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

Jeremie Capron:

My title is Jeremie Capron. I am the director of analysis right here at ROBO World. And at the moment we’re going to concentrate on some of the thrilling areas of robotics and AI, one thing that our analysis group could be very keen about. That’s logistics and warehouse automation.

And we consider that this can be a crucial subject 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 necessary features of the robotics revolution. And we’re going to be speaking about a number of the enabling applied sciences that make logistics automation doable, just like the sensing, the computing, the AI. And in addition about what’s occurring when it comes to companies adopting this expertise throughout a big spectrum of industries.

And to do this, I am actually thrilled to be joined at the moment by a really particular visitor. Erik Nieves is a founder and the CEO of Plus One Robotics, which is without doubt one of the most superior robotics and pc imaginative and prescient corporations within the discipline of logistics at the moment. And earlier than founding Plus One, a number of years in the past, Erik was expertise director at Yaskawa, which is without doubt one of the most profitable industrial robotics corporations on the earth, 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 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 at the moment it’s also possible to study 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 at the moment?

Erik Nieves:

Effectively, good morning. You’re beamed into San Antonio, Texas, which is the place Plus One is headquartered. And I have been wanting ahead to this webinar for a while. I admire the chance to talk to the neighborhood on simply type of the place we’re with warehouse automation and the place this all ends. So wanting ahead to it this morning. Thanks, Jeremie.

Jeremie Capron:

Nice. So earlier than we begin drilling into it, I needed to indicate contributors how we see logistics as a chunk of the funding thesis across the robotics revolution. And as a few of you understand, our purpose at ROBO World is actually to offer publicity to the most effective at school corporations from world wide throughout all the worth chain.

So we’re not solely taking a look at robotic producers or suppliers of turnkey answer for the manufacturing functions and so forth, however actually we’re taking a look at a broad vary of very engaging utility domains of which logistics is a really vital 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 methods doable, just like the sensing, just like the actuation, the computing and so forth. And total, logistics and warehouse automation represents about 13% of the ROBO index portfolio at the moment.

And in order that is without doubt one of the most necessary sectors when it comes to publicity within the ROBO portfolio. And should you have 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 to date this 12 months. However you possibly can see an orange, the logistics and warehouse automation subsector has been actually outperforming fairly considerably and likewise persistently.

And naturally, through the pandemic with so vital enthusiasm across the booming e-commerce and the way these corporations might assist with provide chain points and the great volumes going by means 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 very best attain final 12 months. So pardon me for this aspect be aware 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 resolve to start out a brand new firm?

Erik Nieves:

Effectively, I used to be at Yaskawa for about 25 years. I joined them in 1990. And the robotics trade was very listed to the automotive sector, and we’ll really see that in a number of the knowledge. However round 2010, actually 2008 when the disaster was as dangerous 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 and marketing aspect, “Please go discover one thing else for robots to do this wasn’t tied to a automotive a part of some type.” We kissed a whole lot of frogs. I imply, we checked out aerospace. When you can automate the constructing of automobiles, why not automate the constructing of airframes. And you may, it is simply not that many robots. The lengthy life cycle of the product sort of retains you from that. We checked out 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 actually mattered that had been going to undertake robotics at scale. And that was electronics meeting and provide chain. And you could possibly argue that electronics meeting is an even bigger alternative and it is extra akin to what robotic individuals are used to coping with. It is excessive quantity, it is repeatability, it is precision, it is engineers speaking to engineers.

However from our perspective it did not a lot matter as a result of it was going to remain in Southeast Asia it doesn’t matter what you probably did. And I nonetheless argue that that is true. So logistics although is by definition all the time native. And so I spent a while even inside Yaskawa making an attempt to pivot 100 12 months previous Japanese industrial to constructing merchandise that had been going to be related within the warehouse.

Ultimately, all of us realized that the warehouse is just not actually a robotic downside. It is a notion and greedy downside. It is imaginative and prescient and it is actuation on the finish of issue. The arm is the arm is the arm. So I made a decision to separate from Yaskawa in 2015 and established Plus One consequently.

Jeremie Capron:

I am going again to this chart I confirmed earlier that actually sort of spotlight the growth 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 methods or-

Erik Nieves:

AutoStore.

Jeremie Capron:

… AutoStore that went public final 12 months. So what’s it that actually triggered that inflection when it comes to the adoption of automation expertise by the logistics trade?

Erik Nieves:

The primary inflection level clearly is our continued push of extra of our commerce going surfing. In a way, you possibly can consider, we had been the robots doing the order success ourselves. After we would go to the big-box retailer to the grocery or what have you ever, we did our personal selecting, we did our personal sortation, and we did our personal supply. And e-com modified that. We simply began click on to ship, and that meant anyone else was having to select our orders and pack them and ship them to our doorstep.

In order that was already occurring. COVID simply accelerated the inevitable, the place earlier than grandma would nonetheless go to the grocery retailer as a result of she did not need to need to mess with a pc to get her supply. She figured it out. And COVID is, let’s imagine, now come and gone. Grandma’s not going again to the shop to purchase a 40 pound sack of pet food and need to lug it into her trunk. That is by no means going to occur.

So we’ve introduced on a complete 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 perpetually, is the FedEx or UPS supply individual that’s exhibiting 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 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 reveals just like the IMTS in Chicago the place I am at at the moment, and seeing very spectacular excessive pace, excessive accuracy industrial robots that had been spectacular by their such efficiency. However on the finish of the day had been very dumb robots and unable to do something out of the peculiar of the commercial or the manufacturing plan. Which means, that if there was a change within the half that was presupposed to be picked and even simply location by a number of millimeters, the robotic was caught. And at the moment, we have seen some great advances to the purpose the place the holy grail of robotics from 10 years in the past, which was a random object selecting functionality, we now have that. So what’s occurred that is enabled that over the previous couple of years?

Erik Nieves:

I’d say that is perhaps instructive right here. So this type of speaks to the dichotomy that you just’re referring to. We mentioned that robotics was tied to the automotive sector and you’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 just’re fascinated by, 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 whole lot of robots. It is 200, 300 robots in a facility to do this sort of labor. But it surely was additionally doable as a result of the robotic did not actually need to know far more than its personal repeatability and endurance. It might 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 exterior of automotive, you possibly can’t afford to construction the world this fashion. 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 without doubt one of the only a few that has sufficient worth and quantity to make it a structured surroundings. You are going to do the identical factor the identical manner for the following 4 to eight years.

However in non-automotive, and that mild blue line, sure, that is robots at Flippy doing burgers and fries. It is some development robots, however a whole lot of it’s in that 13% you talked about which is in logistics automation. And in that area, the repeatability is just not 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 mild up, as a result of to do it you wanted sensing.

In manufacturing using sensors is proscribed, using knowledge is much more restricted. However in warehouse automation, you want a whole lot of subtle sensors, these at the moment are 3D sensors, and also you want the info to drive the AI studying. So it’s important 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 whole lot of automation instruments to bear.

What does that imply? They have no technicians or engineers on workers to run the kind of gear that manufacturing has been utilizing for a very long time. So these manufacturing and warehouse automation aren’t the identical factor. And the variations are these. The primary one is variability, which implies it’s important to have sensing, and it is a legacy market that simply hasn’t had the proper experience. However the purpose it is now 13% of the ROBO portfolio is as a result of the acceleration that we’re seeing.

Nonetheless at the moment, solely about 10% of operations are automated in any respect. And that doesn’t even full automation, that is perhaps semi-automated. Given the expansion, there’s one million jobs left hanging in three years time. There’s not a warehouse in America that does not have a “assist needed” signal exterior. 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 almost 160%, which implies in case you have a job that wants doing, you are going to have to seek out our bodies for that job. 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 taking a look at automation as your path ahead.

Jeremie Capron:

Can I interrupt for a second right here?

Erik Nieves:

Yeah.

Jeremie Capron:

I believe the staffing is a large situation for certain. There’s the attrition downside, 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, should you might simply contact on that for a minute. Whenever you automate a warehouse, what precisely occurs to the construction of employment throughout the enterprise of a warehouse?

Erik Nieves:

Yeah. You are proper that given what we simply talked about, that they are all short-staffed, this isn’t a zero-sum sport. It is not robotic in, individual 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 workers you do have, these FTEs might be much more productive and invaluable.

Erik Nieves:

Consider it like this. And we’ll see a few of an instance of our work at FedEx. If my job is to maneuver packages from proper to left, 25 to 30 occasions a minute for the following six hours, that is not a fascinating job. But it surely’s one which it is a job that wants doing. So if as an alternative we are able to say to a kind of operators, “Hey, look, the place earlier than you had 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 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 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 all people that confirmed up nonetheless will get to remain, they only change into extra productive within the duties that they had been chargeable for by leveraging the instruments, they usually transfer up scale in worth to the group. They normally get a pay elevate out of the factor. So it is not a bone of rivalry when the robots present up in any of those services.

Jeremie Capron:

Acquired 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 sort. However in fact the most important one and a considerable portion of the worth to date within the area is these cell collaborative robots, the AMRs.

And there is two courses of AMRs. You could have these, which Locus is a transparent chief. After which you’ve gotten Shopify buying 6 River. And this one, which is MiR that was acquired by Teradyne. And Fetch, which was acquired by Zebra. Within the curiosity of full disclosure, you talked about Zebra earlier. They’re an investor in Plus One ClearPath. All of those robots are successfully wanting on the mobility downside within the warehouse. And making an attempt to both get rid of the variety of of us that need to 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 offered, or deployed moderately, within the US final 12 months. That did not rely a single certainly one of these robots on the proper, as a result of these weren’t offered. 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 sort of speaks to this market.

We speak in regards to the market is high heavy in warehouse automation. There’s actually three completely different ranges. You 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 gotten type of down market. Take into consideration the 3PLS, direct to client manufacturers, et cetera. These of us are shopping for robots by every or the pair. So you possibly can say that the market is high heavy. However then you’ve gotten Amazon that is above each of those who’s deploying robots by the tons of, 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 believe it is actually fascinating that Amazon itself basically builds and ships and deploys extra robots that all the unbiased AMR trade. And but the AMR enterprise would consider is a implausible one now, as a result of the pie is rising so quick. And naturally Amazon has a whole lot 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 ought to be a fairly good one for the years to return and would you apply on that?

Erik Nieves:

I agree. If you’re in a warehouse, the duties to be achieved, the labor within the constructing, might be considered three various kinds of labor. First is the mobility labor. These are of us 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 individuals which are strolling, the ambulatory class of labor. And these could 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 are at a station of some sort, perhaps they’re at a packing station, perhaps 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. Certainly one of them is the physics of the issue is type of simpler. A cell robotic has two and a half levels of freedom, ahead, again, left, proper, flip. And it is all the time wheels on a flat flooring. You sort of perceive the morphology of the robotic. Now you’ve got acquired agility and a few of us 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 downside technically is actually 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 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 will park them for a minute and I will simply have individuals 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 simple for these of us to deploy. So I do consider that AMRs will proceed to steer the tempo in adoption out there. However it’s true that the manipulation class, individuals whether or not they’re strolling or staying in a station which have stuff of their palms, is by far the larger class of labor within the warehouse.

But it surely’s a more durable downside. It is not as simply a two-way door and it is extra CapEx intensive. There’s extra stuff to ship. And so it hasn’t classically lent itself to OpEx fashions as readily as AMRs have. We are going to see that change over time. However at the moment that could be a truism, and AMRs are going to steer the tempo actually for some time and we applaud that.

Jeremie Capron:

So I believe we will transfer on to the manipulation 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 could possibly make these sort 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 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 value 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 could 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 just 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 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 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 choose up my cellphone off of my desk, I want my eyes, my arm, and my hand in that order. And of the three, the arm is the one one which’s an engineered commodity you possibly can 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 will cease this so you may get a really feel for what’s occurring 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 proper and put them on the left conveyor. And had to do this 25 to twenty-eight occasions 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 possibly can see the arm is simply a typical industrial robotic. That is a typical Yaskawa robotic you’d see in an automotive plant. However what’s completely 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 lots 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 occurring right here, is the robotic has to take and choose and place. And what the imaginative and prescient system is doing is evaluating that total choose bowl as we name it, taking a look at which parcels can be found for choose, which means not occluded and that sort of factor. After which its job is simply going to be to place them out one by one. However have a look at this, as a result of this occurs from time to time. 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 presupposed to do. And here is an instance of that. It is wanting and it says, “You realize what? I do not see any single parcel that is utterly unoccluded. What am I presupposed to do right here?” And it doesn’t cross confidence threshold.

The AI says, “I am unsure.” When that occurs, the robotic raises its hand over the cloud. It is aware of sufficient to cellphone a pal, and that pal occurs to be in San Antonio. And a human being, what we name a crew chief, then takes, and with their mouse tells the robotic, “Yeah, go choose up this one. I do know it is occluded, however you possibly can 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 have 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 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 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 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 sort of gripper. One which articulates, sort of like RightHand Robotics or Delicate or anyone else. However that is the notion of the applied sciences coming collectively on the proper time. That is simply one other instance. It is a normal robotic with a typical vacuum gripper, however its 3D sensing permits it to do selecting and inserting mainly depalletizing actual time.

Jeremie Capron:

And so inform us about your prospects that at the moment are deploying these methods. I believe they went by means of an experimentation part. And it appears to me, simply taking a look at a number of the main bulletins out there, that the most important gamers, you talked about FedEx, UPS, DHL over in Europe, and probably postal providers world wide. 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 speak about how they consider the return on funding after they purchase a brand new tech.

Erik Nieves:

Yeah, completely happy to. To present you only a sense of scale, this can be a reside view of the picks occurring on the earth as we converse, utilizing Plus One’s expertise throughout the globe. So the place it is over half one million picks to date, by the top of the daily, 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 in regards to the work they do with us. That they had a imaginative and prescient companion, it wasn’t working. Plus One got here in, the human-in-the-loop made an enormous distinction. We deployed 4 robots there initially, and now it is far more than that.

It is the identical in e-com and it is the identical throughout all parcels. What’ll be fascinating, and that is one thing that can occur I anticipate earlier than this calendar 12 months is completed, is the US Postal Service. As a result of the postal service put out an RFI for two,000 methods, and since then put out an RFP for a portion of that for about 400 robots. That call is due anytime now. And that can instantly drive huge acceleration within the variety of deployed methods globally. So we’re keen. At Plus One, we’re assured that we’re in a very good 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 manner, the adoption charge of robots in parcel dealing with is certainly up into the proper. 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. Effectively, which means 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 individuals in from Little Rock, Arkansas to do kinds at night time. That is two hours every manner simply to have the ability to type packages. It is not sustainable. Automation they perceive is their solely path ahead.

Jeremie Capron:

Acquired it. I need to soar in with perhaps a little bit little bit of a special query. As a result of as you understand, our neighborhood right here on the webcast is primarily individuals in funding, administration, enterprise. I am curious, now that you’ve got raised I believe over 40 million at the moment at Plus One, so you’ve got interacted with the funding neighborhood. For a number of years, what’s your impression of how traders method the world of robotics and AI? Something that stunned you maybe?

Erik Nieves:

Positive.

Jeremie Capron:

Something that traders ought to suppose extra about?

Erik Nieves:

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

The questions that you just get now are actually about enterprise mannequin, Jeremie. As a result of the funding neighborhood, a whole lot of them and notably within the progress stage funds, are actually listed to SaaS metrics. And so the enterprise mannequin that they like, that they offer the most effective valuation, a number of on, et cetera, is what’s your recurring income. Effectively, that is fairly orthogonal to a whole lot 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 will see you when you’ve gotten your subsequent mission. However that is not “SaaS y”. That is not recurring. Even when that very same buyer comes again a 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 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 is going to take a while earlier than this market does that. I am unsure frankly that it ever will utterly. And once more, it goes again to the market being bifurcated. When you’re on the high of this market, chances are high you money flush and you’re on the lookout for locations to take depreciation schedules left, proper, and heart. And an OpEx mannequin is just not in your pursuits. Down market, when you’ve gotten the 3PLs and the DTCs, they’re extra capital constrained and the CapEx {dollars} are going for use for his or her community, services, et cetera. And so they do not need to tie it up with gear.

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

Jeremie Capron:

Effectively, there is no denying that the SaaS mannequin gives solutions to a whole lot of the uncertainty to the enterprise of investing, and it makes traders’ jobs lots simpler. However I believe we additionally went by means of a part of virtually 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 believe there was actually exuberance round that.

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

Erik Nieves:

Crew chief.

Jeremie Capron:

… crew chief that will surely lend itself to such a mannequin. So I am curious should you’re seeing every other, maybe elements of the issues you are fixing by means of your prospects that would comply with such a mannequin.

Erik Nieves:

Positive. So once more, our customers will usually purchase the imaginative and prescient system and that’ll be a CapEx deal. As a result of of their view, the eyes of the robotic are an extension of the robotic, and the robotic was CapEx. So the eyes ought to likewise be CapEx. And we’ll see you subsequent 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. All the time has been. So that is the recurring income piece for Plus One, is of us subscribing to the uptime that Yonder, that is what we name the human-in-the-loop service, gives. And so that can proceed to be an necessary a part of our enterprise mannequin.

So there’s recurring simply from, “Here is a portion of our deliverable.” I like to consider Yonder as a managed service, and that managed service as a subscription. Then you definitely’ve acquired the 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:

Acquired it.

Erik Nieves:

Yep.

Jeremie Capron:

Okay. Effectively, 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 one already that is are available across the share of probably economically invaluable 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 whole lot of headroom to go on this enterprise. Warehouse automation is a nascent trade, 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 provide you with a way of that right here.

We talked in regards to the three courses of labor, the individuals on wheels, the individuals which are operating up and down the cabinets, after which the individuals which are standing nonetheless. That is them. So that is almost 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 sort 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 individuals 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% accessible utility area 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 area.

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 might be very engaging to the person when it comes to not having stranded price danger in a downturn state of affairs.

Erik Nieves:

Positive.

Jeremie Capron:

I believe it goes again to the start of a dialog and whether or not robotics 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 funds had been simply trashed and really rapidly 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 every little thing you simply talked about, Jeremie. So sure, that was a part of the impetus for us at Yaskawa looking for one thing countercyclical to the automotive area.

The remark is correct that RaaS lowers a whole lot of barrier to entry. This is the reason it is working so nicely for AMRs. As a result of hey, if ultimately these robots labored nicely for me from January by means of August and now I do know I’ll surge, I’ll name the AMR supplier and say, “Hey, I want one other dozen robots to indicate up subsequent week. Add them to my invoice. And nice.”

And the flip 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 method has actual advantages and such. I am simply telling you, not all customers need it.

And there’s a distinction between AMRs and manipulation methods. Simply consider the COGS. Consider the COGS concerned in an AMR versus the COGS of a conveyor induction system with a robotic and conveyors and security and all this different stuff. It is simply extra stuff. And if you are going to subscribe to all of that, then anyone’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 at the moment 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. Effectively, as we glance throughout the varied functions of robotics and automation, and I am fascinated by 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 in addition inexpensive options round pharmacy automation for instance. Clearly the hospitals additionally admire the OpEx mannequin. In order that’s only one thought.

And one other one is that actually proper now, should you have a look at the value motion within the public fairness market and notably the one which I confirmed you round logistics automation sector that is actually been sure over the past 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 everyday habits has occurred once more and people shares have been offered off. I simply need to level out that traditionally, these have been the most effective occasions to get entangled. I see we’ve 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 very good query. I haven’t got the reply on the highest of my head.

Erik Nieves:

I do not both. However boy, there are certain a whole lot of of us making an attempt to deal with that downside. So all the large MHE corporations are attempting 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 state of affairs. And never simply throughout 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 autos on public roads.

Jeremie Capron:

And I see a be aware from Aaron. Thanks, Aaron. That in line with the Bureau of Labor Statistics, 700,000 individuals are employed as materials shifting machine operators final 12 months. In order that’s positively is a big pool. And I do know that on high of the businesses you talked about, Erik, the large gamers within the forklift market in fact are paying a whole lot of consideration. So I am fascinated by certainly one of our portfolio corporations, KION that owns T-MATIC, but in addition have an enormous… I believe is the second largest truck carry supplier on the earth. They’re working actually laborious on this downside. And about 5 years in the past or so, they actually bifurcated the choices to incorporate electrical forklift. So you’ve gotten the electrification that is already nicely on the best way, and the following step might be the autonomy.

Erik Nieves:

Mm-hmm. Agreed.

Jeremie Capron:

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

Erik Nieves:

No, I’d simply say that every little thing that we have talked about right here this morning, you possibly can simply lather, rinse, repeat, for development, AgTech, et cetera. The central conceit that I make is that for manufacturing, AI’s position goes to be restricted. We have been efficiently constructing automobiles for a very long time. For outdoor of producing, AI is a crucial instrument and I argue inadequate. That the speed of change of the actual world is such that you’ll 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 development tech, et cetera, these are the issues that I am taking a look at. I get requested repeatedly, “So what is the position of AI in these rising markets and the way ought to traders take into consideration that?” And I assume I have a look at it otherwise.

And that’s I consider an trade for, would that trade be benefited by complete immigration reform with a guestworker program? And if the reply is, sure, that might relieve a whole lot of labor constraint and permit the trade to develop, then it’s important to have a look at robotics. The Economist did a particular report a lot 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 have a look at it’s, would this trade be benefited by immigrants? As a result of complete immigration reform is additional away from us at the moment than it is ever been. So robotics is the one manner ahead, and that is true writ massive throughout a lot of sectors.

Jeremie Capron:

Thanks, Erik.

Erik Nieves:

You wager.

Jeremie Capron:

Effectively, 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 possibly can 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 the moment. Good luck to Plus One and to you all who joined us at the moment for this name. And we stay up for talking with you once more quickly.

Erik Nieves:

Be nicely. Thanks, Jeremie. Take care all.

Jeremie Capron:

Bye.