The robots are coming.
Actually, they’re already here. But they’re not what you think, says Karen Leavitt, Chief Marketing Officer of Locus Robotics.
The Wilmington, Massachusetts-based company, founded in 2014, makes robots that enable e-commerce and B2B companies to maximize efficiency in their warehouses –– enabling them to compete in the dynamic world of e-commerce.
The world of robotics has changed so much in the last 20 or so years, spurred on by forward-thinking innovators like Elon Musk and Jeff Bezos, who have done more for automation than sci-fi pop culture ever imagined.
“This is not Rosie the Robot from the Jetsons,” says Karen. “Think of a self-driving car. These robots are a bit like that, but they don’t look like a car that you or I would get into and drive. They’re designed to operate indoors, in the densely populated world of warehouses.”
Ready to embrace our robot overlords? Karen gives us a view into the real world of automation –– and what takes place in between “add to cart” and your doorstep. An edited version of the podcast conversation appears below.
Warehouse to your house
Karen: Locus Robotics makes autonomous mobile robots –– we call them AMRs –– designed to work in a fulfillment warehouse.
When you order something online, it lives in a warehouse. Typically it gets to you through human labor: someone is literally walking through a warehouse armed with, essentially, a glorified shopping cart. They get an order to pick something and they trudge through the aisles to get to the place where your item is located. They put it in the cart and take it to a packing station, where it’s wrapped up and shipped to your home. And that business, as you can imagine, has grown dramatically in the last decade.
If you think about it, the start of the 21st century was really the start of the e-commerce era. We’ve been seeing roughly 10 to 12 percent compound annual growth rate year over year of online commerce as a proportion of retail sales. It’s still just a small fraction of all retail –– less than 20 percent. But we’ve been seeing stores close in our local malls because there’s been a shift towards direct to consumer shipping.
Getting merchandise from a warehouse into the hands of the consumers is highly labor intensive. When you shop in a retail store, you’re doing a lot of work for the retailer. You drive yourself there, walk through the aisles, select your item off the rack and take it to the checkout counter. After you pay for it, you take it home with you.
As the consumption of goods has shifted upstream –– direct to consumer –– the burden of many of those tasks now falls to the warehouse operator. That’s put a tremendous demand for labor on all purveyors of merchandise and really strained the industry. It’s very difficult to find labor for these tasks, so it was only natural to introduce automation to help with it.
Scott: Tell me about the economics of warehouse fulfillment and automation.
Karen: First of all, the market is huge –– and it’s global. It’s people who buy stuff. If we’re talking about the underlying market we serve, that’s e-commerce companies, warehouse fulfillment. It’s a multi-trillion dollar market worldwide.
But it’s by no means a homogeneous market. The problems shift from one geography to another, based on the availability and cost of raw material. And the raw material in this market is human labor. In markets with a large workforce and low wages, it’s still more efficient and economical to use humans than to use automation.
Many of the top global economies are doing so well that they’re facing labor shortages. When they can get labor, wages are very high. At that point, automation becomes a critical catalyst for further growth.
From our perspective, wages in different places on the planet dramatically affect whether deploying automation is a sensible thing. Here in the U.S., the annual wages of an average warehouse picker get to be close to $40,000. In a comparable role in Southeast Asia, it might be only $15,000. At that point, the economics of using robotics technology may not yet fit the market.
So there’s sort of a logical deployment path. We rolled out our robots first in North America. Now we’re deploying in Europe. We’re targeting new markets based on where the math makes sense for our customers.
Ripples in the Amazon
Scott: It’s worth noting why your company is growing. It’s because Amazon basically changed consumer expectations. Just a few years ago, we didn’t complain about waiting four or five days for shipping. If I ordered something for Christmas, I knew I’d better do it in, like, October.
But Jeff Bezos drew a line in the sand and promised two days, then one, and now even a few hours in bigger cities. He said, ‘you don’t even know you want it, but I’m going to give it to you anyway, and it’s our job to figure it out.’ With the massive amounts of revenue Amazon generates, the company invested in technologies that would make it easy to fulfill its promises.
Karen: In the industry, we have a term for that: the Amazon effect.
Warehouses used to be filled with a ton of crates or cartons sitting on pallets. To move merchandise through the supply chain, you just needed a few workers and fork trucks. They’d pick up the pallets and move them onto trucks, which would take them to distribution centers or retail stores and that was it.
Now, instead of closed crates of bulk merchandise, you have open bins in warehouses. People do what’s called piece picking. They’re not picking a whole case of a dozen or 24 items. Maybe they’ll pick two pairs of socks, but they might pick one toy car or one stapler. And you need to have a small army of workers to do it.
Scott: How does Amazon figure into your plans?
Karen: Amazon is, of course, the 800 pound gorilla in the room. More than a third of all e-commerce in North America last year was through Amazon. It is really controlling the tides in the space. Our solution is not employed by Amazon. About seven years ago, Amazon bought a robotics company, took it private and stopped selling it on the open market. Now it’s exclusively used by Amazon –– they call it Amazon Robotics. That created quite a ripple in the industry.
They created an arms race. And now, from our perspective, we’re an arms dealer.
We are selling a critical technology that allows companies to compete with Amazon. And there are some very big players there. We’re not just doing eCommerce for consumers. As I said, they’re doing B2B. We have companies picking medical devices. If you need a hip replacement, the right size and spec hip will come out of a warehouse and get shipped to the hospital to meet you on the operating table at 8:30 tomorrow morning. Some of our customers provide mission critical services, and our robots can help turn those orders around in a way that’s about more than just convenience.
Scott: We’re fascinated –– and a little scared, perhaps –– of robots. Are they coming for our jobs?
Karen: I think it’s important to sort of pull back the curtain and bust some of the myths around robots. First, they’re not going to steal anybody’s job. They are actually collaborative robots. Our robots are very nimble. They’re sized to navigate aisles that might not be very wide, and they have to deal with the dynamically changing nature of their environments. They are making decisions 10 times a second –– where they’re going, how to get there and what obstacles might be in their way. Often, those obstacles are human. So the robots also have to be very polite, safe and gentle.
The robot and the human become a team working together to achieve the goal: getting merchandise from the warehouse into the hands of consumers. The trick is to divide up tasks so robots do what robots do best, which is traveling and carrying merchandise. And they’re not only carrying merchandise. They’re carrying instructions for their human coworkers.
What do humans do best? We have fantastic manual dexterity. So humans are the best suited at totaling merchandise out of a bin and placing it into a robot. We want humans to make as many of those picking and placing tasks as possible. The more of those that a human can do in an hour, the better the economics for a warehouse.
If human workers are spending most of their time walking from one pick to another, it’s not a very effective economic model, because the warehouse operator is getting paid based on what gets picked and shipped out the door.
Robots as a service
Scott: Tell me a bit more about your business model.
Our robots make people more productive –– twice, or even as much as three times more productive as they are without robots. That’s how the robots earn their keep.
We put it together in a business model that really makes sense for our customers. It’s a real breakthrough in the industry. Most people who are selling automation to warehouses charge for it as if you’re buying a truck or a forklift. They sell it as a capital expense. And we don’t do that. We offer robots as a service. It’s a subscription model.
As a Locus customer, you’re essentially paying your robots a salary. Your worker population consists of human workers and robot workers, and you’re paying all of your workers a salary. The wages you save by requiring fewer workers are spent on robots, which are earning a robot wage. That makes the math sing for our customers.