Joseph Giordano, Cowen’s robotics analyst speaks with Daniel Theobald, Founder and CEO, Vecna Robotics & Co-founder/President, MassRobotics and Karen Leavitt, Chief Marketing Officer at Locus Robotics.
They discuss the adoption and scaling of robotic systems in warehouses, the impact of stay-at-home orders, growth of eCommerce amid the coronavirus pandemic and how robots impact worker safety and efficiency amid social distancing efforts. They also discuss improvements in technology such as sensors, software and interoperability standards that have made robots more prevalent.
Press play below to listen to their conversation.
Joseph Giordano is a Managing Director at Cowen and a senior equity research analyst covering robotics and industrials.
Daniel Theobald, Founder, CEO, Vecna Robotics & Co-founder, President, MassRobotics
Daniel has decades of experience leading research scientists and teams of engineers in developing cutting edge robotics technology. He has 67 issued patents and over 30 patents pending. In 2018 he founded Vecna Robotics, now a global leader in autonomous solutions for the logistics industry. In 2014 he co-founded MassRobotics, a non-profit dedicated to the global advancement of the robotics industry. He is dedicated to the idea that technology can be used to improve life for everyone on the planet.
Karen Leavitt, Chief Marketing Officer, Locus Robotics
In her role as CMO of Locus Robotics, Karen brings over twenty years of experience developing innovative, creative, and effective marketing programs for a wide range of technology companies, from start‐ups to Fortune 1000 public companies. Karen’s outstanding analytical and technical abilities deliver insight and innovative programs that consistently deliver positive marketing ROI. She also serves as Locus’s dynamic and articulate corporate spokesperson before press, analysts, customers, partners, and investors.
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Joseph Giordano: [00:00:30] Hi guys. Thank you all for joining us today to talk about how recent events and restrictions on human movement are effectively proving the case for accelerated deployment of robotics in logistics and supply chains. This is an area where we did extensive work this past November with our partners at MAS Robotics and even though that was only a few months ago, it seems significantly more relevant today. With me today, we have two leaders from the autonomous mobile robot space. From Vecna, we have CEO Daniel Theobald was also a co-founder and [00:01:00] board member of MAS Robotics. And from Locus Robotics, we have Chief Marketing Officer, Karen Leavitt.
So thank you guys for joining me this afternoon, before we jump into the conversation, can you just take a minute each of you to quickly introduce the audience to your companies in cases, or some of them are a little bit less familiar? So Daniel, you want to just kick us off and set start setting the scene with Vecna and what you guys are up to?
Daniel Theobald: Yeah. Great. Thank you. It’s great to be here. I hope everybody is surviving these interesting [00:01:30] times and finding the silver linings where they exist. Vecna Robotics is the world leader in automated bulk handling. What that means is if you look around the room you’re in right now, you see a lot of stuff, almost everything you see there spent a significant portion of its supply chain time on palettes. Hundreds of millions of new pallets are built every year. And it’s a [00:02:00] real challenge to move those pallets, move all of that to material efficiently.
So we really focus on this idea of industrial resource usage efficiency. How do you empower your human workers to accomplish more than ever before? We have built over the past couple of decades industry leading software suite called pivotal, which really does three things that turns any piece of industrial [00:02:30] material handling equipment into a fully safe autonomous mobile robot. Two, it streams data in to our network operation learning center, which is allowing a tremendous amount of customer insights and improvement in the automation systems themselves.
And then three it orchestrates not only the robots behaviors and tasks within a facility, but also coordinates the human workers to [00:03:00] interact efficiently with the robots. And overall the product has shown significant ROI. In a number of cases we’ve shown that without even adding additional resources, we’re able to more than doubled the amount of throughput in a facility just by making better use of the equipment and staff that you already have on site.
Joseph Giordano: Great. Karen, you want to give us a quick intro on Locus?
Karen Leavitt: Absolutely. And as Daniel said, I hope [00:03:30] everybody… First of all, thank you all for coming. I know we’re living in unusual times and I hope all of you and your families and your colleagues are safe and well. We are just, as Daniel said, they’re the world leader in bulk handling. We at Locus Robotics are the world leader in peace handling. So while many of the goods you see around, you spend a lot of their lives on pallets. Eventually they get to the point where a single one of those things is going to get picked out of a warehouse [00:04:00] and shipped to you or shipped to a retailer for you to be able to purchase it. And the work of picking items in a direct to consumer or a retail warehouse is as it’s principle raw material human labor.
And what we do is we offer what we call a multi-bot solution. We have autonomous mobile robots which is just a mouthful [00:04:30] of a way of saying self-driving cars that run around in warehouses and collaborate with human coworkers to assist in the piece handling process and picking items or replenishing items on the shelves and through the use of these collaborative robots, which are not only carrying the materials but they’re carrying instructions to direct the activities of the human workers. It helps the humans achieve a two [00:05:00] to three X improvement in productivity.
So what we’re seeing is much more efficient, effective, and error-free fulfillment of orders from the warehouse but with a dramatically reduced labor requirement. And even though today, of course, we just had the latest jobs numbers, and we’re seeing that unemployment continues to go up, we’re still dealing in a space where labor shortages [00:05:30] are a critical issue. And as, Joe said, this is a particularly timely call because we’ve seen a very sudden, very abrupt shift from retail shopping to online shopping, virtually overnight. We’ve had e-commerce and direct to consumer shipping has been on a growth rocket for a while, but [00:06:00] all of the sudden it just pointed straight up when retail stores became unavailable. And so we’re seeing increasing pressure as a result of our pandemic world on the e-commerce labor market. And that’s what our product is designed to help with.
Joseph Giordano: Perfect. So I guess I’m the only one speaking on this call who’s not a world leader, so it’s a little bit of a hit to the ego there, but we will [00:06:30] trudge on here. So yeah, back in November, we did a big report on logistics, robotics and how the demand seemed to be kind of almost guaranteed in a sense because of worker trends and shortage of labor and shifts towards e-commerce and a whole bunch of different things like that. And I guess what always is somewhat more challenging in calls like that is what’s the catalyst, and this is something that no one obviously foresaw, but [00:07:00] why we’re here today and why we’re having this call right now is it because COVID-19, what has this done to the market and what has this done to kind of immediately change customer behavior?
So I wanted to start there. And what evidence are you seeing of behavioral shifts and thought processes around your customers and how they think about their workflows right now when maybe something that wasn’t as immediate a need three months ago is very different today. And if you have any examples, so maybe Karen, if you want to just start there what are you seeing like incremental shifts [00:07:30] from how your customers are thinking about things?
Karen Leavitt: Sure. Well, it’s interesting because of course we just came out of the holiday season peak in November, December. So we had customers who we’re doing their planning for the year ahead. As I mentioned, a few moments ago, the growth in e-commerce has been pretty steady for the last 15 years or so. It’s roughly 10% Tagore. But still e-commerce [00:08:00] has always has represented a pretty small fraction of retail sales in general, still only about 13% as of this past January. But growing at a very healthy clip. And so our customers come out of the holiday season, they’re already planning for growth and they’re planning for next year’s peak season.
So this has been a pretty classic cycle of constantly planning for growth and expansion while dealing with [00:08:30] a very tight labor market. Well, what we’ve seen in just the last 30, 45 days has been a dramatic uptick in the demand for labor and the activity in the warehouse for some businesses so far there are different classes of products that have different curves on this one. So for instance, some of our customers are actually [00:09:00] doing fulfillment in the warehouse of medical supplies, pharmaceuticals or even retail pharmacy. One of our customers is a company in the UK called Boots. Very large pharmacy. And as you can imagine, they’re just getting hammered with orders now that that consumers in the UK are not able to go into retail stores.
So we’ve always had a [00:09:30] program that allows our customers to scale our robot population on demand. Our customers often will scale up during the holiday season peak, and then we reclaimed the robots in January. Well, now we’re, redelivering robots to our customers who are already starting to see a surge. And that’s first starting with those essential services like pharmaceuticals and medical supplies. But I think we’re also going to start to see that happening with general consumer [00:10:00] goods as well as people settle in for kind of a long shelter process. People are going to start to rely more and more on e-commerce for their basic goods and services.
So we’re going to start to see that I think rippling through to apparel companies, we’re already actually seeing it with things that that help with the quarantine. So one of our customers is picking arts and crafts supplies. That’s seen a surge. [00:10:30] So you can imagine people are home with kids who aren’t in school, they’re doing homeschooling. And so arts and craft supplies has gone up. So we’re seeing some very interesting trends already.
And I expect that what we’re going to see is sort of a new tier, a new plateau when we emerge from the pandemic, as people will have done a more rapid shift to e-commerce. I don’t think that’s going to tilt all the way back to brick and mortar. I think it’s going to stay [00:11:00] at a higher level, and we’re going to continue to see a more rapid adoption curve. And what that’s doing is it’s applying this greater pressure. It’s increasing the tightness of the labor market, and it’s putting pressure on to automate, and we’re seeing customers right now who are taking this opportunity during the pandemic to think about how they can leapfrog their competition or widen the gap if they’re already a leader in their space [00:11:30] so that it can emerge from this already prepared for a more intensified, direct to consumer experience in the warehouse.
Joseph Giordano: Yeah, that makes a lot of sense. And I tend to agree with you on the e-commerce trends. Daniel what are you even seeing on your side?
Daniel Theobald: Yeah, I agree with everything Karen said, all of that is very consistent with what we’re seeing. And I would just underscore a couple of points. [00:12:00] Certainly, this type of disruption has created a lot of introspection in our customers, particularly the biggest retailers, shippers, third party logistics companies, manufacturers, et cetera. A lot of introspection in terms of dealing with rapid change. How can they be resilient to events like this in the future? And I think people have always allowed [00:12:30] for the possibility of these types of things to happen but it was sort of always theoretical. And I think the way that this is unfolding is causing a lot of introspection to say, hey, we need to be ready. We need to be ready for the next time. We need to adapt more rapidly because as Karen was mentioning we have customers like one of the largest medical distributors in the U.S. who have to make very rapid shifts [00:13:00] in the way they’re doing things just because of this off season peak that they’re experiencing.
So they are very interested in taking advantage of some of the capabilities that our pivotal software provides to be very flexible to assign robots, to a variety of tasks that may change tomorrow. If their needs change. Now, this is very different than sort of [00:13:30] traditional automated mobile robots or traditional AGV systems or traditional conveyor-type conveyor systems, because those don’t change very easily.
So a lot of what we’ve done and a lot of what we’re seeing is this desire to be able to reallocate or retask their investments in material handling equipment very, very quickly. So [00:14:00] that’s a big aspect of it. And I think just, we see a lot of customers wanting to get their budgets in place because they know that they need to invest now or they’re going to get left behind.
I think in the past there was a lot more of we can wait and see, we can wait and see where this goes. We don’t want to be the early adopter. Now it is I think a very clear realization that we’re vulnerable and unless we take advantage of automation to make our businesses more resilient [00:14:30] we may not survive these types of events. So a lot of interest in building up the capabilities in those areas. And one final comment there I think to the laggards who would typically wait and see how things go for the early adopters, adopting this type of technology does require a change in thinking, and it does require some organizational adaptation [00:15:00] and that takes time.
And I think what you’re going to see is those early adopters are going to be rewarded. Maybe they’re not getting the massive return on investment from day one with every piece of automation they adopt, but they’re learning very quickly and are going to be in a much better position to not only survive, but thrive in the future over their competitors.
Joseph Giordano: So, Daniel, I think that goes into what… Yeah, go ahead, Karen.
Karen Leavitt: And I was just going to add one other thing that… Again, completely agree with Daniel saying [00:15:30] as well. And that is that remember that the people who had strengths in this area, the people to whom consumers right now are turning by default, are going to see their share increase. I mean, specifically Amazon, for example. So people who are competing with them are, I think, going to feel a tremendous sense of urgency coming out of this to make sure that their lunch doesn’t get completely eaten.
Joseph Giordano: [00:16:00] So along those same lines, maybe perhaps you can argue that customers are maybe thinking more about business continuity more than they are about specific costs for things, and just maybe having the ability to, hey, can we actually physically operate during these types of times becomes like the top priority. So how are you guys specifically tailoring your pitch differently today than maybe how you were going to market a few months ago? Are you highlighting different aspects of [00:16:30] your products or your solutions that maybe would have been like something that is a side benefit that you would have thought about it before and now is kind of the most important thing? How are you just changing the way that you’re kind of pitching your technology to customers?
Karen Leavitt: Do you want me or Daniel?
Joseph Giordano: Oh, sorry. It doesn’t matter. Daniel, you want to start?
Daniel Theobald: Yeah. I’ll say a few things and hand it off to Karen. I think a lot of it is just a [00:17:00] validation of the value proposition that we have been pitching to our customers all along. This idea of empowering human workers to accomplish more than ever before. Karen already pointed out that despite unemployment going up, these are areas where the ability of these customers to hire and staff is still incredibly challenging.
We have customers who before this event we’re having [00:17:30] a very difficult time keeping enough staff onsite. Some of them had up to 300% turnover simply because a lot of these jobs aren’t great jobs. And despite the fact that they continue to raise wages, they continue to increase benefits. It becomes a revolving door. One customer that we work with very closely has struggled with even 300% turnover. That means that they’re basically having to [00:18:00] rehire their entire staff three times a year.
So what the robotics does and whether it’s the Locus solution or the Vecna Robotics solution, is it really empowers the human workers that makes them not only more effective at the job, but it makes that job more enjoyable too. It makes it so that it’s something that they want to do. And that’s incredibly powerful is as our customers are able to attract and retain staff that they need to get the job done. [00:18:30] It gives them a lot more certainty. A lot more ability to know that they’re going to have the labor they need when they need it. And I think the other thing that we’ve specifically done to change or to adapt our message a little bit is we are now offering completely remote deployments for our technology.
So at this point we’re able to essentially ship robots to a new facility we’ve never been at before. And with the existing [00:19:00] customer staff onsite install, bring up those robots and have those robots be productive very quickly for our customers. In the past we’ve tended to send people on site, which is nice to have that face to face until build that relationship. With travel restrictions and of course social distancing and that type of thing we’re offering a completely remote deployment capability now which I think is really helpful to be able to [00:19:30] continue to adopt technology even in the current situation.
Joseph Giordano: And Karen, same question to you, but do you think the ROI for your customers kind of changes now? The way they calculate it internally in their heads because you get the direct return on what you’re doing but you’re also kind of safety future proofings your operations from things like this.
Karen Leavitt: Yeah. So the two excellent points. And by the way, I [00:20:00] would have said almost verbatim what Daniel has said on virtually every front. So I always make the point to people that robots are cool, but cool doesn’t pay the bills. You always have to have a hardened economic value proposition in order for it to matter to customers. So we’re always making an ROI driven sale, but you’re absolutely right. The ROI is typically a function of what the wage [00:20:30] rates are in any given market. So there are some markets that are more thriving markets for us than others. Wage rates in Germany are higher than they are in Poland. So it tends to be a more compelling ROI in one country versus another, for example.
But we still are an attractive solution in a place like Poland because if you can’t find the workers to begin with, sometimes it just becomes a matter of, can you get the job done at all? And I think that [00:21:00] we’re going to be seeing more and more of that as a motivating factor in the near and intermediate term when we emerge from this. And just as Daniel said we are… It’s very interesting this sort of cataract in and all of our existence here is taking place at a pretty opportune time in Vecna’s and Lucas’s respective market [00:21:30] existence.
We’ve gotten past the original proof of concept. We’ve established ourselves as credible players. At Locus, we have close to 50 customer sites deployed. So we’ve gotten to critical mass. And now we’ve already started to turn the corner into more of these virtual assessments and deployments. In fact, we just put a press release out on the whelm and maybe the telegraphing something may be going out on the wire [00:22:00] tomorrow morning for what we call our RAD, which is our Rapid ROI Assessment and Design Program. And it’s really taking a lot of the things that we used to go on site to do, not because it was necessary to, but to do a little bit of the handholding, the relationship building.
And we have shifted that to make it more of a virtual experience. All but the actual day of installation [00:22:30] can be done as Daniel said remotely. And so now that we have all these proof points. Now that we have customers who are demonstrating this ROI, we have customers who have this readiness to adopt. And so while none of us is going to suggest even for a brief instant that what we’re going through right now is a good thing, it’s certainly like anything else [00:23:00] is going to be a driving factor in disrupting markets. And one of the markets that’s getting disrupted is the warehouse fulfillment space.
Joseph Giordano: Yeah, definitely, I guess if we shift a little bit, I think your point on remote deployment is critical here. But if we start thinking a little bit on hard numbers, talk us through, and I think you highlighted some [00:23:30] of these on your prepared remarks guys, but talk us through some of the hard numbers that your technologies can provide to some of these customers. And what are the key metrics you focus on when you pitch them and how do we link that to cost and timelines? Daniel you want to kick that off for us?
Daniel Theobald: Yeah, absolutely. The bottom line for us tends to come down to throughput in a facility sort of dock to dock. In any one of these facilities, you tend to have [00:24:00] material coming in one side in one form and going out the other side in another form. So that’s what we call the throughput. How much material, how many products are flowing through that facility. For our solutions in particular, one of the main metrics we tend to look at is pallet moves and how many pallet moves per hour and that type of thing. But the hard metrics really come down to a [00:24:30] particular facilities approach. What they’re trying to get done. Our system is used in a wide range of different applications from there’s just a whole list of my, I won’t even go into them, but anytime you’re moving material around in that facility.
So there’s some really interesting aspects to those metrics now that we need to focus on them in new ways. So [00:25:00] for example, safety is a really important one. We used to talk about safety when you’re moving pallets and having large pieces of equipment around or in terms of no accidents. Right? The equipment not causing damage or hurting somebody. Super, super important. But that concept really gets expanded now, when you talk about not having workers operate too closely together. You don’t want people in critical masses, you don’t want to have [00:25:30] people coming into contact with other people in the facility.
So one of the really interesting capabilities that our pivot orchestration software provides is you can configure different constraints. So if you put into the system that you want to keep a certain distance between the workers, it’s able to rapidly readjust how it does things. For instance, it can send people down different aisles to not have people passing [00:26:00] or crossing each other’s work areas and those types of things. So the type of product productivity gains and hard metrics around throughput really takes on a broader meaning now, because you have all these additional constraints that need to be considered.
Joseph Giordano: That’s fair.
Daniel Theobald: Karen turn over to you.
Karen Leavitt: Yeah, that’s interesting. Thanks. We start with a very, very simple bottom [00:26:30] line driven metric, which is kind of the overarching value proposition, which is we’re going to double your workers productivity. So the offshoot of that is that you only need half as many workers. And so to calculate the back of the envelope ROI, you say, okay, if I can get a robotics automation solution for less than the cost [00:27:00] of half my workers then I’m already seeing a measurable ROI and the spoiler alert. Yeah, you do. You see it very quickly even if you’re only running one shift, if you’re running two or three shifts, then you’re replacing not just one worker per shift with every group of robots, but you’re replacing two workers or three workers if you’re going to third shift.
But then beyond that, there are a lot [00:27:30] of other factors that we take into consideration. As Daniel mentioned earlier, the ease of use of the robotic solution in a peace handling environment, the traditional way of doing this as for a worker to go through a warehouse, pushing with essentially a glorified shopping cart, and then the cart gets heavier and heavier, to weigh a couple of hundred pounds by the time she gets it to the end of the mission and spends an hour serpentining [00:28:00] through the Isles.
Well, in this case, the worker’s not doing that. So the robots make the job easier to attract and retain workers. More important I think as we start to see an increasingly tightening labor situation. We hear a lot about labor gaps in the past, and there’s always been a discussion of how do you train workers for the available jobs. We take the position that says, instead of training workers for jobs, let’s create [00:28:30] a job that doesn’t require you to be trained for it.
So we make it that easy to do. And so the whole worker experience changes and through the use of the robots, we also are creating just a tremendous amount of business intelligence that we plow back into our customer’s businesses, through the use of real-time dashboards, retrospective reports, and so forth. And that really helps drive the continuous [00:29:00] improvement that Kaizen approach to working in the warehouse that our customers are looking for.
And then of course what’s new is, is what Daniel just mentioned, which is as we start to have this new constraint of social distancing, our robots would never had to worry about what people have thought of as sort of the traditional safety concerns, which is somebody’s making contact with [00:29:30] a large piece of automation. Our robots are designed to collaborate up close and personal with the humans. But similar to what Daniel was saying, robots are about 90% software. And the software is designed to make sure that the robots are doing the traveling. The robots are going from aisle to aisle, and the workers are operating largely in not very hard and fast zones, but in sort of [00:30:00] loosely defined zones.
So the workers aren’t cheek by jowl to begin with. You may have one worker per aisle. And because the work is getting split up that way, the humans are always interacting with the robots and they’re never interacting with another human worker. So that was that’s, again, as Daniel mentioned, that sort of a by-product of the way the robotics functionality works, which is particularly timely right now.
Joseph Giordano: Karen sticking with you there, how flexible [00:30:30] is your technology? I know we’re not talking about prior iterations of warehouse robotics that needed tracks on the floor or predefined paths or anything like that, but are there particular types of facilities that are better suited to what you guys are doing?
Karen Leavitt: Sure. There’s always a really good fit for every product. Right? And less good fits but our products are so flexible that we can get into most existing warehouses in less than four weeks. [00:31:00] The long pole in the tent is the integration with the WMS. We have some customers who’ve added a second or a third warehouse and if they’re running an identical version of the WMS our shortest installation has taken place in about eight or 10 days. And then as I mentioned, they can scale up and scale down. So once you have the robot solution deployed in a warehouse, any robots you add at a later time, once the box arrives on your loading dock, the [00:31:30] robot can be up and running in literally less than three minutes. It’s just a matter of getting it out of the box, turning it on and pointing at a barcode. So it can go off and running.
And then it’s immediately onboarded. In fact, I mentioned our client in the UK Boots and they went through their peak season. At the end of the holiday season, they returned their surge population of robots to us. Obviously nobody was expecting [00:32:00] this new surge period because they’ve just seen their volumes go up dramatically. Essentially every day is black Friday now for them. Another customer of ours in Europe was kind enough to ship 10 robots from their dock over to the Boots facility for them to immediately put online. So it’s very easy to move them around. We’ve had customers who’ve done deployments [00:32:30] when they’re just within a few months of the end of their lease in a building, then get them up and running in their first building and then when they move their workers over to the new facility, they can close down on a Friday and start up on Monday and move them over.
So flexibility is really the key. Our whole solution is done. The business model is robots as a service. It’s not a capital purchase. It’s a subscription based model. You’re essentially paying the robots [00:33:00] salary the same way that you would pay your human workers a salary. And that creates a very low threshold for adoption for our customers. But what we’re really selling in many cases is flexibility and scalability as a service and never has that been more important as people are now forced into a mode where they’re trying to figure out what does the future hold? What am I going to need? And when, and how do I forecast [00:33:30] for what may be the future for the next six months, 18 months and so forth?
And so we have a solution that’s going to allow them not to have to worry about having created a lot of capital investment in their facilities because it’ll be able to pivot with them.
Daniel Theobald: I think that flexibility is really key and couldn’t underscore more what Karen [00:34:00] said. One example from our side is that we had a large customer deploy a lot of tuggers, pull a train of pallets or large, not what are called nonconveyable items, but the surge in e-commerce has created new strains on the shipping industry where people are buying things online that traditionally were never bought online before, tires [00:34:30] and exercise bikes and kayaks and that type of thing. But they were using this particular facility for in a certain way, and then their business needs changed and they needed to convert the facility for a different use. Because they had invested in flexible automation, they were able to put all of those robots on a truck, ship them to a new facility and have them up and running, providing value again very quickly.
And this is very different of course than traditional automation where you’re building into [00:35:00] the facility hard systems conveyors or more traditional automated storage and retrieval systems. Those can be hard because in the past, it used to be that you would plan and predict that your facility was going to be largely fulfill the same function for five to 10 years. And the world has changed. That’s not the world we live in anymore.
So this idea of flexibility and being able to move your material, handling [00:35:30] assets around, and retask them reassign them to new jobs very quickly is not only nifty, not only cool as Karen was saying before, but it has become essential.
Karen Leavitt: Joe, and I think also asked about the types of facilities that are better and worse suited. And the answer I think, is going to be a little bit different for me and Daniel. There certainly will be use cases and facility types that are going to vary, for [00:36:00] my part, for the Locus robots part, we’re looking for facilities with reasonably flat floors. It doesn’t have to be ice rink flat but not to have lots of big crevices and things like that. We want the robots to be able to pass bi-directionally in the aisles. So we prefer aisle widths of five feet, but because our robots are handling again, the opposite, what Daniel’s saying ours are robots [00:36:30] are handling conveyable products.
And so our robots are lightweight enough that they can operate on multi-tiered pick messes. So if you’ve got picked modules that go up four or five levels, not a problem, you can have the robots running on any level and because they’re completely freeform completely autonomous, it doesn’t require as Joseph was alluding to earlier, it doesn’t require the laying of any tracks or wires. The robots will navigate [00:37:00] the space very similar to the way the humans navigate the space.
Daniel Theobald: Yes. And from our side, really any facility that currently moves pallets around and we see some of those key verticals is retail, grocery, third-party logistics, parcel and courier, food and beverage. Again, one of the really nice things about our technology is it is able to go in and operate in these mixed environments where they’re humans, where there [00:37:30] is manually operated equipment. You’re able to incrementally adopt the technology. You can add one robot and then five and then 10, and then 50, et cetera, rather than having to do a huge construction project or build it out.
Joseph Giordano: Moving on then I did want to touch on what’s happened over the last, I don’t know, five years that has allowed this type of technology to really become realistic now. So what would you guys consider to be kind of key enabling [00:38:00] technologies that allow you guys, whether it’s cloud or better connectivity or capability kind of just get into what has allowed this technology to really take hold and what’s next? Is it a middleware thing that is the next bottleneck that can be kind of cleared up to allow different robotic systems to kind of work together? How do you guys see that playing out? Daniel, you want to kick us off there?
Daniel Theobald: Yeah. Sure. There have been a tremendous number of innovations [00:38:30] that have allowed this type of technology to be practical and produce ROI. I’ve been working in robotics research my entire career all the way back to working on Mars rovers and it’s been really great to see in some sense, the commoditization of some of these technologies. It used to be even that a motor controller was an incredibly expensive and [00:39:00] big, bulky, heavy piece of equipment and modern electronics with the ability to use high speed switching to control motors versus amps that we use is something that most people wouldn’t appreciate, but it has been a big one then, of course, just better sensors, better compute, compute obviously being a big one.
Karen already mentioned it, but I tend to upset the mechanical engineering side of the house when I talk [00:39:30] about how robotics is 90% software. That’s actually very generous in truth. Robotics it’s really more like 99% software and the ability to have fast visual processing and some of the new sensors we have has really allowed this technology to come down in price and really provide ROI as you know.
Karen Leavitt: Yeah, [00:40:00] I agree. Yeah. I think we’re really indebted to the automotive industry in particular on a lot of these things because as the automotive industry has looked towards building self-driving cars at scale, it has, as Daniel said, it’s really started to commoditize a lot of these sensors. And so when we started developing our robots, it wasn’t entirely clear [00:40:30] six years ago that the price point was going to be able to create a sort of no-brainer ROI but we’ve seen we really have a perfect storm now of the rise of the market demand with the growth of e-commerce and the drop in pricing and cost of the components as well as maturing of the software space.
So both Daniel and I are having [00:41:00] a little laugh fest here with the software side of it, but that’s really it. Even though the robot looks pretty cool and sexy, like you said, it’s virtually all software. And not that our hardware guys don’t do an amazing job but it’s really the software that creates that special sauce. And what we’re seeing now on the heart tech side is really a Moore’s law taking effect.
So we’re seeing exponential growth in functionality [00:41:30] on the different sensors while we’re seeing dramatic declines in costs. And that gives companies like ours, the opportunity to make choices. We can hold the line on cost and dramatically improve hard tech functionality or we can hold the line on functionality and drive the cost down. And that will make available to us markets that might not be a good fit today for ROI going into some markets and Latin [00:42:00] America, going into some markets in Eastern Europe where the cost of the product needs to be driven down a little bit more to see a compelling ROI.
And that’s giving us a lot of the options that we saw emerging. I liken this to the PC industry in the early eighties with the growth of available commoditized technology meshed with the advent of applications and software coming online [00:42:30] and the market readiness simultaneously. It’s kind of a rocket ship right now, the business that we are in.
Daniel Theobald: And it’s really interesting. I was just going to say, it’s really interesting to think about where the computer industry was a few decades ago. People don’t remember, but it was a revolutionary idea that someone could write software for another computer companies hardware. [00:43:00] It used to be that IBM would come in and build your computer. They would program that computer and the industry didn’t really move forward until you had this idea of there’s an operating system built by one company that runs on another company’s hardware, and then third-party companies can actually write software apps for those businesses.
So I’m going to make a plug now for MAS Robotics. We are still kind of in that spot with the robotics industry now. And [00:43:30] I think there’s just massive opportunity to move this industry forward. If we take a page out of the playbook of the computer industry and the cell phone industry, absolutely the same thing, and now create these interoperability standards that allow customers to adopt solutions, hardware from one company, software, from another company applications from company that inter-operate and allow this industry to [00:44:00] really move.
There are trillions of dollars of value that can be unlocked if we engage in what I would call pre-competitive collaboration in this industry. And one of the things that MAS Robotics is doing is working to facilitate that pre-competitive collaboration by creating a practical interoperability standards between different robotics companies between the large customers who use these systems and need to manage these systems.
[00:44:30] And that’s one of my big asks of everybody involved in this industry is let’s work together to establish reasonable standards. The pie is only going to grow faster than any one company can eat it. We need to work together and really do the right thing for not just this industry, but humanity as a whole. There’s so much value that we can bring to the world by applying automation to so many of [00:45:00] the challenging problems we face. And I think it’s a real opportunity for us as an industry to do that.
Joseph Giordano: I could just tell you that as an out of the relative outsider to this space, when I started doing more work, and when I came up to Boston to meet with a lot of you guys there really kind of is this cool collegial atmosphere up there where we’re all trying to accomplish kind of the same thing, in some cases, we’re competitors, but we’re all happy for each other’s success. And I think that is a unique, at least from what [00:45:30] I’ve seen. And that probably is something that supports a rising tide for everybody, but just along those same lines, can you talk about if there is some sort of explosion here the ability of your own companies and the industry as a whole to kind of scale appropriately, is it feasible to capture demand that quickly and just from a manufacturing and capacity standpoint?
Daniel Theobald: Yeah. We have really focused on this. One of the biggest [00:46:00] questions we were getting from our large customers early on was we love your product. Are you going to be able to meet our demands for your product? Are you going to be able to scale quickly enough to supply us? And so we really spent a lot of 2019 focusing on that question. We brought on board a number of really talented contract manufacturers, OREM partners. One of the big ones that we recently had a press release on [00:46:30] was partnership with UniCarriers, North America. They are producing essentially pivotal ready equipment right off the assembly line.
So it’s a really great step forward towards what I was just talking about the ability of a customer to go out and buy a piece of hardware from a supplier and then to run our software on it. And just have that diversity of suppliers and flexibility to [00:47:00] really be a real industry.
Karen Leavitt: Yeah. It’s interesting. And ours is a little bit different because our robots, we offer what we call our a multi-bot solution. So it’s not a one-to-one relationship between a human worker and a robot worker suddenly between three and four robots for every human. So there tends to be a larger robot population going in, but these are also smaller sized [00:47:30] robots. So right now, until now, I’ll say it that way, all of our robots have had their final assembly at our manufacturing facility in Massachusetts, but we’ve just sourced some contract manufacturers both for domestic use as well as for international deployment. And we have a couple of thousand robots out in the market today. We’re sort of comfortably within our manufacturing [00:48:00] capacities now but obviously as we continue to scale and we’ll have more than double that by the end of 2020.
As we continue to scale, we also want to make sure that we’re bringing on that extra capacity. So yeah, it’s relatively easy to scale this, and it’s just really finding manufacturers who are able to be as nimble as we are.
Joseph Giordano: All right. So maybe we’ll just end it with this one. Karen, can you start us, what are some [00:48:30] of the key lessons, I guess, bringing it back to COVID and why we’ve really the genesis of this call? What are some of the key lessons that this whole situation has taught you guys as a company and how you run your business and how you serve your customers?
Karen Leavitt: So I am going to answer that in two layered approach. There’s how we run our company and how we help our customers run their companies. Our company is already… We [00:49:00] already have our resources pretty well distributed. Robot software in particular is a robotic software team is located in offices around the globe. So when we had to go to shelter in place orders, it didn’t cause even the slightest disruption in our robot software team approach. The same thing for departments like marketing, for example, my team we don’t have a real issue [00:49:30] with quarantine except that we happen to be in the thick of trade show season right now or what would have been trade show season. We had some 20 events planned for the first half of this year, and that those have all have operated.
So it definitely resulted in a shift for us to more of a virtual marketing undertaking. The people who need to show up in person of course, are largely our manufacturing teams. So the first [00:50:00] thing that we did was we made sure that we were clearing the decks for our manufacturing team to make sure that they felt safe and buffered from other contacts. So even before the Commonwealth of Massachusetts imposed locked down orders, we cleared out all non-essential personnel from the building, anybody who could work from home so that our manufacturing team could not only operate [00:50:30] physically on premises, but so they could maintain safe distance margins. Everybody is at alternating workbenches, we’ve spread out the area so that they can do that.
For our customers, our customers are doing similar things. So for example, they’ve gone to, if they had multiple induction lines or multiple pack station lines. They immediately went to or most of them [00:51:00] did went to alternating packing stations so that they could maintain distance with their workers and what they’re now doing because that, of course, that cuts their capacity. They’ve been putting up plexiglass shields in place there we’re able to operate… So the robots are going to operate no matter what. And we’re able to do all of our customer maintenance and support remotely including things like [00:51:30] if they change their facilities, some of our customers are making or making changes to their physical plant right now because they want to put physical barriers between different sections, but any remapping that has to happen can be done remotely.
So we don’t need to be on premises. Most of our customer’s premises are locked down to outside visitors. So we’re able to be very flexible with the use of the robots there. And now it’s really a matter of working with each [00:52:00] customer to talk about capacity planning and what this is going to need for the future, as well as customers that we had who were about to deploy or on the verge of adopting a solution and we’re working with them virtually to establish rollout procedures as Daniel referred to earlier to minimize the on-premise requirements.
Daniel Theobald: Yeah, that’s great. And I’ll just add my two cents to wrap up. I [00:52:30] think that clearly nobody has a crystal ball is one big lesson learned, so we need to be prepared. And what is that being prepared means? It means designing for resiliency and flexibility in your operations. And that’s really what these type of solutions are all about as you’ve heard. Certainly hoping that all of us use this [00:53:00] as an opportunity to reflect on what’s important in life. What’s important in our businesses. And I think this is it’s a great opportunity despite the hardships and the challenges and the sadness that comes along with it to really rethink what we’re doing and what we’re all about.
Our goal is to help investors make good decisions in the robotics space because that is what’s going to really help them move this whole industry forward. [00:53:30] And we want to help avoid mistakes and challenges and really help people to make good decisions here. So really appreciate the opportunity. And it’s fun talking to you, Joe and Karen.
Joseph Giordano: Well, we’ll leave it there in the interest of time. I just want to make sure you guys get out in a respectable window here, but as far as Karen goes, and like I said earlier, we’re partners with MAS Robotics as well. It’s a theme that we’re [00:54:00] organizationally very committed to. We think it’s kind of the future of so many different industries and the intersections of industrial and logistics and medical and consumer and all these different things. So it’s a story that we’re really interested in. We look forward to talking to you guys and companies like yours as it continues to develop. And thank you again for your time.
Daniel Theobald: Thank you, Joe.
Karen Leavitt: Thanks so much. Everybody stay safe.
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