Transcript.

Erik: Dean, thanks so much for joining us on the podcast today.

Dean: Hi, Erik. Thank you. Thanks for having me.

Erik: So, this is a really interesting case for me. Actually, I didn't mention this upfront, but it feels like probably 10 years or so ago. I did a consulting project for Dematic with a firm I was working for back then. So, you guys have probably evolved quite a bit since then. But I'm looking forward to learning more about what you're doing today, and also this partnership that you have with Dexterity.

Dean, I'd love to start by just understanding a bit about how you ended up with the Center of Robotics Excellence over at Dematic. I see from your CV that you have a background more on, let's say, the customer side or the end user side in terms of operations excellence. What was it that led you now to your current position?

Dean: Yeah, you're spot on. When you think about your journey of a career — I started actually in the Navy as a nuclear reactor operator, a very highly regulated industry, electronics and controls, that background and that foundational block. Then when I ended my obligated service with the military, I got into the pharmaceutical world. We're commissioning qualification validation of critical equipment and the integration of that equipment with controls and software systems. It was validated to a point where FDA would review and approve, so to speak, on different process, drug processes. From there, I got into some Lean Six Sigma and working with some companies where we utilize some things that Dematic did many, many years ago. I mean, AGVs, and the idea of lights-out warehouse is not something that's brand new. This is something I'm familiar with over 20 years ago, when we had an ASRS that was lights-out and AGVs put pallets away, that sort of thing.

So, I was a customer back then. I didn't know it. As my career evolved, building on more robotics in the medical device area, where I was with a company. Our operations had a blend of manual operations, and then how do you automate some of those operations for high-volume skews and that sort of thing. I learned a lot about the importance of robotics and how robotics could play a role in the quality system and space, where repetition and reliability is important. There is where I learned also the challenges that you come through from the robotic standpoint. Obviously, medical devices, when we think about Failure Mode and Effect Analysis and that sort of thing, failures there is very critical. Today, in a supply chain, if somebody gets the blueberry granola bars instead of the raspberry granola bars, nobody's going to have a side effect or pass away. So, the order of magnitude of my background and with the attention to detail we had to have in those regulated industries. Then as a customer more recently of Dematic, getting into some more of the automation systems.

As a customer of Dematic, I was also a customer of our competitors. When you learn how each of these competitors look at problems that are out there and how they solve those problems, it was really a great opportunity for me to join Dematic and the role I play. Center of Excellence is a common term used for a lot of different things — Center of Excellence for Optimization, Center of Excellence for Robotics, Center of Excellence for just about anything you can talk about, customer service, whatever.

When you think about Robotics Center of Excellence and my role today, and coming from the customer side of the table — how do I put my customer hat on as I think about these solutions that Dematic is integrating in — that's exactly what we're trying to do. We're trying to build standard modules within our robotic space that plug and play per se into our larger solutions. As those larger solutions evolve into an ecosystem in the supply chain and in the warehouses today, that journey is the journey of lights out that some people might be aware of. So, it's really a lot of fun working through the technologies.

I think when we think about robotics in the automotive industry for the past 20 years, robotics didn't go into automotive and be wildly successful on their first try. They really had to work through it. When you think about robotics in a manufacturing environment, where you're doing repetitive actions over and over again and a process that can be predefined, you can even hone in on your variability of that process, and firm up your process capabilities, that takes time. That was with a process that was pretty consistent.

In our supply chain, the challenges that we face — we, as Dematic, as well as our customers' face — is the process is ever changing. It's a skew set of hundreds, thousands, tens of thousands of skews, each with its own maybe box characteristic or packaging characteristic. How do we work through all that variability with an unknown scene or an unknown body of work on every time a robot has to do work is where the technology is now catching up and allowing us to solve those problems for our customers?

With today's vision and AI machine learning that everybody keeps referring to, there are many companies out there that are working through those challenges. Our job in the Robotic Center of Excellence is to work through those various technologies, understand how they fit in with our customer problems, work with our customers. We have customers that want to be innovative. They want to be on the front end or front edge of technology. We want to help those customers be the first to get to a lights-out situation or closer to a lights-out scenario with their particular supply chain. So, it's a lot of fun working through the various technologies, the various startups, and then working with our customers on the various challenges that we're all facing.

Erik: Well, that's a fascinating background. Although warehousing doesn't have the same cost of failure as when you're working with submarines or with pharmaceutical manufacturing, I'm sure your customers are feeling they have the same challenges right now, dealing with supply chain disruptions and inflation and unpredictable customer demand, challenges in recruiting, labor, and so forth. I'm sure they feel besieged by, to some extent, potentially opportunities, but certainly also challenges in keeping operations moving smoothly.

Maybe that's a good place to transition into the topic of, why are you collaborating now with Dexterity, the warehouse robotics provider? Maybe it'd be useful to provide first a bit of a background on the portfolios of Dematic and Dexterity. Then we can explore the business logic of this collaboration.

Dean: Erik, that's a big question to unwrap. I think you're spot on, as far as the customer feeling the pain. Again, I was on the other side of the fence and dealing with that pain when it's two o'clock in the morning, and you have a process of automation and equipment that needs to run to deliver to a customer's expectation. Customers are more demanding today than ever. You and I, and everybody that's listening today, you order in with whatever e-commerce order system that you're using, you expect that package to be on your front porch or in your mailbox or whatever the next day or sometimes the same day. So, the market demand is driving a lot of — you got to think differently. Differentiated technologies play a role.

For us, we have to consider technologies across the entire ecosystem of our supply chain. Even beyond what Dematic is known for is the four walls of a warehouse or a distribution center. We're stretching out beyond that, because that's where you can really start to make some change on what's happening inside the four walls. So, that's where the importance of other partnerships and our portfolio of partnerships comes into play. More recently, the Google Cloud partnership. When we think about data and everything, Google Cloud is potentially known for. When you think about other technology suppliers out there, there are some companies that have a focus area, that they are subject matter experts on. They play a role in solving some of the problems within the four walls. As I said, how do we start extending beyond the four walls?

With Dexterity, they're just one of the vendors that we feel is doing some pretty unique things with their technology. It fits into our portfolio of partners very well. We plan to work with Dexterity to leverage the technology and the things that they can bring to the table, to offer our customers that full range of solution so that they can help make their supply chains more competitive against their supplier challenges or against their competition.

Erik: Dean, can I pick your brain a bit here on where we are in terms of robotics? So, I think this is a topic that you're looking at from a lot of different angles. I think robotics adoption is scaling across the world. It's moving into new areas of the value chain or of processes, where maybe it didn't make sense to use it before. So, I'm wondering where do you see the most development. Is it in terms of automation, flexible automation, that allows you to kind of program on the fly and have more flexible solutions? Is it cost down so that you can now deploy robotics in places that were just prohibitively expensive before? Is it new capabilities to perform more complicated tasks that were not feasible before? Where do you see the most innovation happening and the areas that are relevant to your business?

Dean: You hit a lot of variables that are key to the equation, for sure, Erik. I think the difference today is, again, some of these companies have been working on these specific areas for years. They've been focused with some good venture capital support and some good venture capital investment and money. As you have that race for the best of the best, some companies are going to come out ahead. Some companies are going to be maybe in a different spot. Some companies might be ahead in one area, and other companies might be ahead in another. Again, we've got a few companies that we're working with that we want to utilize and leverage for overall solution.

But I think to answer your question a little bit differently, it's really about the business case for the customer. I think the difference today is, robots were looked at before — when I say before, say, it's three years ago or prior to COVID. Robots were looked at negatively, in the sense that it was taking somebody's job away. For me, as a technology guy and thinking about how do you change the jobs in a warehouse or in a company from a manual labor job to a technical job where you're operating these systems, that's the opportunity that's out there for our labor market. But the challenge today is that companies just can't find people to do some of these jobs, because of the whole COVID situation driving a major difference on how people bought everything — from their clothes, their jackets, to their food, to their pet food. All that stuff has impacted when we think about disrupting the supply chain. There is no bigger disruption than that.

With that came a different mindset of how you have to be thinking about your CapEx plan, how do you invest in the future, how do you match up your automation solutions to deliver customer value. That's really opened the door to some different thinking. It has opened the door to some executives saying, "Hey, you know what? My business case wasn't really where I wanted it to be three years ago. Now all my rates, and all my factors, my variables have changed. The return on investment has become more favorable." In some cases, people are trying to forecast what that might look like for the next three years, and trying to think ahead and say, "Hey, you know what? This is where it is today. Maybe the ROI isn't so perfectly fine to hit my — let's go with this metric." They're trying to plan for the future and get ahead. So, that's the difference with labor variability. Then as I mentioned earlier, when you combine the market demand in the market changes, and you combine the labor availability, it really has changed the game and the equation for robotics and automation.

As far as robotics adoption, part of our mission with Dematic is to elevate our customers confidence with robotics. If we can do that, and we can win on the first installation, the second installation, and we gain that confidence with our customers, that's when we know we can move forward with the next level or the next space in the warehouse. That's our goal. That's our mission. It's to help customers get confidence, get this brand-new robotic system or cell that they've purchased, along with this great automation technology, and help it work together so that they can utilize and leverage the value.

Erik: There's a way that I often, a very simplistic way that I've been thinking about IoT devices, but I'm curious on your thoughts for robotics here. The way I think about it is that there's innovation in two directions. One is towards more complicated, sophisticated solutions. In automation, we'd be thinking about the factory in the dark where everything is very deeply integrated. Then the other direction of innovation would be having distributed systems where you have a fairly manual process, but then you're able to plug a robot into that process and quickly program it, and get it up and running within a couple hours or days, and then reprogram it as the needs for that specific process did evolve.

I think both of those, they require innovation. One is towards more dense integration, and the other is towards more flexibility, cost, affordability. Where are you seeing your business move? I'm sure, to some extent, it's in both directions. But can you share maybe which areas are more exciting or where you see more development? Maybe there's a couple case studies that come to mind to illustrate the developments.

Dean: Yeah, Erik. Flexible automation, what does that mean? That means a lot of different things. Even lights-out, what does that mean? It means a lot of different things. Different people view those two spaces from their own perspectives. Again, I'm going to refer back to the automotive industry. It took some time for the automotive industry to refine that process and how you leverage robotics. I think we're at a point where, in the last few years, companies have gotten into this. Some companies have said, "Hey, I like these cobots. I'm just going to buy about 10 of them and try to put them in my process and have a person that's trying to keep my operation running. Also, maybe programs on robots and get them on the floor." You have to be careful with that. This is not a Home Depot do-it-yourself project.

Robots and robotic integration into our processes, which are very complex in the variability of our process when you think about picking 10,000, 100,000 skews, even a million skews or some big e-commerce, players. You're not going to have one size fits all here. So, there has to be some integration. There's got to be a combination of robotics with other hardware and automation that's involved. Most importantly, the brain and the software process of making sure you get the right skew in front of the robot at the right time to deliver the right order to the customer so that they get there on time delivery, and everybody can be happy. That takes some effort. You're not going to just pop a cobot in and solve a problem, and hope it's going to be done in two hours.

Now, in the future, do we want to have the ability to put a robot in place of a person? Maybe some portions of the day. Maybe they have an operation that needs some manual support for first shift, and they want to run a robot for second and third. Those are options. How do we think about running our orders differently? If everybody goes home at 6pm and they're sitting on their couch or whatever, or after dinner, they want to order something, they put their order in. Why do I have to wait until the next morning to process that order? So, we got to get smarter on the whole integration and look at our problems holistically.

When we do that — again, combining our partnership approach, how do we bring that information, that data, that order to the operation real time, make that order, make that pick robotically or automatically as much as possible — obviously, you're going to have some skews. The cat scratchers or the 100-pound bag or 50-pound bag of dog food, that might be a bit of a challenge or whatever. Snow shovels are always good up north. Those kinds of skews, you can absolutely come up with robotic solutions for those. But the business case for getting that to that edge of your skew set might be too costly at that point that you're working through your plan.

So, there's an evolution here. I think we have to keep our eye on the future. We want to think about the future and try to plan as best we can to get there. But we also have to make sure we have to get some wins. We have to get some confidence in our process. As we gain confidence, with more run time, more cells running, understanding our skew set, mastering our skews, that's going to be the difference for customers to win.

Erik: Got it. So, maybe on this point of use cases and cases that are going to have the most, maybe, predictable and reliable time to money or time to pay back, is there a short list of use cases where you would say if you're not doing this yet, it really makes sense to look at deploying robotics in these areas because they often have a pretty solid payback? Anything that comes to mind here?

Dean: Yeah, I think that ties in with what we're working at with Dexterity as well. When you think about the process of receiving goods in many skews, high-volume skews, medium-level skews — again, depending on the customer. Every profile is different — you're trying to bring a large, maybe a pallet worth of skews or a layer worth of skews into your operation. So, when you think about breaking that big box down into smaller boxes of work, and then getting down to the unit level, there is some progress that is absolutely proven out and ready to go, and ready to deploy as you go from palette to layer, layer to case, case to units. When I say units, sometimes there's inner packaging. Then you get to each level for an e-commerce order. Robotics has a place along that process and that line. There are absolutely sections of that line that are proven out and ready to go.

Erik: On Dematic, I noticed one thing. It's that they are SaaS based solution. I'm curious. I don't know if I mentioned this earlier, but I'm here sitting in China. Although China adopts SaaS in a lot of areas, in factories, I'd say the cloud is still a late adopter — manufacturing in China. In terms of cloud adoption, I think the US is far advanced there. Are you seeing a significant shift towards SaaS based solutions also in your own portfolio? Where do you see that sitting today in terms of user acceptance?

Dean: I'll give you my perspective. I'm not the subject matter expert in this space. When we think about software as a service, I think we all have software as a service application we all use every single day, whether it's with your phone, whether it's with your Microsoft Office platform, or whatever you're doing. There's more and more of what we do on a daily basis moving to that model. Yes, companies are moving toward SaaS for software. There are some advantages, clear advantages, on how and why that model. Using, again, what we're trying to do with Google Cloud is be on the forefront of this in making sure that we are able to use that information for a customer to their advantage.

How do we gain confidence for those customers to do that, to make that move? There's some work to do there. Every customer has got their own viewpoint in their IT departments, in IS departments, or whatever they refer them that. We have to have confidence. The security level of that information, everybody is very tight on what their customer data looks like. How do you try to keep a competitive advantage on that? That's the breakthrough. You got to have confidence and gain confidence with customers.

How do you tie that in with robotics and automation? There are some companies out there that have a robotic as a service model out there. Yes, it's something that we're looking into. We want to work through that. We have some equipment that's on an equipment as a service, or at least a model already. We already have — some of our software platforms come out with a software as a service model. So, we want to leverage those where it makes sense to help the customer and their business case to move some of the costs into more of an operational expense versus a CapEx. So, there's more work to do in this area of SaaS and RASP. But I think we're on the brink, and we're moving forward in trying to penetrate into that space as well.

Erik: On the technology side, I'm curious about another area, which is the adoption of 5G. I always have people ask me. What are the applications for 5G in the factory for robotics, particularly for modular solutions where you can potentially have a more flexible factory setup, or you don't have to have everything wired in advance? Also, for AGVs for that matter. Do you see 5G having an impact on the type of solutions you're able to deploy? Or is it existing LTE, or Wi Fi, or any kind of other existing technology that are already basically doing the job, and 5G is maybe not having much of an impact in terms of use case adoption?

Dean: Yeah, that's an interesting question. Again, I'm not a subject matter expert in this space. But as our technology advances in that area, there are still customers out there that are using papers. They're not going to have routers and Wi Fi in some pieces or corners of their operation. Maybe they don't need to. I don't know. That's something they got to decide.

How does technology move forward? Again, it's about just like we're talking now. Some of us have an issue if you try to share your video. Do have enough broadband space to carry that information? Warehouses that were designed years and years ago, there might be some infrastructure hardware investment that's required. How do you understand where your customer is at, and what technologies that you can use with that customer is critical. Because if you try to go in with the latest and greatest technology solution, and there's a significant investment just to get the site or the facility updated with that capability, that could be a showstopper for the business case. Other customers are ready, and they're willing to go into that space. They want to utilize that to their advantage. So, that's going to be the difference between one customer and another in the future.

Erik: I think that's a useful perspective. Certainly, pushing technologies boundaries just for the sake of checking a box, reporting up to headquarters is not usually a good investment. Let's talk a little bit more about what else is coming out of the center of excellence or, maybe more broadly, out of Dematic in the coming years. Anything else on your horizon or your roadmap over the next couple of years that you're particularly excited about?

Dean: When I think about why I came to Dematic and some of the things that my experience in the past has been, Dematic is a company that stays with our customers through these technology advancements. Some of our customers, the last time they saw robotics was only to watch the Transformer movie or whatever over the weekend. Robotics is very new to some of our customers. I think when we talk about the evolution in the change management of technology — whether it's our automated solutions coming to a customer or robotics in addition to automation solutions — it's about trying to make sure Johnny, Suzy, and Sally as a customer, who is trying to run that building today, has the right tools, training, and coaching to run the facility tomorrow.

I think that's going to be a big challenge for all of us. As all of our competition and as we bring more technology and automation to our customers, the change management process of our customers, making sure they also have the job and team members to move forward with technology together. We're willing to help coach and guide, but there's got to be a partnership. There's got to be a shared ownership to take in that automation and that technology forward.

Erik: Well, let me ask your advice here that you would share with somebody who is — maybe they have some automation but they're not particularly automated. They have some degree of expertise, but they're also not deep experts in this area. They're looking at a challenging environment where they're having trouble meeting customer expectations on the one hand. On the other hand, maybe just recruiting the talent that they need to run the business as they'd like to run it. They're interested in automating further to meet these needs. What would be your advice for this type of company? Let's say, a medium-sized company that also just has limited or constrained resources in taking their first steps here.

Dean: That's a great call. Because there are some companies that we all know and use every day, that they have their own automation and robotics teams. They are focused in these areas. They're smarter than some of the other companies that are out there. So, the medium level or smaller companies that don't have the resources to be able to support that piece of their organization, how do they leverage companies like us to be that trusted advisor, to coach and guide them, understand their skew set, understand their process, understand their business. If we can help work with them to understand and see where they're at. Then they have to be a little bit open.

How do you step up to the challenge of being competitive if you don't want to change along that journey? It might be a challenge for you to be competitive. So, there will be challenges. We can help work through those challenges, identify them, and put plans in place to help get through that, with good conversation, good partnership. With a good partnership comes trust. With trust comes good outcomes, when you can work together on that.

Erik: Who would be the folks that you're typically working with? I guess, this is also evolving a little bit. The role of IT is evolving. The role of engineering is evolving. I think everybody's in a position where their scope is somehow extending a little bit as IT and OT merged to some degree. Who would typically be leading an automation project? Who would be the other folks that really need to be integrated from the start, either to provide input or to at least buy into the solution as future users?

Dean: That's a great question. So, I'm going to answer it from an internal perspective, and then I'm going to extend it to the external customer. Internally, we have to have good collaboration across our teams. We bring a great portfolio and history around what we can do from our hardware and convey and sort capabilities. We bring some good history around the automation and systems and solutions we bring in. There's collaboration that has to happen between our product management, which we're trying to standardize our products for our customers, to help not only deliver reliability, but when we have to answer that customer service call, we're able to answer that quickly and get them back operationally ready, quicker.

So, there's a lot of internal collaboration across software groups, across hardware groups, across product management, project management, installation teams, commissioning teams, startup teams. As a center of excellence, our role is not to try to take on all that ourselves. Our job is to say, "Okay, here's the new technology. How do I set up our teams? How do I use our 6 to 8,000 engineers across the world, to deliver good solutions to our customers when we talk about new technology?" Internally, the collaboration is a huge part of what we've got to do.

Now, when we think about working with our customers, our customers are out there seeking the best value. Listen, I get it. I was a customer. I understand there's purchasing requirements, and some things that customers need to play by the rules. I totally agree with all of that. But at the end of the day, it's probably going to be more than the cost or the price of the solution. It's going to be the trust that we're going to be there and try to get through the challenges, and the collaborative effort and the discussions. Going from good to great. When you think about the book Good to Great, it takes a team that can be honest with each other to get through those challenges and really lead to some dynamic and innovative solutions.

Erik: Great. Dean, I think that's a great perspective. I think we've covered a good bit of territory here. Anything that we haven't touched on that's important for folks to know?

Dean: That we're all on this journey. We're all in this journey together per se. There's plenty of work and opportunity out there. I think what I would offer is that workers in the facility. I mentioned the everyday person. When they think about what they want to do in their careers, I would recommend, think about getting involved. Volunteer. When your company is pursuing automation and technology, volunteer to get involved. Step up. Go understand. Seek out and understand, so that you can set yourself up for your livelihood and your families.

That's probably the biggest thing. I think people just have to recognize that this is a huge opportunity for those that want to step up, learn and grow. Plenty of opportunity coming your way if that's your attitude. It's all about desire, though. If people want to desire to go do that, that's up to them.

Erik: Yeah, great advice. I think people are often a bit of afraid of change. But if you just step up and own it, and learn along the way, change will be your friend. Dean, I really appreciate your taking the time to speak with us today. Thank you.

Dean: Awesome. Thanks again for having me here. Appreciate it.