IndustrialSage

Deidre Cusack of Dematic shares key lessons from business mentors, and how she sees automation and customer behavior evolving supply chain. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to today’s IndustrialSage Executive Series. I’m Danny Gonzales, and today I’m joined by Dee Cusack who is the chief technology officer at Dematic. Dee, thank you so much for joining me today on the Executive Series. Dee: – Happy to be here. Thanks for inviting me. Danny: – Well the pleasure’s all mine here. I’m very excited. For the audience who’s watching, we had a very lively pre-recorded discussion that we’re going to wrap in, and I’m excited to get into it. For those who are unfamiliar with Dematic right now, who’s Dematic, and what do you guys do? Dee: – Dematic is part of the KION Group. Dematic has actually been in existence for 203 years, and we are essentially the engine that goes behind ecommerce. We do supply chain automation, started in the early years with simple machines like conveyors and racking and so forth. Today we really are a very complex solution provider, full integrator in the supply chain automation space with obviously a big impact on software and robotics and all the latest technology. That’s what we do. Danny: – Excellent. Well ecommerce has done nothing but absolutely exploded. It was a huge growth trend before this thing called Covid came along, but then certainly afterwards it’s just been this massive explosion. I’m sure that we’re going to get into some more of the insights and different things that are happening in the industry with that a little later on in the episode. Right now I would love to get to know a little bit more about you. I’d like to know more about Dee. Dee, tell me, how did you get into this space? Take me back. Is this something that you said, “Hey,” —maybe when you were a kid? “I want to go into supply chain; I want to get into the technology space.” How did this all come about? Dee: – I’d love to say that I had this vision when I was four, but that would be stretching it a little bit. Danny: – You were six. Okay, I got it. Dee: – No, but I started my career in R&D. I have a couple of engineering degrees, and I’ve always been interested in how to apply technology into markets, and particularly market niches to help a business grow in a rapid and profitable way. I started my career in R&D. I then went into business development, and then more on managing entire businesses, P&Ls that were global for a variety of different markets. I did that for about 20 years and decided to come back to my roots a little bit more. A friend of mine, a colleague of mine that I used to work with called me up and said, “Look, there’s this wonderful company that I’m working with called Dematic; we’d love for you to come in and look at some of the opportunities.” And so the opportunity to go and lead the technology in a meaningful way, particularly with the software that the company had and to really develop a strategy to help the company grow in a sustainable way but also bring our solutions to the next level was really compelling for me. As I started to learn more about the company and the industry, I started to get more and more excited about it. And just coincidentally, you said ecommerce exploding, I joined Dematic just about the time that the lockdown started with Covid. I can tell you, it’s been an exciting ride, really trying to keep up with the pace of the market but also the changing demands in the marketplace since being part of Dematic. I just can’t say enough good things about the industry, the company, and some of the path forward and what’s coming ahead. Danny: – Wow, it’s fascinating that you jumped on right before Covid. What a time to jump into a company like Dematic at that time because we know that trends were clearly pushing towards ecommerce and the need for automation, robotics, AI; all this technology was coming in. There was a need for it and a clear growth trend, but then certainly thereafter, I mean, nuts. It just went crazy. So lockdowns were in March; you started in February, March-ish? Dee: – I started in March; that’s right. Danny: – Oh, my gosh. Dee: – Just about the time that the lockdown started so as you said, a lot of the trends were present before Covid, but what happened with our customer base was that everything got accelerated. The need for, how do you work? Everyone was putting demand on ecommerce, and people were working remotely, so we had to figure out how to do a lot of things remotely that we used to do in person, at the same time enabling new capabilities for our customers so that they could then service their customers. It was a very challenging but very fun time to be part of the business. You had to be very agile, very nimble in terms of your thinking. I mentioned earlier, Dematic is 203 years old. We’ve been doing certain pieces of the business for a long time, but it was a very conservative business. Now all of a sudden you interject this crisis, and now people need to apply their thinking in a slightly different way. It was really exciting to see it come together. Danny: – Absolutely. Well, and slightly, and then in other areas completely radically different. As you mentioned, it was interesting; internally from an organizational standpoint, having that thinking shifted, and you mentioned–the whole work from home idea and how do we transition that? But at the same time, in an industry where your customers are—how do we shift that for them as well, and then also oh, by the way, I think the numbers were saying in 2020, ecommerce growing by 40%. You have segments that have never really done this, or they were starting to pilot programs, and then said, “We have to accelerate this.” Exhilarating to say the least. Dee: – It was; it was. But I would say one of the cornerstones of Dematic has always been an entrepreneurial spirit, so I think everyone approached it in the way of, well, how can we make it work? China is still closed to a lot of travel externally, so a lot of things that were normal ways of doing business, we had to find different ways to accomplish the same criteria. How do you lend expertise? Now you do it virtually. Now, people start seeing on the screen the same picture, but through virtual goggles. It was just a different way of experiencing it. It taught everyone how to be a little bit more creative in terms of how do you accomplish a task? Danny: – Absolutely. I love how you said the entrepreneurial spirit. That’s something that’s not—when you talk about bigger organizations, corporations they tend to trend opposite, actually the exact opposite of that. I think that’s definitely a great silver lining of something we’ve learned, but that was already part of the culture to begin with. There was a lot of insights and innovations that came because of that that was already instilled in the culture. I don’t want to dwell too far too long on the whole Covid change and everything. I’d like to learn a little bit more, too, about you and your background. One of the questions that I love hearing answers from executives is just the—throughout your career journey you’ve obviously seen a lot. We were just talking about, obviously, some big changes. Throughout your journey, typically there’s a lot of people that have big influences on your career, both positive and negative. We’re going to focus on the positive side. Could you share a story of somebody that has made a measurable impact in your career? I know there’s a lot, probably. Maybe if there’s just one, I’ll even say two that come to mind that you can share with me. Dee: – Sure. So many people have had an impact on me in a positive way, and I tend personally to always look at an experience and try to learn something from it. Even just sitting in a conference room, I’ll look at who’s effective and who’s not effective with what they’re doing, and I’ll try to learn from the people that are effective, but also from the people that aren’t effective. I think as this is going on, and I replay it later on–– which is, how can I apply some of those same learnings to me? One person that I’ll call out—and I could call out 10 easily without thinking about it—was a leader of mine. I worked for him while I was at ABB. I worked for him for a number of years. He was masterful at not only the way that he interacted with customers, but the way that he interacted with people in general. If you met him, you would say he just enjoys people, and he’s so effective at building teams and building common alignment around the people. He was such a positive influence with me, and one day I said to him, “Not everyone has your same gift to go up and to compel an audience with such ease. It just comes so naturally to you, and you’re just so good at it.” And he said to me, “Yeah, what you didn’t see is last night in my hotel room, I was practicing for six hours.” He basically taught me through a number of different lessons as I learned with him watching how he really helped align his teams. These were all pretty strong leaders that all had very unique ideas, but what he taught me was, this doesn’t happen—nobody gets there by accident. What it takes is hard work and alignment and really getting the right people and understanding how they can work effectively together. It’s a lesson that I’ve learned through playing sports as a kid and so forth. He really brought it home and applied it in also a corporate environment where, again, there are people who are good at it; he was masterful at it. He had a tremendous—and he also was the most giving person. I had a women’s network that I had started at ABB, and I had asked him to participate in this network a couple of times, being the only man then in the room. He was always so gracious with his time and his mentoring that, again, it was all about the people. It teaches you that your objectives are one thing, but you really need to invest in the people. I always watched him a lot and tried to apply that to my own self. Am I meeting the same standard? Would people say the same? Danny: – That’s fascinating. I love that, especially how when you were talking about how—maybe on the outside you said that it came across as just his ease of being able to instill that vision and out there, but yet he was saying, yeah, but here’s really what was going on over here. I think that’s actually really critically important, especially in today’s day and age. When you look at things like LinkedIn, for example. When you look at social, and you can say, that’s a Facebook and Instagram and TikTok thing, the same thing is happening on LinkedIn, on professional platforms. There’s these images that are being projected of people. There was really an interesting stat to connect this; the conversation’s going to have an interesting connection here. When we look at the pandemic and shifts that have happened, there was an interesting stat talking about mental health with executives. There was a very high number, actually, of executives that were struggling, and I think that because of LinkedIn and some of these different areas, we have to project that, oh, everything is great, and it’s amazing. You lose sight of, that’s what you’re seeing over here, but actually this is what’s going on behind the scenes. It’s not something that you just automatically turn on. You have to work at it. I think that’s interesting when you’re talking–hey, look, I was practicing this. I was going over this. This isn’t stuff that can happen overnight, and I think we all know this. But I think that there is this—sometimes you see different things, and you’re like, oh, my gosh. This person is doing this or that. The reality of it is to build teams, to build greatness, it’s sort of slow and steady. It takes, like you mentioned, hard work. Dee: – It does, and I think while people all work hard, it’s also getting that right—having a good team. You can be the best at what you are, but if you don’t have a good team it doesn’t matter because you get to a certain point in your career or in sports or whatever it is that you’re doing. You get to a certain point, and it no longer becomes about what you can do. It’s a collective. You can’t scale, so you have to be able to build that infrastructure and have those people empowered so that they too can build their infrastructures, and then that’s when everything can then blossom. Before that, it’s just little bits of sunlight coming in. You really get the whole spectrum when everything comes together and is aligned. Danny: – Absolutely. Oh, 100%. Outside of the hard work and making this alignment, what’s one of the—there’s a lot of things that you try to put into play with what you’ve experienced with him. Is there another concrete example of something that you try to implement in your leadership? Dee: – The other thing with him in particular was he was very bullish on, “The customer always has to be front and center.” For you to be a good leader, you need to have a significant amount of customer engagement because that teaches you not only what that customer and the market needs, but it also teaches you how to be humble. It teaches you how to listen. It teaches you how to then report back into your greater organization a pulse on what’s going on and the priorities that you need to have. I’ve often thought about him as I’m coaching and mentoring younger people in the organization. My guidance is very similar to his. It doesn’t matter if you want to pick sales or business development or some kind of service, but something that you do should have a customer component in it as you’re building your career because it’s such an important perspective to make sure that you always have as you’re conducting your business. Danny: – Absolutely, and you see this. There’s a lot of this going on right now for as long as business has been around, but even in the material handling and supply chain space you see this a lot. There’s a ton of money being poured in from Silicon Valley. You were talking about a lot of solutions. There’s a lot of challenges, and a lot of companies are coming in saying, “Let’s try to solve this.” We’ve seen a lot when you talk to product development teams and whatnot that there’s an excitement around the technology and all this stuff that’s happening, and you start creating solutions on something. You think, hey, this is great. Look what we can do. But you go back and say, well, what’s the voice of the customer? Is there an actual addressable need that we’re solving? Is this something that they say, yeah, this is a big problem, and we need help with this? A lot of times it’s, hey, we think this is great that we can do this. Then there’s a massive misalignment because we’re not, like you mentioned, we’re not getting close to the customer and listening and getting feedback. Dee: – Absolutely right. It’s even connecting with that customer when you’re talking about some of these new players in the supply chain automation space because there are a lot. The market grew so quickly during Covid that it became a very attractive market. I think there are things to learn from that as well. In fact, some of the lessons I take out of that even today are: if you were looking at the market with a fresh set of eyes, would you solve the problem differently? If you sit back and think about it, it can make you think a little bit differently about maybe some of your own blind spots, having been in the market for a long time. That connection with not only where customers’ issues are today and really listening hard to that for the here and now, but thinking about it, are those your issues today? What are your issues going to be a year and a half from now? If we sit back and we think about it collectively together, what does that look like? Because maybe part of how we can solve today also positions you for a year and a half from now or two years from now because a lot of these customers—not all of them, but a lot of them—have significant capital expenditures that they’re going to be making. If we can think about it in the way of, how do you phase this in so what you’re spending today isn’t wasteful when you think about where you need to be years from now. How can you integrate all of that thinking? That’s where, personally, I get really excited to think about things in that dimension because to me, that provides my customer value, but it also gives my R&D teams a road map that is cohesive over a longer period of time so we can think about learning along the way, but also elevating and transforming the way that the industry is operating today. Danny: – Oh, absolutely, and I love how you were talking about—especially I think we can talk a little bit about some of these challenges that are going on and then things that we’re seeing going out from now because certainly over the last two years one of the biggest challenges was that things have been changing so rapidly when you look at okay, ecommerce just exploded. Then trying to forecast anything was crazy. Supply chain disruptions, and from a retail perspective right now the story is that there’s too much inventory because we had to put all these orders in ahead of time, and demand is skyrocketing. Then oh, now we have inflation and oh, consumers are coming down. Now we’re sitting on all this. What do we do? It just seems like things are way out of whack. Automation’s exploding; do we continue to do that? I heard a story about Amazon coming in, and they’re starting to slow down on some of their automation investment going in there. What are some of these short-term, and then bigger, these long-term challenges that you’re seeing? Dee: – I think with the market—I don’t have the crystal ball, but from everything— Danny: – I was hoping to have the crystal ball. Dee: – I know, but I left that over there. From everything that I can see, the market is inherently strong. We are going through what I would say is a short-term correction of some sort. I think you hit it on the head with the supply chain challenges that there are and the inflation being what it is. I think when you look across most of the market, it’s harder for our customers, typical Dematic customers, to make their ROIs work because the cost of materials is up. It’s hard to get labor. The complexities, the timelines have expanded. You do see some companies taking a bit of a pause to say, is this sure enough that I want to continue on or not? In general, I don’t see the labor loosening up a tremendous—we’re still going to have labor shortages. We’re still going to have ecommerce being a major influence. And consumers haven’t stopped wanting their products in, if not a day, in hours, and in some markets it’s 15 minutes that they want— Danny: – Wow, 15 minutes? That I didn’t know. Dee: – I think those demands are here to stay. When I order something off of whatever website it is, if they say, well you can have it in three days, three days used to be fantastic. Three days, now I’m like, I’ll go somewhere else. Danny: – What is going on? Dee: – Exactly. What all of that does is say, look, the need for automation and in particular more of an emphasis on software is ever-increasing in the market. I don’t think that’s going to go away. I think as companies now are in a point where they’re looking at their ROIs a little bit more closely, they’re looking at their inventory a little bit more closely, I personally think that the way that we’re going to solve that is for not only increased visibility across a particular enterprise’s network, if you will, of locations, whether it be warehouses or retail store or whatever, across their whole network of operations, it’s not only having the visibility but it’s also being able to impact the supply chain. I think of it in terms of, today everything goes in sequence. It starts with the supplier; then it goes here; then it goes here; then it goes here. If you can have enough connectivity, then you can break the sequence and be non-linear, like take that linear network right now and go non-linear, then you can take a lot of waste out of the supply chain, not only in terms of building footprints but in time, in gas, in number of trucks on the road. It really does start to impact things, and that’s where I start to get really excited. I think the need for that, what I just described, a couple years from now you’re going to be sitting down saying, how did we ever operate without that kind of visibility and that kind of awareness because you won’t be able to hit the customer demand if you don’t have it. I think that piece of the market will grow much faster than even automating the manual warehouses because today only 20% of the warehouses are automated across the globe. When you think of it in those terms, yes you have the big giants like Amazon that are very automated, but the vast majority of warehouses today are not automated. The available market is very, very large. Danny: – Yeah, and I’m not sure if I’ve heard that stat about warehousing. I know certainly when we talk about smart manufacturing, for example, which is not exactly identified with that, but it’s still 100% part of the supply chain there. Similar stories there, and there’s big moves to digitization as we move into that. One question I’m curious about in your mind. When we look at total optimization from the supply chain standpoint, a true end-to-end visibility, what does that look like, and how do we get there? To really distill it down, is it like an ERP on steroids, if you will, that has demand forecast, and you have all your tier one, tier two, three, all of those suppliers and all of that connected into that? What is that for you? Dee: – I don’t know if you saw or not, but we just signed a strategic partnership recently with Google Cloud. Danny: – Yes. Dee: – In fact, one of the reasons why we were so keen to sign that strategic partnership with them and them with us is that we share a common vision for what that end-to-end supply chain looks like. I know it’s a term that people throw around a lot, but really having a digital twin of the network in my mind is really important. I don’t think that any one company is going to solve that by themselves. To me, it’s a platform that many people can put their data up onto the platform. Then that data gets used in different ways to help customers solve their issues that they have because they’re going to have issues every day. The optimization is going to have to happen every day. Even if you boil it down to a particular warehouse, I see that those warehouses are going to have to be adaptive in terms of how the automation happens because today you may be processing a certain mix of goods. If you don’t have an adaptive system today, all of a sudden you get unsynced. You have all this automation equipment that’s set up for a particular combination of goods going in and a particular combination of goods going out. In the future, wouldn’t it be nice, and probably essential, that that system adapts itself to the extent that it can so that when you—oh, well I now have to ship. Think about it in terms of, we had a large customer that bought a system from us pre-Covid. They said, “80% of what we process in this very large automated location is going to go to our retail stores.” We said, “Okay.” Well the average number of items per transaction then are about a dozen, 5 to 15 number. When Covid hit, that whole way of going to market switched for them. Then ecommerce became a much bigger channel than retail was. Now all of a sudden people are ordering one or two at a time. The way that the whole system was sized and the capability of the system shifted overnight just based on the way that the order profile demands were coming through. That doesn’t even change what they were buying. But if you just think about that one change, all of a sudden everything got tipped on its head. Well if you allowed your software to be more adaptive and could use things like robotics and mobile robotics in your solutions, well now all of a sudden you might be able to adapt without making large capital expenditures. You might be able to adapt more readily for the variations that you have in your business, and it would all be—if you tried to do it yourself or a person managing that plant couldn’t keep up with the number of computations and look at the possibilities. That can only be done if you start to apply AI and RL to your systems. Danny: – Absolutely. Obviously we know, big lesson learned, and there’s a lot of lessons. I think you touched on it a little bit before–– just the resiliency piece in terms of flexibility and, like you mentioned, being able to go from larger orders, smaller orders. I think the term micro-fulfillment comes to play. From warehousing, and you look at retail or grocers and ecomm, it’s a blend now. It’s turned into, the final mile is a mixture of a warehouse to a traditional brick-and-mortar where customers come in and interact. That now is really changing a lot of people too, present company included. Big behavioral change there. I can’t tell you the last time—I didn’t really walk into stores too much before, but now you need to go to the grocery store to get something unless you make that order, and you just pick it up: “I just saved a ton of time.” I don’t think we’re going back from that. Dee: – I don’t think we’re going back from that either. That’s why I said, the market might be doing a little bit of a correction right now, but I think the long term is secure. The long term has a growth rate that I think is more sustainable, too. A market can’t grow at 40-some-odd percent, year on year. Danny: – No, certainly not. And to clarify, when you were talking about looking at the market, are you talking specifically in the automation and warehousing space, or are you going more macro? Dee: – A little bit more macro, I think. The market overall is continuing to grow, but still in mind of what is automation, what is happening in the supply chain. Danny: – Right. I think the future is bright, and it’s very exciting as we continue to go. I think there’s a lot, to be honest, that’s been—there’s a lot of new things that are going to come at us that we haven’t seen as a result of Covid. I think there’s a lot of things that, as we start seeing demand shift and forecasts and when we look at people reshoring and near-shoring, I think there’s still a lot that we’re going to see down the track. I think that resiliency and that flexibility is going to be just imperative for organizations going forward. But I think that companies like Dematic, and there’s a lot of other players out there doing a lot of different things in many different areas. It’s exciting to see that innovation happen, and not just from an R&D perspective, but also from an actual implementation I think is fascinating to me. Dee: – I couldn’t agree with you more, and I think the future—what I think Covid did to a lot of industries—supply chain automation included—is really challenge some of the business cases that people were using ahead of time. When you think about some of the technologies that have been available for some time, how can you reapply them into different spaces? The core technologies weren’t developed overnight. Those technologies have been viable for a period of time. We’ve just now learned, as a community, how to apply some of those technologies to solve some of the problems of today. I think when we do that and we look at, oh, now we’re much more resilient than we were before because we had to make some of these adjustments that we couldn’t justify necessarily from an ROI previous to Covid, now all of a sudden we say, “Aren’t we better off now because now we have this level of resiliency?” I think that kind of thinking will continue a little bit too. I think there are a number of people that were in leadership positions that had never been in any kind of a downturn before or have any challenges on a very wide level. Certainly Covid being global was very disruptive, obviously, in a lot of ways. But it gave people a chance to think about things in a slightly different way. Now all of a sudden it was, let’s take this from a couple different perspectives. I think it made all of us more resilient, certainly the whole work from home. Just think about what that did to allow everyone across the globe to think about, how do you show up at work? It’s a different way than they had been showing up at work probably across the board for quite some time. Danny: – Absolutely, and I think we’re going to continue to see some of this. Maybe not at the rapid pace that we saw the last two years. Hopefully not anyways, but I think we will definitely see that. Dee, I have thoroughly enjoyed our conversation, and we could probably go on for another, I’d say two or three hours, easy because this is fascinating to me. But you’ve got a lot going on; we’ve got a lot going on, so we’ll have to wrap and maybe do a follow-up here. As we wrap, I’d love to give you the final word. What would you like to leave our audience with? Dee: – Well thanks very much, and I appreciate the time today and have thoroughly enjoyed it. I would love to come back and be a guest at a future time. I’ll just leave you with this. If you have any interest, please go to dematic.com and browse around the website, and please contact us if you have any questions or want more information. Danny: – Excellent. Well Dee, again, thank you so much for your time. I know you’re incredibly busy, and we’re just very thankful for your time with us and sharing your insights and your story as well. Dee: – Great, thanks so much. Danny: – Alright, thanks. Well that wraps up today’s IndustrialSage Executive Series. Great episode. I have lots of notes here, lots and lots of notes, and hopefully you do as well. So thank you for watching or listening if you are on one of the podcasts. Listen, if you are not subscribed, I highly recommend you go to IndustrialSage.com and subscribe so you don’t miss great insights like this and get a pulse on what’s going on in the industry. Maybe it’s directly related to what you are doing. Maybe it’s tangential, but there’s a lot of changes happening, a lot of innovation, and this can help keep your finger on the pulse of where things are going. So that’s all I got for you today. Thank you so much. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Pieter Krynauw shares his career history and how ThruWave is applying millimeter wave tech to save retailers millions in fraudulent returns. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to today’s IndustrialSage Executive Series interview. I’m Danny Gonzales, and today my guest is a company called ThruWave. I have Pieter Krynauw who is the CEO. We met at MODEX in 2022, and so I’m super excited to have you join me today, Pieter. Pieter: – Hey, thank you. Nice to be with you guys. Danny: – Well this is exciting. You guys have some really interesting technology. There’s been several awards that you guys have won over the last several years. For those who aren’t familiar with who you guys are, who ThruWave is, give me a little bit of a high-level of who you are and what you do. Pieter: – Yeah, sure. At a high level, we’re a small start-up based in Seattle. We’ve just developed some amazing, ground-breaking millimeter wave ocular vision technology that can sense through cardboard, plastic, at very high speeds making it a great solution to inspect packages that move along a conveyor. We construct a 3D digital image of what’s inside a cardboard box or a plastic tote providing the ability to verify quantity, condition, content for our supply chain customers. We use simple hardware technology like this, and then it’s all software to analyze and support our customers. Danny: – Excellent. That’s pretty cool. I remember we demoed it; I think we did some video content there. It seemed like it was very interesting technology. We’ll get into that here in a little bit more in the episode, but right now we’re going to pivot, go to one of my favorite sections just to learn a little bit more about you, Pieter. I want to learn about your background, how you got to where you are, hear your story a little bit. Take me back; how did you get into this space? Was it something that, did you go to school for engineering? What was that? Pieter: – Yeah, it’s a long journey and a longer story. I grew up in South Africa. After college I moved to the UK, probably had a plane ticket and £100 in my pocket. Might’ve been a little bit more, but it didn’t feel like a lot at the time. I had some software and computer networking training at the time. This being the late 90s, I was able to find a really nice job at a small data company in the UK, and I had the opportunity to work with just some fantastic customers, a wide variety of customers in the UK which was really fantastic for me as a young person, young professional. I returned to South Africa after about two years in the UK, did an MBA, and I was fortunate enough to get an opportunity with Honeywell. We had a large contract with South Africa’s largest petrochemical company, so I jumped straight into the fire. I worked myself up, sideways, up again, into various positions in South Africa, the Middle East, China, and into the US working in a variety of roles, mostly in process automation, industrial process automation. Honeywell then acquired a material handling company a few years after I got to the US. I went over shortly after to lead that business. That’s the short story of how I got into the supply chain space. Danny: – Excellent. Through that journey—obviously we got the short, we got the abridged version. Totally get it. I’m sure there’s a lot of things that probably, a lot of left turns and right turns and then circles and go back up. Typically, like with anyone’s career, there’s a lot of people that have had a major impact and helped to shape who you are today. I know there’s way too many to go over, but who is one person that comes to mind that really helped to create and helped you to be the Pieter of today? That could be a lesson or a scenario. What is that for you? Who is that person? A person. Pieter: – That’s also a difficult question. I think maybe living and working in so many different locations, parts of the world, every location leaves something with you. The experiences and the exposure you later realize is a blessing that very few people get to have. I’ve been fortunate enough to work with just some fantastic professionals, individuals, over many, many years. If I really want to think back to what made me who I am, I would have to go back to my dad in two ways, one probably good and one probably bad. The good part is that he just showed me the work, the integrity, ethics, hard work, and I got that from him. But I grew up in a small town, never really moved, and I think that also wanted me to be a little bit more adventurous and go do a few things that maybe I didn’t think at the time was possible or that I had the capability to do. That part I think also shaped me. Then I’ve also got to say, from moving a family so many times, my wife has just been tremendous. I think I was enabled by her sacrifice to put her career on hold so many times. Very difficult to pinpoint the exact influences, so those would be two. Then I also would like to think that I’ve taken some of the good things from everybody that I’ve worked with in the past, and then maybe also avoided some of the bad things that I’ve seen in people that I maybe didn’t like that much. A combination of things, but my dad and my wife would be two ones that have really influenced my career. Danny: – Certainly. That’s great. Let’s jump a little bit now to your transition. You said you spent a lot of time with Honeywell, and there was a lot there. You moved to a lot of different countries, had a lot of different exposure across the industry. Let’s talk about ThruWave and how that started, how you got involved, and what did that journey look like? Pieter: – That’s a really good question. Obviously I was very blessed to work with a really great American multinational company that afforded me a lot of opportunities. I really liked moving from oil and gas, petrochemical into supply chain, really loved that transition, and I just see so many opportunities for technological advancement, automation, improvement, things that maybe oil and gas learned many, many years ago that can transition into the supply chain space. I really just love working in material handling and supply chain. After a couple of years running Intelligrated, I came across ThruWave, and I was blown away by the technology and just what this team of scientists were able to develop. I’ve never really worked in a start-up environment, and I thought the combination of those two things—doing something I haven’t done before, getting into some awesome technology—was just a great opportunity for me to do something that I haven’t done before. Danny: – Yeah, absolutely. It’s a night and day difference, going into very established corporate to start-up. It’s very entrepreneurial. Did you have that in your background at all? Was that something that was—is that spirit embodied in your family, or is that a new venture for you? Pieter: – I’m not sure; I guess working within a large multinational I think afforded me a lot of support, but I think to some extent also the places that I worked were so far removed from headquarters that you’ve got to do what you need to do to be successful. Roles aren’t always as defined and as clear, so working in the middle of nowhere you’ve got to do the project management, the sales, the service, the support. You’ve got to have a little bit of a self-starting nature and some entrepreneurial capability, I think, to be really successful. I think I learned that even though I worked in a fairly large company. Danny: – Excellent, very cool. Alright, so talk to me a little bit about that moment when you decided that, hey, I’m going to make this transition, and I’m going to jump onto the start-up. I imagine typically that’s a very challenging and difficult decision to make. Obviously there’s a lot of unknowns. It’s exhilarating, but it can also, I imagine, be a little terrifying, both sides of the spectrum. What was that like for you? Pieter: – Maybe I look at it a little bit differently. I think through my past career moves, I’ve always brought excitement and energy from trying things that I wanted to develop in myself firstly or tried to take on challenges that I haven’t done before. One of my first big moves was moving from South Africa to the Middle East. New culture, new location, new teams, different macro-environment. That was really exciting, although for me that was a sideways move at the time. Stepping out and growing into a company like ThruWave, I think the excitement and the challenge and the opportunity overshadows the risk or the doubt. I think from my point of view, that’s how I’ve always looked at things. I think if you’re going to look at everything that’s going to go wrong or if you’re worried the challenge is going to be too big, then probably it’s not a good move. Probably you’re not going to be successful. I tend to get energized by that, so I don’t think much about what can go wrong. Danny: – That’s great. I love it. The always positive optimist, it embodies a true visionary. Great, so ThruWave, you had this opportunity. How did ThruWave come to be in existence? Where did that technology come from? What’s the origin story? Pieter: – The founders of our company all came out of University of Washington where they’ve worked under Matt Reynolds and developed the basics of the technology. Then it spun off from there to really focus on the commercial application in the supply chain space. So out of UW, and it’s been a fairly long journey to really develop a technology solution that’s viable for supply chain customers. Danny: – The technology that you have, what exactly does it do? Pieter: – We use millimeter waves; it’s in the invisible spectrum. It’s totally human-safe. Think about it as a camera. Again, I’ll show the little module here. We have RF antennas mounted within this module. As an object, a case, a tote passes past the sensing module—we’ll have an array of modules—the movement and the waves reflecting off what’s coming past us gets received at the bottom. Then we would use those millimeter waves and reconstruct a 3D digital image of those reflected waves that comes back. Really simplified, but that’s in short how it works. Then once we have this reconstructed digital image, we can apply an analytic software algorithm, a classifier, and actually interpret the image and then do something with it. Think about it as, we’re taking a—this is a camera; we’re taking an image and then apply some computer vision algorithms to those images. Danny: – Absolutely. When we met—we didn’t meet, but I met your partner there, Matt—he was basically explaining to me, dumbing it down for me, was that essentially—that’s the same, if I understand correctly, it’s the same technology in body scanners at the airport that we might be familiar with. What it sounds like is there’s a lot of use case and applications to be able to—when we think of computer vision right now, it’s more on the surface level, on the exterior. But you have the ability to be able to actually give insights into what’s going on inside that tote or that package or the parcel. From a quality standpoint, or quantity, making sure that what is actually in there is what’s supposed to be in there. I’m assuming that’s one of the many applications. What are some of the top applications for this? Pieter: – Just to confirm, you’re absolutely correct. The scanning technology that they use at the airport, it’s also millimeter waves. We’ve been able to put it in a form factor with the right reconstruction and software algorithms have made it so that it can actually be viable within supply chain, working at very high speeds. In the airport instance you’ve got to stand really still, and speed and performance is a real issue. The team just did a fantastic job to be able to do that. Then you’re also correct. Think about a camera taking a picture; it’s really good with what it can see, but occlusion is a problem. Visible light spectrum is a problem. It can’t see beyond certain things which makes our technology really good. We can see through cardboard, plastics, light plastics, air packs, and the like. Yeah, so we can then see what’s inside which makes it a really good application to count, to detect damage, detect leaks. Heavy plastics, liquids, and metals really reflect well, and we see those images really well and we can then do something with it. Think about high-value electronics, liquids, bottling applications, security applications, counting applications for various industries. We’re fortunate that we can place throughout the supply chain, whether it’s inbound on the manufacturing side, within the manufacturing operation, outbound from the manufacturing, inbound to retail distribution fulfillment, outbound to whether it’s retail again or the end consumer, and then everything back through the reverse logistics chain, making sure the right things show up at your door. There’s no fraud; things are in the right condition, and the right counts are there. There’s a whole host of applications that will just grow and grow in the future as we develop new capabilities on the software side. Danny: – I can only imagine. As you were talking about all those different areas, lots and lots of applications. Is there a particular focus that you have right now as far as, from a go-to-market, that you’re really honing in on? Pieter: – We want to keep it simple, so we focus on a couple of use cases, a couple of applications. Really focused on a homogenous product set at the moment. Think about bottling, canning, operations whether it’s consumer product goods or in the bottling, beverage, brewery type of application. We can count bottles; we can detect broken bottles, broken cans, things that’s metallic of nature that’s missing, that should be there or metallic objects that’s in the packaging that shouldn’t be there. That’s got a nice, broad application, but from a software and a commercialization point of view, the value proposition is largely the same. And then the other thing we’re focused on is really determining whether the right quantity of things are in a box or a tote, so whether that’s in an ASRS system or in a packaging operation or picking operation. Those are the main things we’re focused on at the moment. Danny: – Excellent, well it makes a lot of sense, certainly. We’re talking about, I think you were mentioning a little bit about reverse logistics. That seems to be a big story right now, especially as a lot of retailers—there’s an influx of inventory because demand forecasting, the last several years have been crazy. Who the heck knows what’s coming down the track? Now everyone’s sitting on a ton of inventory, depending on where they are, right? Pieter: – On the reverse side, a lot of businesses have done a really nice job on the outbound side, but this growth in ecomm and then the reverse side, it’s just so difficult to keep up with. If we can deploy our technology and at least just tell our customers, “Hey, what’s supposed to be in there is in there,” it goes a long way for them to feel a little bit more confident that they can process a refund, process somebody trying to defraud them. Fraudulent returns in the US is about $25 billion a year, so it’s a sizable problem. Danny: – Absolutely, and it’s just like on the outbound side. It’s all about speed, speed and quality, so getting products and things to consumers—or could be other businesses—but then the same thing on the back end that you mentioned from a refund standpoint, get that going quickly. So I don’t think I’ve asked this—how long has ThruWave, have you guys existed? Pieter: – We’ve really come out of the shadows in the last 18 months to two years. Prior to that was really under the radar, in stealth mode, developing the core of the technology. We’ve gone through, over the last 18 months or so, we’ve gone through a lot of our POC testing, pilot programs, and commercial roll-up now. We’re really scaling up fast at the moment. Danny: – Excellent. You answered one of my next questions. Another question that I have on this just is from a funding standpoint. Have you gone through Series A? Where are you in that process? Pieter: – Yeah, it’s a good, timely question. We’ll be raising a Series A in the next, in the coming months. Danny: – Excellent. Pieter: – Before year-end. Danny: – Very good, very cool. Well listen, this has been—I’ve enjoyed this conversation. Like said when we met at—well we didn’t meet, but we saw ThruWave, I thought it was fascinating technology. I thought it was also really interesting that that hasn’t really, to my knowledge, from a visioning standpoint, there’s not a whole lot of other technologies out there like that at the moment. It just makes a lot of sense as far as all the different applications, specifically when we were talking about a lot of ecomm and logistics there and the supply chain space. I’ll give you the last word if you’d like to leave anything with our audience before we wrap. Pieter: – Great. We’re really excited about the technology and the solution that we can provide our customers. We think we’ve got a really disruptive vision of the future, and a lot of our customers, the only thing they can do today is throw labor at the problem, whether that’s statistical sampling and opening boxes and looking for defects or checking that things are good. We’re getting really a long way to automate that, make the labor a lot more efficiently and provide visibility to things that have not been visible before. We’re excited to work with the customers out there and really excited to get our technology and our solution out there to drive real value in what is a very challenging environment within supply chains. Restructuring of supply chains are going to happen, and transparency and visibility of data is probably going to be one of the most important things for customers to build a real competitive advantage within the supply chain. We’re excited to be part of that. Danny: – Excellent. You have exciting technology. We’re going to be hearing about you guys a lot more over the next several years, for sure. Pieter, thank you so much for spending some time with me today on the Executive Series. Pieter: – Thank you. Danny: – Alright, well that wraps up today’s episode with ThruWave. I had Pieter Krynauw, the CEO of ThruWave, which you can go check them out at thruwave.com. And that’s T-H-R-U-Wave. There’s a link, and we’ll have information that you can go check that out. Thanks so much for watching or listening. Maybe you’re listening on the podcast. Hey, if you’re not subscribed, I want to encourage you to go and go to IndustrialSage.com, and you can subscribe so you can get some of these great insights and hear about all the innovations and the technology that’s happening in the manufacturing and the industrial supply chain space because it’s rapidly evolving, and there’s some amazing things that are happening. That’s all I got for you today. Thank you so much for watching. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Jim Liefer of Ambi Robotics shares his view of prioritizing customer desires and workforce quality of life when implementing ai and robotics. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to today’s IndustrialSage Executive Series interview. I’m joined by Jim Liefer who is the CEO of Ambi Robotics. Jim, thank you so much for joining me today on the Executive Series. Jim: – Absolutely. Thanks for having me here, Danny. Danny: – Well I’m excited to jump into our episode, learn a little bit more about you. Learn a little bit more about Ambi. It sounds like you’re a robotics company, based on the name. I’m just going out on a limb there. Jim: – We are an AI Robotics company. That is absolutely right. Danny: – So tell me a little bit about—what exactly are you guys doing? What are the problems that you’re solving today? Jim: – Yeah, so Ambi Robotics is an AI Robotics company, as you guessed. We are developing solutions that empower people. Primarily we are in the world of supply chain at the moment, so we are enabling those humans to work smarter. If you think of it in the way of right now the work that they do out there in the parcel world, in that industry, and also in the fulfillment world for retail operations, they are moving packages and parcels around. Our technology allows them to become robot handlers instead of package handlers. That is what the technology does, and that is where our focus is today. Danny: – Excellent, alright. Well sounds good. Sounds like a lot of the companies that we’ve talked to, there has just been such a huge acceleration of automation, robotics technology to solve a lot of the challenges that are going on now that were honestly present before the pandemic, but certainly accelerated afterwards exponentially with the, you mentioned specifically in the parcel or warehousing. Ecommerce has exploded. Then there’s nobody there. The labor has dropped. Jim: – Yeah, it’s a couple of things. The way that I always think of this is that all of us consumers, we’re on this path anyway of moving from brick-and-mortar shopping into ecommerce, going on our phone, having something arrive at our door basically. Then when the pandemic hit, it just accelerated that 5 or 10 years. I also, the way that I’ve seen this at least here at Ambi Robotics is that during that time where everyone was sort of in their bunker during the pandemic, there was a lot of progress made, a lot of progress made on the AI side, a lot of progress made around robotics and configurations. As you’ve said, Danny, there aren’t humans anymore, so it created this moment where the customer sort of has to find this solution because we can’t serve the need anymore. That’s the journey through the pandemic as I see it. Danny: – Oh, sure, absolutely. I’m excited to jump into that a little bit more as we get a little bit later in the episode. Right now—it’s one of my favorite parts. This is when I want to get to learn a little bit more about you. We get to learn more about Jim. Jim, so tell me. How did you get into this industry? How did you get into this space? Take me back. Jim: – Okay, well as you can see I have a few years on me, so we’ll go way back. Danny: – You don’t look any older than 25. Come on, man. Jim: – So I actually started as a computer operator for a bank. I also was mainframe systems operator, had the overnight shift. I was the sole operator, by the way, for this bank. I had this huge amount of responsibility on me to make sure that all the systems were working every day when the bank opened. Eventually I moved from that heavy set of responsibility into the world of 3PL. I worked for a third-party logistics provider, air and ocean freight and all of that around the world. UPS acquired that 3PL in the early 2000s, so now I became a UPS-er. Through all of that time at UPS on the technology side, I was exposed to different systems and what we were doing for customers. Then I moved from UPS over to Walmart ecommerce as VP of operations at Walmart. Had a lot of responsibility for the ecommerce fulfillment buildings and supply chain for Walmart ecommerce. All of that time, I was in the chair of looking for solutions to the problem, the problem being solving for process, solving for new volume, solving for the labor side. That is where I started on the big company side, and then after six holidays at Walmart, I moved into the exciting world of start-ups and eventually made my way to—the first start-up at AI Robotics was Kindred, and I was there helping them with that product that would serve the apparel industry. Then made my way over here to Ambi about 16 months ago as the CEO here at Ambi Robotics. Danny: – Well that’s awesome. Congratulations on that. It sounds like an interesting progression, an interesting journey into that. Throughout that time period, maybe if you could share with me a story or somebody who’s had an impact on your career. It could be a mentor; it could be somebody who gave you some great advice. I know most of the time people have a lot, and they struggle to pare that down. Share with me, who’s that one person for you? Jim: – There were many. I had many people along the way. I would say the person who changed the way I think about being in the professional world and also being a leader is a gentleman who came to be my manager in the late 90s, came to that 3PL that I mentioned. He had this perfect blend of challenging the team, uplifting the team, and protecting the team. His name is Gene, and so I always say there is Gene-isms that I talk about all the time. I hear his voice in my head. I hear him saying different things that make me much more of a servant leader and being humble. He changed everything I think about leadership Danny: – I like it. Share with me; what’s a Gene-ism that you can share with us? Jim: – Well an easy one is, catch people doing something right. He was a big believer in, don’t wait for the moments when you have to tell people, “Hey, you did that wrong,” but catch them doing something right. That’s one. I can give you a second one. The second one is—and it’s very corny—but he said, “Anytime you’re pointing your finger at somebody, there’s three fingers pointing back at you,” which, a lot of people say that. He would always say that, so don’t blame others. Many of those things that just—overall how to carry yourself and look out for the team just meant a lot to me always. Just speaking of that, we have an amazing team here that I think of every day. Caring for this team is my top priority. Danny: – That’s awesome. I love that. I especially love that you call them Gene-isms. You obviously are able to quickly rattle them off, and I like it. Corny or not, there’s three fingers pointing back at you when you point at—I love that. I’m curious. I think I know the answer to this, but how is that—obviously it’s influenced your style, your leadership. You mentioned servant leadership there. You mentioned that that was, back when you were at the 3PL. Was that before UPS acquired them? Jim: – Yep. Danny: – Okay. Were those Gene-isms, as you progressed and you moved up the ladder so to speak, was there a point where it just clicked and you said, “Hey, I need to go ahead and put these into play,” because a lot of times you’ll go through this stuff, and it takes time to absorb. Then there’s a moment where things shift. You say, “Oh, wow, I completely understand from a leadership standpoint how viable and important this is.” Jim: – Yeah, so it’s a combination of things. First meeting Gene and all of those things that are Gene-isms, but also the way that he thought about employee engagement and surveying and so all of those things to take care of the team. Then as I told you in my career when I moved to Walmart, Walmart is the place where I heard that term, servant leadership. By the way, Gene and I worked together in several places. The 3PL, we worked together at UPS. He then came to Walmart after I was at Walmart. The point of that is, it’s a build. I had that foundation, those things I learned from Gene, and then also all of the way that Walmart leadership works and thinks about the customer, so layering that in. There’s a strong customer component. One of the Walmart sayings is that the customer is always right, so I believe that strongly. Then when you tie into the other aspects of Walmart of everyday low cost is another big one for Walmart. Respect for the individual and servant leadership, those components, it just made sense to me. I couldn’t think of leading in any other way, and I think it’s served me really well to this point around being humble, servant leadership, passion, all of those things. Danny: – Oh, I love it. I think that’s one of my favorite stories I’ve learned, especially that you have some terminology around it. Gene-isms, that’s very catchy. I’m definitely going to be stealing some Gene-isms. I’d love to hear more later down the road. Well very cool. Let’s pivot a little bit now. Let’s go back to Ambi a little bit. You were talking about, obviously we’ve got a lot of issues with supply chain, with labor. You guys are helping to solve some of that. I guess a big question that I would have is, there’s been a huge influx of robotics companies. If you look at the last several years, it was growing and emerging. One big thing that jumped out to me was, we were at MODEX in 2020. There were AMRs everywhere, AMRs, AGVs, everything. Robotic arms, cobots, Spot was there, of course. Going back in 2018 it was a little less, and further, and there’s a huge emergence of it now. What is your biggest point of differentiation from the crowd, so to speak? Jim: – Okay, so we’ll weave this together. You have the technology component, so just to drill into that for a moment, on the technology component, it’s easy to get very excited about that. Being inside the AI Robotics company and all of that, you can get really into your own tech, and you can tell yourself that the simulation to reality transfer learning is the most important thing, and it’s really exciting. The way that the mechanization works with the hand-off between the software side and the mechanical side, that’s really cool. I say that because, as words of caution. Yes, that’s really cool, but—and the way that we’re differentiated is, the customer doesn’t actually care about those things specifically. The customer, and this is where Ambi is very different, the customer cares about their throughput, the volume that’s coming at them, the uptime, the ability to reposition labor—labor, human labor, reposition in their places of buildings and whatnot, and that is the primary differentiator for Ambi is that we care about the key metrics that the customer cares about. Yes, it’s great that we have the technology to rely on and we can bring the solution, but if you’re not shoulder-to-shoulder with the customer being attentive to those key metrics for them, I don’t know how you can truly win because you win when they win. I want to go back to what you were saying about MODEX. I saw the same thing. This MODEX that we just came from a couple months ago, kind of shocking how much technology there is everywhere, like robots and picking robots and all of that. As I said, though, there has to be a lot of realness. It actually has to be solving their problem, their specific problem that you have to configure for. Otherwise it doesn’t matter. Danny: – You’re 100% right. That’s the product developer’s challenge. Hey, this is super cool. This is great tech. That’s awesome, but is it an addressable market? What’s that need that you’re tangibly solving? One key thing you mentioned, that you were shoulder-to-shoulder with a customer. What does that look like specifically? Let’s say as you’re going through R&D, what are those practical things that you’re doing to really have a true understanding of your customer’s needs to develop something that says, “Hey, this needs to be addressed, and there’s a need for this?” Jim: – The first part is, it’s helpful that you have knowledge of what’s happening within the four walls. That’s useful. I told you I came from UPS and Walmart. Danny: – That’s helpful, yes. Jim: – That’s super helpful is to have that understanding, know the terminology. That aside, going and looking at the sites and understanding because you can’t say that—let’s use Walmart and Target as two examples. You can’t say that those two entities are providing fulfillment operation in the same way. There’s all kinds of different permutations, and in fact within any of those large retail entities, they might be doing it different ways at their different buildings because one of them is more manual; one of them has more high-speed sortation and so forth. Going through the operation and understanding the process and understanding what’s causing pain to the people there, the people at the line level and the supervisors and others, that is the key when you develop the system, and the Ambi solutions are highly configurable, both on the software and the hardware side. That’s what allows us to, and I’ll give you a couple examples. A, we can be upstream before high-speed sortation. We can be doing something around induction, or after high-speed sortation you can then provide more output locations from an AI robotic perspective. But it just depends on what the customer needs in that site and for that market. Danny: – No, absolutely, that makes a lot of sense. What are some of the big challenges? Obviously we know that labor is a massive one. Supply chain is another really big one, which are very inter-related. What are some of these challenges, though, beyond that, are you seeing with your customers? Or even in the industry in general? Jim: – In the industry in general, let’s first say for AI Robotics’ industry. What are those challenges? The way that I always think of it is, for a start-up, and for any of those where we are creating solutions that have never been in the world before, and also, by the way, the same kinds of challenges that businesses have that have been around for a long time which is around focus. As I said a moment ago, focus on the customer. Take care of your team. And I would say making sure that you have the ability to deploy what you say you’re going to deploy. It comes down to, it’s basic stuff of do what you say you’re going to do. If that’s what you commit to, then do it. That’s the big overarching. Going to the broader industry around, let’s just say supply chain is the—this phenomenal growth that happened, as we said, in the compression time of the pandemic is ongoing. The number of—if you think about supply chain in terms of last year there were something like 130 billion parcels in the world. 130 billion is this number to wrap your head around, and then only something like 25 billion of that was in the US. And all of those parcels are being touched three to five times, so it’s an enormous problem I guess is what I’m saying from a challenge perspective. There are so many places to go after that problem, all kinds of different directions but that is the challenge is the volume, the speed that all of us as consumers are demanding that we have it to our door, and the variation of all of those parcels. It’s everything from little, tiny things to very large and flat things and rigid and deformable and all that. I think there are seemingly endless challenges around those problems and different ways that you can solve it. Danny: – That’s a fascinating stat. I have not heard that before. You said 130 billion parcels out there, and only 25% were basically owned by the US, so to speak? Jim: – 25 billion of the 130 billion in the US. All of us that have packages arriving at your door, you would think that the US is leading, but actually we’re not. There’s many more parcels out there. I just think about where these solutions could go outside of the borders of the US to deploy these solutions and solve that problem. Danny: – To get into it, I’m sure the parcel—what am I trying to say? What I’m trying to say is, how much of this is consumer—I guess a lot of it ultimately is going to be consumer-driven, but relative to parcels that is B2B versus B2C, OEM parts versus a package of masks or pens. Jim: – Yeah, the numbers that I’m talking about are B2C and—there was something other. These are all parcels. This is all just parcel volume out there. It might be that it’s much larger parcels, sort of non-conveyable parcels. Yeah, that’s a lot of that. Danny: – Well that’s a lot. Like I said, I hadn’t heard that stat before. I think that’s fantastic. That’s pretty interesting. One of the things that I have heard that they’re reporting is after the pandemic, you get into March, April, May, I think through 2020 that ecomm, for example, exploded. It was like a 40% growth just in that year alone which obviously is going to accelerate, push all those parcels there. Jim: – It’s about parcels, and it’s what we also call eaches. Again in this world where we moved from product going into distribution centers in full cases and those full cases going to stores, and then people would put them on the shelf so you and I could go buy them, now that doesn’t happen anymore. Now all of those full cases are opened up at the distribution center, and the worker has to take out the each. The bottle of water, if you will, and then that goes in. Maybe you mix that with a bottle of water and, I don’t know, a mobile phone or something, things I’m looking at now. Then that goes into a parcel. Everything at this each-level has caused—it’s adding to the challenge because there’s just not enough human labor to manage all those eaches. It’s actually really fascinating. Danny: – Yeah there was an interesting stat at the A3, their conference I think last summer in Memphis. There was an interesting stat specifically about that, talking about as the growth of ecomm comes in, and I can’t quote it 100%. It was a very short time period, within I’d say three to five years, that the amount of jobs needed—which we’re already, right now I was reading a stat, it was, there were 6 million people short for jobs right now across the board. That is going to increase even more, but specifically into this warehousing and ecomm piece specifically because of that, as everything’s becoming more distributed. Jim: – Yeah, there’s several vectors to it. While we were talking about all of this volume and the throughput need, also the other thing to say is that no one—not no one. Few people want that job because that kind of work is quite onerous. The environments, those environments are not set up well for humans. They’re hot in the summer; they’re cold in the winter. They’re loud; there’s forklifts. There’s horns; there’s all kinds of mechanization going. The way that we want to help in the industry, and we want to uplift those workers’ lives, is that you put a robot solution there, and then that person can interact with their robot instead of having to interact with all those eaches. It’s just a far more fulfilling kind of a role, and just to tie this back, the symbiotic part of it is that the worker has a more meaningful role. They stay in the job. It benefits the person who has given them that job, so they have a better relationship. We feel great to be a part of that. Danny: – One thing that I’d be curious about, just as far as your technology and what you have, just from a training standpoint, you were mentioning one of the challenges, one of the things you often hear with automation whether it’s robotics or whatever type of automation, that oh, we’re taking the jobs away and whatnot. And we can say, “Alright, first of all, the reality is it’s hard to find labor right now.” People are saying, “I don’t want to do this,” for whatever reason. “I’m done with this; I’m moving on,” whatever. The reality of it is, there’s a big gap there, but let’s put that aside for a second. For those who are actually still in the workforce, there is fear and trepidation sometimes. Hey, this process that I do over and over again, maybe I’m going to get replaced. If we can train and redeploy that existing workforce, as you mentioned, you’re going to be assisted by, with a cobot. What does it take, from a training standpoint, that you’re seeing with your customers to be able to redeploy an existing workforce to have, hey, I’ve got a cobot here, and then here’s the new process? Jim: – That’s such a great set of questions there. Our approach has always been—let’s go back. The former way that perhaps this problem was being approached and that people were reacting to was robots are going to take our jobs. You can have a dark facility, and it’s all just robots doing all of this stuff. We’ve never believed that. We believe that in order for the solution—take the AI technology. I talked about virtual to physical transfer learning. You take the AI; you take the configuration capability. It needs to have a human interacting with it. So the human work changes, as I said, You sort of up-level that human’s work, so we’re very proud of what we think of as human-centric design. All of our systems have the human worker in mind in terms of the user interface that they have that tells them what’s going on and how to do something, so lights and indicators, things like that. That’s number one. Number two, we have developed what we call the robot operator program, so think of it this way. If you’re the customer and you’re managing this facility and you’re hiring these people, we’re working with our customers to allow our customer to post jobs that say robot operator in a parcel facility. Now you can post the job for a robot operator. You can bring the person in, and we have programs that we’ve worked out where, for example, there’s additional training. You can do training right from the user interface at our system. You can also do training online, so it uplifts them in a way that they get to learn new things. Then there’s of course moments of pride around Ambi apparel and pins and things like that that help them feel like, this is great. I get to come to work, and I get to interact with this robot. I think the world of thinking that robots are going to take over all these jobs completely is, really doesn’t make any sense. Danny: – I think that’s interesting, your robot operating program. Have you seen, when you’ve deployed this, that your customers are finding it may be a little bit easier from a recruiting standpoint to recruit new workers in because it’s fascinating and it’s new technology? Jim: – Well, so yes, and I want to say one of our key customers has told us just recently in the last month that when they post for this role—and just to say levels—when they post for this role they are able to post as a level 4, and I don’t know the distinction between 1 and 4 and 10, but they talk about it as, “Oh, it’s a level 4.” There’s many more people that are interested in level 4—it just seems to make sense—than they would be a level 1 which is just the very basic stuff. Finally, because you asked about training and familiarity with the solution, we find it to be a half-day, sometimes less, for them to understand how to interact. It’s very intuitive. Even I can do it, so it’s pretty easy to learn how to interact with the robot. Danny: – No, that’s awesome. I brought my son, he’s eight, to MODEX, so he could see all this. He’s been begging me. I went to ProMat in 2019, and there was an R2-D2. Somebody had, I think it was a— Jim: – Oh yeah, yeah, I remember that. Danny: – I was like, “That is awesome.” I sent videos, and he was like, “Dad, you have to take me to Chicago next year.” So anyways, we didn’t see R2-D2, but that’s okay. There was a lot of really cool robots, and one of the things that stuck out to me is that, how easy it was for him to be able to program and do, and the excitement. And I’m thinking, “This is amazing where the technology is going now.” You said half a day; you can go, and you can train on this. It brings a new sense of purpose and excitement to the role, and it’s assisting in a very material way. Jim: – Yeah, well first of all I just have to say right now, please don’t tell my nine-year-old that your eight-year-old was able to go because he specifically asked me, and I thought somehow that you had to be 18 to get in there. Danny: – You are; I didn’t know that, so anyways, we’ll just cut that from the— Jim: – Yeah, yeah, okay, we won’t talk about that at all anymore. And also the other thing is, our kids will be—my son is much more capable to do anything related to technology than I am. It’s pretty fascinating to watch him do stuff on his iPad. Yeah, I think back to the interacting with our system, the intent was to make it easy and approachable so that the employees of our customers would have no hesitation. And just that point of, is this robot going to take my job? In the early-on time, we were concerned with that in terms of our first deployments. What we found to our delight is that there’s a lot of pride. People, the employees out there, the warehouse workers that are doing this hard work, very proud of the fact that they have their system and their—one operator I spoke to one day, she was doing a selfie to send to her kid who is in high school. She was like, “Now I can send a selfie that I’m working with this robot,” and her high-schooler wrote back and was like, “Mom, that’s really cool. Can I work there at some point?” Who would think that? Who would think that that would be a world where her kid, her teenager would be excited to come do the work that she’s doing? Danny: – Exactly, and I think we’re seeing that play out. That’s awesome. That’s great. Okay, so great stuff here. I have one final question. This is a fun question. Here it comes. It’s the magic wand question; I’m going to give you a magic wand. You can solve one industry challenge, but it can’t be labor. It can’t be supply chain, and it can’t be my prospects, companies that I’m talking to, wide open, I need my solution. What would that be for you? Jim: – Okay, it can’t—and it’s one of my customers who we’re asking, or just anybody in the world? Danny: – Just in general. A lot of times people say, “Hey, listen, I wish procurement would just be like, go ahead. Oh yeah, this is easy to deploy. We need this; go.” Jim: – I will put it in this place of—I’ll use our general technology and capability and the thing that I wish was possible in the world. which is, we are still a long way off from robots being able to do things in the way that we look at, like you look at a future, sci-fi kind of a movie. I guess the one thing that I would wish for is an advancement such that the robots have broader capability from the start. I think about a couple examples. I think about having robots that are, I don’t know, going down the street. One of them is how, this notion of, there’s a few people working on this notion of delivery to your door. I think I want—maybe I don’t want this, but I think I want a world where there’s robots that are out there interacting more in the world with us humans and uplifting all of us. There’s a lot to be done in the world. You look around, and you think, “Why did somebody not pick that up,” for example, or whatnot. I suppose that’s my one, and again I’m thinking that world hunger is off the table in terms of answers that you were looking for. I think that that is one, and it will come someday, but I want it to be in my lifetime. Danny: – I think we’re beginning to see more and more of that. One of the funny discussions that I had on that topic with my son after coming back from MODEX, he was like, “Dad, they need to make a robot that can pick up my room and can clean up.” It’s funny, but you start seeing there’s more. You’re starting to see more things slowly roll out. Let’s take lawn care for example. Husqvarna’s got their robotic—and certainly the Roomba’s been out forever. Yeah, that’s interesting to think we’ll see more of these things slowly deploy out. I think safety is probably the big thing right now, but even more. You go to, what is it, I believe the airport in Cincinnati. They’re rolling out with a lot more of robotic solutions that are cleaning and trash. There’s a couple of things. It seems to be a good—they like to test a lot of things there. Jim: – I would say your son has a really good one, and if I had thought for a moment about my son’s room, because again it is such a mess. It’s not even—it’s just clutter. There’s a lot of projects going on in there. Yeah, I think that we live in a time where, just look back over a couple of generations and look at how the hockey stick, where this is going. It’s pretty amazing, and hopefully I’ll be able to live long enough to see other huge strides forward. What we’re doing right now is also incredibly exciting, so I’m happy for what I have. Danny: – That’s awesome. Well listen, I think it’s exciting. I think that world definitely is coming. It’ll be very interesting to see what that looks like, the world of the Jetsons that we were all told was going to be here in 2000. It’s a few years behind. But listen, Jim, I have really enjoyed our conversation and our time. Thank you so much for sharing your insights and your story and letting me sort of poke and prod a little bit, asking you some questions that may be relevant and on and off topic. I appreciate it. You’ve been a good sport, and I appreciated it. Jim: – Loved your questions. Thanks, Danny. Danny: – Alright, well thanks. Okay, well that wraps up today’s IndustrialSage Executive Series interview with Jim Liefer who is CEO of Ambi Robotics. If you’d like to learn more about what they’re doing, you can go to ambirobotics.com. There should be a link in the show notes or on the webpage or wherever you’re watching or listening. That’s all I’ve got for you today. Thank you so much. Listen, if you’re not subscribed, I highly recommend subscribing. Why? Because you’re missing out on great content like this that we do every week, and there’s even more stuff coming. We even have a really cool documentary series that’s going to be rolling out very shortly called Industries of the Future. You don’t want to miss that. That’s going to be fantastic where we’re highlighting what companies are using technologies to roll out, for solutions for their customers’ problems, things like computer vision and robotics, AI, bioenergy, all really cool stuff. That’s all I’ve got for you. Thanks so much, and I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Bob Kuniega of Lanco shares how the industry’s lean practices wax and wane, and how manufacturers need to improve their recruiting methods. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Hello and welcome to today’s IndustrialSage Executive Series interview. I am joined by the president and CEO of Lanco Integrated, Bob Kuniega. Bob, thank you so much for joining me today on the Executive Series. Bob: – Very welcome, Danny. I’m glad to be here. Danny: – Alright, well I’m glad to interview you. We met, we were at the ASSEMBLY Show. We were talking about this before, in Chicago in 2021. My dates are all—with all the Covid stuff, time has just gotten all messed up. But yeah, it was the ASSEMBLY Show in Chicago. I think we met you guys there. You guys have some pretty cool technology and solutions. I think you guys were showcasing a solution with a partnership you had with I think Stäubli at that point. And so anyways, caught our interest, started talking, and here we are. For those who aren’t familiar with Lanco, could you just give me a quick high-level of who you guys are and what you do? Bob: – Sure, great. So Lanco, we make custom automated assembly and test machines really for the assembly and the testing of small to medium parts. Been around over 35 years; we have over 8000 machines stationed around the world. What we do is we work typically with an end customer who has a product and wants to get it to market and wants to automate the assembly end or test processes. We’re doing the concept. We’re doing the design. We’re doing the build and then the eventual validation and certification and tests that the product is meeting form, fit, and function. We typically, because of the size of the products we handle and the expense of our solutions, we’re focused in on a couple markets. It’s medical; it’s consumer electronics, automotive, some commercial industrial so a lot of these specialty applications that can warrant the complexity and the cost of these automated systems. Danny: – Sure, absolutely, okay. Well I’m sure that you guys have experienced quite of—like a lot of companies in this space, in the automation space, just quite a huge boom relative to Covid. I know there was a lot of, the industries were moving towards a lot of automation anyways, but certainly basically gas got thrown on that fire. Bob: – Yeah, absolutely right. Covid, while it was an unfortunate thing for the world, it was a boost and a refocusing, I would say to our business. We were fortunate early on to build a number of very rapid solutions for Covid test card kits, so more the self, home versions. That really shifted our market segmentation and what we’re working on. But as a result of that and as a result of supply chain disruptions and rebalancing, especially in this market in the Americas, you’ve got a lot of manufacturers who have decided they’re not going to go to a low-cost country and then have that disruption, so they’re forced to build local to their customers. But then depending where you’re at, probably now anywhere in the world, it’s tough to get people, and it’s expensive to get people. That whole shift, that was the gasoline that put on the whole industry. And in general our end users have really lost this ability to do the integration themselves, so they’re looking for us and our partners, our manufacturing partners to put it together and give them the solution they want in the end, which is produce their product to serve their customers. Danny: – Yeah, totally makes sense. That’s a story that we’ve seen and we’ve heard play out constantly. What’s interesting, too, is as things shift, we’re seeing new trends and different things. I think the labor piece was something that was really interesting. I think that everybody thought coming out of summer, 2021, I know the big thing was, the federal unemployment is helping to keep people out, and as soon as that’s over, we’re going to be back to normal. And then all of a sudden it was just like, wait a minute. People aren’t coming back. Wait, what’s going on? It’s a super interesting thing as we continue to progress. It’s like the story continues to evolve. We’ll circle back on some more of this stuff here in a minute, but what I want to do at this point is just get to know a little bit more about you. We want to know about Bob. Bob, tell me; how did you get into this industry? Take me way back. Did you study this? Did you go to school saying, “Hey, I’m going to go into engineering”? What did that look like? Bob: – Well like many people, I guess you take a bunch of turns. It’s never a straight line. Danny: – Exactly. Bob: – I am a recovering engineer; I will admit that. But really, I first got into it because I wanted to be a pilot in the military. It was circa Top Gun-ish things, and for various reasons I attempted to go in a couple of times. The engineering was a big of a fallback and a level of interest. My degree is actually aeronautical engineering. Danny: – Okay, that’s very cool. Bob: – I ended up not going into the military. I ended up going to work for Boeing, so I was designing and making airplanes. Had a couple cool jobs there. But the aviation industry is a little bit cyclical. I was living in Seattle; probably more opportunities if I got laid off at Boeing if I was in Southern California, but in Seattle there were some periods when Boeing laid off people, and the lights were out in the city of Seattle. I ended up joining an industrial distributor at the time who was selling PLCs and sensors and VFDs and data acquisition systems. So I was selling back to Boeing, to some of the departments I worked in. That got me into the manufacturing side. I eventually went from a distributor to a manufacturer and then spent a good part of my time on the manufacturer side working for a number of public and private companies, domestic and international experience, things like that. For the bulk of my career I’ve been in and around this manufacturing space. It’s kind of come full circle. As a manufacturer I would sell to some of our customers. I would sell to people like Lanco. And now I’m in a position to take a leadership role within Lanco and building that bridge between the manufacturers I once worked for and the customers I would occasionally service and that bridge and putting a whole solution from various manufacturers together to common customers and markets I’ve had experience with. Danny: – Oh, that’s very cool. I have to ask you this follow-up question because you completely piqued my interest on this. Do you have your pilot’s license? Bob: – I’ve got hours; I don’t have it yet. That’s a post-retirement thing for various reasons. Quite honestly at my time at Boeing, I would sit up in the cockpit, and it’s kind of boring being a commercial airline pilot. The military route is gone. They’re not recruiting as many pilots anymore. It’s almost more boring now, because it’s so automated, than it is being a bus driver. Danny: – That’s very true. So I’m a general aviation pilot, so I have a small 1979 Grumman Tiger. It’s funny when you talk to—you hear some similar things about all the commercial pilots. They like, “You literally take off; you just hit buttons. You’re on autopilot, and we’re just kind of monitoring things and talking to air traffic control.” You get into general aviation, you get to do a lot more things and play around with it. It’s kind of like a glorified bus driver, is what I was told. Bob: – What I was always told because I would occasionally go on delivery flights or revenue-generating flights, and the pilots would say it’s 99.5% boredom and 0.5% sheer terror. Danny: – Yeah, it can be polar opposites, no in between. That totally makes sense. Well that’s good. I’m glad it’s mainly more boring than terrifying. Okay, well cool. Sorry for that pivot; it just piqued my interest. I was very curious about that. Going back into your career and how you started and progressed and where you are now, throughout that process, can you maybe share with me somebody or something that had just a really big impact in your career? It could be an event; it could be somebody, a mentor. I know normally there’s a lot, but if we could focus on one thing, what would that be for you? Bob: – I would say—I had mentioned previously that my first job after Boeing was working for an industrial distributor. One of the vendors that we represented, I went and worked for them, and then we eventually got acquired by Danaher Corporation. We were their first acquisition that became a platform which became their motion group. So I was there in the nucleus of that. I’ve got a lot of respect for Danaher. They’ve got some spin-off businesses as a result of the success they had which was the core Danaher businesses. But immediately when we got acquired, you got immersed in what they call DBS, Danaher business systems, and they had their own educational system. It was a lot about lean, Six Sigma thinking, some concepts of strategy deployment, and so it was about actually putting a fact-based, process-oriented, results-driven type strategies together. In terms of, that was eye-opening for me. And they’ve been wildly successful as a company. I appreciate my time there, and I’ve taken that plus little pieces all around my career and used it as I’ve gone forward. Like anything, when you use it more you get better at it. When you make some mistakes, you learn from that. But I would say that was, Danny, from a professional standpoint, a really pivotal time in my career. Danny: – Okay, another follow-up question, that’s great. You mentioned lean, Six Sigma. I’m curious as we pivot a little bit now into current challenges and things that are going on right now, obviously one of the big learnings and things that companies continue to see is this resiliency with supply chain and looking at just how fragmented things are right now. Relative to let’s say lean manufacturing, this is an interesting question I like posing and asking people. Do you think we’ve gone too far in some cases with lean manufacturing? Relative to maybe just-in-time and some of these other elements. Bob: – I guess it’s easy to sit in the moment and arm-chair quarterback. Certainly we’re being impacted by it from the supply chain disruptions. I think our customers are thinking about this differently now, so it’s not all just-in-time anymore. The challenge is, you can be very lean as an organization and efficient, but you’re still reliant on outside forces. And unless you can get all those people in the supply chain up and down to be as lean and as efficient as you, the chain breaks, and then you have a problem. That really got exposed during Covid. Stuff was quarantined; you didn’t have people. Stuff was stuck on the water. You couldn’t get it out of ports and things like that. I don’t know that’s—lean has to be in the right balance, I think, and it has to be put in perspective with all the supply chain inputs and outflows that you have to deal with. Danny: – Yeah, it totally makes sense. If we were looking at it in a vacuum, certainly hindsight is, well I hate to say this now, 20/20. Overused phrase now. But I just think it’s interesting, is companies rethinking that. You have to, obviously, because it’s like, wow. But almost the unthinkable happened. I believe we were talking a little bit before we started recording here just how companies are now re-shifting, say, “Hey, listen, we’re reshoring. We’re bringing stuff back.” We need to make sure that our suppliers are closer to us so we can reduce a lot of—instead of saying we’re going to have suppliers overseas because we’ve seen what’s happening with shipping and ports and other countries—there’s a lot of dynamics at play that—maybe is there a lean 2.0 emerging from this? Bob: – Yeah, I think it’s a—the pendulum shifted as you previously implied, to super-lean, super-efficient. I don’t think it’s going to go back to massive amounts of inventory, but they’re going to have contingency plans. They may make the same product, and we’re seeing it with our customers. They’re making the same product in multiple locations in the off chance that a site has a cyber-attack or a natural disaster happens. They’ve got some abilities to flex and shift how they run their businesses. But I think the next wave, this notion of chasing the low-cost countries, there’s very few places anymore that are left to do that—China, India, some of these places, or the BRIC countries that were in vogue 10 years ago. They’re all seeing labor increases, and then you add to it the cost of transportation and logistics. Where lean worked was, you had low-cost inputs. You had a very stable logistics channel, and Covid blew that all up. Now people are going back, maybe back to where they were 20, 25 years ago before they were chasing all this lean and high-efficiencies. So it’s not going to go back to where it was. I think the pendulum will be somewhere in the middle. Danny: – Yeah, and that totally makes sense. What are some of these other principal challenges? Labor and supply chain obviously are the really big ones, but concretely what are you seeing some of these challenges are for your customers right now? Bob: – Their challenges—I talked about how they provide us a product, that we have to help them assemble and automate. Engineering is a discipline in demand for us and for them, and so sometimes we see designs coming from our customers that are not really made for manufacturability. And if they are, I guess that’s good for us, but sometimes we lose projects because it’s going to take so much automation to fit their product. Then it becomes something that they can’t tolerate any longer. I think on the one hand it’s good for us because they don’t have the engineering talent, and sometimes they give us a lot of liberty and maybe bring us in early on in the design phase. Sometimes we’re actually not only designing automated equipment, but we’re giving them comments on how these components put together make a product are going to be difficult for us to give them the solution they want, so we help them redesign some things. In most places, universities aren’t producing enough engineers fast enough. It’s one thing to be academically a student and understand the ME side and the electrical side. It’s another thing to put it into a practical sense, and that’s a struggle our customers deal with. It’s a struggle we deal with. One of our challenges, quite honestly, is because we’re so intimate with our customers sometimes, we are an attractive talent pool for our end customers because they work with us for a year, two years on a machine. We go install. We live onsite with them until it gets up and running, and then they put opportunities in front of some of our employees. But it’s a challenge that every business has in terms of keeping your employees engaged and wanting to work for us rather than somewhere else. Danny: – I definitely can see that being a very big challenge, certainly, especially in today’s environment. You were mentioning that one of these challenges, that maybe a lot of your customers are losing some of this engineering talent they would have on staff. Is that something that was a result of the pandemic, or was that something that you were seeing beforehand? Or is that new? Bob: – Yeah, I think it’s just a slow degrade. Part of it is, they don’t have engineers. Part of it is, their side is leaning and outsourcing it all. They used to have, in many cases, their own automation teams that at the very least serviced the equipment. At the very most they actually designed it. But with few exceptions—Amazon is a company that comes to mind—they have their own robotics division. They do their own skunkworks. They’re taking some off-the-shelf products or designing stuff themselves. I think it’s just that slow degrade and students not knowing when to go into the engineering field, and maybe this automation and manufacturing side isn’t as sexy for them. They’re off doing something else software-related or somewhere else. Danny: – That’s something that we hear a lot. You hit the key word I think there. People, oh, it’s not sexy. We want the jobs out in Silicon Valley or the tech startups and the cool—I think personally the reality of it is, I think for a lot of people, there is a tremendous amount of innovation. Personally I feel like there is so much innovation going on that’s happening that’s really exciting, and it’s even more of an exciting time because of that proliferation and acceleration of all these innovative new technologies. Certainly the pandemic again, if you want a little bit of a silver lining, accelerated all this and pushed this to do new things. What I think is fascinating, when we look at the—you were talking about it. I can’t remember now if we were talking about when we were recording before or after, but talking about certainly with the pandemic. We have to focus on these automation initiatives because it’s hard to find labor. If you can find it, then we have the rising costs. I think part of the big challenge is when you mentioned maybe from a lean standpoint, companies going back 25 years from where they were, maybe bringing that pendulum a little bit more towards the middle, that because of these new automation solutions, and because of the labor that is not there, that we can really bring in a little bit more independence and produce domestically. There’s a whole geo-political—if we could look at that right now, energy obviously is a big point of conversation and looking at I guess this question of globalization. It’s naturally, you’re seeing all that come back, and I think because of this technology, that’s eliminating—it’s solving the problem that 25 years ago companies started saying, “Well, we’re going out because of cheaper labor.” That’s a problem they have over there now, so how can we do that here domestically? Well I think technology and using automation—it’s not going to be the end-all, be-all, but it’s certainly filling that gap is what I’m seeing and hearing. Bob: – Absolutely. But that’s not just to western countries. We have operations in—I just got back from Malaysia. We have an operation in Malaysia, and that part of the world is booming to service that market, and we’re thriving as a result of it. They want to deal with a company A, that’s global; check, we are that. But they don’t want to deal—we service most of our 8000 units have been made in this facility in Portland, Maine, shipped domestically, shipped around the world, but that’s going away rather quickly. It was interesting; I went to Kuala Lumpur right before I left Malaysia to a company I used to work for, Parker Hannifin. We had sold them several machines, and their first question is, “How is your facility? Is it up and running? Is it functional? Do you have design, manufacturing, and supply chain capabilities in Penang? Because we know you; we’ve dealt with you around the world. We want you to make our next machine here in-country.” So even in those areas we would say they’re maybe not as developed, the mentality is, buy local. Again, they want that interface directly with us. Teams meetings, Zoom calls are great, but they want to see face-to-face. They want to work collaboratively, and we need to be there not in a couple days but in a couple hours. The only way for us to follow these global customers around the world is strategically put our businesses there where we have the capabilities locally to service and support them. Danny: – Interesting. That makes a lot of sense, totally makes sense. For a focus for you guys, obviously it sounds to be like that’s on the roadmap for you. Start localizing a little bit where your key customer accounts and whatnot. Totally makes sense. So I’m curious; I’m going to move on to our magic wand question. I like this question because we get a lot of different answers on there. I’m going to give you a magic wand. It’s this pen; I don’t know. It’s a magic wand. You can solve any industry challenge that you see, but it can’t be labor. It can’t be supply chain. I may even add a third one in there; we’ll see. What would you solve? Bob: – There’s still a war out there for different proprietary or open networks in the connection of these devices. When I worked for global companies, we would push our one, singular message. But no company, no matter your size in an automation world, has all the products. And so we’re faced with this challenge of taking these disparate products from various manufacturers, all very good on their own, but the connection to one, unified solution, and then the requirement moving forward is you get into industry 4.0 to connect it up to the ERP level to get this full digitized solution is still in its infancy. If we could get customers, suppliers agreeing on some standard protocols because that’s where we get challenged in terms of, the customer sometimes does not have a specification or a requirement for certain products, and then that makes our job a little bit easier. But sometimes they have other lines that our stuff has to hook into, or they’ve got some standards for maintenance reasons. We have this hodgepodge of different protocols and different programming environments which makes it challenging for us. Thankfully we’ve been doing this for 35 years, so we know how to hook this together. But quite honestly it makes it challenging for them and expensive for them. That’s the magic wand. I know coming from the manufacturing side for 25 plus years, they don’t want to do it because they want to keep you into their solution. We’re getting there. There are some open protocols, but I think going down that path I think would speed up the automation, the digitization across the manufacturing platform, make it simpler, make it less expensive for everybody. But right now everybody’s in their camps and trying to proport why theirs is the best solution. Danny: – No, it’s great. Interoperability seems to be a big thing. It’s interesting too, with all the continued emergence of new technology that’s coming in, you take robotics for example. I don’t have the updated stats on there, but just the explosion of new technology in robotics companies. Even going to shows, like we were at MODEX in Atlanta here a couple months ago. I think going back to 2018, 2019, probably 2016 certainly and then 2018, you continued to see more and more and more. Then now it’s just like this massive explosion, but then everyone’s running, to your point, on their own protocols, so really tying in all of the stuff together. Bob: – And speaking of robotics, I’m sure you saw at MODEX. Now there’s these cottage companies that are growing up around that with a top GUI layer that communicates to multiple robots so that the user has one interface to look at, and they translate everything down to the different protocols. Danny: – Yeah, it was actually Mass Robotics, the non-profit in Massachusetts. Last summer they came out with an interoperability standard which I thought was fantastic, and they had several different manufacturers involved with that to be able to do that. Do you think part of solving that challenge, is that going to be really solved eventually through association and standards boards coming in from programming and whatnot? I’m starting to get into areas that I am not as familiar with. Bob: – Yeah, and that’s been, I think, the current path. I think quite honestly it’s going to be the end customer pushing. If you’ve got these strict, hidden standards, we’re not going to use it. I think there’s going to be multiple pressure points that are happening. I think manufacturers just have to come to a courage to say, “We shouldn’t have a proprietary protocol” because it doesn’t—in the end if somebody comes up with a better mousetrap, and speaking of robotics you’ve got these guys that are laying over the top of this. Their power in terms of having a solution but it is a proprietary solution, they start losing that power. I think like anything it’ll mature over time, so there’ll be these open standards committees which there have been for PLCs and other software platforms. But I also think there has to be some pressure from above from the customer set saying, “We will not use anything other than something that’s open and standardized.” Danny: – Well that makes sense; that makes sense to me. Bob, listen, I’ve really enjoyed our conversation. It’s been fantastic. We’ve covered a large swath of topics over a relatively short time. But I appreciate you just spending some time with me and our audience just getting to know a little bit more about you, a little bit more about Lanco. For those who’d like to learn more about you guys, I’ve got lancointegrated.com. Is that correct, the correct URL there? Bob: – Yes. Danny: – Perfect; we’ll make sure those are in the show notes and anywhere this goes so that if people want to learn more about you and your company, that’s where they can go. Bob: – Well great; thank you for this opportunity, and hopefully we can speak again. Danny: – I would enjoy that. I’d like that as well. Thank you again. It was awesome. Bob: – Alright. Danny: – Alright, well that wraps up today’s IndustrialSage Executive Series interview. Listen, if you liked that, make sure that you subscribe if you are not already. You can go to—if you’re not watching it on the website, you can go to IndustrialSage.com and subscribe there. You don’t want to miss out because there’s a lot of great content like this. You can learn about trends and things that are happening and learn about other executives and have some great takeaways from that. So that’s all I’ve got for you today. Thank you so much for watching. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Michael Giagnacova of CHL Systems shares on building relationships in business; and seeing challenges as new opportunities.   hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to the IndustrialSage Executive Series. I am joined by Mike Giagnacova, the CEO for CHL Systems. Mike, thank you so much for joining me today on the Executive Series. Mike: – Oh, thanks for having me. I appreciate it. Danny: – Alright, well I’m excited to get into today’s episode. For those who aren’t familiar with CHL Systems, could you give me a high-level, like who you guys are and what you do? Mike: – Yeah, so we design and build solutions that move, make, and pack the products that feed our country. That’s the short clip of what we’re involved with. Danny: – Excellent, alright, well I’m excited to get into that a little bit more as I suspect you guys—there’s a lot that’s been going on in that industry. We talk about food and packaging and just moving all that, so a lot of things that have been going on. But before we get into all of that, this is one of my favorite parts of the episode where we get to learn more about you. We get to learn about Mike. So Mike, tell me; take me back. How did you get into this industry? How did you get into this space? Mike: – Yeah, so I was kind of born into it. My father owned a company that designed and built custom machinery, one-off machines. You would come to us; you would have a need for something that you’d have to custom design and build. So at a young age I started working as a machinist, working for my dad in that industry. Then I went to night school, Drexel University, for industrial engineering and worked during the day for my father. Then when I graduated there, I went to the University of Pennsylvania. We are just outside of Philadelphia. The Wharton School had a management program, so I took that. I went through that, that application. Then from there, worked in various manufacturing jobs learning how to make products, learning how to market and sell them. Those early days of being a machinist really have, I’ve carried them all the way through my career. Understanding manufacturing has been a huge part of my career. Danny: – Yeah, absolutely. What I think is interesting is that you said your dad owned that business, right? He was creating machines, and you’ve got a lot of, I’m guessing, some entrepreneurial genes or certainly some learnings from seeing your father doing that. Talk to me a little bit about that. Is that accurate? Mike: – Yeah, it’s pretty accurate. My dad was—he’s still alive—a true inventor, a great engineer. He went to Drexel as well, so we have a family history of Drexel grads. He was a true inventor of custom technology. You just couldn’t help but be a part of that. That’s who we were, and so some of the technology that we would use was cutting-edge. No challenge was too big, so to your entrepreneurial thing. The greater the challenge, the more exciting it was. And so yeah, I have a piece of that in me, too; not as much as my dad, but enough to get me into trouble. Danny: – Yeah, that’s always the rub right there. Enough to get you into trouble. Well let’s talk about some of that trouble. What trouble has that gotten you into? Mike: – Yeah, so I’m 59. I’ve been in this industry since I was a teenager, and been in different management positions pretty much all my life. There’s a lot of learning. You’re dealing with a lot of people. How you work with people, how you learn from them, there’s always an experience to learn. It builds who you are. That entrepreneurial spirit, for me, is really probably more driven around growth. How do you continue to grow a company that’s conservative, but at the same time it’s controlled growth? You’re not just swinging 20, 30% one way or another, and then you’re dipping back down. I think probably through my years of experience, the biggest challenge is going to be, how do you build a sustainable growth model that builds a company in manufacturing? You’ve got to remember; when I started manufacturing, the percentage of manufacturing to service was 80 manufacturing, 20 service. Now that has switched to maybe 5% manufacturing, 95% service. That’s a huge dynamic change in manufacturing. Danny: – Yeah, absolutely, and it’s continuing to evolve, it seems like just certainly on a yearly basis. Certainly with Covid there’s been a tremendous amount of change with that. Still in the same vein of your journey with this, who has had—if you could talk to me about somebody who’s had a big impact on your career? I know there’s a lot, but is there somebody that comes to mind that really has helped to shape you, to help you, to where you are today? Mike: – Yeah, that’s a good question. I think it depends upon the lens that you look through. If you look at the entrepreneurial spirit, there’s no doubt it was my father. I grew up in that. From a management standpoint, I worked at a company for a number of years called Harold Beck and Sons. They made electronic control drives. There was a manager there; his name was John Miller, still alive. His management perspective was just rock-solid. He didn’t get too excited. He didn’t get too down. He was really focused on, how do we make everybody better? He was probably my manager when I was maybe 30; I’m 59 now. To this day, I still use phrases that he shared with me back then. From a business environment, I’d have to say he was a big impact. In my personal life there’s plenty of guys that go to my church that I’ve worked with that really come alongside me, help me with my walk. Those guys are rock-solid. They may not be CEOs or famous people, but their impacts are huge. Danny: – That’s awesome. That’s great. Alright, so let’s move to… pivoting here a little bit. What, on a daily basis, what keeps you super energized? What gets you, in the morning when you wake up, you say, “Okay, we’re tackling this, or “We’re doing that”? What is that thing that pushes you along? Mike: – I wish it was one thing. The challenge is, it’s multiple things. For CHL, I think one of the main things, and one of the real benefits that I really get out of working here is the people. Really strong technical craftsmanship-type people here, and so they really get me fired up because they’re the people you work with every day. I enjoy that; I enjoy interacting with them. I enjoy being a part of their day. The growth model, how do you scale and grow at a respectable rate? We just opened an office in Texas, so we’re leaning into that space. Those things fill that entrepreneurial spirit in you. Danny: – Yeah, absolutely. Let’s talk a little bit about industry challenges and things that have been going on. Obviously there’s a lot of things going on right now. There’s a lot of things that were going on because of Covid, stuff that was going on before Covid. What are those challenges that your customers are facing right now? Mike: – Yeah, so probably the biggest challenge that a lot of our customers are facing is the labor shortage. If you go back through 2020, 2021, through the height of some of the Covid period, a lot of our customers, they may be protein providers. They may have 500, 600 people in the plant. Just to keep their level of headcount up, it was a challenge. Moving forward, what’s that challenge going to be? It’s going to be continuing to find ways to automate, to help those workers out, to take some of the jobs that are really difficult on them, and how can we automate that? That’s a place where we can help them. As of just this last week or two, the price of fuel, that’s going to be a huge problem for all of us. We’re all going to deal with that challenge. That’s the people that work here and the people that work in those facilities. They’re going to pay more for gas. But beyond that, everything that we use that has petroleum, the price is going up. Plastics, stainless steel, anything that has that in its processing is going to affect everyone. Danny: – Yeah, unfortunately. Hopefully that’s going to be a—we’ll see. Hopefully that’s a short-term bump. I don’t know; we’ll see. There’s a lot of craziness going on right now, but let’s talk about how you’re solving some of these challenges for your customers. You mentioned a little bit earlier on, you have a partnership mentality when it comes to your customers. Talk to me about, what does that look like, and how are you solving those challenges for your customers? Mike: – Yeah, that’s actually a great question. The mindset of partnering with your customer is huge for us, and what does that mean? If you’re working with a customer that is going to engage in some level of automation, for that to be really successful, it has to be a close-knit communication, a trust both ways. It can’t be, hey, I’m just going to take the lowest bidder. You’re going to get the job, and do it. There’s got to be a long-term partnership that goes back and forth. Especially with automation, it depends upon what it is. It can be robotic automation. It can be hard machine automation that you’re going to design a specific machine that can do that. But educating everybody, especially the customer, on what does it mean to own this automation? And so when you look at that, that’s a long-term play. That’s not one order, and I’m out, and I’m going to go to the next. When you really work with someone as a partner, the trust factor is huge, but also the outcome at the end. In our industry for a number of years, a lot of customers were, they made a lot of decisions just on the return on investment. Well, you’re starting to see that change a little bit. You’re seeing some of that in years of return extending out. The real benefit is that people are starting to see the value of just having a close-knit partnership they can rely on. Danny: – I’ve got a couple questions I want to follow up with. One of them I guess would be, as far as a go-to-market strategy, are you guys working directly with customers? In other words, are you working through integrators or just directly with these customers? What does that look like? Mike: – Yeah, so we are working directly with the customers in 98% of the situations. There are some situations where we’ll come in as an integrator for someone else. The business model that we have is, we’re going to take the project from inception to engineering to manufacturing to installation to commissioning, and that’s kind of like our competitive advantage. In that model, we really want to have a connection with the customer to really be able to make sure you understand what the needs are and you’re providing that. When you go through another channel, sometimes that can be… things can get lost. Danny: – Certainly. Mike: – To your one question there about how do you go to market, for us it’s really important that we don’t have one category. This is how we handle every customer. We’re really trying to market to the customer that’s going to be the best fit. That’s a challenge, but for us that’s the best model. Danny: – Do you have any stories or examples, concrete, XYZ—you don’t have to name a customer, but here is the challenge, and how you would walk them through that process? I know you mentioned hey, we’re going to do design then engineering and manufacturing. It sounds like you have a whole suite of solutions and capabilities, if I understand correctly. You have in-house manufacturing capabilities. You’ve got a really, from soup to nuts solution that can be fairly custom. Is that accurate? Mike: – Yeah, so when you look at what we can provide—internally how we do it is we break it into technologies. We have one technology group that we call CPI which is conveyance and process improvement. Then we have another group which is design/build. Now, that design/build is like a one-off. You have a custom machine that you need us to take a look at, we’re going to design and make that machine. Then we have a robotics area which would be either palletizing or pick and place cell. Then the other area would be what we would call an equipment group which would be products that we’ve designed for people several times, and maybe you’re going to try to commoditize some of that. That’s a small piece of our business, but we’d like to see that grow. To answer your question, it depends upon which area it resided in. For instance, if it was in a CPI environment, it could be a protein producer that wants to change how they’re processing a particular product or a cut up line or something like that. They would come to us and say, “Hey, here’s our existing space.” Now I need to design you a whole new layout with some technology that’s going to produce that. We’ve done that several times. We’ll go in; we’ll look at what the requirements are. We’ll come up with a design, a layout, working with the customer to meet their needs. Then upon that, we’ll design that, make it, and put it in. The other model is if it’s a custom design build. The ideal scenario in that situation is that you partner with someone and say, “Hey, this has never been made before, so let’s work together. We’ll do an engineering study, and we’ll do some initial concepting to see if it’s going to meet the needs,” like a staged design. Then if we get to that stage, if it’s approved, then you go to the next. Each model has its own path, if that makes sense. Danny: – Yeah, absolutely. Obviously there’s a lot of automation companies and things out there. Now we’re seeing a lot of investment coming in. It was interesting; before the pandemic, it seemed like we were seeing a lot of consolidation, PE money coming in, just acquiring a lot of groups and making these bigger organizations and growing through M&A. How does your organization really stand out from your peers? What’s that competitive advantage? Mike: – Our competitive advantage is really going to be one, we’re high quality. We’re known for that in the industry. Most of the area, especially in the CPI, the conveyance and process improvement, is in the sanitary design. It’s in a protein plant that has to be washed down. The level of quality of your product, fit and finish, is essential to preventing any bacteria and those types of things. That’s number one; you make a quality product and good things happen. But the real advantage that we provide is the beginning to end. You’re going to come to us, and we’re going to work with you on what the concept is. How do we solve the problem? Then we have ownership all the way to the end. Where a lot of other people in the industry, they just—and you had mentioned earlier—they do one piece, then someone else has to take it from there. The advantage, especially in this climate when the labor pool is tight—you’ll be at some of these facilities where they may have had an engineering staff; now they no longer have that. They need to rely on partners to be able to provide that solution, not just a conveyor. Without a doubt that high quality, cutting-edge technology, and we’re going to be with you through the whole process. That’s our competitive advantage. Danny: – That sounds like a very strong competitive advantage. These are not simple solutions that you’re bringing. These are very complex challenges, and they’re high-dollar. These are operational, huge changes to organizations. It’s not something that you’re going to take lightly, I would imagine. I’m not a food processor. I’m not a manufacturer. But you’re not going to take that decision lightly. That sounds like a great value proposition, a competitive advantage to me. One of the things that I’m curious about, and this may feel a little off-topic, but obviously we were talking about a lot of changes. Labor is a big issue. It was an issue before Covid, but now certainly it’s a much bigger issue. It’s a critical issue. What other challenges and changes have you seen in the organization, whether that’s inside your organization or inside the industry, due to Covid? Mike: – It’s interesting; we talk about Covid a lot, and we talk about the challenges. It’s funny; as you look back, there was also opportunity. Danny: – Yeah, yeah. Mike: – And so for us, I just had this conversation the other day. We have a remote engineer in Ohio. I have a manufacturing guy who worked for us for 35 years who’s now working in Florida. We have an office in Texas with engineers and applications guys. I say, would we have had that if we didn’t have Covid? Covid taught us how to work remotely, taught us how to work differently. We were blessed to have some really big orders, and the technology, IT, infrastructure in-house to make that happen. It really has actually strengthened us. Moving forward, the same model that we use to try to partner with customers, we’re partnering with vendors. The last year was a really strong year for us. We needed to partner with other manufacturers to help us do that work. Those relationships are phenomenal, and so they’ll help us in our growth model. So yes, Covid without a doubt had a lot of challenges, but it also had some opportunities that we may not have actually taken. Danny: – I love that. I should’ve addressed that, what opportunities. I like how you took that and you spun it, and you showed what you’ve learned and how you’ve been able to grow and take advantage of those opportunities. I think that’s fantastic, and that’s interesting when you ask a lot of our organizations about that because you get some similar answers. It creates some other opportunities by doing that, certainly, but I think it’s interesting, as you mentioned. It creates a little bit more diversity from your portfolio or your talent pool. You’re able to go and work with other people that you otherwise wouldn’t be able to work with or hire individuals who—because you had geographic constraints that you don’t have anymore. I think that’s interesting. One last question, and I didn’t send this to you, kind of on purpose. I like getting the real answer here. I’m going to give you a magic wand. You can solve any issue that you want or take advantage of any opportunity for the industry, for the industry. What would that be? And it can’t say Covid, we’re solving Covid or gas prices right now. Mike: – Yeah, that’s a great question. I’m going to qualify the lens that I’m going to use. Danny: – Perfect. Mike: – It’s not going to be the lens of, hey, this is a poultry plant or this is a pork plant. This is a manufacturing facility. If I could take a magic wand and fix an issue, it would be to change people’s mindset that welding jobs, machining jobs, service jobs, manufacturing jobs, they’re not low-end jobs. These are careers, and our country has started to devalue some of those jobs. Boy, America would be so much stronger if we could continue to build that and build a manufacturing environment where we could make things here again. That’s my lens; it may not be yours, but that would be awesome. Danny: – That’s an awesome answer. Thank you for that. I have heard that several times, actually. It’s interesting, and I try to keep it open. It’s interesting because I think—I agree. And I’ll use ourselves as an example. Several years ago we never, as an organization, didn’t have a ton of manufacturing or engineering background. We came from a video marketing agency and was working in this space and learning and had a perception like you were talking about. Had that perception, oh, it’s dirty. I don’t want to do that. We want to work with the cool technology companies. But when you started getting into it, and you started seeing what was happening, and you see true innovation, that was eye-opening. It’s been amazing, and so I think part of it is exposing—we have to expose people to what is going on, the real innovation that’s happening. It’s not, “Okay, I’m doing this job.” The bigger impact that it’s having, and that there is real innovation happening. That’s exciting. I actually, just this morning—it was interesting—I was driving my kids to school, and we’re driving by this open—it’s very interesting; I don’t know. I’ve got to maybe digest. Maybe I’m talking too much to them about this stuff. There was this open field, big grass field, and the kids start talking about, “Oh, yeah, that’s a lot of grass to cut.” And they said, “You know, they should use robots, robot lawnmowers.” which are coming–whatever, that’s here. And they’re like, “Yeah, I think it could take—if we had one per mile, maybe if that would be enough.” What I thought was interesting, and they’re just discussing this among themselves, and they’re young kids. I think my eight-year-old or seven-year-old or nine—however old; it changes every year, so I forget the ages. Maybe they’ve got a little bit of an engineering mind, but thinking about that, it was interesting. There was excitement about how they were going to solve that challenge using robotics. Mike: – That’s awesome. One of the things we are seeing, too, is you’re starting to see engineers, young engineers come out of school and then want to get the hands-on experience. We’ve had a couple engineers who started out as a mechanical engineer, designing-type position, and move into a manufacturing engineering position because they need that hands-on, they need that piece of, “I’m going to make something,” and craft it which is really encouraging. Danny: – There’s something super fulfilling with that, to get in there. And I think there’s a learning that you don’t have without that. I don’t have an engineering bone in me, so I have a deep appreciation for that. I really struggle putting IKEA furniture together. I’m not a good litmus for that, but I think there is absolutely 100% something to that. Anyways, I love your answer. I think it’s fantastic, and I’ve really enjoyed our conversation. I’ll give you the last word as we’re about to close here. Is there anything you want to leave the audience with? Mike: – Yeah, I think it is easy to look at all the negatives and look at all the challenges, but it’s almost just as easy to look at the opportunities and see what can be done. We’re a relational company, and customers are becoming more relational. That’s a huge benefit because what you can accomplish together is far greater than what you can accomplish on your own. Yeah, so 2022 is going to be an interesting year. We’re going to have a lot of interesting things happen, but we’ll get through it, and we’ll be looking at the next challenge in 2023. Danny: – I love it. What I heard is there’s going to be a lot of opportunities in 2022. That’s what I heard. Mike, listen, I appreciate it. Thank you so much for your time. I’ve really enjoyed this. For those who would like to learn more about you, they can go to chlsystems.com. Is that accurate? We got the right URL? Perfect. We’ll make sure that that is in the show notes so people can learn more about you if they say, “Hey, listen, we want to learn more about these guys. They might be able to help us.” That’d be fantastic. Again, thank you so much, Mike. I really appreciate it. Alright, well that’s a wrap for today’s IndustrialSage Executive Series. I really enjoyed it. You know, there are a lot of great takeaways. Once again, that magic wand question was a big one, all about changing the perception around manufacturing, and it’s such a big problem. It’s a really big challenge, and we need to address it. We need to expose kids and students to the industry and show them and not tell them, but really show them with all sorts of internships and co-ops. I know a lot of them already exist, but we’ve got to do more. You can tell I’m a little passionate about this, but that’s all I’ve got for you today. Thank you so much for watching this episode. Listen, if you like this and you’re not subscribed, make sure you subscribe. You can do that by going to IndustrialSage.com, going to the Executive Series, and you can subscribe there. We have pop-ups, all kinds of things that come up to allow you to do that because you’re missing out on great content like this. Also, I want to put a little plug in for a new documentary series that we are in the middle of right now. It’s a mini-doc series called Industries of the Future that we’re partnering with Schneider Electric on. It’s an awesome exploration into the manufacturing and industrial space. We’re exploring digital transformation, AI, robotics, sustainability, and really looking at companies and talking with their subject matter experts and really seeing what they’re doing, sort of pulling back that curtain a little bit. It’s a little bit more exploratory, if you will. We’re not focusing on product, per se. It’s more about process and different things in there, so check it out. You don’t want to miss it. We’re super excited about it. That’s all I’ve got for you today. Thank you so much for watching. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Hear from Vince Martinelli of RightHand Robotics about his career journey, from coffeeshop management to startups and warehouse robotics. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Hello and welcome to the IndustrialSage Executive Series. I’m joined by Vince Martinelli who is the head of product and marketing for RightHand Robotics. Vince, thank you so much for joining me today on the Executive Series. Vince: – Yes, thank you Danny. Nice to talk to you. Danny: – Well I’m excited to jump into this conversation. I don’t think that we’ve had you on the show before. I know that we were talking about it a little bit before how I think we did a quick interview at MODEX in 2020, and I think you guys were part of that. That was fantastic. But first time on the Executive Series, so we’re excited. Vince: – Yes, thank you. Danny: – Before we jump into learning about you which is one of my favorite parts, if you could give me just a high-level on RightHand Robotics, who you guys are, what you guys do. Vince: – Yeah, so RightHand Robotics builds what we call a data-driven, intelligent picking platform for predictable order fulfillment. Now let me break that down just a little simpler, everyday language. Simply, it’s a configurable autonomous picking machine, and it can move individual products in a warehouse such as from an inventory tote. It might be coming from an ASRS-type system like AutoStore into an outbound order or a box. At that junction between the inventory storage system and picking the products flowing out of the building, the robot can move items. One thing that’s cool about that is an ecomm facility may have 50,000, 100,000, a million different products. Enabling a robot to pick and handle all those different things reliably is the secret sauce of what we do. Danny: – Wow, that’s awesome. It’s fantastic and super needed, obviously right now with ecomm growing exponentially, solving the big labor challenges, all kinds of stuff that I’m sure we’re going to get into. But before we do that, I want to—this is the part of the show where we get to learn more about you, and really this is one of my favorite parts. Tell me, how did you start your career journey? How did you get into this space? Were you always in robotics, in product or marketing? Tell me how things started. Vince: – Yeah, so coming out of college, my background’s in materials science, really semiconductor physics and so on. I got out of MIT, and I go into a semiconductor industry for different things. I learned a lot about designing of complex processor systems. Flash-forward another, I don’t know, key moment years later—well first off, I switched from R&D side of the world to business side and product and sales and some marketing and all these things when I joined Corning and got into the fiber optics business. Again, my interest there was more about the material science of the glass and how you make these things, and it was all cool. To cross over and work there, I kind of grudgingly took a job on the business side. Danny: – Oh, you went to the dark side. Vince: – Yeah, on the dark side, exactly. That’s the phrase. Found out I really liked it because there’s a part of communicating to people how that technology works and what you can do with it that I found I had some ability to take these complex things, talk to the PhD guys in the research lab, translate it into ideas and things that customers could gravitate to. There I worked on new products, so one thing that’s been consistent throughout my whole career is I’m always working on new products. While fiber optics was used for telecomm, we did things like work with a partner company to build a fiber optic gyroscope that was used in car navigation systems. So again, you never heard of that. Danny: – Wow, very cool. Vince: – 25, 30 years ago you could buy a Nissan car, one of the high-end models in Japan, and it had a fiber optic gyroscope as part of the navigation system with the fiber coming from Corning in the States here. That was really a cool application that was a lot of fun. We spent a lot of time looking for new market segments where fiber optics would be useful. Eventually that led me into some optical networking systems work and so on. The next big step was, I joined a start-up. So early in my career I was with big companies. This seems like a very logical step coming out of school, nice, steady career path. I meet a guy—we’ll talk about an influence that I had. I meet a guy on a flight, and we start talking about his company. It turns out they were potentially a customer of ours, but they were a start-up. I eventually joined there, but I learned a lot about networking and systems there. Now I know about how to design processor things, and I know a lot about networks. Years later when I start getting into retail and warehouses and fulfillment centers, all these things kind of come together. These are just networks and processors of a different scale and type. I probably spent, now, the better part of 25, 30 years just working on networks and processors and designs. It’s really fun. Danny: – That’s awesome. That’s pretty exciting and very interesting career path and challenge, going from materials sciences and then going over to product design, development, marketing, sales, all of that. I think that was pretty interesting about using fiber optics for a gyroscope for navigation. That’s interesting. Vince: – Yeah, and one other part—again, just to layer it in here, somewhere on that path—actually one other side bar is, after the optical networking company—I was with the company, we had an IPO, things went great, and I thought, “Wow, I’m going to go chill for a while.” I traveled, got married, and I opened a coffee shop. You might not have had that in my bio, but for a while I had a coffee shop near the beach north of San Diego, and that was exciting. I learned some capacity planning and supply chain issues and things from that business. It was there, the other thing I learned is a coffee shop, at least ours, was 365 days a year, and I could be there from 12 hours to 20 hours a day. Somewhere along the way my wife encouraged me to consider a new career path other than the coffee shop, and I bumped into a friend around that time who let me know about this company called Kiva Systems. A mutual friend of ours had founded the company, and I said, “Wow, I remember. I played baseball with a guy,” so anyways I reach out to Mick over at Kiva and scrambled, and I got a job there, joined when they had one customer. It was about 35 people. No one had dreamed of putting robots in warehouses really at that time. It seemed kind of crazy, so I took a chance with them. That turned out pretty well over time. So that’s a major crossover point. I went from coffee shop to warehouse robots in one jump. Danny: – That’s pretty awesome. What happened to the coffee shop? Did you sell it, close it down? Vince: – I sold it, and then eventually—the one positive outcome of that is, now I can make a really good cappuccino, and I’ve got a fall back plan if all this start-up stuff ever fails. I can be employed somewhere. Danny: – Hey, there you go. I love it. So you’ve got definitely an entrepreneurial gene or something in there for that. Was that something that came from family? Was it your parents or family members, they have businesses or anything like that? Vince: – Now that you mention it, if I think back when I made the decision to leave Corning and go to a start-up, this company called Sycamore Networks—I have an older brother, and he was part of Cisco Systems in the early days. In fact, he turned them down. He had a chance to join before their IPO, thought it was too risky and crazy. But he joined soon after, so before Cisco Systems became the giant networking company everybody knows, he joined when they were about 300 people or so. Anyways, when I was looking at that decision myself, he said, “Well, there’s no guarantees. Big company or small, there’s really no guarantees,” and he could explain to me in the early years of Cisco, there were good days and bad days and strong quarters, and there was always the concern that it may all fail at some point. You never know. But anyways, he encouraged me to take the leap there, and I think that made a difference. Again, I’m not necessarily saying either of us were entrepreneurial from the get-go, but when faced with the opportunity, maybe we have a little higher risk tolerance than most people, I guess. Danny: – Well I think that’s for sure. That certainly is a very common theme, and you have to. You have to have that. I’m curious; how has that—I think that that experience probably, there’s a lot that that has helped to influence the second part of your career as you’re moving in that risk-taking or that ability to see new things or other things that others might not. Is that something that you see now? Vince: – Yes, in fact it’s dawned on me in the last few years that I’m sort of an angel investor. I invest with my time at these companies. This will be my fourth start-up. The first three have two successful exits and one that we didn’t quite get there. You’re really betting with your heart, your soul, and your blood, sweat, and tears. I try to be pretty careful about which things I join and participate in. I think, again, the Kiva experience—of course, we got bought by Amazon. I worked at Amazon for a while. We actually helped redesign their template fulfillment center with Kiva as the engine, the picking engine in the middle. That was a great experience, nothing but favorable things from my point of view and my time at Amazon. Then you look at RightHand, and you say, “Oh, wow, this is another level of, could the robots make the item?” That first move, recently I did a talk somewhere, and I said, “The first mile, delivery, starts with getting the inventory out of the tote and moving.” Today the default is, you throw armies of people at it. It’s a boring job. It’s not a fun job. You stand there all day. You and I wouldn’t want to do that for too long, just stand there and move things, move the box all day. You can automate it. I don’t know; I guess sometimes from being on the inside of that industry and so on, I look at when I was looking a few years back for the next exciting challenge, and I got introduced to RightHand. I thought okay, this is coming up to an inflection point, and it’s a great time to get involved. Danny: – That’s awesome. Let’s talk about, you teased it and mentioned it there a little bit, but a big influence, somebody who’s had a big impact on your career. I know there’s probably a ton. I know for a fact there is a ton. If we could just boil it down to one person, and it doesn’t mean that this is the best one or the top one or whatever, but what comes to mind? Vince: – I’m going to name a guy. He’d be surprised if he ever listens to this. I may encourage him to, but anyways, Wade Rubenstein, great guy. I met Wade on a flight. We sat next to each other. I had gone to a trade show, again, in the networking space. It was called SUPERCOMM; some people may recall that one. Big show, and anyways the mission on that show was to sign up a particular customer for a contract and this and that. That kind of went sideways, so now I was flying home and thinking, “How are we going to explain this when we get in the office the next day?” The big deal didn’t look like it was going to happen. I sit down next to this guy Wade, and he had something with him that said SUPERCOMM, and I had a bag of literature and trinkets and stuff. We get to talking a bit, and I realize, oh wow, he’s at a company that could be a customer. They were a start-up. They were a couple of months old. As we talked—I learned later that he had seen me give a presentation somewhere and that he was already thinking that they needed someone with some of my background in fiber optics and stuff for their business. Anyways, within a few months, it turns out from that flight, from sitting next to him quite by accident, he reaches out. I get a job offer. I have to make that decision. Do I leave Corning, the really secure, well-known company at the top of that industry for this tiny start-up, 30-odd people. Again, I’ll throw one other name in there, Desh Deshpande who is a serial entrepreneur, who was one of the cofounders of Sycamore. It gave me some confidence. I met Desh and looked at his background and said, “Okay, this guy who always emphasizes dream big, think big and has gone on to a wonderful life and career of philanthropy,” past Sycamore and all. But anyways, with Wade, we hit it off, and we’re still friends to this day. It was really a changing point for me. He gave me the confidence to join the start-up, and then one of the things there was his focus on, if we need to do something, let’s do it right now. I’ll give you an example. We would get a resume in over the internet at the time; someone would submit their resume for a job we posted. This one guy, Jeff Lowe, Jeff sends in his resume. Wade comes over to my office, says, “The resumes hit two minutes ago.” He says, “This guy looks great. We should call him.” I said, “Really, we’re going to call him now? Doesn’t HR get involved? What happened?” “We’re calling him now.” We get on the phone, and we call him. He’s shocked because he just hit send five minutes ago, and we’re on the phone. He’s out on the west coast somewhere. We say, “Jeff, fly out for an interview next week; let’s get this going.” Within two or three weeks, he’s on board. Hey, if there’s challenges ahead, there’s white space on the calendar, let’s get it done and move fast. Wade was like, “If it’s worth doing, let’s do it right now, and let’s do it right, and let’s get moving.” Again, Corning was a really well-run company, all kinds of great things. But boy, that spirit was different. That was a shot in the arm for me. Danny: – That’s awesome. Great story on how you met and just that anecdote in terms of, let’s move now. I love that. That embodies that start-up spirit, and let’s go. What are we waiting around here for? Let’s move, and that flexibility you’re able to do that. Vince: – If we have time for one more, I’ll share another one. Recently we crossed paths, and he had a buddy with him. We shared the same story. 10:00 one night he calls me up and says, “Vince, any chance you can cover a meeting for me tomorrow? You’ve got to travel.” I was like, “Well Wade, tomorrow, really?” He says yeah, he had been traveling 100% of the time. He says, “My wife, she’s—I can’t travel tomorrow. I need you to help me out.” “Okay, where’s the meeting?” “It’s in Sweden.” So if I didn’t mention, our company was in Boston. I’m like, “Sweden, tomorrow.” He says, “Well the meeting isn’t tomorrow; you just have to fly out tomorrow.” “Okay, great.” So I meet him at the office mid-day. My flight’s at 5:00; we meet at 1:00. And I say, “Well what’s the topic of the meeting?” It turns out it was something that I didn’t know anything about. He briefed me for 30 minutes on it, and I’m going to meet the CTO of this company and resolve some critical issues. As I’m getting ready to leave, Wade says, “Oh, by the way—” he reaches to his bookshelf, grabs a book. He says, “Here’s a book on the topic; you can read it on the flight.” On the overnight flight I read the book. The meeting went well. We got the contract; everything turned out okay. Again, that was the spirit of the start-up we were in at the time. Danny: – I love it. That’s your consulting right there. Hey we got a—I don’t know what this is. I’m going to figure it out. We’re going to learn, and we’re going to go. That’s awesome. That’s a great story. I love that. Let’s pivot a little bit towards, talk about some of the industry challenges, things that are going on right now. Obviously I know we talked about labor. Supply chain’s a big thing right now. Certainly you were talking about the challenges of, from a picking standpoint that it’s so repetitive, but the reality of it is, what kind of a job is that? Now where we’ve got such a labor issue right now, I imagine that you guys are just, it must be crazy for you. Are a lot of companies saying, “Oh, my gosh, we need to solve this problem,” and they come to you? Vince: – Yeah, so let’s see. That’s absolutely true. I think, and again even before Covid, ecommerce, online shopping and so on was growing at 15 to 20% a year everywhere in the world. So eventually this puts pressure on—and again why does it put pressure on labor? I think no one ever thought about how they shopped. And again, if I said to people, “What’s the difference between shopping online versus going to the store?” Okay, there’s a few differences, but one of the big ones is, when you shop at the store, you provide some labor for free. You walk around, and you— Danny: – You’re the picker. Vince: – Yeah, you’re the picker. You’re the last mile delivery. Sometimes you’re the pack person too. You do all those tasks, and it’s somewhat efficient because if you go to the grocery store, you buy 50 items at a time or 20 or 50 or whatever, so your time trade-off, maybe it all makes sense to you. But when you order online a couple things happen. One is you start ordering things one or two at a time. Now you’ve exported that labor; you’ve outsourced it to somebody else, the labor that we used to provide for free. So that’s got to be accommodated somewhere. But distribution centers that feed products to stores mostly move items by the pallet or by the case. There’s some each-picking, break pack for certain goods or certain products, but it is the lower percentage of the overall volume of goods moved. Retailers all of a sudden have had this shift, and it’s been—again, I had the viewpoint from Kiva, Amazon, now RightHand. Over this last 15 years or so, people are having to deal with shipping ecommerce orders is entirely different from shipping goods to stores. It just flips things upside down. At 90-something percent, almost everything is by the individual product. Nobody buys a case, typically, online. And you buy them one item at a time, two items at a time. I’ll get 57 shipments to me over the next few months where I might’ve made two trips to the store before. I did a talk at that MODEX in 2020 where I said, “What if you projected this forward 10 years?” And you say, “Oh, my goodness, that labor content of picking things one at a time in the warehouse is going to skyrocket. There’s no way to find enough people. In fact, in the ridiculous endpoint of that, you would order it, and then you’d have to drive to the local fulfillment center to pick it yourself. That is shopping. Danny: – Wait a minute; that sounds strangely familiar. Vince: – Well there’s a point where—because the question I was trying to answer there is there a point where ecomm plateaus because you can’t just physically fill and deliver the orders? I’m sure other people looked at that at some of the bigger retailers and said, “Oh goodness, we’ve got to automate more than we were,” because even with conveyors and ASRS systems and a lot of these things, they automate chunks of the store, move, and sort in the warehouse but not really end-to-end. This is where, again, coming from telecomm, we built networking systems where you can pick up your phone, it goes to a cell tower to a back hall network to the main network across the world, all the way to someone else’s in milliseconds, and you’re connected. The grid’s network has got delays and buffers and storage and things, but even within the building which is sort of like a motherboard to a machine if you will, there is a lot of inefficiency between zones. If you can automate the interconnections in the building, it just sort of reduces friction, reduces cost, makes it simpler to fulfill the orders. Then again, I think for people who are doing that job today, we haven’t yet solved the automated delivery side of things. You can go from being a picker to a delivery driver. It might be a better career, better job. There’s all kinds of opportunities there. This is like switchboard operators switching to other jobs 50 years ago or something. The picker at the ASRS port maybe is just a temporary job patch for the last 20 years or so, just an artifact that you couldn’t automate it end-to-end at the time. Anyways, I think there’s a lot of opportunity and change there, mostly for the good, I think. Danny: – Yeah, absolutely. I agree, and I think it’s exciting. It’s interesting. Obviously things were—you mentioned at MODEX, this was pre-pandemic, sort of, I guess. It was right before everything went nuts. Obviously things were—what do they say? The puck was going that direction anyways, but then obviously it really accelerated. I think it’s fascinating as technology increases and it creates that ability. I remember some of these delivery services that were rolling out, or trying to roll out in the ’99 dot com era, and then even beyond that. It was so exciting at that point. Oh wow, one day, this is cool. Then it was just too early. The technology I think was too expensive at that point. The internet just wasn’t as prevalent. It just wasn’t the right time, but what I think was crazy, oh, just wait a few more years, and wow. Vince: – When you listen to—and I listen to some business podcasts and things. After companies are big and they’ve succeeded, it’s easy to say, “Oh yeah, we knew all along how things were going to play out.” But most of the guys, when they’re really pressed, and there is this one particular podcast that I listen to sometimes. When they ask the person, was it hard work? Was it brilliant intuition? Was it luck? Was it timing? It usually comes back to luck and timing, for start-ups anyway. You’re not driving the whole world. You’re not driving the trends or whatever. Hopefully you’re at the right place at the right time and then reacting and iterating and evolving. It’s never going to be quite perfect, and you’ve got to be ready to adjust. Yeah, same thing for us and, again, Covid. On the challenging side for us, we went from a company where everybody went into the office every day and worked to 90% remote, and now we hire people in other parts of the country or other parts of the world to work for us directly which we probably wouldn’t have done before. Some of our projects where we would have had engineers on-site, we have projects in Japan. Travel gets closed off, you can’t go there. Now we’ve got to train the customers and the partners that we have to do things that only our engineers would have been doing before. We had to accelerate that which pulled it in by a year or two from what we would have done otherwise. To keep the business going we turned a lot of things inside out and upside down, and here we are. We’re on the other side and still in a position to play to win. Danny: – Yeah, that’s awesome, and it’s exciting. I think you’re right about the luck and timing, but then pivoting, innovating, that continuous improvement piece. Speaking of pivoting for a second, I’m curious. As you are doing marketing—head of marketing and product—I’m curious. I’d love to talk a little bit about marketing for a second. One of the things that we constantly hear and I think that everyone is curious, trying to figure out, go-to-market strategies, where do we put the investments? What do we do? What is working, and what isn’t? We’re in such this environment that has been so consistently inconsistent, I think, over the last two years in particular. Let’s take trade shows for example. It seemed like summer of last year they were really starting to open up a lot more, a lot of stuff in the fall, and then as winter came, Omicron, everything just really nosedived. Early Q1 I know hearing about NRF was super low. CES was super low. We’ve got, as we’re coming out of this stuff, I feel like my general sense—if I looked at my little crystal ball, but it only goes about six months out. I feel like hey, things are opening up. Trade shows are going to be back, whatever. But I’m curious. What are your thoughts on that, and how have you guys been handling this whole—feel like you’re learning to drive a stick shift for the first time. First gear, second gear, you know. Vince: – I think again on our marketing side we always have a bit of a portfolio of investments. We got digital and social media, website, these things. We’ve got events, trade shows, things like this conversation. I think for a start-up, one of the things in the early stages—and when we onboard new employees at our company and I do a training on marketing for people, I say, “Hey, we can’t presume anybody’s ever heard of us or knows what we do.” We’ve got to get out there and evangelize that and keep that out there. In the earliest days of our company, if you’re familiar with the crossing the chasm model of technology adoption, well the innovators and early adopters are looking for people like us. Inbound marketing works pretty well because people are seeking out that next new thing. They want to be the first ones to use it. Now as we just raised some funding, we completed a Series C, and we’re on a new growth trajectory. So now we’re looking at things like account-based marketing which is the buzzword for, how do you really target the right guys in the right industry, right company, who are likely to be your qualified customers and again, maybe haven’t gotten comfortable yet or know enough about your company to pull the trigger and reach out to you, so can you start to take that to them a bit. Then the trade shows, we’re cautious about, we don’t have all our eggs in that basket. We went to NRF recently, and actually I think the other thing about our business model, we have two paths to market. One is selling direct to the end customer, the end retailer. But many of those firms work with system integrators, so we’ve been developing a partner program and channels program where we’ve been designed in with the system integrator, and when they sell the automation suite for the whole building, it will include some robots, our RightPick system from RightHand. At these shows we are meeting end customers but also integrator partners and companies to work with, so there’s value to that. Again, we’re playing on two or three levels and thinking about how to place our bets. There’s no one—you and I talked briefly earlier. There’s not one, single solution here. There’s not one-size-fits-all, so where you’re at in the market adoption curve, scale of your company, resources you have, it’s wise to not load up 100% on any one channel. The trade shows are important I think too, by the way, because we also see media there, analysts there, and other people, so back on that brand recognition and the awareness that we’re out there with something useful. This is a chance for us to get that message out, and we hope there’s enough customers there to really generate some pull from them as well. Danny: – Yeah, absolutely, I appreciate that. It’s good. Like you said, you’ve got to have that diverse portfolio, especially in a world that’s constantly changing. Let’s be honest too, the marketing and sales world too has been shifting especially when you look at all the MarTech and everything that’s been going on. It’s exciting. One of the things—congratulations on Series C. That’s exciting. And I should’ve asked this beforehand but totally did not. How long has RightHand been around? When was the founding of the company? Vince: – Yeah, 2015 was the official founding date, so about seven years now. We are right around 85 people or so, and again I think as we look forward, one of the big things on our plate this year is, we’re going to probably double headcount size, give or take. Recruiting, finding the right people, there’s all kinds of… It’s been—what’s the right word? Exciting for me to see in the last several months in particular the kind of quality of people we’re able to find and recruit. It’s a real competitive market out there. Danny: – Oh, yeah. Vince: – We have an interesting technical problem to solve. We have a really good culture of the company, and it’s really exciting the kind of level of folks we’re getting and finding. And then again, opening up our recruiting where some jobs don’t have to be in the building every day. We have people living all over. This is a new challenge by the way too. If you said, “As a competitive edge, how do you manage a team of 100 or 200 people when a good chunk of them never visit the office or see at once every three or six months?” They’re not even in clusters. An older model would’ve been, oh yeah, after we’ve got an office in this city, make people go every day. But no, this is everybody working like I am today from a room in their house somewhere. How do you keep that cohesiveness and interaction? This is something—we’re not the only guys trying to figure that out, but we’re actively and energetically putting time and thought into that to make it as good as we can. So far it’s pretty encouraging. Danny: – That’s awesome. That’s exciting. What I’ve heard too from other companies as well as you were mentioning earlier, the whole work from home now opened up to, well we probably wouldn’t have done that, but then now we have this diverse talent pool that we can draw from because of that. I don’t have to look at just these geographies to be able to hire new talent. We can go beyond that. It possibly opens up to more capabilities than what we had initially thought. The trade-off being, as you mentioned, that obviously is a big challenge to how do you instill culture? How do you—you mentioned cohesiveness. I think it’s lots of pros and—I still think they’re pros. It’s just, they’re opportunities versus challenges. How do you make that adjustment? I think that’s interesting. What would you say—2015 you guys started. There’s a lot of other robotics companies out there. We’re just seeing lots of activity, lots of VC money, lots of stuff going on. Relative to your competitors, what is your real strong competitive advantage? Where is your points of differentiation? Vince: – We talked a lot about the fact that we provide a picking machine. Again, at one end of the spectrum there’s folks who provide some aspects of the software so the vision system can work, but then you need other partners to pull it together into a machine, and then it still needs to be integrated to other things in the warehouse. We think our business model where we’re bringing a vision, the gripper, the AI intelligence, all together in one package, in one module, we think that’s a differentiator for many people. In the early days we didn’t talk about it as much, about our gripper. It doesn’t look like my hand, but I have to do that when I say gripper. Danny: – That makes sense. I like the visual. Vince: – The genesis of our company comes from a group of researchers, our founders, who were working on robotic grasping and manipulation in their PhDs and post-docs. The worked on a DARPA challenge and won this challenge of designing a gripper that is really good at doing complex tasks, so picking things up and so on. When they started the company, actually we would sell—when I joined in 2017 we were still selling kind of a research-grade gripper to academic institutions. This picking and warehouses is the main thrust, and so we sidelined that other business there. For a few years we didn’t want to get confused and have people think we only sell grippers because we weren’t a gripper business. We kind of downplayed on the marketing side and said, “I don’t want to talk about grippers all the time because then people pigeonhole us.” Now as we look ahead, we’re like, oh, no, our gripper, which has a suction cup like every gripper out there has to singulate and pull items up. But then we have some flexible, compliant fingers that really help stabilize items so you can move fast. You don’t drop things; You don’t fling them, with have sensing integrated into the grippers, so there’s a lot in our gripper technology. Again, over the years I’ve been with the company, other picking companies and other people have approached us and said, “Hey, can we license the gripper? Can we buy the gripper?” It’s like, “Well no, that’s ours.” An indication that, oh, we might have something special there. Danny: – That is, yeah. Vince: – Sometimes competitors want to buy it or license it from us. Then I think it depends on the competitor, but we just have a single-minded focus. This is the only line of business for us. There are large companies and traditional system integrators who will start up a robotics activity. They hire really bright guys, capable people and so on, but you mentioned the funding. We’ve raised 90-something million dollars, so if you want to build a really great, autonomous picking system which is as different from a factory robot as an autonomous vehicle is to a traditional car—it’s a whole different thing—if you want to do that, you’re not going to do it with three guys in the lab somewhere, even if your company’s got 10,000 people. It’s how many can you apply to this problem, solving it and doing it well and productizing it? We’ve got our, closing in on 100 people. That’s all we do. So I think that focus, it depends on which competitors and who you’re talking about in the landscape, but the kind of solution we’re providing, the fact that it’s designed to work and play well with integrators, the gripper, these are some of the advantages we’ve invested in, but then because we see that they’re differentiating us with the end customers and partners in the market. Danny: – Excellent, sounds good to me. Very interesting. I love when you were talking about with the grippers, too. You say, hey, I think we’ve got something here if we’ve got competitors wanting to license it or buy it or what have you. I think it’s great. Like I said, congratulations on the closing of the Series C. Sounds like that’s going to go a lot into R&D to continue to grow and to solve these challenges like you mentioned productizing stuff. Vince: – Engineering and recruiting, don’t forget recruiting. Danny: – Oh yeah, a lot of recruiting. So if anyone’s out there who’s interested and want to say, hey, listen, interested in an opportunity. We might know a company that’d be interested. Vince: – Yes, thanks. Danny: – Excellent. Vince, listen, I’ve thoroughly enjoyed our conversation. We have covered a wide spectrum of topics over probably 40 minutes or so. I personally really enjoyed it. I loved hearing your story, your background. I loved hearing about the airplane story—two airplane stories that you gave us, one how you met Wade initially, and then the second airplane story on how you had to read a book and school up on whatever topic that was. Came in victorious. Closed the deal. Vince: – Yeah, it was gigabit ethernet. Talk about a book that’s tough to read on an overnight flight, it was everything you needed to know from an engineering standpoint about gigabit ethernet standards. Danny: – Okay, that sounds—yeah, very good. Vince: – I made it through, cover to cover. Danny: – That’s awesome. Well we talked about that; we talked about industry challenges. We talked about you guys, your competitive advantage. We talked about a lot of things. I think we’ve got a lot of information here, and thank you again for your time. I’ll put out there, anyone who is interested, like I said who is watching or listening, if they want to learn more about you guys, they can go to righthandrobotics.com. Sounds like you guys got a lot of things going on. Thank you for your time. Vince: – Yeah, thank you very much, Danny. I really appreciate it. This was fun. Danny: – Alright, well that’s a wrap for today. We covered a lot. I especially loved hearing Vince’s story and the fact that he owned a coffee shop and very clearly has an entrepreneurial spirit having worked with so many start-ups over the course of his career. I loved hearing that RightHand Robotics story, what their value proposition is, how they’re differentiating themselves in the market. It’s exciting to see as we continue to see more innovations and solutions in the industrial space to address labor and supply chain issues, and I’m excited to see what the future holds there. Well that’s all I’ve got for you today. Thank you so much for watching or listening. Listen, if you’re not subscribed on the series, you need to make sure that you jump on that today. If you’re not on IndustrialSage watching there, maybe you’re listening on the podcast. Go to IndustrialSage.com; you can subscribe because you’re missing out on great content like this. You don’t want to miss out anymore, so get on that email list. We’ll send you an alert when this comes in. So that’s all I’ve got for you today. Thank you so much. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Mike Willoughby of PFS discusses his winding tech career, and how he’s seen the ecommerce market evolve since even before the internet. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello, and welcome to today’s IndustrialSage Executive Series. I’m joined by Mike Willoughby who is the CEO of PFS. Mike, thank you so much for joining me today on the Executive Series. Mike: – Oh, it’s my pleasure Danny. Thanks for having me on. Danny: – Well I am excited to jump into today’s episode. So you’re coming in from Dallas, Texas, and for those who are unfamiliar with the weather going on right now, we were talking about beforehand, you’ve actually got snow going on there. Mike: – We do. It’s unusual. Texas is not known for having a lot of snow events, but this is our second this year. We were actually talking earlier about the one we had last year, so we’re definitely not getting a repeat of that, thank goodness. Nobody wants to spend a week with spotty power and the kind of freeze that we had a year ago. So just some nice, pleasant snowflakes going on outside my window. Danny: – That sounds nice, not like what you guys had last year. So glad it’s— Mike: – Definitely not. Danny: – And like we were talking about here, it’s crazy because it’s 70-something degrees over here. Whatever you got’s coming over here, so we’ll see what happens. – Have fun with that. Danny: – Thank you. Alright, for those who aren’t familiar with PFS, what do you guys do? Mike: – Well, so PFS provides order fulfillment services, to put it simply. We provide for our clients a premium order fulfillment solution, so if you think about brands that care a lot about their unboxing experience, what it really means to get, say, a Chanel health and beauty product or a high-end luxury jewelry item, you’re probably not expecting that to come in just a plain brown box with a bunch of air pillows around it. You’re probably expecting that it’s got some boutique-caliber experience. We do that for our clients. It’s a very non-Amazon kind of experience where you would equate that with, if you were going to a boutique and you were going to shop that boutique, you’re going to carry that package out. You’re probably spending a decent amount for the product itself, and the experience that you’re going to have when you actually receive that product yourself if you’re shopping in the store, you want to have as much of that as possible if you’re going to receive that package on your front door delivered by a courier. We provide a fulfillment experience across both the way that we manage the order as it comes into our systems, the way that we process payments, ultimately the way that we take the product out of our fulfillment centers, package it appropriately for each brand that we support, and then tender it to a carrier to get it to your doorstep and then provide the customer service that goes along with that, if you have a question about your product. And we want to do that in a way that reflects the brand, that we are not in the way of that at all. You’re never going to see the words PFS on any kind of packaging, on an invoice, your interaction with a customer service agent. Our intention is to be on-brand and reflect the brand that we’ve been entrusted to support. So that’s what we do. Danny: – Excellent, very cool. So yeah, very different than a traditional Amazon experience where the experience is the big piece of value, right? Mike: – Right. Well, you know with Amazon it’s all about efficiency, and they do an amazing job of creating an efficient transaction. We want to be efficient, but at the same time we want to create that exceptional experience. It’s the mission of the company to provide exceptional experiences for our clients and their customers. Danny: – Very cool. Well, I’m excited to get into that a little bit more because this sounds a little bit more unique than some of the other companies that we’ve been talking to where it’s all the same sort of thing. Obviously you’ve got different packaging sizes and whatnot, but it sounds like this is very much different. So we’ll get into that here in a second. But now is the section, the time where we get to know more about you. We want to learn more about Mike, so Mike, tell me. How did you get into this space? Take me back. Did you go to college for this? Did you, as a kid, say, “This is what I want to do”? What was that? Mike: – Yeah, I think probably like a lot of entrepreneurs, like a lot of business leaders, my journey is a bit of a winding journey, and I certainly didn’t—was sitting in my first grade class think, supply chain, logistics, transportation, those things sound cool. I want to go do that. In fact, it wasn’t until I was actually in college, my sophomore year, that I stumbled on technology as something that I really loved and that I had an aptitude for. One of the things that I think we’ll probably talk about is influencers. Who influenced you in your life? I think about a professor who recognized something in me and said, “You’ve got a real knack for technology.” And we’re talking about early 80s when I was at university, so technology wasn’t the kind of immersive, ubiquitous sort of experience that we all have today. That’s what got me started on the current journey that I’m on is an aptitude for technology and for solving problems using technology. I went and got my degree in information systems. I started my career with a consulting business that I started while I was in school. I really started that business out of necessity because I was in love with my girlfriend at the time and wanted to get married while I was still in school, and the only way that was going to happen is if we could earn a living while we were actually trying to finish out our degrees. I decided I better start a business and make some money. I did that by doing some work around the oil field, helping oil and gas businesses that were in the area of Texas where I went to school, and just put that sort of expertise to work and started to help people solve technical problems doing some programming, doing systems administration, that sort of thing. That small business grew into my first business that was all around custom programming consulting, that sort of thing. I sold that business to my partners in 1994 and started a software company that was oriented around commerce. We didn’t call it ecommerce at the time. In fact, the software that we actually created was a CD-ROM based application where you put a catalog on a CD and shipped it out, and along with that your pricing tables and everything went out for the specific customer. It was an early version of ecommerce, but it wasn’t HTML and browsers. It was based on CD and an application that we shipped. But a couple years after we started that company, it became obvious that the internet was going to take over providing content. Instead of getting a CD-ROM, you could actually just go to a browser and pull up the content. So we converted our application into an ecommerce application, and really the timing was perfect because it was the dot com boom at the end of the 90s. And so one of my biggest customers was a company called Priority Fulfillment Services, we now refer to as PFS. They were using my software to help their clients solve ecommerce problems in the late 90s, and we were so successful that the CEO of the company at the time came to me and offered to buy my company out in order to have access, exclusive access to the software that we were providing. And in 1999 it seemed like the perfect time to join a company whose focus was on ecommerce. That’s what got me into logistics is the application of technology to this ecommerce problem. I guess the rest is history as far as PFS is concerned. The last 22 years have been an amazing journey as we participated in dot com boom and a lot of bleeding edge kind of things to what does it look like to have a mature model and to do ecommerce 22 years later when it is rapidly becoming the way that people want to interact with the brand? Danny: – I think that’s a fascinating story. A couple of questions that I wanted to circle up on, I think it’s very interesting about the, particularly around the dot com, the 99 boom. But there was also not just the boom; there was also the bust. We had a lot of failed dot com companies that came in. And I am curious; did PFS, when did they start? Mike: – Priority Fulfillment Services was actually started by a wholesale distributor called Daisytek International in 1994. Danny: – Okay, alright. Mike: – And the purpose was to provide fulfillment services to the kind of clients that Daisytek had which are IBM, Hewlett Packard, Dell, basically high-tech products and consumables. And so we provided fulfillment services, customer care, and order management back in the mid-90s. As the company grew, as the subsidiary grew, we started to have brands approach us that had an idea to sell online but had no clue how to actually deliver a product that was sold online. So they were asking us to solve those problems around actually fulfilling orders that they were taking through their websites. And so we started to have clients that have product categories that were way different than anything Daisytek had. We had investment bankers that were working with Daisytek who came to the parent company and said, “We think this subsidiary that’s doing $30 million a year is probably worth four or five times as much as the parent company,” which everybody thought was ridiculous. How is that even possible? But they were right. We did a spin-off of PFS in 1999. I joined shortly before the IPO, and they were right. This $30 million fulfillment services company that was not profitable had a billion-dollar market cap in early 2000. March of 2000 happened three months later, and just as quickly as we shot up, we shot down. But the thing that really sustained the company was the blue-chip clients that we had, the folks like IBM and Dell and Hewlett Packard. They had the staying power where some of these dot com booms that became busts were gone overnight. So we were really fortunate to have the blue-chip clients that we had. Danny: – That was my next question. I was curious. Hey, what was the secret sauce that kept you going? That’s pretty interesting. Obviously you had those guys in your pocket, and you were servicing them. That was helpful. Fascinating actually, really, really interesting stuff. I want to back up a second. You talked about how you started the company—I want to make sure I heard this right. Did you start—you said the first company. Were you in college when you started that? You said, “Hey, the motivation was I need to start a living.” I find that interesting because we’re talking about entrepreneurship there. Is that something that you were predisposed to? Did you come from a family of entrepreneurs? What did that look like? Mike: – Well, so I didn’t necessarily come from a family of entrepreneurs. I came from a family of people who felt like it was important to stand on your own two feet, so to speak. My grandparents were farmers and ranchers. My father grew up in the oil field while he had a technology-oriented job. It’s very much an industry, and where I grew up in west Texas is a place that inspires doing what you can to support yourself and stand on your own two feet. My parents encouraged me at a young age to try to provide for myself and the things that I wanted to have. What are you going to do to earn those things versus them being given to you? Paper route at an early age; I worked in a restaurant busing tables in order to afford my first car when I was 16. That kind of work ethic I think maybe you might describe it morphed into entrepreneurialism in college where my giftedness sort of crossed with the need to support a family, at least the two of us that were starting our family. It just seemed like the obvious thing. Here’s a passion I have. Here’s a giftedness I have. Here’s problems that need to be solved, and I really loved to solve those problems, so why not combine the thing I love with making some money? It just lit a spark. It lit an entrepreneurial spark that has served me well, not only in the two businesses that I started, and the second one I ultimately sold to PFS to join this organization, but just thinking about how innovative this company has to be in order to thrive in such a dynamic industry. If you are an adrenaline junky like almost everybody who works at PFS is, this is a place that just feeds that because it’s always changing. There’s nothing ever status quo about this business. And if you’re going to rely on status quo, you’re going to quickly be out of business. Danny: – Absolutely, yeah. Yeah, those who don’t innovate, die. I think it’s fascinating on the entrepreneurial standpoint that it wasn’t something necessarily that you were predisposed to. You mentioned work ethic. How did you decide to start your first—were you just, okay, I have this problem. Alright, I need to do this. I need to make some money over here, and I want to be able to support a family. I’ve got some good skills here. What was that decision like? Obviously some opportunity presented itself, and you said “Hey, I think I can”—because not everybody just, in college, says, “Hey, I’m going to go start this business. Let me go start doing that.” What was that for you? Mike: – Well my story I think is probably going to be similar to a lot of people’s story which, sometimes it’s more important who you know than what you know. The way that I got started was, frankly an influencer in my life, the department chair of the information systems department at Abilene Christian University where I went saw something in me, and he actually had a friend who was working, had an oil-based business in town. He said, “My friend needs help, and I think you could help them. I know you know the programming language that he uses to run his systems, and he just needs a little bit of help, so can you go talk to him?” So we had lunch and talked about his problem and said, “Sure, I think I can help you.” I got in and made a change to a program, and anyway, he said, “Wow, really appreciate that.” He paid me $500 for two days’ work, which I thought was amazing at the time. Like, wow. Danny: – Yeah! Mike: – I’m going to get rich. But one thing led to another, and it was word of mouth that, helping him solve that problem and some more problems that he had. Then he referred me to somebody else, and pretty soon I had a business. It’s part jumping on an opportunity, but it’s also part having somebody who is connecting you with other people or somebody who has a problem that can be solved, and your talents can be put to work. I am definitely not the kind of person who says, “I am a self-made man,” or, “Pulled myself up by my bootstraps,” or anything like that. There’s a lot of people who were helping along the way to get me to where I am today. Danny: – That’s cool. I love hearing stories like that. I think it’s fascinating. It reminds me; you were mentioning oil in Texas. There’s a story that I heard recently, actually, of two college students in Houston—I believe they were in Houston—and they are doing bitcoin mining. They’ve created this bitcoin mining basically out of a shipping container, and they’re deploying them on oil platforms I guess because the natural gas that gets—I guess when they’re drilling for oil—I’m not super into oil. I don’t understand all of it. But what I was told is that you hit some natural gas; they have to burn it off. And so these guys said, “Hey, wait a minute. Let’s turn that into some energy. We’re burning it off,” and I think they did 4 million in bitcoin mining or something this last year. It’s opening up this whole thing. I think that’s really interesting. Mike: – Yeah, and how somebody would take an old-world industry like oil and gas production and the most high-tech industry you could think of, bitcoin mining, and somehow create some combination that makes sense. I’ve often looked at the flare on an oil platform and thought the same thing. Why are they wasting all of that natural gas just burning it off? Somebody saw the same thing and did something about it, so congrats to them. Danny: – Yeah, it’s interesting. That’s a whole other conversation we could have. You have a crypto-currency that is actually really expensive to produce. You’re like, wait, what? Anyway, so that’s a whole other thing. We could go into a big rabbit hole there, but I’ll bring it back. Okay, so really interesting story. Obviously you were talking about a pretty big influence there in terms of getting things going, somebody who said, “Hey, I see something in you,” and you take it, and you ran with it. You guys were able to sell that first company and then the second company into PFS, from what I understand, and then you guys were able to navigate the whole dot com bust issue and then continue to innovate and grow from there. You said that you have to innovate, and that’s constantly what you’re doing there right now. What has that change looked like over the last several years? 99 to 22, obviously there’s been a lot of change, even from 2019, but then obviously we had a lot of change in the last two years. What does that look like? Mike: – Yeah, well it’s a fascinating story, and I could take several hours to tell the whole story. Let me condense it for you. So this is what it looks like. Coming out of the dot com boom, as I’ve mentioned before we had the benefit of blue-chip clients that we were able to rely on when some of these other fly-by-night, as it turns out, ideas came and went. But we also discovered, I would say around the 2004, 2005 time frame, that we were really good at taking care of some complicated order fulfillment problems. We had some early clients that were asking us to do difficult things that you just didn’t see in a typical third-party logistics kind of situation, and especially the fact that we were bringing technology to bear to solve problems. It wasn’t just, “Well we put your stuff in a warehouse, and we’ll pick it and put it in a box and ship it.” We were actually solving some pretty complicated technology problems. So we decided that it would be in our best interest, and it would be a great commercial value to try to do as much as we possibly could around ecommerce and create what we called an end-to-end solution where we could take care of creating your website, designing your website, deploying your website on top of a platform, do all the order processing and the fulfillment, and that way if you had a brand and you wanted to come to us and say, “Look, I want you to just take care of all of this stuff. I’m going to do all of the advertising and manufacturing of this product. But then you take it, and help me put up a website and sell and deliver and all these things.” And so we built our company from 2005 to 2020 around this notion that we could help a client completely with their ecommerce problem. And we built the company that way. We built a professional services subsidiary called LiveArea that was built to design, deploy, help to manage the technology associated with selling online and were very successful doing that. But we also recognized that the trends that were happening in our industry, say five to seven years ago, were driving clients to start to really look at best-of-breed solutions and have multiple partners in an ecosystem to help them out. We started to run into headwinds associated with this bigger, diverse kind of strategy that we had, and we also recognized within our business that the better that we got at these professional services and at this kind of order fulfillment, the more different the two sides of the business became. As we were looking at what investment we want to make and what innovation has to happen in the two parts of our business, we decided that we really wanted to take advantage of tailwinds in our industry and specialize. So we went from diversification to feeling like it was in our best interest to specialize in some areas where there really were some very strong tailwinds. So we sold the LiveArea business last year, very successful transaction for $250 million. It was about a $90 million business, so that’s three times revenue. Danny: – Congratulations. That’s a great multiplier. Mike: – Pulled off a really good transaction for our shareholders, but what it allowed us to do was to really focus on the area where I feel the most growth potential is. One of the things that’s happened over the past two years that you’re aware of is that everybody really doubled down on ecommerce as the best way to deliver product to a consumer when that consumer didn’t want to get in their car and drive to a store or weren’t able to get in a car and drive to a store because the stores were closed or they were locked down. So we saw a massive increase in the growth of ecommerce just in a one-year period as retailers, by necessity, pivoted to ecommerce and as consumers, by necessity and then by choice pivoted to ecommerce. And we found ourselves where we have a premier order fulfillment company that has all the capabilities that we do with great technology and an amazing experience and an amazing set of clients to refer to and amazing tailwinds. We’re, I feel, perfectly positioned to take advantage of this evolution in ecommerce and to drive a lot of growth from just the opportunity that we see. Expansion, diversity, and then coming back to really focusing on the thing that we think has the most potential to drive growth which is this order fulfillment and just all the changes that are happening in our industry around how you actually get product to a consumer’s hands in an amazing way. Danny: – Yeah, absolutely. Quite the journey in the story there, and obviously there’s a lot with technology and how things have changed over those periods of time to make it easier. It’s kind of funny; when you were talking about it a little bit earlier when you guys were a little bit more diversified, it made me think of Tim Ferris and the whole four-hour work week, the premise being drop shipping. I remember that was a huge—it’s still very big. You see the evolution of Shopify and all these different things that are happening. Right now, the types of companies that you engage with: what do they look like in terms of size and volume? You were mentioning some brands specifically before that were a lot more specialty brands. Is there a particular sweet-sized company that you deal with? Mike: – It’s not necessarily a size from a revenue perspective or something. What’s going to be indicative of a really good relationship for us with a client and a true partnership is where that client really has a passion for the experience that the consumer’s going to have. I mentioned earlier, this unboxing experience. That’s usually how it’s expressed for us is, what is it going to look like when that person receives their package and opens it up in the way that the product is packaged, presented, potentially even the way that an assortment might be put together? There’s something about that experience that they care a lot about, and so what that does is, it creates difficulty in how you actually fulfill an order as compared to what you might see in a typical sort of warehouse. You’re having to gift wrap boxes. You’re having to personalize products. You’re having to work to make sure that that brand experience is what the consumer’s going to experience just like if they were shopping in the boutique. So that’s the common thread that you’re going to see through all of our clients is that they are passionate about the experience, and they are looking for something that’s differentiated compared to a typical just general merchandise retailer or Amazon, who I mentioned earlier. That could be across product categories like jewelry, especially luxury jewelry, accessories, luxury fashion, whether it’s handbags, footwear, apparel items, but particularly the more high-end luxury type brands. Our biggest product segment is health and beauty, so if you’re going to buy a beauty product you probably care about how it shows up. You probably want to have some samples that come along for the ride that invite you to experience the brand in a new and different way. You may even want to be able to choose the products that go into the pallet that you’re going to receive. Those are all difficult fulfillment challenges. They are difficult order management challenges. You may want to pay with PayPal; you may want to pay with Apple Pay. You may want to pay with a traditional credit card. So there’s complexity around how you manage the order from that perspective. But the biggest thing is going to be when it actually arrives on the customer’s porch, that she’s going to be able to have an amazing unboxing experience, and if there’s any question whatsoever she’s able to get on the phone with a real person that’s in her cultural context that she can talk to to say, “Look, I got a question about this, and I know that you’re going to relate to me, and you’re going to relate to my product. You’re going to relate to my experience, and you’re going to be able to help me solve my problem in the same way that if I was walking into a boutique. I expect the person behind the counter’s going to be able to help me with that problem.” So that’s what we do, and if you look at it across our entire client portfolio, you’re going to see that in every single client, that that’s their expectation for that kind of experience with their customer. Danny: – That sounds very cool. I like the value proposition, and you talked about the unboxing experience. Do you guys get involved from a design standpoint? Or is it, okay, so it’s, hey, this is what it needs to look like so we can create that feeling, and then here’s how we’re actually going to be able to deliver that experience and all the technical nuances there. That sounds like fun challenges. I totally see how you’re saying that things are not the same because it’s not a set it and forget it, here’s the template; here’s A, B, C. It’s A through Z plus whatever, right? Mike: – That’s right. Danny: – That sounds super interesting. As far as industry challenges that are going on, obviously with the pandemic, everyone—you were referencing a lot of customer changes and whatnot. How has that impacted you guys? I imagine it would impact you guys in a little bit different manner, maybe, than those who are specifically pushing out the same boxes or same sort of sizes. I know I’m generalizing here a little bit. What was that impact for you? Mike: – Well, so I do believe that everybody experienced some of the same kind of things from the last two years, one of them being, how do you respond to completely-unexpected scale? That happened for us in March through July of 2020. We actually have a graph that shows what happened to our order volumes coming in from our clients during that time period compared to the previous year which was a typical year. If you look at it, there’s this mountain that happens in Q2 and early Q3 of 2020 where we saw an exponential increase in orders coming in to our platform from our clients because they were shifting all of their orders to their ecommerce platform when the stores were closed. So one of the things that happened across our industry was surprise scale. Some providers, some retailers, some businesses were able to respond to that in a way that captured that demand, but many found themselves at the mercy of that demand and disappointing clients, unable to fulfill orders, unable to respond to that unexpected increase. We built a company, as I said earlier, that is able to provide that kind of premium experience and scale the business which is, it’s pretty unique in my opinion. The fact that we were able to turn that on at a moment’s notice in March of 2020 and say, “Okay, here’s unexpected demand, but we know how to do this. We do this every, single year during the holiday season.” And able to scale to that unexpected demand I think is different than a lot of people. And even somebody like Amazon who you would think would scale to be able to scale at a moment’s notice, you saw them saying, “Well we’re going to have to not take certain product into our facilities. We’re going to prefer other types of product. We’re going to potentially put our finger on the scale when it comes to which providers we’re going to support and which ones we’re not going to support as an indication that they even had trouble scaling to unexpected demand.” And then I think more recently one of the things that you’ve seen is our industry is reliant on the human factor. You’ve got people that are working in facilities that help make things happen, that are picking product and packing product and shipping products. You’ve got the—not that we do this, but in our industry you’ve got people driving trucks to deliver product to people’s doorsteps. There are humans involved in the entire supply chain. And as labor has become constrained as we’ve seen wages increase, you’ve seen a lot of business really struggle with, how do you adapt to that very rapid change in the availability and the cost associated with the human factor? We’ve always had an automation philosophy that says, “How do you help people be successful with automation versus coming in and trying to completely replace the human factor with automation?” We feel like augmenting the workplace and our people with effective automation is the best way because it’s really impossible for a robot to package a Chanel package in the way that Chanel would want. You have to have, in my opinion, people that are surrounding this experience that you’re creating, but you also want to help them to be as effective as they can. So our automation and our philosophy is that we want to own the most important automation where it’s the most differentiating was a key part of our ability to scale quickly and still provide that experience. We’ve learned how to quickly expand, quickly launch a new facility, and enable our people with the kind of technology required to be successful and in the process help our people to feel like they’re really contributing to supporting the brand that they’re working with in a way that doesn’t make them feel like a robot. They’re not showing up to a facility, and they just see product going by, and they’re basically just acting like a robot. They’re actually contributing to an experience that they can see and maybe even envision somebody’s going to actually have when the box arrives on the doorstep. And I personally think it elevates the human factor which is an important thing for us. We’re not looking to replace people with robots. We’re looking to help them be more successful with the right kind of automation. Danny: – Yeah, absolutely. That’s one of the really big talking points is, as a lot of companies have been looking at automation before, then pandemic, it was we have to automate because the labor is simply not there for multiple reasons. Obviously now there’s a lot of challenges with that. However, some of the stigma with it being that, are these replacing people’s jobs? Actually I read a very interesting survey that Accenture came out with when they were talking to specifically warehouse workers about their sentiments towards automation, robotics. What I found very interesting is that they reported that 60% had a positive outlook on it, which I found interesting. Then there was a 40% negative sentiment towards it. I thought that would’ve been higher, to be honest with you. But I think one of the really interesting things, and maybe you can expand on this a little bit. I’d be curious about your philosophy on this, but one of the negative areas was certainly, I’m worried about losing my job. I think that’s kind of a given. Number two, though, was concerns about training and being able to help onboard somebody who, this is normally a very manual process, and I’m picking this, I’m doing whatever, but now I’m interacting with some type of automation whether it’s an AMR or some sort of robotic arm or what have you. What are your thoughts on that? Mike: – I think that the application of technology to the workplace has the same pros and cons across a lot of different industries. And it’s the same factors are in place in a logistics facility which is that when you can use technology and automation to help people be successful, when you can help to alleviate the negative aspects of their job, like anything that we require that would create repetitive stress injury, where you’re lifting heavy things, how can you help somebody to do their job when you can take away that necessity for them to lift a heavy object or transport it from one place to another? That’s a job that automation can do and not only be more effective, but also to take that danger away from someone. You mentioned repetition. One of the things that is the most demoralizing about a job is meaningless repetition where you’re doing the same things over and over and over again in a way that you’re not really adding value other than the fact that you’re just accomplishing a task. Where that happens, you actually want to apply technology because if you’ve got a human that’s doing that same thing over and over and over again, it becomes demoralizing. And you’ll probably be able to be more effective with some sort of automation. You can also take the task that would otherwise be repetitive and actually provide a positive experience by adding gamification, for example, where if you’re going to be picking products and putting it on a cart, you’re able to see your statistics. You may get points for your productivity. The automation you’re interacting with maybe feels like a video game. It’s got some graphical experience that’s more than just “pick a product and stick it in a box.” There’s something about that process that actually appeals to your creativity and to your desire to have a richer experience. If you can provide that at the same time that you’re accomplishing the task, then it’s a win-win. You’ve got people who say, “”I actually kind of enjoy this. It’s like playing a video game, and I actually see how the more successful I am, that I can see that in my statistics right here on my little dashboard. And oh, by the way, somebody’s able to come along and give me a pat on the back and say, ‘Wow, you did a great job today’.” How does that maybe translate into value that I may be receiving, even if it’s as simple as the kind of value that you get from a video game when you collect a certain amount of points for achieving an objective. So there are ways, as I said gamification, just thinking about mixing it up, having people working on different clients and different products, not necessarily being always in the same, exact spot. What’s their upward mobility? How do they traverse the organization and move up and take the skills that they’ve learned and apply that to a new situation? It’s the same thing we all want. You’re working in a workplace where you can apply your giftedness, you can be rewarded, and you can take advantage of opportunities to manage your career. It’s not any different from somebody who’s working an hourly job in a warehouse facility as it is working a corporate job in a marketing department. Danny: – Yeah, absolutely. I love it, specifically on the gamification. I really like that. We’re seeing a lot of applications with that, and I think it’s pretty cool. It’s fascinating. So one last sort of industry question, and that’s I’m going to ask you to take out your crystal ball and look into it a little bit. Where do you see the future of the industry going? Mike: – Well one of the ways I think it’s actually really easy doesn’t take much of a crystal ball to predict, is inventory everywhere. If you’re going to be responsive to a modern consumer’s expectations, you’re going to deliver product same-day, next-day. That’s really the standard. Amazon has created that expectation. If you’re going to do that, you really have to have inventory that is in a lot of locations. It needs to be really close to the consumers, so it’s going to have to be in the region or the metro area in order to satisfy that. That is a huge change for anybody who’s operating a fulfillment network where you’re thinking about, I’m going to have a multi-node network. I’m going to have a lot of smaller locations that are probably distributed. And for us it looks like, how do you enable these kind of fulfillment experiences without necessarily having to always have the people in the buildings? So one of the things we’re working on is this idea that our clients are going to want to do some of these things themselves, and so how do we use our technology, our business processes, the knowledge that we have in creating these kind of experiences in our facilities and help our clients do that where it might make sense? For instance, turning a store stockroom into a little fulfillment location. Over the past two years retailers have learned that they really need to think about their stores as inventory locations for curbside delivery, for local delivery, somebody who wants to order online, pick up in store. They want to get in and get out really fast. Well to do that cost-effectively, you need to be able to run the back room of the store as a little, mini warehouse. How can we apply our technology and our knowledge to solve that problem? How could we put a small, metro fulfillment location up for a client or for multiple clients where you’re serving the Dallas/Ft. Worth area or you’re serving the Metro Atlanta area or you’re serving the Chicago metro area from a location where you’ve got inventory that’s there. That’s a change that Amazon introduced on a massive scale. Retailers need to figure out how to replicate that same scale without all the investment and all the overhead. And I think we have something really unique to offer in that scenario. The second thing that I would point to is the sustainability and resilience aspect. We have to do this in a way that’s sustainable. We have to figure out how to do these things in a way that is good for our planet and is good for people. Taking mileage out of delivering a package is one way to do that where you’re not putting it on a truck, then on an airplane, then on a final delivery truck. The closer you get your product to the consumer, the less carbon footprint you should have across that experience. We also need to be thinking about how we can create resilience. You look at supply chain disruptions that happened last year. You look at the impact of the pandemic on just the whole industry and the supply chain. We’ve learned a lot about where we don’t have resilience, and I think that there’s an opportunity for us all to look at, how do we create more resilient systems that are going to withstand some of these things that just happen unexpectedly, and do it in a sustainable way that’s good for everybody and the planet, which leads me to the third thing which is, stakeholder equity is going to be more and more important as we look in the future. How are we doing things in a way that creates win-win-win scenarios where you’ve got shareholders, you’ve got your employees, and you’ve got your customer and their customers that you’re taking into account all of their interests and needs when you’re designing a solution to a problem. That looks like to me equity when you’re thinking about your stakeholders in a business, not just your shareholders. Who all is relying on that business in order to make the world a better place? I think that’s going to drive more and more investment and focus for all of us, but when we think about our business, that’s a traditional—maybe not as focused traditionally on sustainability and stakeholder equity. How do we do the things that we’re doing that drive for those objectives? Danny: – There you go, awesome. No, I appreciate. Hey look, a lot of opportunities, a lot of challenges ahead to solve some of these issues and to really adjust to it. I think what you guys are doing over there is pretty cool. You guys got some really interesting, very interesting value proposition. I imagine you guys have—and imagine a lot of challenges in terms of how to fulfill orders that are very custom and still to do it at a faster, have that expectation of next-day—dare I say same-day—or two-day delivery. That certainly is a big challenge. Listen Mike, I really appreciate the time that you’ve spent with me and our audience here on IndustrialSage. I’ve really enjoyed it. I really, really enjoyed hearing your story. I think it’s fascinating hearing these entrepreneurial spirits and where it came from. You just solve problems, and it sounds like you’re still really passionate about it, just a little bit. Mike: – I think you’re right. Danny: – Anyways, for those who’d like to learn more about you guys, I’ve got pfscommerce.com. They can go check you out there. And Mike, thank you so much for your time. Mike: – Thanks Danny, really appreciate it. It’s been a lot of fun over the last hour just to talk about all of these things, so thanks for allowing me to share. Danny: – Oh, I appreciate it. And we’ll schedule maybe two hours next time so we can keep going. I had to hold myself back from really getting into these rabbit holes, but I really enjoyed it. Mike: – Thanks Danny, I appreciate it. Danny: – Excellent, thank you. Alright, well that wraps up today’s IndustrialSage Executive Series with Mike Willoughby who’s the CEO of PFS. You can check them out at pfscommerce.com. They got some fascinating technology and solutions, really interesting value proposition. I love talking about the unboxing experience and what that is. Obviously it’s very different than your traditional Amazon experience that you get with a package. What I think is interesting, and I didn’t bring this up in the episode, but I’m willing to bet you’re going to see more of that as you remember—I remember certainly as a kid, getting boxes, getting shipments was a big deal because they didn’t happen a whole lot. Now I look at my kids; they’re like, oh, it’s another box, whatever. I think that experience of actually unboxing and seeing things, I think it’s going to become more of a thing. Hey, but that’s my two cents. Hey, thanks so much for watching. Listen, if you’re not subscribed, I highly recommend. Go to IndustrialSage.com if you’re not there right now and subscribe because you’re missing out on great episodes like this, great content, great insights from guests like Mike who was talking about solutions and insights and challenges that can help you in your business, whether it’s in the same vertical or something different in the industrial space. You’re missing out, so subscribe. Alright, that’s all I’ve got for you today. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Chad Zollman of TGW Logistics shares major milestones of his career, and the challenge of making business decisions as markets regularly shift.   hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello, and welcome to today’s IndustrialSage Executive Series. I am joined by Chad Zollman who is the chief sales officer at TGW Logistics. Chad, thank you so much for joining me today on the Executive Series. Chad: – Thank you, appreciate it. Danny: – I am excited to get into our conversation. So we were just talking before; you are in Grand Rapids, Michigan, and it’s very warm up there right now. Chad: – Yes, absolutely. It’s swimsuit weather for sure. Danny: – Excellent. Before we get into the first part which I love is getting into learning more about you personally, but for those who aren’t familiar with TGW, can you give me a little high-level of who you guys are and what you do? Chad: – Sure, so TGW is a global systems integrator for our customers. We focus on our core industries which would be fashion and apparel, grocery, and industrial and consumer goods. We actually design, implement, maintain highly automated fulfillment centers inside for various customers in various regions. And that’s not only in North America; like I said, we’re global. So what’s unique from a TGW standpoint, I think is we have manufacturing that sits in Austria and Germany, so we have, on top of your traditional conveyor, your automated storage and retrieval systems that we manufacture, we also have a robotics company as well. Palletizing, depalletizing, automated picking solutions, et cetera, all within our realm and sphere that we offer to our customers. Danny: – Excellent, well it sounds like quite a nice footprint. So the manufacturing and the integration side, you bring engineered solutions, bringing all that together. Chad: – That’s right. Danny: – Excellent. We’ll get more into that because I think there’s a little bit of interesting stuff going on with supply chain right now, and as we get into fulfillment and ecomm and retail and all these things. I’m suspecting you’ve been affected by this a little bit. I’m being a little facetious, obviously. Chad: – Right. Danny: – Let’s jump into you a little bit here. How did you start your journey? How did you get into this space? Chad: – Clearly through my college courses because I have an economics degree, but actually I came in through a family friend. He got me into the automotive supply chain area, so it was in the 3PL industry. I actually started in one of the initial lead logistics operations for General Motors in working for Ryder. That was more transportation-based, so really optimized transportation design and execution. Then that particular solution morphed into just-in-time delivery, and that’s where the warehousing portion came in. Really started working on, from a design perspective, warehouse layouts and effective solutions for just-in-time delivery, and then made my way through the 3PL industry. I worked for another organization, CEVA, for about 19 years or almost 20 years in various capacities, but eventually that led me to where I am today with TGW because the more the supply chain industry evolved, while the 3PLs were providing excellent solutions and there’s a lot of benefit to operations excellence and lean practices, we had more and more customers asking for ways to reduce their headcount, so really looking into automation. And the more my team kept working on solutions for these large customers, the more we saw the need, the want, the desire to understand more about automation. That really led to the interest, from my standpoint, into the automation. TGW reached out to me, so it was perfect timing; worked out really well. Danny: – Excellent. When did you start at TGW? Chad: – Four years ago. Danny: – Okay. Alright, excellent, so 2018. I think I can do math. It’s one of the things I forgot with the pandemic. Alright, so I’m curious. You said economics degree, and then now you found yourself going into supply chain and operations excellence and all. You said you came in through a friend. I’m just curious; initially what did that look like for you? What specifically were you doing in that job, and then at what point were you like, hey, I kind of like this? Chad: – I started outside of an internship. I actually started managing in a warehouse, first shift operation for container sortation, so returnable containers for the automotive assembly plants. After about a year of that, I worked my way into the design team, so that was more transportation optimization, so essentially taking all the suppliers that you normally work with and building out your daily milk runs, your weekly milk runs, and then working through our team who at the time actually provided the transportation services as well as third parties who did truckload provision, longer hauls, and then the assembly plants themselves to coordinate the activities from a parts standpoint, inventory standpoint, et cetera. So it really started, honestly, purely on the transportation side. And that evolved from a single plant to multiple plants and looking at synergies, et cetera. It was an interesting start, and the hook for me was just the logic. It just made a lot of sense, the concepts that the automotive industry was trying to apply, and really they were the frontrunners, I think, in the supply chain and really that lead logistics provision work. Being able to see its impact on the plants themselves to transportation budget, quite frankly, and then as it worked its way into more of the just-in-time delivery into warehousing solutions, you could just really see the benefit. You could really understand it. It just made a lot of sense, and I always enjoyed it. Honestly when I moved away from Ryder into CEVA, it was more on the sales side initially and design, but I got to see more and more customers. Suddenly you see similar problems across customers, across industries, and every problem was new, but at the same time you had the confidence to really work with a customer to solve it, and I think that was the hook. You felt that you brought value to the table, and you felt like there was a high amount of demand for what you were providing. I really enjoyed that aspect. Danny: – That’s awesome, yeah. That’s an interesting transition over from more operationally, engineering, over to sales. What did that look like in terms of being approached; hey, we think this would be a good opportunity for you to sell this? Well wait; I don’t know. What was that for you? Chad: – My initial transition from Ryder to, at the time it was TNT Logistics but eventually made its way over to CEVA that’s known today was just on the design side. Then a few years in after leading their design team, I was asked to commit to the dark side and move into sales. Danny: – You said it, not me. Chad: – Honestly, it’s an easy transition when you talk about the detail and the complexity of the designs because it is primarily engineering-driven and solution-driven. As a participant in that sales process, it was just natural, really, moving from an engineering leadership standpoint over into a sales position. It was an easy transition. I’m a competitor at heart. I love it, so getting into the sales side was fantastic for me. It was perfect and aligned with exactly where I wanted to be at the time, which is great. Danny: – No, that’s awesome. I love it. You mentioned, it’s such a technical sale. It’s very consultative, and it makes sense. You mentioned before a little bit really bringing value to customers. I think that’s where, obviously people talk about the dark side, sales, whatever. I don’t want to be the sales guy that’s always pushing this or that or whatever. But the reality of it is, when you really do have a solution that fits and you do have a customer that you know that you can really help solve their challenge, that is fantastic. Where it gets difficult is when that customer doesn’t know they have that problem that needs to be solved. That can be a little challenging. Chad: – Absolutely, absolutely. It sounds like you’ve been in sales. Danny: – Never, I’ve never done sales, ever. I do love sales. I think it’s a lot of fun, for those exact reasons you brought up. When you can solve a real, tangible problem for a customer or a client, that gets me excited when they say, wow, this is awesome. Look at this; this is great. Chad: – It does, and realistically in our industry right now these are large numbers. We’re not talking small investments. We’re talking material investments that in some instances are really career-changing for individuals making those decisions, and they don’t take them lightly. From our standpoint when you talk about sales cycles, nine months a year, in some cases well beyond that, both parties are making a big commitment to each other. I think you said it; it’s a mutual victory at that point. When you see the value, and the customer sees the value, and you’re really able to reach an agreement at the end of the day, everyone’s happy about it. You’re not really selling at that point. You want to be an advocate for change, and that’s really what the team is really happy about. What I enjoy is really working through just, I’m selling something to someone. It’s a solution that’ll make their business better, that’ll improve overall their company’s health, improve their personal careers as well. I think it’s fantastic. Danny: – Absolutely, no, I think it’s exciting. I love it. Over your career, tell me about somebody who’s had a big impact. I know there’s probably a lot. When I ask, most people are like, oh, there’s so many. Tell me about one that has had a big impact and why. Chad: – Sure, and we talked a little bit about it beforehand. I think in preparation I had seven names ready to go, past mom and dad and past other people. But in all honesty from a true career standpoint, I think the one person who is absolutely pivotal is Dick Jennings. He was the family friend that brought me into the 3PL industry and into supply chain right away. He really just had a unique perspective that resonated with me. I think his background was psychology, to be honest with you, and he made his way into operations and led really dynamic and fun teams. I saw what he could do, not only from a building standpoint because he brought in great people for their different roles and different functional areas, but just how he built that team dynamic and how he handled them as a leader and how he was revered by everybody as a leader really shaped the way of what I thought a leader should be because you have that mindset when you’re 21 years old or whatever you are at the time, and you say, boy, I want to be like that. I want to be someone that inspires people. And yet he can absolutely relate to everybody on the team. He was fantastic. He really set me on the right path to where I’m at today. Outside of that I’d probably be working for a bank somewhere. I’m really blessed and grateful. He really had a huge impact on my direction for my career, and then obviously personally its impact from there. Danny: – That’s awesome. You mentioned leadership was a big aspect of that. What are some of those lessons that you’ve learned from him, from Dick, from what, maybe 5, 10 years ago? You look very young. Chad: – You are in sales. It’s official now; you are officially in sales. Well done; well done. Danny: – Well I come by it honestly. What are some of those learnings that you apply today? Chad: – I think with Dick, he knew how to balance humor with the seriousness of the job. Specifically in the automotive industry, minutes equal dollars. There’s penalties associated with that when you’re running your business. He understood how to take the gravity of the business and balance that with the good atmosphere for people to thrive. That really, like I said, it really resonated with me on how he handled that. He knew the time to turn up a little bit of the heat, and he knew the time when to let people blow off some steam. I think just recognizing that at a young age for me, I said this is an environment where I would prosper. Having seen different environments now throughout my career, I really respected that about him and what he could do. As much as I try to do it, I’m sure I can’t exactly replicate that, but I think it’s important, just that balance of humor and life with the gravity of the business. We’re out selling deals at over $100 million. That’s a lot for people to be a part of. It’s pressure, regardless, when you’re in sales. And it’s pressure for our customers. But balancing the human side of it, the relationships, I think is really important, and I really drew from that. I still think about it regularly. Danny: – That’s awesome; I love it. It makes a lot of sense. Obviously a ton of stress involved with these decisions because, as you mentioned, these could alter careers and alter the massive trajectory of businesses. Let’s talk about that a little bit right now as far as challenges that are going on in the industry. Obviously everything has been completely shaken up over the last two years. There was a lot of movement and a lot of activity moving into automation going into these solutions. You mentioned you guys have got a robotics division. A lot of this was hot beforehand. Ecomm, fulfillment was hot beforehand, and then the pandemic happened, and it was like somebody just threw a can of gasoline on the fire. What are some of these impacts that you’re seeing, that you guys have experienced over the last two years? What’s your experience like? Chad: – From our standpoint, like you said, the pandemic’s really been an accelerant. We have just seen the projections from a 10-year basis shrink down to two and three years. Everyone’s scrambling to make decisions and accommodate, so I think initially through the pandemic we really saw that push to say, what can we do? If you think about it from our standpoint, again I mentioned earlier sales cycles can be nine months plus, and then the actual implementation—we call realization here—but the realization cycle can be 18 months. There’s a significant lead time for those changes to take place. Really educating customers as much as possible, working with them as much as possible to better understand their business because we’re forecasting for five years out, four years out, whatever it may be for future capacity and demands. Our customers were scrambling to come up with models that suggested what either through the pandemic and post-pandemic things would look like. That’s really been the challenge more recently, I would say. So that’s probably the first two years. More recently I would say it’s, the problems still exist, period, but it’s more on the supply chain side. Will I see that continued volume through my warehouses and what I have in my distribution nodes, and will the demand be there for the customers? It’s really interesting just to see how it’s evolved, even by Covid standards, over the past two years and how the customers are trying to balance that out with future projections because what we’re dealing with, honestly, are strategic decisions that are being made. It’s made it very difficult and very difficult to predict. Danny: – Yeah, it’s almost like trying to solve a Rubik’s Cube because it seems interesting looking at customer behavior. I think you said grocery, retail, fashion, apparel. Those are big industries. Looking at consumer behavior and how that, obviously that’s going to come downstream to affect you guys. There was a report that I heard—there’s a local consumer expert; I think he’s nationally syndicated, but Clark Howard, consumer advocate looking for value and whatnot. When you’re looking at all the inflation that’s going on right now, people are looking for cheaper solutions and whatnot, and one of the things that he brought in which I thought was interesting was that he was pointing out that certain big-box, online retailers that people are looking at from a pricing standpoint, they’re saying actually we’re paying a little bit more of a premium doing that, and he started to see that people are starting to go back into stores to shop there versus saying, hey, I’m going to have delivery. This is something that I heard maybe a week or so ago, and I thought, oh my gosh, this is crazy because we were—this whole shift of online delivery, everything, and you’re seeing all the retailers, we’ve got our curbside; we’ve got this. Then, okay, no actually forget that. Now people are going to go back into the store. Let’s talk about micro-fulfillment for a minute, like oh, my gosh. Those challenges changing, and then you mentioned the supply chain piece. I imagine that you guys have not been immune from that operationally from your own standpoint, saying just raw materials, getting that in to manufacture. I’m sure if you’re like anybody else that we’ve talked to, orders coming in, companies saying we need to put these solutions in now. You’re like, well I’m waiting on all this steel or whatever to come in. It’s craziness as you’ve had that experience. Chad: – Yeah, absolutely. We’re not immune from our side. I think our team’s done a fantastic job really of trying to plan out, really for those long lead time components and those components that are critical to our success and what we’re trying to accomplish. We’ve been very fortunate; I will say that, very fortunate. But it’s an hourly, daily job. The best we can do is keep our customers informed. There’s no doubt when you say supply chain today, everybody knows what that means versus when I started my career. No one knew what supply chain really meant in logistics. But now it’s so common to our nomenclature and what we’re saying and what we’re doing on a daily basis. We hear it in the news about everything from what we buy to how it impacts our business. Again, it’s just dealing with the challenges. It’s head-on, making as many plans as you can, working your partnerships as strongly as possible so that you can make your way through and setting the right expectations. I think that’s clear. From our standpoint I feel like we’re a little more predictable, probably than our customers have it. Like you said, there’s so many options out there, and it’s so difficult to say this is what our business will look like in two years, three years, five years. I spoke to a customer recently, and they had projections from 2019 that said by 2022, it’s an absolute decision point. After reevaluating over the last six months, that decision point’s been pushed out five, six years based on the projections. So it’s extremely dynamic right now, honestly, and I think everybody is just trying to level-set. That’s what I do appreciate. I think in conversations with customers, with our suppliers, with our trading partners, we’re having very open dialog about what timelines look like. I think that’s been the benefit across all of this, very open, honest communication, probably. Danny: – Yeah, that makes a lot of sense. I think that was a lot of challenge that was happening, a lot of education that was going on, too. Earlier on you were mentioning that the whole idea, supply chain and logistics, that people didn’t really necessarily know exactly what that meant or what were the nuances. Now there are supply chain experts everywhere. I’m sure if you had Thanksgiving, you ran into a lot of supply chain experts as well. Thanksgiving, the holidays, whatnot. One of the things that I found fascinating was that even on the C-suite, I was hearing stories that at the height of the pandemic that there was a lot of confusion, even internally, like why can’t we move this? Why do we have all these hold-ups? It was all this internal education, like well, there is this thing called supply chain. We can’t get our things in so we can make the things so we can ship them out. It was this, what? One of the things that I’m curious about is where do you think the industry is going, forward learning from what we’re still kind of going through, very much so, and what we’ve learned? Chad: – Sure, I still believe in the projections are there, in the fully-automated dark warehouse. I still think there’s a place for that, and that’s absolutely in our future, sooner than we think just based on the breakneck speed with which technology’s changing and improving. I think really the impediment to that right now is that predictability factor and really seeing what the pandemic will bring. Is this mid-term, long-term? I think there’s a hesitation, probably, in the marketplace in getting there right now. But at the end of the day I think the way technology’s improving, the way we are recognizing data as an absolute tool to run business, the way we are becoming more and more comfortable with automation within just various warehouses and warehousing applications, it’s absolutely where we’re headed. I think the industry as a whole is going to head right where we think it’s going to with the growth rates. I think there just might be a little bit of hesitation to understand, okay, how do we invest? How do we get there, and how can we make sure that technology is reliable enough and flexible enough for our needs? Hopefully Covid will be a little bit of a blip, and we’ll have some more consistency post-Covid with regards to consumer behavior and our supply chains, et cetera. But it depends on who you listen to; this could last many, many years. Danny: – Yeah, exactly. Who knows, right? One thing you mentioned, obviously predictability. Earlier in the conversation you were talking about when you were specifically at GM and with Ryder. You were talking about just-in-time at that point. We get into a little bit of lean manufacturing and whatnot. Are you seeing a–well obviously everyone has had a pull-back in that, naturally, because if you don’t have your things, okay, then you’re seeing massive disruption there. But going forward, do you think that there’s maybe going to be some rethinking on that? That maybe, have we gone a little too far? Is there maybe a little bit of a pull-back? I’m curious. Chad: – I think the root of it—we talk about this quite a bit in the impact to our business. At the core of the issue is the labor market and the scarcity. Unemployment levels, lower than pre-pandemic periods. The aging workforce is not changing. It’s difficult to find people for peak. It’s difficult to find them for daily operations. I usually have conversations with our customers, prospective and existing. I ask them, how are you, related to the overall staffing? The numbers come back between 80 and 90%, so if you figure businesses on average are only staffed to 85% of where they need to be—and this is just in their distribution nodes. This is just in their warehouses. That labor is in demand. The need for automation just grows, so I see the need in demand to be there absolutely 100% because I don’t see the labor market and the labor pool changing anytime soon. Emigration is down. You look at the aging workforce, you look at the jobs available to everybody right now, it’s a ridiculous amount of the great resignation with 40-some percent of the workforce turning over. People are looking; they’re seeing different options, and even through peak season, you see the signs going up offering 20, 30, 40% premiums for these jobs. I think that’s going to be the driving factor and will continue to be the driving factor. Yes, there may be some hesitance to say, my supply chain costs are greatly increased because of the scarcity of drivers because of the scarcity of ocean containers because the supply chains are being impeded. But at the end of the day I think the demand will continue to be there in some way, shape, or form, and the warehouses just aren’t staffed enough to support that. Danny: – Yeah, absolutely. I’m curious relative to your peers. What are you guys doing to stay ahead, sharpen that axe, if you will? Chad: – Yeah, I think the robotics company was purchased quite a few years ago, and I think utilizing them as an asset more and more in our solutions has been very advantageous for us. We explore strategic partnerships, technology changing so fast. Our core is in manufacturing. What we produce today is absolutely our strength, but we also recognize we have to continue to look in the marketplace. We have to continue to look with other trading partners to see what’s out there, AMRs, for example, other things. From our perspective it’s keeping your eye on innovation of what you have, but also recognizing that we have a core competence and maybe we can partner with others in the industry. I think more tactically what we’re doing, honestly, in North America I’ll use some examples, and then we have our own apprentice program that we’re utilizing to develop and retain talent. I think that’s really important. Globally we have our own training academy, again talking about developing leaders inside the organization and our employees overall. It’s really about that retention and what we’re trying to do to ensure that we have the right baseline for future growth. We talk about, the sky’s the limit in the material handling industry. The projections long-term are extremely high. For us, we have to continue to retain talent to stay ahead of our competition. We have to keep those folks who have experience inside our ranks and develop the individuals to be able to support that growth in the future. That foundation is clearly important for our success, and I’d stack that up as a key component to our ability to compete against anybody in addition to any other technology advancement, et cetera. I think that people are going to be one of the most important factors. Danny: – Absolutely, I think you’re 100% right. I think you’re seeing a lot of companies that are struggling with that just across the board. You mentioned the great resignation there earlier, a lot of people just shifting. There’s a lot of things going on right now, but I love how you said you have an apprenticeship program you’ve got going on, and then also global training centers. I think that’s absolutely the key to help keep people engaged and to continue, help them to continuously grow and be able to have that advancement. I think that’s fantastic. I’m going to pivot real quick as we’re starting to wrap a little bit. I’m curious; are you a book reader? Do you do any book reading? Chad: – I do; I do read books, absolutely. Danny: – Okay, that is good. I’m going to be clear: book reading versus audio, podcast listening. Chad: – Both, it’s perfect 50/50. I spend hours a day on IndustrialSage. Danny: – That’s the right answer, perfect. Alright, so we’ll move on. No. I’m curious; we got a top book that you’re reading right now, or listening to? Chad: – Sure, yeah, literally just wrapping it up is The Power of Stay Interviews. When we talk about retention of our employees and what we’re doing, we’re really looking at that as an executive team and what it means to really work with our employees on a regular basis to understand how they are personally, what their opinions are of the industry, of the organization, and their needs. Really, that’s what it’s about right now. That’s the most recent book I have on my nightstand. Danny: – That’s cool; so you said The Power of Staying? Chad: – Yep, I think I wrote it down here. It’s The Power of Stay Interviews for Engagement and Retention. Danny: – Oh, awesome. I haven’t heard of that, and there’s five people I’m going to send that to right now. Chad: – The author is Richard Finnegan, if you need it. Danny: – Oh, very cool, awesome. Alright, so since we talked about a podcast, or audio, what’s your number one podcast? Outside of IndustrialSage, I know. Chad: – Listen, I am all over the map, honestly. I am all over the map. Mostly sports, I would say; that’s more for me personally. Danny: – That’s perfect. What are the sports? Chad: – Everything, I mean everything. Right now college basketball, NFL that just wrapped up, college football. I’ll listen to pretty much anything that I can get my hands on. I can’t name one specifically that I would say is my go-to. I just plug in and go. Danny: – If you’re looking for an apology for the Georgia-Michigan game, you’re not going to get one here. Sorry, I’m just— Chad: – You’re breaking up. Danny: – What, you can’t hear—? Anyways, that’s awesome. And last question, just curious, as we wrap on this. Top hobby when you’re not solving the world’s problems, what’s your top hobby? Chad: – Outside of my three kids, I love to fish. I love to be up at our lake house. It’s awesome; just love to be outdoors, and I personally love to fish. I get out there and relax. I didn’t say catch; I just said fish. Danny: – That’s a good distinction. Chad: – Absolutely, so just to sit out on the water and relax and enjoy, unwind, is my number one. I absolutely love it. Danny: – That’s awesome; I love that too. Yes, I enjoy fishing. I’m not very good at catching. Chad: – It’s okay; you have good company here. Danny: – Awesome, well Chad listen, I have really enjoyed our conversation and learning more about you and learning more about TGW, what you guys do. Thank you so much for coming on to the show here. If anyone wants to learn more about what you guys do, I’ve got the website here, tgw-group.com. Yeah, I encourage anybody that wants to learn more to go there. Chad: – Absolutely, give us a call. Thank you for having me. I really appreciate it. This was great. Danny: – No, this was awesome. I enjoyed it as well. Thanks for sharing some of your insights with me and our audience. Chad: – Thank you. Danny: – Alright, well that wraps up today’s IndustrialSage Executive Series interview with TGW Logistics. I really enjoyed my conversation with Chad, and I hope you did as well. Listen, if you’re not subscribed, I highly recommend you go and get on the subscription list because we’re sending out content like this on a weekly basis. So you’re missing out on great conversations and learnings and happenings that are going on in the industry, maybe not directly in your industry, but still a lot to learn. So that’s all I’ve got for you today. Thank you so much for watching. I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions

Tim Vargo returns with Stryten Energy to discuss the interwoven world of automation, infrastructure, domestic manufacturing, and the evolving energy industry. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to today’s IndustrialSage Executive Series. I am joined by Mr. Tim Vargo who is the CEO of Stryten Energy. Tim, thank you so much for joining me on the Executive Series. – Great to see you again, Danny. Danny: – Well I’m excited to jump into this. For those who aren’t familiar with Stryten Energy, tell me a little bit about who you guys are, what you do. Tim: – Sure, happy to do so. So Stryten Energy is a company that has 13 different manufacturing plants in North America, in the United States, over 2 million square feet. We supply a variety of energy storage needs across several different platforms. So we have multiple chemistries solving multiple problems, and really excited about our future given all the challenges we’re having with energy storage today. Danny: – There are certainly a lot of challenges. Tim: – That’s for sure. Danny: – I think you guys have a lot of work cut out for you, but a lot of great opportunities. Let’s talk a little bit about—we can go into a little bit of the pandemic. What I think is interesting is just hearing from companies about how things have really altered that future for you. Some, it’s completely changed it. Some, we’re still the same. What was that effect for Stryten? Tim: – Our company is one of the essential manufacturing companies in the infrastructure of our company for both the military and stored energy. Our plants never closed. Our plants were open every single day from the beginning of the pandemic until now. We’ve had virtually no lost work days from a plant perspective. The demand for our products has been exceptional across the board in every segment that we serve. Our challenges have been, through the pandemic, two-fold. We all had to learn to work from home. That turned out to be a lot easier, I think, than everybody thought. Frankly, it’s a little harder to get people back to the office now because everybody likes to work from home, me included. I think we’re all sensitive, though, to the need to make sure that we’re continuing to build the team. Communications are always a little better in person than they are just, how many Zoom calls can you do in a day? Danny: – Exactly, yeah. Tim: – Having said that, our other challenge is just getting a workforce that is robust enough to handle the demand for our products. Like all manufacturers around North America that I’m aware of, we’re all short-staffed. We could probably all make more products if we had the employees to staff all the shifts and all the machines that we have. All of us are accelerating our plans to automate certain functions in the plant, so it’s not an automation play that’s designed to reduce the number of people we have, but I think we’ve all recognized we’re probably not going to get too many more people. Yet our demand is very robust, so we’ve got to figure out a way how to automate and use the people that we have to make more products. So that’s pretty exciting stuff in addition to the products that we’re making have huge demand and a really, really bright future. Danny: – Yeah, absolutely. Let’s talk a little bit about the bright future, too. One of the things is that, this whole idea of going with net-zero carbon emissions by 2035. What is Stryten’s role in that and your stance on it? Tim: – Sure. I’m going to focus just on the United States. Our plants are all located in the United States. We have a very tight supply chain centric in the United States. We get very few products from China at all, very few, a few electrical components that are also available from other parts of the world. We do get some supply out of Europe for our lithium blocks, but we’re in the process of bringing that all in-house in North America. It’s our ambition to provide a stable stream of energy solutions that are manufactured in the United States. We’re really positioned well to do that with that 2 million square feet of manufacturing that we have and with the knowledge that we have, the deep engineering and manufacturing and design knowledge we have of energy storage. That’s going to play a key role in the whole goal for 2035. That will not be possible without a concerted effort by a lot of manufacturers across a variety of different chemistries and solutions to provide that energy storage because one solution… lithium is not going to solve the world’s energy storage problems. Lead is not going to solve the world’s energy storage problems. Flow batteries and any other technology are not going to, by themselves, so it’s going to take a concerted effort across a variety of different chemistries and platforms to do that. I think we’re really positioned well to do so. Danny: – What I was unaware of before our conversation is that how much domestic production was happening. I think you said then numbers, it was over 90% or 90% there at. Tim: – For our supply chain, it’s well over 90, 95% of the products that we manufacture in the US are captive in the US from a product standpoint. When we look into the future with lithium expansion, flow expansion, the electrification in order to get to that net-zero by 2035, it becomes a little more pragmatic in how we end up getting there. It’s going to be interesting, that’s for sure. And then when you layer on top of the really enhanced regulations that are coming down the pipe, we were headed this way anyway. California has had energy challenges for well over a decade. The infrastructure is not able to support the demand in the electricity market. Storage has been a big deal out there for a long time. With the infrastructure that we have in North America that is so aged and the lack of investment in actually the electrification infrastructure and the reduction of nuclear energy and the reduction of coal, the storage of energy is going to be just so exciting and so demanding that even without government regulation to accelerate the process, it was going to accelerate naturally anyway. But with government regulations, they’ve got us on a fast track with some huge, great, ambitious goals for energy storage. Danny: – Talk to me a little bit about the—what does that future look like for you, down to on a consumer level or even from an industrial standpoint? Tim: – Sure. So if you think about the consumer level, obviously a lot of folks want to have solar power so that they can reduce their energy storage bill so they can send power back to the grid and have a stable amount of energy coming into their home. What has been lacking, really, over the last couple of decades with very few exceptions has been the storage of that energy that’s captured from a windmill in your backyard, solar panels on your roof or a solar array set up in your yard. That’s all fed back into the grid, and there’s really nothing stored in your home, for the most part, if you looked at it over the last decade or so. The opportunity there is to provide a variety of different storage solutions for the home. We have a lead solution which is probably a little more complicated than most people would like. Lithium storage is certainly the most convenient. It’s also pretty expensive. And so as lithium cost continues to go down, that’s going to be a very efficient way to store energy so that when the power goes out, you have actually energy stored up to run everything in your home from your heating to your air conditioning to your refrigerator to the lights on. That grid that can be made—let’s call it a micro-grid. Micro-grids are generally, would be more of a neighborhood thing. But just a grid for your house, you can support yourself. What the government is doing now, the government is talking about legislating micro-grids for neighborhoods. And so then you’re going to need something more than lithium to back it up, and that’s where we think the flow technology—we’re using vanadium as our chemistry to store energy because we happen to know it’s pretty efficient, more efficient than many of the other flow battery technologies—but that flow battery is going to be able to hold an awful lot of energy for a much longer period of time, four hours in duration or greater. And it’s completely scalable for the size of the grid that you want to support. Pretty exciting stuff. Danny: – That is super interesting. So I’m going to break that down to, in my mind, to an elementary level. I’m curious; I want to make sure I understand this right. You’re thinking that the future will be that, obviously, there’s a higher demand in energy production that needs to happen at a local, micro level, at your house or neighborhood and that we need the ability because you’ve got a solar array. You’ve got EV. The EV market, I guess we can talk about in a little bit, that’s exploding. Everyone wants their Teslas and their Rivians, and Ford’s coming—all this stuff. That’s creating a bigger demand there. From a storing standpoint, if the issue goes—we have issues. That would happen at a local, residential level, or even at a neighborhood level—call it micro—that’s pretty interesting. Tim: – The challenge here is that lithium today is the ideal solution for home energy storage. I’m going to venture to say that probably 95% of the lithium batteries that we get in the United States are made in China. The world, not only the United States, is very dependent on China-manufactured product. Long supply chain, I won’t even get into all the other nuances of products coming out of China relative to the importance of owning our own energy storage. Right now we have a foreign country that virtually owns our energy storage opportunity. Danny: – It’s a critical infrastructure issue. Tim: – It is, absolutely. Given that, we are, along with several other North American manufacturers who know how to build product and energy storage to scale which is really critical, we are all driving towards a North American or a United States-sourced supply chain and manufacturing to manufacture lithium energy storage right here in the United States for the United States. Government regulations, as they’re being formed today, are going to be requiring that energy storage to be manufactured in the United States, not only for your home, for the micro-grid or for the total grid backup, the critical infrastructure for all of the power plants. If you were to do that today, you’d have to go to China to get that product. We have the manufacturing technology in the United States. We have the understanding, the design, the footprint, and the intellectual capital to build that product right here. We just need a few years to get it done. Danny: – That’s super exciting. I love that. And we’re hearing all these stories across—actually I’ll give you a really interesting—not in the energy space, but in healthcare. There was, and just down the road, one of our clients over at Optimum, Jackson Healthcare. It’s a big healthcare staffing. They ended up buying an antibiotics manufacturer called US Antibiotics in Bristol, Tennessee. During the pandemic, they ended up going bankrupt and had employees that were coming in that were working there because they are the only domestically-produced—the only domestic producer of antibiotics, so penicillin, amoxicillin. That’s the only one in the United States, and it went bankrupt. And so they bought it, and we have to keep this thing moving forward. That was fascinating to me; a little terrifying, to be honest with you, saying wait a minute. When we’re talking about critical infrastructure here, certainly energy storage, the grid, you want to talk about big issues? That’s a big one. Tim: – You know, driving towards electrification, and obviously the EVs are at the forefront of that. That’s what gets all the publicity. The unfortunate part is, if you look at the average home in America, it only has 100-amp service. That 100-amp service, for the most part in the average American home is probably about 90% used. If you’re going to put an EV charger in your home, I think you need somewhere between 60 and 80 amps. Danny: – That’s a significant— Tim: – Where’s that going to come from? You’re certainly not going to say, well listen, we can’t use our refrigerator today because we have to charge our Tesla or our Ford pickup truck. Let’s take it down a couple notches. Ford’s got the great Mustang Mach-E which is a great vehicle. They’re selling a ton of them, manufactured right here in the United States. They’re sold out of their F-150 Lightning truck. If you want to do home charging with a reasonably fast charger, you’re going to have to have more amps in your home or you’re going to have some form of stationary backup power that you can charge through solar or through your network, hold that energy so when you come home at night to charge your vehicle, you plug in, and it runs off of that instead of your 100-amp box. So there’s a lot of things that are going to have to change in order for us to meet our net-zero goals. Danny: – A ton of things, but I do think it’s super interesting. We were talking about a little bit how people are—there’s this shift. I think even before we started recording, we were talking about this idea of creating energy production at the micro, at the home level or an industrial facility, what have you. I think that’s an interesting frontier, especially as now I feel like the costs have dramatically dropped. I remember looking at this 10 years ago. Okay, this is—the return on this, and now we’re really actually, the costs are going to—and from a storage standpoint. What is that looking like over there? Tim: – Lithium has dropped dramatically in the cost per kilowatt hour, which is how I think businesses around the world look at it, cost per kilowatt hour. It’s still expensive. It’s a lot more expensive than traditional energy storage. Let’s just use lead acid for a minute. We have our lead acid batteries in data centers around the world storing energy for if the grid happens to have a little hiccup. You lose power for a little bit, our batteries can pick up the delivery of electricity. That’s been tried and true for decades. It really works well, and it’s really cheap. Lithium hasn’t gotten there yet from a cost yet, but it is a lot more compact. It has a better charging cycle, and there’s virtually no maintenance to it. On the lead side, we’re working with a variety of different government agencies to try to improve and enhance the technology that’s being applied to lead acid battery manufacturing, so we think we’ve got considerable upside there to get it more competitive with lithium. There are some other chemistries that are being used that are also pretty exciting that are manufactured. The batteries are manufactured in the same way, but they just don’t use lead. Nickel zinc would be an example, so instead of using lead, they use nickel and zinc. They make a battery that just looks like a regular battery, only it has better characteristics for storage and charging. It gases less; you don’t have to worry about it being in your house. One of the challenges with lithium that you’ve seen in the news where your Tesla catches fire and burns to the ground; the fire department can’t put it out. So let’s just put that battery in your house. Little concerning for a lot of people, and so our understanding of that is pretty implicit because we’re in the energy storage business. It’s pretty hard to catch a lead acid battery on fire. It’s like the safest thing you can do. Where we were heading with our lithium drive to find, develop, and manufacture those products in the United States, we bought a great little boutique company up in Canada. They have the intellectual property that has lithium with significantly reduced exposure to explosion and fire. Between an enhanced battery management system that controls the electricity going out, electricity going in, in an absolute way, the technology that they’ve developed that we now own and are trying to commercialize for things like home energy storage is the dramatically reduced flammability of that lithium that everybody talks about as being so flammable. So again, applying what we know how to do from an energy storage standpoint, getting the right IP to be able to develop that—this happened to be for a military application, so it’s very usable and can be made a lot more cost-efficient if you don’t have to do these certain things that the government requires you to do for military applications. We see a huge opportunity there for us to supply a lithium product for the home that’s safer than anything that’s on the market today. It’s going to take us a couple years to get there, but it’s going to take everybody else a couple of years or longer. We’re going to have that again, manufactured right here in the United States with products from the United States or in some cases perhaps products from NATO-related countries with lithium. Danny: – I think that’s just—we’re hearing more stories of more insourcing, more companies switching supply chains saying, hey, we want more domestic production. I love it. I think it’s awesome. I’m curious; let’s talk about labor a little bit for a second. Obviously you mentioned before, there are some serious issues. It’s forcing, pushing a little bit more of investing into automation. How much of that was happening, before the pandemic versus—obviously the pandemic shone a light, and that created some interesting opportunities. Obviously a lot of companies were looking at automation, but maybe that was on the pecking order. That was, okay, that’s a nice-to-have, not necessarily got-to-have. When we’re looking at specifically with domestic production, and labor rates being higher than what they might be going to China, was automation part of a solution before that, before the pandemic? Tim: – Yeah, so great question. I would say that most people in manufacturing have a road map to improving their automation. Although the labor issue has been really acute during the whole Covid two years, it was a problem before. It really depends on what industry you’re in. If you look at automotive manufacturing, for example, where there’s a lot of risk for injury because you’re moving a lot of heavy items, automation has been a key to that for a long time. The wages that the car manufacturers pay their workforce is considerably higher, so automation became a cheaper way to do that. Your robot never takes a day off. They don’t leave for the first day of hunting season and all the other things that we all talk about in manufacturing. And so it really depends on your own business, but everybody has been working on automation, and it’s just gone up a couple of notches here in the last couple of years. Danny: – Yeah, it’s been super interesting, and I think it’s opening up all these other opportunities for companies that maybe didn’t have the same road map that you have. I actually think that’s really exciting because I appreciate that domestic production. Tim: – Not wanting to get too sideways, but a lot of those robots aren’t made here either. A lot of those circuit boards aren’t made here either, and so the big announcement about Intel and their huge manufacturing effort to begin making things here in North America again, in the United States again is critical to that whole robotics supply chain as well because we need to be making that here. We shouldn’t be depending on somebody overseas making that product for us. It’s a complicated problem, but there are great solutions. Danny: – Absolutely. I’ll go a little bit more on EV. I know we talked about some of the challenges and the impacts that’s happening. I would say challenges, but also opportunities with that. I’m curious from a, obviously we were talking about Ford, and I’ve always, from an automotive standpoint, but there are also so many applications. One of the areas that I’m fascinated in for multiple reasons because I’m a pilot, but that’s one, is actually in the aviation space. When it comes to drones or UAVs, in the parcel and packaging, so a lot of FedEx and a lot of, part of the—and I’ll throw a little, part of the Industries of the Future initiative that we’ll be launching here soon, one of the episodes we talk about that space and one of the former—looking at the future of the industry, drone delivery was one, and that’s one that keeps coming up. Obviously that’s incredibly battery-dependent. Tim: – Yes, it is. Danny: – Not to mention, there are a lot of other issues with weather and whatnot. I’m curious from your standpoint, from a technology standpoint, that and maybe even deeper aviation as we’re looking at some of these electric that are carrying passengers and larger cargo than just a package that’s this big. Have we arrived? Tim: – I think from a package standpoint, an unmanned drone to do a variety of different things, whether it’s military use, application is clearly an unmanned drone, whether it’s a drone that you put out in the field with sensors on it to determine where the enemy is or whether it’s a drone in flight, there are a lot of different drones that the military is using all using lithium technology. Again, challenge to find the product made here, so there are a couple of US manufacturers, competitors of ours who have been in that for a long time, and they do a great job. They’ve got a nice little head start, a very compact, different than an EV, for example, and clearly different than aviation. You’ve seen, if you’re an aviation buff, you know how long it takes for the government to approve something, and even when they do sometimes they mess it up. I’ll leave Boeing out of this because the government helped Boeing mess that up, but it took years to get those approved only to find out they didn’t work. Think about how long it’s going to take them to be comfortable putting a battery that burns on an airplane to fly people. A lot of drone development’s going to be done, large drone development’s going to be done with the government, with industry. It’ll likely happen but probably not in your business lifetime or mine would be my guess. I’m a little older than you—a lot older than you, so it’s certainly not going to happen in mine, but I could easily see it happening. The great thing about manufacturing ingenuity is, is that it never ends. It’s amazing the things that we can do to solve problems and create jobs and different solutions that we had only dreamed of before. Danny: – Absolutely. Well speaking of the ingenuity and being able to solve problems, if I were to give you a magic wand—this is a magic wand question—to solve one thing in the industry, what would that be? Tim: – People, that would be the biggest magic wand I could come up with. Whether you’re in the car repair business, trying to find a technician to do that is hard. Our schools aren’t set up like they used to be to train people for anything other than going to college. And yet we have a lot of jobs that are required to make America work that we don’t have the people for. We’re in the forklift battery business, so we have a nice share of wallet in that for new fork trucks and used fork trucks. Well guess what? They don’t have the technicians that they need to have either, so whether you’re an automotive technician, a motive power technician, you’re a technician working on a Navy submarine, you’re a technician working in an electrical substation, you’re an electrician, all those skills, all of them are short. We’re short hundreds of thousands of those people. So from a magic wand standpoint, if I could wave one, that would be it because then that would allow us to do all of the other things that we need to do to build the infrastructure to get the job done. If we don’t have those people—A robot can’t do that unless somebody can build it. A robot can’t do that unless somebody can design what the robot’s going to do. And even though there’s a lot of work being done for artificial intelligence, and frankly that gets a little bit scary from my perspective. I think if you heard Elon Musk’s interview it scares the heck out of him too. If he’s afraid of it, I think I should be afraid of it too. I’m just saying. AI is going to be doing a lot of things. We just have to be careful what we let it do. So anyway, the magic wand: people, labor. Danny: – Alright, another question then with that: how do we solve it? That’s the million-dollar—that’s the, well, billion-dollar, multi-billion-dollar question. Tim: – It’s going to take what we’re trying to do right now with this energy solution. It’s got to take a combination of government and private enterprise to work together to solve it. The government has one idea of what public education ought to be, and that varies by geography. But I think that we all have to recognize that as a challenge and invest in it together. Private enterprise can do an awful lot, but we have a huge education infrastructure that costs us trillions of dollars a year. We have to figure out how to better solve our education problems other than the way we’re currently solving them. Danny: – Interesting. Well, listen Tim, I loved this. I do have one more question. Last question, I think. Tim: – Last question, alright. Sure, I believe you. Danny: – As the leader of your organization, and this is a little bit more of a personal question here at the end, what do you do to help stay at the top of your game? Tim: – I’m in the manufacturing business, and we manufacture products with people. The best thing I can do with our leadership team in concert is to make sure we’re effectively communicating to all of our employees where we’re going, how we’re going to get there, and what it means to them and their families. Those are the things that our team works on every day is we’ve got to have clear goals. They have to be attainable goals. We can have stretch goals; we can dream big. But we’ve got to make sure we’re explaining that to the men and women that we work with every day so we’re all along on this journey together. We all know where we’re going. We have a pretty good idea how we’re going to get there, but we’re not going to get there working in isolation. We’ve got to get there working as a team. We’ve got 2500 employees in 13 different plants around the country. We’ve got to work together to make this work as well as we all aspire to have it work. Danny: – Awesome. Well Tim, thank you so much for joining me today on the Executive Series. Fascinating conversation; I know I threw you some curveball questions there, but I appreciate it. Tim: – Danny, it’s my pleasure. I really enjoy doing this with you. I like what IndustrialSage does here, and we’re happy to participate any time. So thank you . Danny: – My pleasure. So if anyone wants to learn more about you guys, they can go to—I’ve got the website here. It’s stryten.com, and learn all about the innovations. You guys have a fascinating story. Thank you for all the work that you’re doing. Love the mission, and we want to help; we’re here to help support that. Tim: – That’s great. Danny: – That’s awesome. Tim: – Thank you. Danny: – Alright, well thank you. Okay, well that wraps our interview with Tim. Thank you so much for coming on. Awesome; I loved it. So many great takeaways. So listen; if you are not subscribed, you’re missing out on great content like this, great interviews with leaders who are really creating innovative solutions, who are changing the world, really solving some of our pressing challenges that we’ve got going on. There are some great opportunities here. So subscribe; you can go to IndustrialSage.com. Subscribe there, and otherwise you’re missing out. That’s all I’ve got for you today. Thank you so much for watching, and I’ll be back next week with another episode on IndustrialSage.   Thanks for reading. Don’t forget to sign up for our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! 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Florian Pestoni of InOrbit discusses the challenges of creating company culture, scaling robotics companies, and adopting industry automation. hbspt.cta.load(192657, 'ee6f69de-cfd0-4b78-8310-8bdf983bdcc9', {});   Danny: – Well hello and welcome to today’s IndustrialSage Executive Series. I am joined by Florian Pestoni who is the CEO and cofounder of InOrbit. Florian, thank you so much for joining me today on the Executive Series. Florian: – Yeah, Danny, thanks for having me. Danny: – I’m excited to get into your story. So for those who aren’t familiar with InOrbit, if you could give me a little high-level, who you guys are and what you do. Florian: – Yeah, we’re a data platform for robot operations. So essentially when you roll out autonomous robots or smart robots into the world, you still need to keep track of them. You still need to manage them. So we provide the infrastructure in the cloud to manage all these robots, everything from knowing what they’re doing to stepping in when necessary. Danny: – Alright, excellent. Well that sounds interesting. It sounds like it’s a very needed thing, especially as there is an exponential amount of robotics companies that are coming out, and there’s all kinds of unique and different applications. I suspect that there’s a nice challenge that poses that you guys are solving, and we’ll get into that here in just a little bit. But before we do that, this is the segment where we like to dive in and get to know our guests a little bit better. This is where we want to know a little bit more about Florian. So Florian, if you could just give me some color on your background. How did you get into the technology space? Take me way back. Florian: – Yeah, I’ll tell you Danny, it has not been a straight line. Danny: – It rarely is. Florian: – I think in the curves is where something interesting happens. Maybe a little bit about myself, I’m originally from Argentina, born and raised, studied there. Came to Silicon Valley essentially pursuing the best technology. Worked at research labs and then eventually got closer and closer. into the business. Did an MBA here at UC Berkeley. I went from big companies to start-up, back to big companies. Usually a lot of people will either pick one track or the other. But to me, it’s always been just different ways to have an impact. I’ve worked at some of the very well-known companies like Microsoft and Atlassian and the company now known as Meta as well as a lot of those start-ups that you probably never heard of with various degrees of success, as start-ups go. I think what’s been the common thread throughout all of that is really technology with a global impact. I had the chance to work on products, for example on video, on the internet when it was relatively new, when it was still being proven out. Being able to reach a billion people with my products was really fantastic. But then I’ve also worked in really new technologies like, for example image processing, cryptography, all of these foundational technologies that we’re now seeing in spaces like the one I’m in, in robotics. So what’s interesting is some of the things that I did very early in my career without being able to foresee where they were going are things that I’m utilizing these days in this new space of robotics. Then in terms of robotics in particular, the way I like to say it is I blame my cofounder for getting me hooked on this. He’s had over 12 years of experience working in robotics. His name is Julian Cerruti. He worked with a research group called Willow Garage that was extremely influential. He started telling me about this recurring problem that robotics companies had, which is they work really hard to make a robot, but then once you go into the real world, you need to scale. Scaling is hard for every business, but it’s particularly hard for robotics. We built a lot of the foundational technologies to help them out. Danny: – Wow, that sounds—well definitely a very interesting story there. You told me how, you said you came from Argentina, and you went to UC Berkeley, you were looking at the MBA program there. Take me back before that. What’s the draw into the technology space? What pulled you into it? Florian: – It’s a good question. For me, it’s always been about what’s the thing that can have the most impact? I think we’ve seen the positive and sometimes negative impact of technology. I think that different professions will have impact maybe at more of a local scale. If you’re a physician, for example, you can have a huge impact on people, but you have to treat them one-by-one. Whereas through technology, you can reach a lot of people. Like I said, I had the fortune of working with products that had global distribution with over a billion users. So I think it’s really about that reach and that impact at scale. I could give you an example of a prior company that I started and shut down as these things go, which was in the digital health space. This one was really a labor of love for me, a very personal thing. My dad went through a lot of health issues, and it motivated me personally to go try to help people. I thought that through technology I was able to do that. This particular company didn’t pan out, but now you see a lot of digital health companies that are doing just that, especially when people are less able to go to the doctor. So technology does have that empowering effect, and in a very strange twist of fate, I now work on the health of robots instead of the health of people. Danny: – Yeah, that makes a lot of sense. That’s a good point there. Was that some EMR-type technology or some sort of digi—yeah. Florian: – It was a lot of digital tracking of—in the US, despite all the news that we get from Covid these days, cardiovascular disease is the number one killer. Danny: – Absolutely, yeah. Florian: – So I worked with two physicians who were specialists in treatment of cardiovascular disease, and a lot of it is about daily management, so blood pressure for example has a lot to do with food intake and so on. A lot of this is very lonely for people. You’re living with your condition every day. You don’t have a lot of support. This was meant to bring that extra level of support through data and help you stay on the path to maintain your health as opposed to treating the disease. Danny: – I think it’s always fascinating with technology as you were talking about just—you talked about having a global impact and being able to—it’s sort of the one-to-many effect versus maybe one-to-one. I think it was interesting, especially; you were talking about you were in the medical space, and that one-to-one treatment versus this technology being able to go out and open that up and touch tons of people. You were involved in a platform that had billions of users. That’s pretty exciting, and certainly would be able to touch a lot of people there. Throughout your career, who has had a big impact from an influential standpoint? Florian: – Yeah, let me answer this way. It’s an interesting question. People have influence in different ways. I had a great mentor really early in my career. I was doing research, and she was a world-renowned researcher. She took the time to get to know me and to understand what my motivations were and to coach me through that. I’ve always been greatly appreciative of that extra time, that extra effort that somebody puts beyond what their job description is. I also wanted to mention, there was another person who had an influence through inaction. I don’t think it was intentional on their side. I’ll tell you the story. Danny: – I’m intrigued, yeah. Florian: – Really early in my career, I was already very passionate, I would say, about technology and about having this global impact. I was working at a very traditional, slow-moving organization, and I kept pushing and pushing because I knew we could do more. We could have more impact for our customers. But people just wanted to maintain things as they were. And at one point–– again, this was probably my second manager ever— he comes to me, and he says, “You know, Florian, I love all your energy. You keep pushing and pushing, but sometimes when you push so hard, the rope breaks.” So he was basically telling me, look, just pipe down and play along. It was fantastic feedback because within a couple of weeks I was working somewhere else. That helped me move my career forward. He basically said, look, if you want to stay here, you just need to go slow. And I said, nope, not for me. So I think it helped me, and years later I remember that conversation. Again, it wasn’t a pleasant conversation, and it wasn’t intended as advice. Sometimes influence that pushes you in one direction or another can come from any side. Danny: – Yeah, absolutely. I love that; that is kind of a funny story. You were saying yeah, a little bit of an unintended, maybe potential consequence or action because of that. It certainly makes a lot of sense. It’s a very interesting difference between, you were working with gigantic, monolith companies. It’s interesting; even the companies that had start-up roots, they were lean, and they could pivot quickly. But then as you grow you start adding all these other layers to be able to essentially stop the innovation, or you mentioned to maintain, and you keep adding layers and layers and layers and layers and layers. I’ve always found that interesting. You’ve got the root, innovation, move, we can pivot; let’s go. And then it gets siloed, and then it’s just this giant ship you’re trying to move. It’s very difficult to make change there. That makes a lot of sense to me. I think it’s interesting. What was the phrase again? It was, sometimes if you push too hard… Florian: – I think it was something, if you’re pulling too hard to get everyone to come along, the rope breaks. The phrase that stuck in my mind was the rope breaks. Again, I think it was meant as a, just play along. I think the value that it brought me was clarity that that wasn’t a fit for me. Danny: – Absolutely. Florian: – Even today, InOrbit is still a relatively small organization. We’re about 20 people, and my cofounder and I spent so much time on culture. I know people talk about culture in grandiose terms. For us, it’s really helping people understand why we’re doing what we’re doing and really helping them bring their own way of contributing. I think—maybe this is too much of a rathole, Danny, but— Danny: – No, this is good. Keep going. Florian: – We hear a lot from companies that talk about culture fit. But I don’t think that’s what you should aim for because then you’re trying to get people to conform to a pre-existing mold. I think what you want is culture-add. As you bring someone new, are they contributing? Are they adding to the culture in the general direction that you want to take? I think, as you said, it’s really hard to do that at a greater scale. It’s a little funny that, with a company of 20 people, we’re already thinking about okay, how will this work when we’re 1000? But I believe that you lay the foundation for that culture really early in the life of a company. And then if you’ve done your job right, it’s self-reinforcing. You tend to attract people who want to contribute and add to that culture. If you get it wrong really early on, you did it with your hands. There’s the roots and then the tree. Maybe the tree will be skewed, and so I think it’s important to get it right. We spend a lot of effort on that. Danny: – That’s awesome. I would love to dig into that a little bit more if we can. I love the idea around culture, and it fits really well into your story there as far as how that transition goes. I love the concept of, you said a culture-add versus culture fit. What are some concrete things that you’re doing there to set the tone for the culture? Florian: – Yeah, maybe a little bit about the company. We’re a distributed team, so we have people all the way from northern reaches of Canada to South America. As a distributed team—and throughout the US also, from the East Coast to the West Coast. So that adds an extra layer of challenge when it comes to having people feel like they’re part of an organization that has a shared meaning and a shared objective. One of my—people don’t usually love meetings, but I do have a favorite meeting that we do every two weeks on Fridays. We call it the wins meeting. This is a meeting where we get together; there is no agenda, per se. People from across the company, we all get together. It’s not mandatory, so it’s not an official thing, but usually everyone is there. It’s really to share wins and lessons. Wins is, could be something that you did at work, you completed some development, and you want to demo to the rest of the team. Or somebody won a big deal, and they want to celebrate that. I think that’s pretty normal to do celebrations of things like that. On the other hand, we also do lessons. I think that’s really valuable, which is something that didn’t go according to plan. What did you learn? And sharing that with everyone else. This meeting kind of took a life of its own, and I’ll tell you a concrete story. We had an intern, and it was—one of the things we do is we rotate who is basically the emcee for the meeting, for the wins meeting. It’s a very participatory thing. We were having our wins meeting on May 4th, and for Star Wars geeks, that’s an important day. It’s May the Fourth day. We ended up; I said, well why don’t we do something with Star Wars? So this intern who happened to be hosting, she put up this amazing trivia game about Star Wars. Then we have some people at our company that are insane with trivia, like really, really good. They beat me every. Single. Time. But what’s funny is, this became kind of a tradition, so a lot of times we start the meeting with, tell us something about yourself, something embarrassing that you did or a trivia game. And it took a life of its own, and what I love about it is, it wasn’t like a top-down thing. We just created a space, and then it’s self-reinforcing. I don’t know. It’s a great way, like I said, my favorite meeting. Danny: – That’s awesome. That sounds like a great meeting. I love that concept of doing that and creating a cadence and letting it go beyond maybe what it was initially set up for and grow a little bit more organically. I think I see now a little bit more where you’re talking about the culture add aspect. I see that very clearly in that example. That’s fantastic. Florian: – So for example, we have an engineer on our team who does parasailing. Danny: – Very cool. Florian: – I’ll admit, I look forward to when he shares a video or something because it’s like vicariously living through his excitement. But you get to know people beyond just work. I think that’s really important for me. Danny: – That’s a great takeaway. I’m writing some notes here. I think we may be implementing something like that similar here. Anyways, I’m selfishly very excited about that. Thank you. What a great thing, talking about culture. It felt like a great, certainly an absolutely great segue as you’re building out InOrbit and maybe some of that inspiration. What’s the story behind how you started it? I know you mentioned that you said you blamed your cofounder there a little bit, but what’s the story there? How did you start? When did you say, we’re going to make this jump, and we’re going to start this venture? Florian: – As with many companies, it started with just a conversation about interesting problems to solve. Like I mentioned, my cofounder had been in the robotics space for quite some time. I came from the cloud world, so it was completely foreign to me. Maybe like a lot of people who may be watching this had my preconceived notions from movies and so on about robots. As I started learning more about it, I learned a couple of things. One is, the old-school robots that worked in factories, for example if you go to an automaker’s factory floor, you’ll have these massive robots, million-dollar robots. They just do the same thing over and over. They’re programmed in a very precise fashion to do the same thing over and over. What got me really excited was, there’s now a new generation of robots enabled by really new technology where the robots are coming into the open world. So now you’ll see robots in warehouses, in farms, on construction sites, at retail stores, in airports. So really pretty much wherever you go, there is a robot. I live in Mountain View in California, and when the pandemic hit we were really worried about our close neighborhood store, our grocery store, mom-and-pop shop, we know the owners. We’re like, okay, how are they going to hold up? Well this being Silicon Valley, within two weeks they were doing delivery to the home via robots. Danny: – Really? Florian: – What I thought was interesting was people’s reaction to the robots because at first it was just like, oh, my God, what is this? People taking pictures. That lasted about two weeks. Then it became part of the (of course) robots. So I think it’s interesting how we as consumers ourselves, we respond to the technology, first maybe in awe, but then it becomes part of our landscape. I think that’s what we’re seeing what’s really exciting about what’s happening with robotics. Back to InOrbit, we said, okay, great; how do we help? We see the potential. We see the impact. How can we add to that? Before we even started the company, within I think it was 25 interviews with founders of robotics companies, with users, really to understand what their problems were, we landed on this idea that, when a robot goes from the lab to the real world, there’s a big transition. A lot of times, and this is not probably very well-known, but a lot of times in those early days, robots had chaperones. They literally have an engineer following the robot around to make sure that it behaves as needed. Again, in the early days you probably had more engineers than you had robots. Then as you start to scale, when you want to go from 5 to 500, let’s say, a lot of things that worked in the early days stop working. That’s something that I’ve seen in the cloud, and that’s where my connection to this was–– which is, I’ve seen this work in the cloud where in order to operate the massive data centers that companies like Facebook or Microsoft operate, you couldn’t do it one server at a time. You have to have these scalable tools. So we set out to build those scalable tools for robotics, and we landed on this concept that we call rob-ops. If you’ve heard of dev-ops, which is tools and practices for operating software at scale, we’re bringing a lot of those ideas to the world of robotics. Danny: – That’s awesome. Can you say that again? I had not heard that, and I’m not ashamed to admit that, so what was… Florian: – So in the cloud space, there’s something called dev-ops. Danny: – Oh, dev-ops. Okay, I thought you said something else. Florian: – Yeah, like development and operations put together. So now we’re doing rob-ops which is robotics operations as a cohesive idea. Danny: – Perfect. That makes a lot of sense, and that’s great. Great analogy there, or connection on that. I’m curious, though; how did—you said you talked to several robotics companies just wanting to get an understanding. I think you said 20 or so leaders and end users. What was that moment in your mind? It sounds like you’ve done this before, so it’s not like—you’ve gone through this process, but did you have a particular moment where you said, okay, yeah, this is it. This is a big problem that I know we can solve, and it’s time to go. Let’s do that. What was that moment like? Florian: – Yeah, maybe to the point that you made about having done this before, there’s a method to the madness of starting a company. It’s generally called customer discovery and customer development. Customer development is a framework by Steve Blank. You go through the process, and that’s part of what guided us. In our case, maybe the moment of insight was precisely this idea that robots are, if you want to think about it this way, it’s like servers on wheels. It’s like a complex computer server with lots of sensors and moving around. So it’s in the—if you designed a data center for hundreds of thousands of hosts or computers, you need reliable power. You need great networking. You need ventilation to dissipate all that heat, so you design it, and you control as much as you can. A fleet of robots, I like to call it, it’s a data center from hell. It’s the worst possible way of operating a distributed computing platform because a lot of times they’re in uncontrolled environments. They have networks that come in and out. They’re on battery, so they need to come back on their own to recharge if they’re a mobile robot. So the challenges are much, much higher. When we talked to a lot of these robotics companies, what we realized is a lot of them weren’t necessarily thinking about those problems of scaling. If you’re very passionate about robotics, maybe you have a PhD and you work as a roboticist, you really have to focus on building that robot. We felt we could augment and help them focus on that, and we’ll take care of the boring part, if you will, of running the robots at scale. Danny: – Yeah, that’s exciting. So maybe an oversimplification of what you do. I’m a little nervous about saying this, but it sounds like you’re helping to solve—and there’s a lot of different challenges, but I know there’s a big challenge of interoperability, certainly, in this space because there are so—it’s interesting to see the growth of robotics over the last several years. It was a fast trajectory of growth, and then you pile on the pandemic. The huge needs just grew exponentially, and they continue. I can’t remember; there was a stat that I’ve seen as far as how many new robotics companies are on the—you have players who’ve been in here for years and years and years, and then you’ve got constantly new start-ups. It’s interesting because, like you mentioned, a lot of people think, you watch Terminator or all these other robotics and AI movies. Oh, wow, it’s going to take over the world and all these things. The reality of it is, is even though that, yes, you’ve got from an automation standpoint you mentioned automotive, and you’ve got these giant, maybe these FANUC robots that have been there, and they’re moving, and they’re—but they’re very set in place, or they’re caged. You’ve got all of these AMRs that are now, they’ve got more autonomy, and they’re going around all over the place. It’s totally opened up the playing field. But the problem being that, that’s great, but you can still only solve a finite amount of problems with this particular robot. You may need a whole fleet of 10 different types of robots to solve some of these different challenges. Is that part of what you’re solving there, with some of the software solutions? Florian: – Absolutely. If I can get really geeky here— Danny: – Please, get really geeky. Florian: – For a minute, we like to say we solve the four Os of robot operations. So the first O is observability. This is kind of like a fancy word for monitoring, but it’s really knowing through data what’s up. What is the robot doing? It has its own set of challenges as I describe because they’re all over the place. They’re on weak networks sometimes. So we solved that problem, and that becomes the foundation because it’s the data. So at our core, we’re a data platform. But then from there, there’s an operational aspect which is, robots get into situations where they’re no longer autonomous. They’re stuck. This happens—I won’t disclose numbers, but it happens a lot more than everyone anticipates. I think we have this picture of a robot; oh, it must be perfect. Far from it, especially when you’re in crazy environments. You talk about a warehouse, for example, but we’ve seen robots in retail stores while there are shoppers around. So there’s going to be a kid with a shopping cart and ketchup stains on the floor. You can’t expect the robot to be perfect, and that’s where some of these—augmenting the robot by human operators is a way to do that. So that’s the second O, operations. I think then you get into optimization. What you really want is to not have those problems happen as often. How can you solve it? We do things like tools for root cause analysis. Root cause analysis allows you to identify cases where things didn’t go as planned and derive insights from it. And just to give you a sense of scale, each robot may generate a terabyte of data per hour. The approach of, we’ll just throw everything to the cloud isn’t really practical, especially as you’re thinking about we now have fleets of thousands of robots operating in the world. So that takes us—optimization is how do I run my fleet more efficiently? Then the last O is getting to what you were mentioning before. We call it orchestration. Again, that’s a very cloud term, but it’s really, how do I bring different components together in a harmonious way? Now you’re more like the conductor of the orchestra. That can include many different types of robots from different vendors. In a warehouse, for example, you may have—let’s say there’s a cargo dock, and a truck comes in. Well you need to unload it, so there are now autonomous forklifts that can do part of that job, or maybe all of it one day. Then you have pallets. You need a depalletizing robot that will break down the pallet into its components. Now you need to take it into the warehouse proper. How do you do that? Do you do it one by one? Traditionally a lot of these warehouses have conveyor belts. The conveyor belts are really efficient, but they’re really expensive and they’re really inflexible. So what an AMR, an autonomous mobile robot gives you is flexibility because it’s controlled through software. So that’s where we’re able to bring all of these robots from different vendors and give someone a complete view. The term in the industry is a single pane of glass, one way to see all of your IT, or in this case OT, in one view. I think that’s where this is going, and you see really pioneering companies like FedEx really advocating for this ability to control different robots. Danny: – That’s super interesting. Thank you so much for getting, I think you said geeky with me. Getting into the technical weeds. I appreciate that. Actually one thing in particular that I had no idea, never heard this before: one terabyte of data per hour, one robot could generate. That’s a ton of data, especially if you’ve got a fleet of hundreds of these things. Transmitting that and getting that, storing it and then analyzing it seems—That’s crazy. That’s a lot of data. Florian: – A lot of times, Danny, all of those terabytes of data, you just need this one piece of data, the proverbial needle in the haystack. I think that’s what we do is, we try to turn all of that data into insights that people can take action on. Danny: – Right, absolutely. Well there’s a ton there. A couple other questions that I’ve got coming up then, how do you engage with your customers? Are your customers—obviously you talked about robotics companies. So I imagine, would your customers be robotics companies, end users, and integrators? Do you work with one, all—how does that work? Florian: – We work with different players in the ecosystem. At the end of the day, because of our orientation towards operations, we really care about maximizing the potential of every robot. As a robot vendor, of course you want a more efficient robot, a robot that fails less often or that requires fewer interventions. So we can provide a lot of data for them to improve on their robot. As an end-user, you’re really running the robots. In fact, I like to say, and this is a little shocking for companies in the robotics space, the end users, they don’t really care about the robots. They care about their process and what the robot can do to it. Their needs are going to be a little different. They’re all based on the same foundation of data, but what they’re trying to do is, they’re trying to drive this SLA higher and higher and higher. What’s interesting is there’s this middle ground between those two cases that I mentioned which is this idea of robotics as a service. Increasingly you see companies that, instead of selling you a robot and now you do whatever you want with it, they’ll essentially sell you a service that is backed by their own robots. We’re starting to see—this is very new—third party companies that will say okay, I’m not going to make the robot. I’m not an end-user. I’m just going to run these robots at scale. So we can help them with our infrastructure to do that like I said at scale, across robots, across sites, and across customers. Danny: – Yeah, that sounds super interesting. I have heard, definitely over the last little bit or so, robotics as a service. I think it’s a super fascinating play. Certainly with all the labor issues that we’ve got going on now, certainly a lot of companies are turning towards automation in any way—there’s a huge shift in the digital transformation that is happening. It was happening before, but again because of the pandemic in all areas, you’re seeing the supply chain, manufacturing, all up and down, logistics, and beyond. End users, you were mentioning retail and grocery for example. I love the store that you talked about, how the response with the local grocery store in the neighborhood, you said being Silicon Valley, what do we do? It’s fascinating, but we’re continuing to see more of that. And we’ll see more. What does the future look like for you? Florian: – I like to think of this future where we have millions of robots around the world that are positively impacting billions of people. Each robot can have this multiplier effect, whether it’s a robot in a farm making—so one of the companies that we’re familiar with is a, basically a robot that goes in a farm, identifies weeds, and then literally zaps them with lasers. Instead of having to have herbicides and spray it, you can turn that to zero. Another customer of ours has been able to grow leafy greens with a 90% reduction in the use of water. Again, all of these are things that are not moving the needle a little bit. They’re moving it a lot. We’re seeing a lot of electrification also which a lot of times goes with autonomy together. We see that reducing, for example, the carbon emissions. These little robots that deliver around Mountain View, they’re replacing somebody driving around in their car, getting out of the car, dropping the groceries, and getting back in the car. I think these things have huge impact. But to take it a little bit further, where we see the future is the collaboration between robots and people. I think we’re only starting to see the shape of that. I like to talk about this what we call a roboteer, like a puppeteer, but for robots. Maybe your job isn’t to go deliver food or isn’t to unload a truck. You’re monitoring. You’re the boss of a group of robots that are doing those things. Just like we said, the robots may not work fully autonomously, fully independently all the time. There’s always going to be corner cases or areas where somebody needs to intervene. But now maybe you can do–– instead of sitting in a forklift and driving it around–– maybe you can supervise 5 forklifts or 10 forklifts. You don’t even need to be there. You could be doing it through our platform or through other people’s platform. You could be in an air-conditioned room sitting in an ergonomic chair and responding to events as they happen. I think that vision of collaboration between people and robots and obviously the cloud and AI that come into that, I think that’s a great, in my mind a very optimistic vision of the future. Danny: – That’s really interesting. I like that, and it’s interesting. People always harp on, “Robotics is taking people’s job away,” and the answer we keep hearing is—I love this; I haven’t heard this, roboteer. It makes a lot of sense. You’re seeing that’s a—I do certainly believe that is where the future is going, too, when you look at a lot of these jobs as well. Obviously we’ve got major issues right now for a whole host of reasons, but the trend for years though before this has been, a lot of people, they don’t want to work. I don’t want to work in a warehouse, or I don’t want to work in manufacturing or logistics. There’s been a struggle trying to attract, so if there’s a way to say listen, we’re already seeing a decline in that. If we can bring in a solution over here from a technology standpoint to be able to assist people in those jobs, it’s creating an increased net positive effect. Florian: – Yeah, and you say I don’t want to work. I think it’s—these are tough jobs. I had the opportunity to tour some facilities, and without automation your job may be to literally walk 15 miles a day within the warehouse pushing a cart back and forth. Let me tell you, that’s not good on your knees. It may be super healthy because you’re walking a lot, but it’s not necessarily the best environment where you want to do that. What we’ve seen is, we’ve seen this tremendous increase in productivity while also improving the health of the workers where you can have, instead of somebody pushing a cart, the cart knows where to go. When you think about a robot, some people may have this idea of a humanoid robot. Our robots have very boring shapes. They resemble something that has existed all along, but now they add autonomy to it. So if the cart can go where it needs to go, now you’re focused on picking the right products and putting them on the cart, not on walking back and forth. So that has the dual effect of better, less wear and tear on the body and also greater productivity. Some companies will see 300% productivity increases by introducing an AMR. I think it can very much be a win-win. Danny: – Certainly, absolutely. Alright, my last question is a very difficult question. Since you brought up Star Wars earlier and you’re working in the robotics space, I’m curious. What’s the difference between a robot and a droid? Florian: – Ah, I think it’s just a terminology thing. Everyone knows R2-D2. Danny: – Who’s that? Sorry; no, I’m just playing. Florian: – So that is actually called an astromech droid. This is me showing off my Star Wars nerdiness. They do have different models. Not all of them are R2-D2. You do have, in the Star Wars universe, different types of droids that do different things. They already had this orchestration problem in Star Wars, and maybe they’re using InOrbit—you know, InOrbit, star—maybe there’s something there. Danny: – Maybe, and it’s a great parlay from the question of the future. So there we go. Listen Florian, I really have appreciated our conversation. Thank you for obliging. I loved your answer. Thank you so much on that, and for just sharing all of your insights about the industry, what you guys are doing, sharing your story and how you got to where you are today. It sounds like you guys have a very bright future, no pun intended with the Star Wars analogy. But I really do think that you guys are solving some big challenges and creating some unique opportunities in a space that is exploding. I’m going to be very excited to follow you guys. So for those companies who would like to learn more about you, I’ve got the website here, or the URL, inorbit.ai. I want to make sure that’s correct. We’ll have that in the show notes. Florian: – You got it. Danny: – And Florian, again, just thank you so much for your time with us today. Florian: – Danny, it’s been a lot of fun. Thank you so much. Danny: – I have enjoyed it too. Alright. Alright, well that wraps up today’s IndustrialSage Executive Series with Florian Pestoni who is the CEO and cofounder of InOrbit. You can go check them out at inorbit.ai. I loved today’s episode. Great story; a lot of great insights here. So if you like today’s episode, you need to go to IndustrialSage.com if you’re not there right now, and you can subscribe because you’re missing out on great content like this. Not only do we have the Executive Series. We also have news, and we’ve got a lot of other great content coming down the pike. You don’t want to miss it; I guarantee it. So subscribe; don’t miss out. And I’ll be back next week on another episode of IndustrialSage.   Thanks for reading. Don’t forget to subscribe to our weekly newsletter to get every new episode, blog article, and content offer sent directly to your inbox. You can also subscribe wherever you download podcasts so you can listen on the go! Sponsored by Optimum Productions