolio firms, KION that owns T-MATIC, but additionally have an enormous… I believe is the second largest truck carry supplier on this planet. They’re working actually laborious on this downside. And about 5 years in the past or so, they actually bifurcated the choices to incorporate electrical forklift. So you’ve gotten the electrification that is already nicely on the best way, and the following step might be the autonomy.

 

Erik Nieves:

Mm-hmm. Agreed.

 

Jeremie Capron:

Okay. Properly look, Erik, anything you need to talk about or current right this moment earlier than we wrap it up? We’re getting near the top of the hour now.

 

Erik Nieves:

No, I’d simply say that every little thing 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 vehicles 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 will need to 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 taking a look at. I get requested often, “So what is the position of AI in these rising markets and the way ought to traders take into consideration that?” And I assume I have a look at it otherwise.

And that’s I consider an business for, would that business be benefited by complete immigration reform with a guestworker program? And if the reply is, sure, that might relieve a number of labor constraint and permit the business to develop, then you must have a look at robotics. The Economist did a particular report quite a few years in the past about robotics and referred to as them immigrants from the longer term. And that is actually the best way that I have a look at it’s, would this business be benefited by immigrants? As a result of complete immigration reform is additional away from us right this moment than it is ever been. So robotics is the one manner ahead, and that is true writ giant throughout quite a few sectors.

 

Jeremie Capron:

Thanks, Erik.

 

Erik Nieves:

You wager.

 

Jeremie Capron:

Properly, it is time to wrap up right here. And I need 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 right this moment. Good luck to Plus One and to you all who joined us right this moment for this name. And we sit up for talking with you once more quickly.

 

Erik Nieves:

Be nicely. Thanks, Jeremie. Take care all.

 

Jeremie Capron:

Bye.



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