PULSE Integration and OTTO Motors Deploy the Largest AMR Fleet

PULSE Integration and OTTO Motors Deploy the Largest AMR Fleet

PULSE Integration partnered OTTO Motors, to undertake what is the world’s first in-depth analysis of automated mobile robots (AMRs) deployed at scale in industrial facilities. With hundreds of facilities across North America, this billion dollar organization is a household name in Consumer Packaged Goods. In 2 facilities spanning over 1.7M sq ft, this Fortune 500 company is 100% reliant on OTTO technology for their material transport.

Watch the video here

View the business case here

Proving the Case for Autonomous Mobile Robots

Proving the Case for Autonomous Mobile Robots

PULSE Integration partnered OTTO Motors, to undertake what is the world’s first in-depth analysis of automated mobile robots (AMRs) deployed at scale in industrial facilities.

Working with an F500 company, OTTO deployed the OTTO Materials Handling Platform at a brownfield and greenfield site. PULSE then compared performance with:

  • Forklifts
  • Conveyors
  • AGVs
  • Manual material handling

The fact that these deployments were carried out at scale was important. What we have found amongst all but the digital leaders is that businesses look to adopt the technology bit by bit, trying to hedge their bets on their investment risk and keep all stakeholders happy. The result is that you tend to get islands of automation across a business or a production facility, missing out on the network effect you get with a large scale implementation where all pieces complement each other to achieve a greater whole.

Analysis and Conclusion

The findings of PULSE’s study were unanimous – on a per-unit basis, they found that:

  •  AMRs were significantly cheaper compared to other materials handling solutions
  • 90% cost saving compared to manual handling
  • 33% saving compared to AGVs.

Depending on the investment model used (system lease, vehicle-only lease or capital funding), PULSE calculated that this would translate to ROI being achieved in one to two years.

These are significant figures for an industry that has long tended to view robotics as an expensive solution with a high bar for ROI. As McKinsey puts it, the robotics market, in the past, leaned towards customers with the biggest spending power, focusing on proprietary, non-standardized whole factory solutions that kept costs high – and meant only those firms with the deepest pockets could forge ahead.
PULSE’s study is proof that times have changed. AMRs offer a specialized automated solution for one critical area of manufacturing operations, materials handling and intralogistics. PULSE and OTTO have demonstrated how AMRs can boost agility, efficiency, productivity and space utilization in the factory, while also driving down costs.
Critically, AMRs do this in a way that is more cost-effective than other available solutions, with an ROI that fits well within standard financial reporting cycles. If, as the likes of Interact Analysis forecasts, this leads to significant growth in the mobile robotics sector, this will also help to close manufacturing’s digital divide.
The Business Case for Autonomous Mobile Robots in Manufacturing

The Business Case for Autonomous Mobile Robots in Manufacturing

OTTO Rendering
  • First deployment of OTTO AMRs at scale at an F500 company demonstrates clear benefits in productivity, cost savings, and robustness.
  • Analysis reveals that a single AMR unit represents just 10% of the equivalent human labor cost, 20% of forklift operating costs, 50% of conveyor costs and 66% of AGV costs.
For a number of years now, Autonomous Mobile Robots (AMRs) have been considered a promising technology for improving the resilience of manufacturing operations.

In the context of manufacturing, resilience means agility – the ability to react to and adapt to change at speed, whether it be in response to fluctuations in demand, market conditions, supply lines, the availability of labor, or otherwise.

The COVID-19 pandemic has tested the resilience of manufacturing operations worldwide like never before. Yet in the midst of the turmoil created by the biggest global crisis in 75 years, mobile robotics has been singled out as one of the most promising of all emerging technology sectors, offering a vital tool in the race amongst manufacturers to adopt COVID-safe, flexible, and digitized working practices.

Yet for all the optimism, manufacturing firms rightly ask one crucial question about AMR adoption – where’s the evidence that it will have the promised impact on my operations?

While there are plenty of examples illustrating the benefits of small deployments, the business case for full-scale adoption by large firms has been lacking robust evidence.

Until now, that is.

A World-First for AMRs

PULSE Integration partnered with OTTO Motors to carry out one of the world’s first large scale deployments of autonomous mobile robots for materials handling in manufacturing.

The project involved the deployment of the OTTO Materials Handling Platform to provide the backbone of advanced manufacturing and eCommerce intralogistics at an F500 company. It took place over two sites, a brownfield and a greenfield.

Brownfield deployment at an existing 700,000 square foot facility, half of which was given over exclusively to the use of AMRs to provide transport of raw material pallets, work in progress pallets, and finished goods pallets in place of forklifts.

Greenfield deployment at a brand new 1 million square foot facility, where AMRs were deployed exclusively in a 400,000 square foot area to collect materials from human pickers to take to automated machining cells, and also to perform autonomous collection of materials from automated cells.

By relying 100% on AMRs within the dedicated zones, PULSE was able to carry out a robust cost-benefit analysis in comparison with manual handling (use of hand carts or carrying good), forklifts, conveyors and also with Automated Guided Vehicles (AGVs), which run on tracks and therefore don’t offer the same freedom of movement as AMRs.

Clear Cost Benefits

1. AMRs vs. Forklifts

The findings were unanimously in favor of AMRs. At the brownfield facility, PULSE found the OTTO 1500 platform worked out at just 20% of the equivalent operating costs of forklifts. This was based on the calculation that a single unit operating around the clock, 24 x 7 x 52, cost $40-50k per vehicle per year. The equivalent cost of a single driver working 4.2 shifts per week, plus the forklift lease, comes in at $200-280k.

At the greenfield facility, PULSE deployed OTTO 100 units managed by the OTTO Fleet Manager IoT system. With an average cost of $15-25k per vehicle, the OTTO 100 represents just 10% of the labor costs of human drivers when compared on a 1:1 basis.

2. AMRs vs. AGVs

In comparison with AGVs, PULSE found that the overall productivity of the OTTO 1500 units was broadly similar and that AGVs even showed some advantage in wide-open spaces. However, in the tight, narrow spaces of a compact facility, the smaller footprint and better maneuverability of the OTTO 1500 showed clear performance benefits.

Freed from fixed paths and guideways, the AMR is, for example, able to navigate independently around obstacles and pedestrians and can maneuver flexibly within the footprint of a pallet. This makes it much more efficient when operating with work cells or production machinery. Overall, PULSE calculated that this gave the OTTO 1500 a 66% cost efficiency advantage compared to an equivalent AGV system.

3. AMRs vs. Conveyors

Compared with conveyors, meanwhile, which operate in fixed positions that cannot easily be rerouted as demands change, PULSE calculated that a single OTTO 100 unit could do the work equivalent to a 250 LF conveyor. This worked out as a 50% cost saving, although this was based on optimum loads. When conveyors, as so often happens, are sub-optimally loaded for throughput or when loading only happens sporadically, the cost benefits of the AMR can be even higher.

4. ROI

Finally, as well as significant cost efficiencies, PULSE’s analysis revealed that ROI on AMRs at this kind of scale could be as little as a year.

With payback driven by labor savings, increased productivity and efficiency, enhanced ergonomics, improved safety, lower capital costs (compared to conveyors) and the opportunity for more compact facility design (compared to AGVs), PULSE calculated that ROI for large scale deployments on system lease could be under 12 months.

Using vehicle-only lease, this would push up to 12-24 months, while upfront capital purchases would be typically paid for in two years or less.

Retail Strategy And Learning How To ‘Think Big’

Retail Strategy And Learning How To ‘Think Big’

Prior to Covid-19, most retailers were operating with the same business models that they had used for years. When Covid-19 hit, many retailers were identified as being nonessential, resulting in their stores being shut down for long periods of time. The only retailers allowed to remain open were those deemed essential — grocery stores and pharmacies, for example.

Being listed as a nonessential retailer resulted in lost sales and furloughing thousands of employees. As 2020 progressed, retailers focused on implementing strategies for social distancing and increased cleaning practices inside their stores. Many consumers avoided shopping in nonessential retail stores that sold apparel, shoes and other items found in department stores, and instead focused on essential items like groceries and food. 

As retailers enter 2021, essential and nonessential retailers will be faced with the need to evaluate their strategies. This is easier said than done for most retailers. Nonessential retailers will need an actionable vision that will set them apart from their competitors while attracting customers to shop in their stores. These same retailers will also have to determine if stores are strategic to their operating models or if moving to an online model is the better strategy.

An unknown for retailers is what will happen in the year ahead. Will Americans embrace getting vaccinated and will Covid-19 be in the rearview mirror by the end of 2021? Or do we have more hurdles ahead with the virus?

Retailers can’t operate based on assumptions. They must operate based on the needs of their customers and company. What’s certain is that the strategies used by retailers in 2021 must be an improvement over the strategies used in 2020.

The Science Of Strategy

In my consulting practice, most retailers that contract my services are focused on improving the strategy they were using to compete in the market. I enjoy working with retailers, but on the topic of strategy, I find it necessary to spend an exorbitant amount of time understanding who within a company came up with the current strategy and their motivation for doing so.

I continue to be amazed at the number of CEOs and other senior executives that identify the strategies they want to use based on “gut feel” vs. science. In some cases, retailers operate without a strategy.

To simplify the understanding of strategy, I leverage several methodologies that I learned from Capgemini and Deloitte. In addition, I utilize game theory, which is referred to as the science of strategy. When used correctly, game theory is ideal for comparing and analyzing what strategies will achieve the desired outcome for a retailer.

What I like most about game theory is that it provides an opportunity for executives to better understand the impacts of their decisions on their companies and, most often overlooked, their competitors.

For example, I’ve worked with retailers that prefer to minimize markdowns on the products they sell in their retail stores. However, increased competition reduced sales leading to a rash decision to markdown items by as much as 25%. Executives believed the decision would increase the number of customers in the stores to take advantage of the bargains.

The opposite happened. Customers chose to bypass the retailer altogether and instead go shopping at everyday low-price leaders or discounters that carried similar products. Reducing prices by only 25% failed to attract bargain hunters because those shoppers could find bigger savings elsewhere.

Strategy is among the most difficult challenges faced by retailers, and it’s about to become even more difficult.

Learning How To Think Big

When I worked at Amazon, leading the expansion of AmazonFresh and Pantry, a phrase we used frequently in the company was “think big.” Jeff Bezos challenged everyone who worked for Amazon to come up with ideas that would delight customers and, in turn, create an increased advantage for the company.

Thinking big was part of the culture at Amazon.

Most retailers, however, don’t think big and it’s not part of their culture.

A technique I use to teach retailers to think big is to review a series of examples that question the status quo within retail. These examples showcase the value of questioning the status quo and challenging a company’s culture to embrace big ideas and change. Each contains the name of a well-known retailer (or another company) along with a recommendation to acquire a company, merge with a company or make some other type of “big move”:

• Amazon acquires Target, Kohl’s or Shopify.

• Shopify acquires Instacart.

• Kroger and Target merge.

• Facebook acquires Instacart or Target.

• Walmart acquires TikTok or Instacart.

• FedEx and Walmart partner and acquire Shopify.

• Tesla acquires Jeep.

• Instacart opens automated micro-fulfillment centers and becomes an online grocery retailer.

• Google acquires eBay, Instacart or Shopify.

Game theory comes in when challenging and discussing the value of each example and identifying which recommendation would generate the best results.

The size of your retail business doesn’t matter. This exercise is helpful to understand the impact that big strategic moves can have on your company. By applying game theory, you can learn how to answer the who, what, when, where and why of each recommendation.

After this exercise, thinking strategically about the moves your company can make becomes easier — at least that’s what I’ve found in my work with my clients.

2021 is going to be another difficult year for many retailers. Learning how to think big is a must. The future of many companies will depend on it.

Read the full article featured in Forbes

 

How Social Commerce And Online Auctions Are Set To Revolutionize Retail

How Social Commerce And Online Auctions Are Set To Revolutionize Retail

Retail is one of the oldest industries still operating. Throughout history, individuals have had a desire to buy for fun and a need to buy out of necessity. Retail is also an industry that is constantly changing. The arrival of Amazon has ushered in the growth of e-commerce, and consumers are increasingly shifting their preferences to ordering products online vs. shopping inside retail stores.

Based on what I’m seeing, I believe retail is about to undergo further changes as a result of the growth of social commerce, where buyers form a group in order to receive discounts from suppliers. Complementing social commerce is the growing trend of using online auctions to find the lowest bidders to fulfill orders for apparel, shoes and other merchandise.

Much of my academic research during three master’s degree programs was focused on retail, auctions and supply chain management. Since 2015, I have conducted research on one of the largest social commerce platforms, China-based Pinduoduo. In addition, I have provided consulting to retailers interested in social commerce and online auctions. (I do not mention these retailers in this article.)

Auction-Driven Social Commerce

Pinduoduo has taken China’s retail industry by storm. The platform reportedly had 585.2 million active buyers in 2019, surpassing JD.com’s 362 million and catching up to Alibaba, which reported 712 million users (in the 12 months leading up to September 30, 2019). I believe this can be credited to Pinduoduo’s executive team’s focus on efficiently receiving, fulfilling and shipping orders to customers.

To accelerate growth, products on Pinduoduo list two prices: one for individual purchases and a price for team purchases. Team purchases encourage consumers to convince as many friends and family members as possible to buy the same products together. The more products that are purchased, the lower the price for each product sold.

The model from Pinduoduo differs significantly from a warehouse club like Costco or Sam’s Club, which already sells a product in bulk. Convincing friends and family members to buy the same product in bulk doesn’t decrease the price.

I believe this is what’s missing in the current commerce model — duplicating the social experience online where friends and family buy together and have fun together. Further, I anticipate a move toward an online bidding model, whereby more than one seller can bid on selling their products to a group of consumers. This model has the potential to explode in popularity for several reasons.

First, the Nobel Prize for economics was recently awarded to two Stanford University professors for their work related to online auctions. The award has generated interest from retailers (several of them my clients) who wish to learn how to leverage auctions within their retail ecosystems.

Second, at nearly $800 billion, the grocery industry remains one of the most important industries operating today. Consumers purchase groceries more than any other commodity on an annual basis.

However, according to many economists and analysts, grocery retailers are examples of monopolies due to the fact they control all pricing power over the products sold in their stores. Walmart, for example, reportedly controls over 50% of the grocery market in many areas within the U.S.

In addition, the growth of online grocery ordering and delivery has uncovered a weakness in the current model: Every online grocery order is treated as a separate order. No attempt is made to combine orders to sell in bulk to reduce prices.

I believe the current grocery model can easily be disrupted. For example, a third party with an online platform for ordering groceries could enter the market with the promise of reducing grocery prices to their lowest possible level through the use of an online auction.

Instead of treating every online order as a separate transaction, a third party would be able to bundle hundreds of thousands of online orders and, on a daily basis, conduct a bid whereby brands, grocery retailers and wholesalers bid to fulfill the online orders at the lowest cost. (I wrote more about this topic earlier this year.)

Removing pricing power from grocery retailers has the potential to drive significant growth to a third party that perfects the use of social commerce and an online auction for selling groceries.

When To Use An Auction Model

Virtually all retailers can use an online auction and social commerce in their business, assuming they have a platform with the required technology. However, there are risks that must be taken into account. For example, retailers must understand what their costs are, and they must have a cutoff price that they won’t exceed, lest they rob themselves of margin and eliminate any chance of making a profit.

Also, retailers must have a supply chain capable of managing inventory and shipping bulk orders to many locations. Partnering with the right inventory optimization software can provide the needed algorithms to manage and optimize inventory.

It should be noted: I don’t recommend the use of social commerce or online auctions for high-value products that require a long time to make. I evaluated an online auction model for a company that manufactures extremely complex and expensive (over $1 million in some cases) CT scans and other intricate medical equipment. Using an auction would prevent the company from personalizing its process for making the machines and showing how its “hands-on” approach provided value above and beyond price.

Retailers must evolve or they will surely die. The status quo is no longer acceptable, and I strongly recommend all retailers in the U.S. to crush it.

Read the full article in Forbes