Tune in to our hearth chat with Plus One Robotics CEO & Co-founder, Erik Nieves have been we dug into the present demand for robotics in warehouses – and a few of the obstacles Plus One is working to beat in relation to the advanced means of selecting and packing packages.

Jeremie Capron:

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

And we consider that this can be a essential matter for traders, not solely as a result of it has already began delivering spectacular funding returns, but in addition as a result of it touches on so many vital features of the robotics revolution. And we’re going to be speaking about a few of the enabling applied sciences that make logistics automation attainable, just like the sensing, the computing, the AI. And likewise 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 at present 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 discipline of logistics at present. 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 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 in addition I believe Erik is a outstanding communicator. And over the ten years or in order that we have recognized one another, I’ve discovered an amazing quantity from Erik as we researched and make investments on the planet of robotics. So I hope at present you may as well study 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 at present?

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 trying ahead to this webinar for a while. I admire the chance to talk to the neighborhood on simply kind 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 realize, our objective at ROBO International is de facto to offer publicity to the most effective at school corporations from around the globe throughout your entire worth chain.

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

And in order that is likely one of the most vital sectors when it comes to publicity within the ROBO portfolio. And in the event 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’ll see for the reason that inception, nearly 10 years in the past now, the returns that reached nearly 300% on the highs of final yr after which main pullback to date this yr. However you’ll be able to 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 as well see the numerous pullback, which we view as a significant alternative. The sector has pulled again greater than the 35% from the best attain final yr. So pardon me for this aspect observe 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 start out 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 trade was very listed to the automotive sector, and we’ll really see that in a few of the knowledge. However round 2010, actually 2008 when the disaster was as unhealthy because it was, the robotic trade was actually struggling as a result of it was so tightly coupled to the automotive sector.

And I used to be tasked together with my colleagues on the advertising aspect, “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 variety 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 medical lab automation, no person needed to be dealing with blood samples anymore.

However all of those have been kind of area of interest. And ultimately there have been solely two sectors that basically mattered that have been going to undertake robotics at scale. And that was electronics meeting and provide chain. And you might argue that electronics meeting is a much bigger alternative and it is extra akin to what robotic individuals are used to coping with. It is excessive quantity, it is repeatability, it is precision, it is engineers speaking to engineers.

However from our perspective it did not a lot matter as a result of it was going to remain in Southeast Asia it doesn’t matter what you probably did. And I nonetheless argue that that is true. So logistics although is by definition at all times native. And so I spent a while even inside Yaskawa attempting to pivot 100 yr outdated Japanese industrial to constructing merchandise that have been going to be related within the warehouse.

In the long run, all of us discovered that the warehouse isn’t 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 basically type of spotlight the increase 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 corporations 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 basically triggered that inflection when it comes to the adoption of automation expertise by the logistics trade?

Erik Nieves:

The principle inflection level clearly is our continued push of extra of our commerce logging on. In a way, you’ll be able to consider, we have 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 someone else was having to choose our orders and pack them and ship them to our doorstep.

In order that was already taking place. COVID simply accelerated the inevitable, the place earlier than grandma would nonetheless go to the grocery retailer as a result of she did not need to should 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 should lug it into her trunk. That is by no means going to occur.

So we’ve got introduced on an entire new class of on-line shoppers and there is simply no stepping again from that. The person who’s going to be lugging that 40 pound sack of pet food from now and ceaselessly, is the FedEx or UPS supply person who’s exhibiting up in your porch. And so all of that conspired to seeing this actual spike in volumes, concurrently we have been so constricted in labor. And the expansion of the market, outstripped labor’s availability and the result’s burgeoning marketplace for automation within the warehouse.

Jeremie Capron:

And what in regards to the technical aspect 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 at present, and seeing very spectacular excessive velocity, excessive accuracy industrial robots that have been spectacular by their such efficiency. However on the finish of the day have been very dumb robots and unable to do something out of the extraordinary of the commercial or the manufacturing plan. Which means, that if there was a change within the half that was imagined to be picked and even simply location by a couple of millimeters, the robotic was caught. And at present, 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 might say that is possibly instructive right here. So this kind of speaks to the dichotomy that you simply’re referring to. We mentioned that robotics was tied to the automotive sector and you’ll see that on this knowledge the place the darkish blue is automotive and light-weight is non-automotive. Beginning 2018, the automotive trade was successfully flat. However the non-automotive orders continued to develop.

Now, the automotive orders are those that you simply’re excited about, 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 automotive physique. And we have been efficiently doing that now for 40 years. The great factor is, spot welding calls for a variety of robots. It is 200, 300 robots in a facility to try this sort of labor. However it was additionally attainable as a result of the robotic did not actually need to know far more than its personal repeatability and endurance. It may lug that 200 pound gun all day day by 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’ll be able to’t afford to construction the world this fashion. The worth to quantity curve means you are going to should take care of issues as they’re, not as you ought. The automotive sector I might 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 means for the subsequent 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 a variety of 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 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 essentially gentle up, as a result of to do it you wanted sensing.

In manufacturing the usage of sensors is restricted, the usage of knowledge is much more restricted. However in warehouse automation, you want a variety of 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 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 variety of automation instruments to bear.

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

Nonetheless at present, 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 1,000,000 jobs left hanging in three years time. There may be not a warehouse in America that does not have a “assist needed” signal outdoors. All of them are short-staffed and their churn is the best on the market. It is quick meals churn.

The attrition charges at Amazon final yr have been almost 160%, which implies when you’ve got a activity that wants doing, you are going to have to search out our bodies for that activity. 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 occasions. So the place does that go away you? It leaves you automation as your path ahead.

Jeremie Capron:

Can I interrupt for a second right here?

Erik Nieves:

Yeah.

Jeremie Capron:

I believe the staffing is a large challenge 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, in the event you may simply contact on that for a minute. Once you automate a warehouse, what precisely occurs to the construction of employment inside the enterprise of a warehouse?

Erik Nieves:

Yeah. You are proper that given what we simply talked about, that they are all short-staffed, this isn’t a zero-sum 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 exhibiting 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 could be much more productive and worthwhile.

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 occasions a minute for the subsequent six hours, that is not a fascinating activity. However it’s one which it is a job that wants doing. So if as a substitute we are able to say to a type of operators, “Hey, look, the place earlier than you have been chargeable for 1,500 picks an hour, I’ll make you chargeable for 6,000 picks an hour.”

At first their hair would go on hearth as a result of they know they can not do this. However while you inform them, “And the best way we’ll do that’s I am making you chargeable 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 grow to be extra productive within the duties that they have been chargeable 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 is not a bone of rivalry when the robots present up in any of those amenities.

Jeremie Capron:

Received it.

Erik Nieves:

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

And there is two lessons of AMRs. You’ve these, which Locus is a transparent chief. After which you might have Shopify buying 6 River. And this one, which is MiR that was acquired by Teradyne. And Fetch, which was acquired by Zebra. Within the curiosity of full disclosure, you talked about Zebra earlier. They’re an investor in Plus One ClearPath. All of those robots are successfully trying on the mobility downside within the warehouse. And attempting to both eradicate the variety of people that should be chargeable 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 fairly, within the US final yr. That did not depend a single certainly one 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 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 totally different ranges. You’ve got obtained a stage right here, which is kind of the place the DHL and FedEx exist. They’re adopting robotics of their operations, they’re scaling them out, et cetera. They deploy robots by the robotic arms 20 and a few odd at a time. DHL deploys Locus robots a thousand at a time. Then you might have kind of down market. Take into consideration the 3PLS, direct to client manufacturers, et cetera. These people are shopping for robots by every or the pair. So you’ll be able to say that the market is high heavy. However then you might have Amazon that is above each of those who’s deploying robots by the lots of, and AMRs by the 1000’s themselves. So it truly is kind of a three-tiered market the place Amazon is sui generis, they’re their very own factor. Any ideas, questions on that?

Jeremie Capron:

No, I believe it is actually attention-grabbing that Amazon itself basically builds and ships and deploys extra robots that your entire impartial AMR trade. 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 variety of competitors, and it raises the bar for everyone else to basically 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 needs to be a fairly 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, could be regarded as three various kinds of labor. First is the mobility labor. These are people 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 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 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. Considered one of them is the physics of the issue is kind 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 obtained agility and a few people 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 de facto simply the kind of coordination among the many fleet of those robots, kind of deconflicting them, and charging. You need to do alternative charging and that sort of factor. However AMRs lend themselves to the warehouse proper now as a result of one, it is a two-way door. I can put AMRs in and in the event that they work nice, my effectivity goes up. If they do not work, I am going to park them for a minute and I am going to simply have individuals return to doing what they have been doing. So the kind of disaster hole is minimized on AMRs.

Second, AMRs, nearly from the very starting, lent themselves to an OpEx mannequin. You do not purchase a Locus robotic, you rent it. It is on some kind of efficiency OpEx mannequin and that made the ROI simple for these people to deploy. So I do consider that AMRs will proceed to guide 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 arms, is by far the larger class of labor within the warehouse.

However it’s a more durable 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 are going to see that change over time. However at present that could be a truism, and AMRs are going to guide the tempo definitely for some time and we applaud that.

Jeremie Capron:

So I believe we’ll transfer on to the manipulation aspect and what Plus One is fixing. However I might like to focus on that, you look again a decade in the past which is when Amazon acquired Kiva, which was the muse of their AMR resolution for his or her distributions facilities. It is taken the enabling applied sciences to achieve the extent the place you might make these sort of autonomy attainable on the bottom ground.

It took some time, and when you concentrate on what these applied sciences are, the sensing, the movement management, and the movement planning, the computing, and as you mentioned, the fleet administration. All of those basically converged about 10 years in the past. Is it truthful 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 aspect?

Erik Nieves:

Sure, we are able to. 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 may be very leery of [that happening] once more. So what which means is nobody main person goes to be single-threaded. They’ll have a number of suppliers of the applied sciences that you simply see, whether or not it is AMRs or manipulation. They don’t seem to be 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 kind of fulfill themselves that they’ve put themselves able to proceed to achieve success within the face of [that kind of] acquisition once more. So right here we’re 10 years later, Jeremie. And that transaction remains to be having ripple results on this trade, proper?

Jeremie Capron:

Proper.

Erik Nieves:

However as for manipulation, sure. We mentioned it was a notion and greedy downside. If I decide up my telephone 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’ll be able to simply go purchase. I got here from that world. That is what Yaskawa, and Fanuc, and ABB, and KUKA, and Common. That is their world. So what was wanted was low price, dependable 3D sensing and greedy.

Now, on the sensing aspect, so we’ll simply soar up right here. That is, and I am going to cease this so you may get a really feel for what’s taking place right here. Okay. So these are robots at FedEx. So these are robots deployed in Memphis. This was a job of an individual at a station, and their life was get all these packages out from the precise and put them on the left conveyor. And had to try this 25 to twenty-eight occasions a minute for the subsequent six hours.

Individuals do not need to do that anymore, excessive churn job. So deliver automation to bear. However you’ll be able to see the arm is simply a typical industrial robotic. That is a typical Yaskawa robotic you’ll see in an automotive plant. However what’s totally different is these sensors right here. So this can be a 3D low-cost, high-fidelity 3D sensor. Plus One did not make that sensor, Intel did. These are the Intel RealSense cameras 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 knowledge. 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 complete decide bowl as we name it, which parcels can be found for decide, that means not occluded and that sort 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 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 trying and it says, “You recognize what? I do not see any single parcel that is fully unoccluded. What am I imagined 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 telephone 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’ll be able to decide it up there.” Identical situation right here. It is like, the place does one bundle 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, comparable, shiny, reflective, occluded. The AI goes to fail. And when it does… Jeremie, you instantly knew which one the robotic ought to go get. So the human tells it, “Go decide up that one from there.” And that’s the notion of supervised autonomy. These are the applied sciences which have come to bear. It is the sensing to generate the purpose clouds, the illustration of the world. It is the AI to kind of decide from these pictures what’s legitimate and what is not. After which it is the greedy.

Now, for our world, vacuum is sufficient. As a result of I take care of parcels. If I have been doing every’s out of an auto retailer, it would not work and I would wish a unique sort of gripper. One which articulates, type of like RightHand Robotics or Delicate or someone 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 typical vacuum gripper, however its 3D sensing permits it to do selecting and inserting principally depalletizing actual time.

Jeremie Capron:

And so inform us about your clients that are actually deploying these programs. I believe they went by way of an experimentation part. And it appears to me, simply a few of the main bulletins out there, that the largest gamers, you talked about FedEx, UPS, DHL over in Europe, and doubtlessly postal providers around the globe. The place are we at when it comes to the adoption? Are you seeing any acceleration right here?

Erik Nieves:

For positive.

Jeremie Capron:

And likewise would love so that you can discuss how they consider the return on funding after they purchase a brand new tech.

Erik Nieves:

Yeah, glad to. To present you only a sense of scale, this can be a stay view of the picks taking place on the planet as we communicate, utilizing Plus One’s expertise throughout the globe. So the place it is over half 1,000,000 picks to date, by the top of the everyday, there will probably 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 let you know, FedEx is public in regards to the work they do with us. That they had a imaginative and prescient associate, 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 anticipate earlier than this calendar yr is completed, is the US Postal Service. As a result of the postal service put out an RFI for two,000 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 can 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’re going to be multi-threaded the best way others are, or if will probably be single sourced.

However both means, the adoption price of robots in parcel dealing with is certainly up into the precise. And it must 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. Right this moment, FedEx is busing individuals in from Little Rock, Arkansas to do types 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:

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

Erik Nieves:

Certain.

Jeremie Capron:

Something that traders ought to suppose extra about?

Erik Nieves:

Properly, the early questions again in 2017 after we have been first beginning was, “Hey, is that this a large enough downside? What is the TAM related to warehouse automation? Or not less than the totally different functions inside the house.” These questions are largely behind us now. Everyone has kind of reconciled themselves to, logistics is extra than simply trucking. And that inside the 4 partitions of the warehouse there may be nice alternative. And in order that’s not the constraint it as soon as was.

The questions that you simply get now are actually about enterprise mannequin, Jeremie. As a result of the funding neighborhood, a variety of them and significantly within the progress 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 variety of the best way that automation has classically occurred. Even inside warehouse automation, T-MATIC does not promote you a system on a efficiency foundation and you purchase productiveness. And you’ve got this ongoing relationship with them on a month to month foundation.

No, it has been, like all system integration, classically it is out and in in 26 or 30 weeks, and here is progress funds alongside the best way. I am going to see you when you might have your subsequent undertaking. 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 subsequent facility.” That promoting movement to the funding neighborhood, feels bespoke. And they also do not actually provide you with credit score for a similar buyer coming again and shopping for once more. They need that to be contracted recurring income.

It may take a while earlier than this market does that. I am undecided frankly that it ever will fully. And once more, it goes again to the market being bifurcated. When you’re on the high of this market, chances are high you money flush and you’re on the lookout for locations to take depreciation schedules left, proper, and middle. And an OpEx mannequin isn’t in your pursuits. Down market, when you might have the 3PLs and the DTCs, they’re extra capital constrained and the CapEx {dollars} are going for use for his or her community, amenities, et cetera. And so they do not need to tie it up with gear.

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

Jeremie Capron:

Properly, there is no denying that the SaaS mannequin offers solutions to a variety 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 simply described, most likely has a variety of potential maybe beginning by a few of the items of the providers that you simply provide. You talked about the supervision of robots by-

Erik Nieves:

Crew chief.

Jeremie Capron:

… crew chief that would definitely lend itself to such a mannequin. So I am curious in the event you’re seeing some other, maybe components of the issues you are fixing by way of your clients that might observe such a mannequin.

Erik Nieves:

Certain. 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 could be a subscription. All the time 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 vital a part of our enterprise mannequin.

So there’s recurring simply from, “Here is a portion of our deliverable.” I like to think about Yonder as a managed service, and that managed service as a subscription. You then’ve obtained the parents 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 parents 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 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’ve got one already that is are available across the proportion of probably economically worthwhile warehouse automation that has been achieved to date. I believe you touched on that a little bit bit, there’s varied estimates on the market out there. What do you suppose, Erik?

Erik Nieves:

There’s a variety of headroom to go on this enterprise. Warehouse automation is a nascent trade, I might argue. So for that million plus picks a day, that does not scratch the floor of the quantity of picks that occur on the planet. So I am going to provide you with a way of that right here.

We talked in regards to the three lessons of labor, the individuals on wheels, the individuals which can be working up and down the cabinets, after which the individuals which can be standing nonetheless. That is them. So that is 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 the 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 provide you with a way of scale as to the place the TAM is but to go on this house.

Jeremie Capron:

I see. We have now a remark from Michael across the RaaS mannequin. And I believe it is a truthful level that he raises that RaaS could be very engaging to the person when it comes to not having stranded price threat in a downturn scenario.

Erik Nieves:

Certain.

Jeremie Capron:

I believe it goes again to the start of a dialog and whether or not robotics trade first flourished or within the auto trade, which is as cyclical as it may be. And the place it is true that the very first indicators of decelerate and demand, the CapEx price range have been simply trashed and really shortly robotics corporations felt the ache. What do you concentrate on that, Erik?

Erik Nieves:

One hundred percent true that robotics traditionally, automotive will get a chilly, robotics will get a flu. It’s a main indicator of softness within the robotics marketplace for every 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 variety of 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’ll surge, I’ll 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 need to take care of all that. However come February, that very same operator can name up their AMR of alternative and say, “Hey, thanks. These labored nice. I am again now to regular state quantity. Come get your robots.” So sure, the OpEx strategy has actual advantages and such. I am simply telling you, not all customers need it.

And there’s a distinction between AMRs and manipulation 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 someone’s obtained 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 at present and say, “I’ll solely do conveyor induction for you on an OpEx mannequin.” They’ll inform us, “We can’t be doing that.”

Jeremie Capron:

Mm-hmm. Properly, as we glance throughout the assorted functions of robotics and automation, and I am excited about the healthcare sector right here, the place we have seen significant pickup when it comes to the leasing mannequin for issues like massive costly surgical robots, but in addition 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 definitely proper now, in the event you take a look at the worth motion within the public fairness market and significantly the one which I confirmed you round logistics automation sector that is actually been sure during the last six to 9 months, I believe it is clear that traders 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 standard conduct has occurred once more and people shares have been bought off. I simply need to level out that traditionally, these have been the most effective occasions to get entangled. I see we’ve got 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 variety of people attempting to deal with that downside. So all the massive MHE corporations 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, that means they’ve a distant driver. So there is no lack of individuals attempting 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 vehicles that transfer the 53 foot dry vans round. There’s corporations Outrider, ASCE, et cetera, which can be attempting to automate that as kind of a stepping stone to automated, autonomous automobiles on public roads.

Jeremie Capron:

And I see a observe from Aaron. Thanks, Aaron. That in line with the Bureau of Labor Statistics, 700,000 individuals are employed as materials transferring machine operators final yr. In order that’s undoubtedly is a big pool. And I do know that on high of the businesses you talked about, Erik, the massive gamers within the forklift market after all are paying a variety of consideration. So I am excited about certainly one of our portfolio corporations, KION that owns T-MATIC, but in addition have an enormous… I believe is the second largest truck raise supplier on the 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 might have the electrification that is already properly on the best way, and the subsequent step might be the autonomy.

Erik Nieves:

Mm-hmm. Agreed.

Jeremie Capron:

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

Erik Nieves:

No, I might simply say that every thing that we have talked about right here this morning, you’ll be able to simply lather, rinse, repeat, for building, 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 outdoor of producing, AI is a crucial instrument and I argue inadequate. That the speed of change of the true world is such that you will should 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 building tech, et cetera, these are the issues that I am . 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 suppose I take a look at it in another way.

And that’s I consider an trade for, would that trade be benefited by complete immigration reform with a guestworker program? And if the reply is, sure, that will relieve a variety of labor constraint and permit the trade 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 long run. And that is actually the best way that I take a look at it’s, would this trade be benefited by immigrants? As a result of complete immigration reform is additional away from us at present than it is ever been. So robotics is the one means ahead, and that is true writ giant throughout plenty of sectors.

Jeremie Capron:

Thanks, Erik.

Erik Nieves:

You guess.

Jeremie Capron:

Properly, it is time to wrap up right here. And I need to remind everybody, if you wish to study extra about investing in robotics, automation, AI, you’ll be able to 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 at present. Good luck to Plus One and to you all who joined us at present 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.