Tune in to our hearth 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 advanced technique of selecting and packing packages.


Jeremie Capron:

My identify is Jeremie Capron. I am the director of analysis right here at ROBO World. And as we speak we’re going to concentrate on one of the vital 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 buyers, 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 necessary points of the robotics revolution. And we’re going to be speaking about among the enabling applied sciences that make logistics automation doable, just like the sensing, the computing, the AI. And in addition about what’s taking place when it comes to companies adopting this expertise throughout a big spectrum of industries.

And to try this, I am actually thrilled to be joined as we speak 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 pc imaginative and prescient corporations within the subject of logistics as we speak. And earlier than founding Plus One, a couple of years in the past, Erik was expertise director at Yaskawa, which is likely one of the most profitable industrial robotics corporations on the earth, the place he labored for, I consider practically 20 years.

 

Erik Nieves:

25.

 

Jeremie Capron:

I feel Erik is a thought chief in robotics and he has a really deep technical experience, but additionally I feel Erik is a exceptional communicator. And over the ten years or in order that we have identified one another, I’ve realized an amazing quantity from Erik as we researched and make investments on the earth of robotics. So I hope as we speak 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 as we speak?

 

Erik Nieves:

Nicely, good morning. You might be beamed into San Antonio, Texas, which is the place Plus One is headquartered. And I have been trying ahead to this webinar for a while. I respect 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 trying ahead to it this morning. Thanks, Jeremie.

 

Jeremie Capron:

Nice. So earlier than we begin drilling into it, I needed to point out individuals how we see logistics as a chunk of the funding thesis across the robotics revolution. And as a few of you understand, our aim at ROBO World is basically to supply publicity to one of the best at school corporations from all over the world throughout the whole worth chain.

So we’re not solely robotic producers or suppliers of turnkey answer for the manufacturing purposes and so forth, however actually we’re a broad vary of very engaging software domains of which logistics is a really important one. And you may see on the left hand aspect right here, we’re additionally offering publicity to the enablers, the applied sciences that make robots and autonomous techniques 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 as we speak.

And in order that is likely one of the most necessary sectors when it comes to publicity within the ROBO portfolio. And in case you take a look at historic efficiency, here is a chart that my colleague Brad, put collectively a few week in the past that shows the efficiency of the ROBO index in blue. And you may see because the inception, virtually 10 years in the past now, the returns that reached virtually 300% on the highs of final 12 months after which main pullback up to now this 12 months. However you may see an orange, the logistics and warehouse automation subsector has been actually outperforming fairly considerably and in addition persistently.

And naturally, through the pandemic with so important enthusiasm across the booming e-commerce and the way these corporations 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 12 months. So pardon me for this aspect word right here. I need to go straight into Plus One and ask Erik concerning the genesis of Plus One. After your lengthy profession at Yaskawa, why did you determine to begin 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 business was very listed to the automotive sector, and we’ll truly see that in among the information. However round 2010, actually 2008 when the disaster was as unhealthy 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 aspect, “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. If you happen to 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 type of retains you from that. We checked out scientific lab automation, no one needed 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 basically mattered that had been going to undertake robotics at scale. And that was electronics meeting and provide chain. And you may argue that electronics meeting is a much bigger alternative and it is extra akin to what robotic persons 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 making an attempt to pivot 100 12 months outdated Japanese industrial to constructing merchandise that had been going to be related within the warehouse.

Ultimately, all of us realized that the warehouse 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 because of this.

 

Jeremie Capron:

I’m going again to this chart I confirmed earlier that basically type of spotlight the increase within the logistics automation enterprise, the businesses which are 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 corporations which are in Switzerland like Kardex, the automated storage retrieval techniques or-

 

Erik Nieves:

AutoStore.

 

Jeremie Capron:

… AutoStore that went public final 12 months. So what’s it that basically triggered that inflection when it comes to 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 achievement 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 any individual 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, lets say, 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 we have now introduced on an entire new class of on-line shoppers and there is simply no stepping again from that. The individual that’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, similtaneously 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 concerning the technical aspect and the expertise? As a result of I’m going again 10 years in the past and visiting the commerce reveals just like the IMTS in Chicago the place I am at as we speak, and seeing very spectacular excessive velocity, 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 strange of the commercial or the manufacturing plan. Which means, that if there was a change within the half that was purported to be picked and even simply location by a couple of millimeters, the robotic was caught. And as we speak, 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 few 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 stated that robotics was tied to the automotive sector and you’ll 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 occupied with, the place the robotic is simply robust and dumb. You do not want pc 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 kind of labor. Nevertheless it was additionally doable 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 each 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 need to cope with 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 setting. You are going to do the identical factor the identical means for the following 4 to eight years.

However in non-automotive, and that gentle blue line, sure, that is robots at Flippy doing burgers and fries. It is some building robots, however numerous it’s in that 13% you talked about which is in logistics automation. And in that house, the repeatability isn’t the rule. Variability is the rule. I do not know what is going on to return down the road subsequent, and I certain do not know what is going on to return 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 essentially gentle up, as a result of to do it you wanted sensing.

In manufacturing using sensors is proscribed, using information is much more restricted. However in warehouse automation, you want numerous refined sensors, these are actually 3D sensors, and also you want the information to drive the AI studying. So you need to generate that in a just about on each cycle. After which the very last thing that I say concerning 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 haven’t any technicians or engineers on workers to run the kind of tools that manufacturing has been utilizing for a very long time. So these manufacturing and warehouse automation aren’t the identical factor. And the variations are these. The primary one is variability, which suggests you need to have sensing, and it is a legacy market that simply hasn’t had the precise experience. However the cause it is now 13% of the ROBO portfolio is as a result of the acceleration that we’re seeing.

Nonetheless as we speak, solely about 10% of operations are automated in any respect. And that doesn’t even full automation, that could 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 very best on the market. It is quick meals churn.

The attrition charges at Amazon final 12 months had been practically 160%, which suggests you probably 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 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 feel the staffing is a big situation 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, in case you may simply contact on that for a minute. Whenever 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 folks 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 useful.

 

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. Nevertheless it’s one which it is a job that wants doing. So if as a substitute we will say to a type of operators, “Hey, look, the place earlier than you had been answerable for 1,500 picks an hour, I will make you answerable for 6,000 picks an hour.”

At first their hair would go on fireplace as a result of they know they cannot do this. However if you inform them, “And the best way we will do that’s I am making you answerable 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 simply turn into extra productive within the duties that they had been answerable for by leveraging the instruments, they usually transfer up scale in worth to the group. They often get a pay elevate out of the factor. So it isn’t a bone of rivalry when the robots present up in any of those services.

 

Jeremie Capron:

Bought it.

 

Erik Nieves:

Yeah. And that is the rationale we are saying robots work, folks rule. So you are going to discover these robots, they’re both going to be doing selecting or they are going to be palletizing of some sort. However after all the largest one and a considerable portion of the worth up to now within the house is these cell collaborative robots, the AMRs.

And there is two courses of AMRs. You may have these, which Locus is a transparent chief. After which you’ve 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 trying on the mobility drawback within the warehouse. And making an attempt to both eradicate the variety of people that need to be answerable 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 bought, or deployed reasonably, within the US final 12 months. That did not rely a single one in every of these robots on the precise, as a result of these weren’t bought. These are Amazon’s proprietary AMRs. And there have been extra of those deployed than everything of those on the left. And that is as a result of Amazon simply adopts automation at a special tempo than anybody else. And that type of speaks to this market.

We discuss concerning the market is prime heavy in warehouse automation. There’s actually three completely different ranges. You have acquired a degree 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 type of down market. Take into consideration the 3PLS, direct to shopper manufacturers, et cetera. These people are shopping for robots by every or the pair. So you may say that the market is prime heavy. However then you’ve Amazon that is above each of people who’s deploying robots by the a whole bunch, and AMRs by the hundreds 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 feel it is actually attention-grabbing that Amazon itself basically builds and ships and deploys extra robots that the whole impartial AMR business. And but the AMR enterprise would consider is a improbable 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 basically mimic or attain the identical kind of productiveness and efficacy ranges of their warehouses and provide chains. So on the finish of the day, I feel the AMR enterprise ought to be a reasonably good one for the years to return and would you apply on that?

 

Erik Nieves:

I agree. In case you are in a warehouse, the duties to be completed, the labor within the constructing, might be considered three several types of labor. First is the mobility labor. These are people which are 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 folks which are strolling, the ambulatory class of labor. And these will be the ones strolling up and down shelf stacks or what have you ever. After which the third class is static labor. These are folks which are at a station of some sort, possibly they’re at a packing station, possibly they’re at an induction lane, et cetera.

The cell class of labor is the smallest, however it’s additionally the one that’s accelerated the furthest in its adoption of robotics. And there is a few causes for that. One among 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 all the time wheels on a flat flooring. You type of perceive the morphology of the robotic. Now you’ve got acquired agility and a few people making an attempt 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 basically simply the type of coordination among the many fleet of those robots, type of deconflicting them, and charging. You must do alternative charging and that kind 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 will park them for a minute and I will simply have folks return to doing what they had been doing. So the type of disaster hole is minimized on AMRs.

Second, AMRs, virtually 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 people 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, folks 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.

Nevertheless it’s a more durable drawback. 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 are going to see that change over time. However as we speak that could be a truism, and AMRs are going to steer the tempo definitely for some time and we applaud that.

 

Jeremie Capron:

So I feel we will transfer on to the manipulation aspect and what Plus One is fixing. However I would like to spotlight that, you look again a decade in the past which is when Amazon acquired Kiva, which was the muse of their AMR answer for his or her distributions facilities. It is taken the enabling applied sciences to succeed in the extent the place you may make these kind of autonomy doable on the bottom flooring.

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 stated, the fleet administration. All of those basically 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 aspect?

 

Erik Nieves:

Sure, we will. However earlier than we do this, since you talked about the Kiva acquisition, I ought to let you know, 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 meaning is nobody main person 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 need 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 huge gamers would require escrow agreements or one thing to type 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 continues to be having ripple results on this business, proper?

 

Jeremie Capron:

Proper.

 

Erik Nieves:

However as for manipulation, sure. We stated it was a notion and greedy drawback. If I choose up my cellphone off of my desk, I would like 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 aspect, so we’ll simply leap up right here. That is, and I will 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 precise and put them on the left conveyor. And had to try this 25 to twenty-eight instances a minute for the following six hours.

Folks do not need to do that anymore, excessive churn job. So deliver automation to bear. However you may see the arm is simply a normal industrial robotic. That is a typical Yaskawa robotic you’ll 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 lots 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 choose and place. And what the imaginative and prescient system is doing is evaluating that complete choose bowl as we name it, which parcels can be found for choose, which means not occluded and that kind of factor. After which its job is simply going to be to place them out separately. However take a look at this, as a result of this occurs every so often. I will cease it right here.

A couple of half a % of the time, the imaginative and prescient system will see a scene and never perceive what it is purported to do. And here is an instance of that. It is trying and it says, “You realize what? I do not see any single parcel that is utterly unoccluded. What am I purported to do right here?” And it doesn’t go 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 good friend, and that good friend 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 choose up this one. I do know it is occluded, however you may choose it up there.” Identical 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 take 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 choose 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 cope with parcels. If I had been doing every’s out of an auto retailer, it would not work and I would want a special kind of gripper. One which articulates, type of like RightHand Robotics or Tender 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. This can be a normal robotic with a normal 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 clients that are actually deploying these techniques. I feel they went by way of an experimentation section. And it appears to me, simply among the main bulletins available in the market, that the largest gamers, you talked about FedEx, UPS, DHL over in Europe, and probably postal providers all over the world. The place are we at when it comes to the adoption? Are you seeing any acceleration right here?

 

Erik Nieves:

For certain.

 

Jeremie Capron:

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

 

Erik Nieves:

Yeah, blissful to. To offer you only a sense of scale, it is a dwell view of the picks taking place on the earth as we communicate, utilizing Plus One’s expertise throughout the globe. So the place it is over half one million picks up to now, by the top of the everyday, there can 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 expertise. So I can let you know, FedEx is public concerning the work they do with us. They’d 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 can occur I count on earlier than this calendar 12 months is finished, is the US Postal Service. As a result of the postal service put out an RFI for two,000 techniques, 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 huge acceleration within the variety of deployed techniques 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 best way others are, or if will probably be single sourced.

However both means, the adoption fee of robots in parcel dealing with is unquestionably up into the precise. And it needs to 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 return deal with all of that quantity. And there is simply not sufficient rooftops in these metropolitan areas. At this time, FedEx is busing folks in from Little Rock, Arkansas to do kinds at evening. That is two hours every means simply to have the ability to type packages. It isn’t sustainable. Automation they perceive is their solely path ahead.

 

Jeremie Capron:

Bought it. I need to leap in with possibly slightly little bit of a special query. As a result of as you understand, our neighborhood right here on the webcast is primarily folks in funding, administration, enterprise. I am curious, now that you have raised I feel over 40 million as we speak at Plus One, so you’ve got interacted with the funding neighborhood. For a couple of years, what’s your impression of how buyers strategy the world of robotics and AI? Something that stunned you maybe?

 

Erik Nieves:

Positive.

 

Jeremie Capron:

Something that buyers ought to suppose extra about?

 

Erik Nieves:

Nicely, the early questions again in 2017 once we had been first beginning was, “Hey, is that this a sufficiently big drawback? 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. All people has type of reconciled themselves to, logistics is extra than simply trucking. And that inside the 4 partitions of the warehouse there’s 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, numerous them and significantly within the development 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 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 will see you when you’ve your subsequent mission. However that is not “SaaS y”. That is not recurring. Even when that very same buyer comes again a 12 months 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. If you happen to’re on the prime of this market, likelihood is you money flush and you’re searching for locations to take depreciation schedules left, proper, and heart. And an OpEx mannequin isn’t in your pursuits. Down market, when you’ve 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. And so they 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 seem like a SaaS world. You might be nonetheless going to have 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 buyers, I’d say, be occupied with whether or not SaaS is the precise means to consider warehouse automation or not.

 

Jeremie Capron:

Nicely, there is no 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 feel we additionally went by way of 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 best way up, and extra just lately explode on the best way down. And so I feel there was actually exuberance round that.

I feel additionally the robotics as a service mannequin that you just described, most likely has numerous potential maybe beginning by among 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 will surely lend itself to such a mannequin. So I am curious in case you’re seeing another, maybe elements of the issues you are fixing by way of your clients that would 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 12 months 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 people 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 necessary a part of our enterprise mannequin.

So there’s recurring simply from, “This 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 acquired the parents that simply purchase the entire answer, 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 parents which are 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 will see you subsequent 12 months for the upkeep settlement. And that is the recurring piece.

 

Jeremie Capron:

Bought it.

 

Erik Nieves:

Yep.

 

Jeremie Capron:

Okay. Nicely, I feel it is time for us to open the decision to questions from the viewers. So be at liberty 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 we have now one already that is are available in across the proportion of doubtless economically useful warehouse automation that has been achieved up to now. I feel you touched on that slightly bit, there’s varied 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 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 the earth. So I will offer you a way of that right here.

We talked concerning the three courses of labor, the folks on wheels, the folks which are working up and down the cabinets, after which the folks which are standing nonetheless. That is them. So that is practically one million and a half FTEs which are 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 one million and a half folks doing this proper now, and there is solely one million picks on the earth. 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 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 feel it is a honest level that he raises that RaaS might be very engaging to the person when it comes to not having stranded value danger in a downturn scenario.

 

Erik Nieves:

Positive.

 

Jeremie Capron:

I feel 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 finances had been simply trashed and really shortly robotics corporations 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 all the things 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 true that RaaS lowers numerous barrier to entry. This is the reason it is working so properly for AMRs. As a result of hey, if ultimately these robots labored properly 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 would like one other dozen robots to point out up subsequent week. Add them to my invoice. And nice.”

And the flip aspect, 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. You must cope with 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 techniques. 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 as we speak 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 purposes of robotics and automation, and I am occupied with the healthcare sector right here, the place we have seen significant pickup when it comes to the leasing mannequin for issues like huge costly surgical robots, but additionally inexpensive 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 definitely proper now, in case you take a look at the value motion within the public fairness market and significantly the one which I confirmed you round logistics automation sector that is actually been certain during the last six to 9 months, I feel it is clear that buyers will simply rush out of these corporations on the first indicators of potential downturn or recession. And right here we’re with our rate of interest curve inverted, and the everyday habits has occurred once more and people shares have been bought off. I simply need to level out that traditionally, these have been one of the best instances to become involved. I see we have now another 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 people making an attempt to deal with that drawback. So all the large MHE corporations 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 is no lack of individuals making an attempt to deal with that scenario. 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 corporations Outrider, ASCE, et cetera, which are making an attempt to automate that as type of a stepping stone to automated, autonomous automobiles on public roads.

 

Jeremie Capron:

And I see a word from Aaron. Thanks, Aaron. That in line with the Bureau of Labor Statistics, 700,000 persons are employed as materials shifting machine operators final 12 months. In order that’s undoubtedly is a big pool. And I do know that on prime of the businesses you talked about, Erik, the large gamers within the forklift market after all are paying numerous consideration. So I am occupied with one in every of our portfolio corporations, KION that owns T-MATIC, but additionally have an enormous… I feel is the second largest truck raise supplier on the earth. They’re working actually exhausting on this drawback. And about 5 years in the past or so, they actually bifurcated the choices to incorporate electrical forklift. So you’ve the electrification that is already properly on the best way, and the following step might be the autonomy.

 

Erik Nieves:

Mm-hmm. Agreed.

 

Jeremie Capron:

Okay. Nicely look, Erik, the rest you need to focus on or current as we speak earlier than we wrap it up? We’re getting near the top of the hour now.

 

Erik Nieves:

No, I’d simply say that all the things that we have talked about right here this morning, you may simply lather, rinse, repeat, for building, AgTech, et cetera. The central conceit that I make is that for manufacturing, AI’s function goes to be restricted. We have been efficiently constructing automobiles for a very long time. For out of doors of producing, AI is a vital software 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 once I take into consideration AgTech, once I take into consideration building tech, et cetera, these are the issues that I am . I get requested repeatedly, “So what is the function of AI in these rising markets and the way ought to buyers take into consideration that?” And I assume I take a look at it in another way.

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 numerous labor constraint and permit the business to develop, then you need to take a look at robotics. The Economist did a particular report plenty of 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 take a look at it’s, would this business be benefited by immigrants? As a result of complete immigration reform is additional away from us as we speak than it is ever been. So robotics is the one means ahead, and that is true writ massive throughout plenty of sectors.

 

Jeremie Capron:

Thanks, Erik.

 

Erik Nieves:

You wager.

 

Jeremie Capron:

Nicely, 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 corporations and the ROBO, the THNQ, and the HTEC portfolios. So thanks very a lot, Erik, for sharing with us as we speak. Good luck to Plus One and to you all who joined us as we speak for this name. And we stay up for talking with you once more quickly.

 

Erik Nieves:

Be properly. Thanks, Jeremie. Take care all.

 

Jeremie Capron:

Bye.



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