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Craig Malloy is the chief executive officer of Vecna Robotics. He brings 25 years of experience in founding, scaling, and leading global technology companies in venture capital, publicly traded, and private equity environments, including Lifesize, Bloomfire, and ViaVideo. Before entering the corporate world, he served as a lieutenant, surface warfare officer and nuclear weapons officer, in the United States Navy. Malloy holds a bachelor’s degree from the United States Naval Academy and a master’s of business administration from the University of California, Los Angeles, Anderson School of Management.
David Maloney, Editorial Director, DC Velocity 00:01
What are the barriers to automation? Mezzanines are on the rise. And trends in nearshoring.
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast.
Hi, I'm Dave Maloney. I'm the group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: with the current shortage of labor — and it doesn't look like it's going to get any better — many companies are rushing to fill the gaps in their distribution operations with automated systems. But how do they get started, and what are the barriers to achieving their goals with automation? To address those questions, here is Ben with today's guest.
Ben Ames, Senior News Editor, DC Velocity 01:23
Companies across America are struggling with understaffing, low unemployment rates, and supply chain bottlenecks, and one of the crucial tools to deal with those hurdles and keep producing is material handling automation. Of course, that term covers a lot of ground: conveyors, to robotic arms and self-driving lift trucks and mobile robots. It also covers a big variety of inventory amounts, everything from piece picking to cases to pallets. But while those technologies can certainly solve the challenges we're talking about here, major barriers to actually adopting the automation still exist. Here to talk about some of those barriers, and some possible solutions, is our guest today, Craig Malloy, who is the CEO of Vecna Robotics. Welcome, Craig.
Craig Malloy, CEO, Vecna Robotics 02:11
Thanks, Ben. Great to, great to be here with you today.
Ben Ames, Senior News Editor, DC Velocity 02:14
Yeah. Craig, first maybe you could give us a quick profile of Vecna, just to help our listeners understand exactly how the company fits into this sector?
Craig Malloy, CEO, Vecna Robotics 02:23
Sure, Vecna Robotics, one of the leading providers for supply chain autonomy, for pallet-sized loads in warehousing and manufacturing, and what that means on a more practical basis is, we provide, we build, develop self-driving, autonomous forklift and vehicles to move pallets around warehouses and manufacturing. So, self-driving robotic forklift trucks and tuggers for use in warehousing and manufacturing. And when we say pallet-sized loads, we really think about 500 to 10,000 pounds. Most things are on a pallet, but we can have odd-shaped loads that we pull on, behind tuggers. Or, for automotive or for retail stores, retail distribution centers that pull couches and rugs and other odd-shaped heavy things around warehouses. So, that's what we do, pretty exciting field, a workflow that really hasn't changed in more than 100 years: people sitting on forklift trucks — humans sitting on forklift trucks — picking up pallets, since the invention of the forklift truck in 1918. So, it's an industry is really ripe for automation and starting to, starting this inevitable shift to autonomy.
Ben Ames, Senior News Editor, DC Velocity 03:42
Amazing to think of it as not having changed for 100 years like that.
Craig Malloy, CEO, Vecna Robotics 03:46
Yeah. It really hasn't.
Ben Ames, Senior News Editor, DC Velocity 03:50
And so, I know that there's growing demand for automation, as you say, in that 100-year-old process, and your company itself recently shared some market research showing that 85% of the market is deploying warehouse automation in the next 12 months — a year, coming up here. Can you tell us a little more about that research, and did you see any sort of certain specific trends about the types of automation involved in that growth?
Craig Malloy, CEO, Vecna Robotics 04:17
Yeah, this was a pretty thorough survey we did with not only our customers, but prospective customers, people in our, you know, basically our customer, our available market of customer base. And what we found was, customers are really struggling with what you mentioned at the beginning of the introduction here around labor availability and wage inflation, and they're trying to figure out a way, figure out ways to get better, initially becoming a business continuity issue. And that's what we're talking about with, more than often when we talk about it with customers, it's not, How do I take people out of my operation to save money? It's, Oh my gosh, I can't hire enough people to run my manufacturing facility, I can't hire enough people to run my warehousing facility and serve my customers. We actually recently had a customer come in and say, You know, I'm okay today, but Tesla is building a giant battery factory, you know, in conjunction with Samsung, two miles down the road, and it's gonna be open in 18 months and I'm afraid they're gonna take all my people, so I've got to start to work on implementing some level of automation today to kind of take the edge off of that. It's not really going away. I was just reading the news this morning, and I got up and [was] having had some coffee early, and I noticed an article in Bloomberg, and I'm sure it's all over the rest of the news sources today, that [there's an] unexpectedly high level of job openings in the United States for April, that was reported today. Ten million job openings in April, and one of the sectors that they highlighted was, you know, at the top of the list for for job openings was warehousing. So, you know, it's just not going away anytime soon.
Ben Ames, Senior News Editor, DC Velocity 06:14
Yeah, that's some striking stats right there. So, the demand is definitely there, but at the same time, I know, you've also found that many companies are reluctant to invest in the supply chain transformation we're talking about, and the automation, that can really be a strong solution. Are you getting a sense for any sort of the reasons for that reluctance?
Craig Malloy, CEO, Vecna Robotics 06:34
Sure, a lot of it is, Gosh, I don't really know anything about it. This seems really scary. Are these robots safe? Are they productive? Are they economically viable? Will my will my workforce adopt them? You know, do I have to, [will] this cost me $10 million to get into the game? So I think there's just a, it's still very early days. It's a bit of an educational sale, educational discussion with customers on showing them the path. We do this webinar series, through our marketing department, called "No Bot to Robot," where we talk about how customers can get easily and safely embark on this journey to automation without disrupting their operations or breaking the bank or making a big mistake. The thing about the types of customers, or the customers who have adopted these automated vehicles — so, I'm really talking kind about AMRs today, mobile robots. There are other types of automation — robotic arms, which have been in use for decades, and automated storage and retrieval systems — the big fixed-infrastructure grids that move boxes and pallets around, but kind of our market, our area of expertise is autonomous mobile robots. And so, there's just, most of the customers that come to us, particularly in the warehousing space, this is their first foray into autonomous mobile robots. Almost no warehousing uses these types of vehicles today. A very, very, very tiny percentage. In automotive, and automotive-like manufacturing, kind of heavy manufacturing, there's a little bit more history of kind of gen-one, what we used to call automated guided vehicles that are following a track on the floor, rather than a[n] autonomous mobile robot, which is more like a self-driving car technology. So, it's all, it's very new for customers. They know they need to do it, and know that they need to learn about it. Sometimes it's driven by a corporate digital transformation team. But sometimes it's driven by the site themselves, the general manager of the operations, where it's like, Gosh, I can't hire enough people to fulfill the mission of my my operational side. I've got to get some help.
Ben Ames, Senior News Editor, DC Velocity 09:14
Yeah, yeah. I like that, "No Bot to Robot," but it's really...
Craig Malloy, CEO, Vecna Robotics 09:19
Ben Ames, Senior News Editor, DC Velocity 09:19
Yeah, it's really accurate, though, it sounds like, if so many of your customers are coming from this with their first foray into the automation.
Craig Malloy, CEO, Vecna Robotics 09:26
Ben Ames, Senior News Editor, DC Velocity 09:28
So, in getting over that hurdle, of course, as you say, there are there various concerns. One of the basic requirements for any business investment — and you mentioned it can cost millions of dollars — is ROI, the return on that automation. Is there some best tips and tricks that logistics operations can get that ROI out of adopting robotics, particularly, into their workflows?
Craig Malloy, CEO, Vecna Robotics 09:55
Yeah. So, the sequence of events on the conversations is usually, Gosh, I can't hire people to run my operation. I've got to get some automation. So, we'll have a conversation and talk them about how that works, and then, you know, make up, give them a quote, a proposal. It could be, you know, a single vehicle, or three vehicles or five vehicles. We start very, very small. With us, there's no fixed infrastructure, you know, it's relatively low cost, low risk. And then, you know, once it gets through the, into the purchasing process at the customer side, obviously, they need to do some financial analysis and ROI calculation. And it's a bit of a give and take. I think if you look at the full costs of the fully burdened employees, plus turnover costs, you know, recruiting costs, the sign-on bonus, vacation, sick time, absenteeism, damage, injury, breaks. I mean, all of those things that add up, and then the cost of the manual vehicle itself. You know, if you've kind of eaten, include all the soft costs, it's a pretty easy calculation. Now, I'll give you an example. Most of our customers operate in very large [warehouse], so you know, for us, for a customer [trying to] maximize their ROI, it's kind of our target market. Where we're very confident we give a great ROI to customers is, the customer has a large facility, let's call it 300,000 square feet or more, because longer distances, longer travel, you get more, better utilization out of the out of the vehicles; you run at least two shifts of labor, but better three or four shifts — four shifts to be 24/7, and many of the large distribution centers that we work with have three- or four-shift operations; and you have a lot of heavy things to move around — either pallets or heavy, odd-shaped objects that get pulled on carts. So, if you satisfy those requirements: big facility, multiple shifts of labor, and lots of heavy stuff to move around, we are very confident we can give you a great ROI. One of our customers is a large retail chain and runs 14 major distribution centers around the country and lots of smaller ones, and they run three shifts of labor, and then kind of their fully burdened costs on an employee, including health insurance, etc., etc., [is] like $65,000 a year, so it's $32 an hour, which is not that crazy, but a $that $65,000 a year. So, you're spending, that customer is spending, almost $200,000 per year to pay three people, you know, shift one, two, three, to drive one forklift truck, move pallets around the warehouse. And then there's, you need then to buy a $35,000 forklift, and $8,000 for maintenance. So — and most customers look at this as kind of a five-year total cost of ownership. If you're into that, you're into that's almost a million dollars. You add all that up in over five years. So, it's kind of having that conversation with the customer. coaching them, helping them understand all the soft costs around this ROI calculation.
Ben Ames, Senior News Editor, DC Velocity 13:29
Interesting. Yeah, good. That's a great point about it. It has to fit into the context of the whole greater concept of the operations in the building, and some of those are hardware and the robot, and some of them are soft costs that are surrounding it. Craig, I really appreciate that. I've learned a lot from our conversation and we're glad that you were able to come on the podcast today.
Craig Malloy, CEO, Vecna Robotics 13:50
Well, thank you very much. I love talking about warehouse automation. It's a super exciting time to be in this business.
Ben Ames, Senior News Editor, DC Velocity 13:55
Great. Well, we're going to, it looks like we're gonna be, both of us, very busy in these coming years, so we'd love to have you back.
Craig Malloy, CEO, Vecna Robotics 14:01
For sure. Thank you very much.
Ben Ames, Senior News Editor, DC Velocity 14:03
Our guest today has been Craig Malloy, who's the CEO of Vecna Robotics.
David Maloney, Editorial Director, DC Velocity 14:08
Thank you, Craig and Ben. Now let's take a look at some of the other supply chain news from the week. Victoria, you're working on a story for this month's issue of DC Velocity about how warehouses and distribution centers are making some physical changes within their infrastructures. Can you share what you're writing about?
Victoria Kickham, Senior Editor, DC Velocity 14:28
Absolutely, Dave, happy to. Yeah. So, as you say this is a story that will appear in DC Velocity's June issue. I did some research on demand for mezzanines and work platforms, which many in the industry say is growing for a variety of reasons. Now, these are products that haven't changed much in the past 10 or 20 years, but they nevertheless remain a warehouse and distribution center staple, and we're talking about those industrial platforms that can hold either equipment or people, and they primarily function as a way to maximize space in a facility. It turns out that as warehouses become more automated, demand is on the rise for steel support structures like these that can be integrated with sort of the latest and greatest material handling technologies.
David Maloney, Editorial Director, DC Velocity 15:12
Victoria, what's driving that demand? Is it because of a lack of available warehouse space, or is it just a proliferation of different kinds of automation we're seeing in the warehouses today?
Victoria Kickham, Senior Editor, DC Velocity 15:23
Well, it's both, according to the experts I spoke to, which included executives from platform manufacturers such as Wildeck and Nucore warehouse Systems. When you add automation to an already-cramped space, platforms can help open up that space, providing workspace above the equipment or creating space below where workers can perform picking tasks, as one example. And in larger warehouses, where companies may be implementing an even wider array of automation, many are finding that they need more and larger platforms to do the same thing. As with many of the recent industry trends that we've been tracking, this is also being driven by e-commerce. Platforms are especially helpful in e-commerce environments, where companies are storing more products, processing orders at a higher rate, and really striving to get packages out the door faster than ever before. You'll commonly see these structures in large facilities that have multilevel pick zones for e-commerce, as one example. Platforms are also used to provide access to automation equipment for things like maintenance, troubleshooting, and safety. You see this often in manufacturing environments, and the same principle applies in warehousing. So, the more we see this technology and automation in play in the warehouse, the greater the need for structures that help employees gain access to it. My story also includes examples of how platforms are being used in conjunction with things like autonomous mobile robots, or AMRs, which is becoming increasingly common as well. And as we said at the beginning, anyone interested in learning more about this can turn to our June print or digital editions, and I should say the story was also posted to DC Velocity earlier this week.
David Maloney, Editorial Director, DC Velocity 17:03
So, we look forward to reading that full story. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 17:07
David Maloney, Editorial Director, DC Velocity 17:08
And Ben, you wrote this week about some new research into nearshoring trends. What can you tell us?
Ben Ames, Senior News Editor, DC Velocity 17:15
Exactly. This is one of the bigger themes that we've been covering in recent months, which is an effort by companies to try to trim down all the disruption in their supply chains by nearshoring, which of course, is an alternative to the offshoring trend that we'd seen in past decades, where U.S. companies sent a lot of their production overseas, particularly to China, which has great strengths in productivity and efficiency and labor costs. But China has been looking less attractive lately, just because of recent geopolitical events: trade tariffs; Russia's war on Ukraine; big spikes in container shipping rates during the pandemic. So, some analysts have been tracking an uptick, where companies are sourcing to countries from that region. Other alternatives, also in Asia, they see Vietnam, Cambodia, Singapore, for example. But of course, we have a closer option right on our doorstep for U.S. companies, and that's Mexico. So, this week, we saw some fresh data from FourKites, which provides supply chain visibility data to its clients, and they said that shipment volumes from Mexico to the U.S. are up 20%, while dwell times for those cargo shipments are actually down 25% compared to the same levels from two years ago. That theme is particularly pronounced in the food-and-beverage and the automotive sectors, they said.
David Maloney, Editorial Director, DC Velocity 18:45
Ben, that sounds like a big swing in trade. Do we know which logistic providers will be affected the most?
Ben Ames, Senior News Editor, DC Velocity 18:51
We don't know yet, because this is the start, or really the continuation, of a long-term trend. Glenn Koepke, who's general manager of network collaboration at FourKites said, while manufacturing and sourcing from Mexico has been an option for companies for decades, evolving global competition and factors such as infrastructure, talent, duties, freight costs, and raw-materials supplier locations, continually influence the decision of where to produce the products. Specifically, FourKites had been tracking things in food and beverage that are often shipped northbound, like limes and avocados and tomatoes. That's, of course, not so much about production, although agriculture has productivity. But automobiles, really. They're tracking, particularly, U.S. companies that ship car components, south, produce the cars in Mexico, and then ship the completed cars back north. So, one transportation provider would seem to be a possible beneficiary of all this. That's the new combination of the Canadian Pacific and Kansas City Southern railroads. They finalized an enormous merger in April. The idea for them to do that was to create a network that spanned Canada, the U.S., and Mexico. So, it sounds like a natural match, but Koepke cautions that the payoff for Canadian Pacific Kansas City Southern would not be immediate. He pointed out that investments in infrastructure improvements really take time to trigger greater network improvements for total capacity throughput.
David Maloney, Editorial Director, DC Velocity 20:26
Yeah, well, that makes sense. It will be interesting to watch the return of manufacturing to North America, and of course, we'll be here to report on it.
Ben Ames, Senior News Editor, DC Velocity 20:34
We will. It'll be interesting to see.
David Maloney, Editorial Director, DC Velocity 20:35
Thank you, Ben.
We encourage listeners to go to DC Velocity.com for more on these and other supply chain stories. And check out the podcast Notes section for some direct links on the topics that we discussed today.
And again, our thanks to Craig Malloy of Vecna Robotics for being our guest. We welcome your comments on this topic and our other stories, you can email us at email@example.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded each Friday.
And speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane. It's coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. We have a new eight-part series releasing weekly on transportation tech. It starts this Tuesday. Subscribe to Supply Chain in the Fast Lane wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by PERC, the Propane Education Research Council. Propane is the safe, reliable energy for material handling. Propane-powered forklifts can improve air quality inside your facilities for a healthier, more productive workforce. See how propane can give your productivity a boost at propane.com/forklifts.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.