Future-Proofing Warehouses Against Real Estate and Labor Crunches with Adam Brown

Joe Lynch: Hello, friends. Welcome to the Logistics of Logistics. My name is Joe Lynch. Thank you so much for joining us today. Today’s topic is future-proofing warehouses against real estate and labor crunches with my friend Adam Brown. How’s it going, Adam?

Adam Brown: Doing well, man. How you doing?

Joe Lynch: Doing great. So Adam, please introduce yourself and your company and where you’re calling from today

Adam Brown: Sure. My name is Adam Brown. I’m the senior director of market intelligence for Dematic. My job [00:00:30] consists of it sounds more ominous than it is, but my job consists of developing our market models and context of the market for our customers and our executives to understand what’s going on, but also the corporate development world of mergers, acquisitions, and VC funding for us to see how we can pull our de- development timelines forward.

So it’s a pretty dynamic

Joe Lynch: So what does Dematic do?

Adam Brown: It’s an interesting conversation when you talk about what Dematic does. If I want to explain it in the [00:01:00] best words possible is anytime that you buy something online or anything you buy something from a store, Dematic has the systems that actually replenish the store or replenish the DC that actually you pick your item from.

So we deal with warehouse automation, the everything between the four walls and outside the four walls needed to fulfill your specific order as an end customer and get it to you when you need it

Joe Lynch: So are your customers warehousing companies, fulfillment companies?

Adam Brown: Yeah. We- [00:01:30] warehousing companies, fulfillment companies. We do everything from e-commerce to retail. We do healthcare grocery, pretty much anything needing to move goods from one end to the other to fulfill business needs

Joe Lynch: Yeah, I was on your website earlier today and I just looked at it. Apparel, wholesale B2B, consumer goods, of course, food and beverage, general merchandise. And so basically everything. But if when somebody says, “Oh, I have a dark warehouse where there’s nobody in it,” is that somewhat what [00:02:00] you guys could support, a dark warehouse?

Adam Brown: Yes, absolutely. And that’s really where a lot of trends are going when we’re talking about the warehousing industry in general, and it’s warehousing and order fulfillment. They’re slightly different, but in, in the dark warehousing, we can definitely help in those areas with automation and different ar- different robotic applications that we can provide

Joe Lynch: Yeah, I think all of us have seen online the unbelievable Amazon warehouses that are just… Stuff is moving, lightning [00:02:30] fast. That is not the normal Amazon warehouse. They have… I think they have some that are super automated, and then majority are not super automated yet, and it’s ’cause it’s not easy, and it doesn’t happen fast, and it’s not cheap.

But given some of the problems we have, and we’ll talk about it at, at, at length, the labor issue we’re having with warehousing, and also the real estate issue we’re having with warehousing. And I think everyone who runs a warehouse is constantly worried about as mu- [00:03:00] if I… If they don’t own the building, is my rent going up, and are my people going to leave or need more money?

And these are never-ending fights

Adam Brown: It’s a constant challenge that has to be balanced, almost daily when you’re talking about where to position your nodes in your network, and it goes all the way down to, like you said, what kind of labor force do I have access to? What kind of automation can I deploy if I don’t own the building?

There’s a lot of things that businesses are challenged with that yeah it’s a [00:03:30] recipe maker every day

Joe Lynch: Yep. If somebody came to you, Adam, and said, “Hey, you know a little bit about warehouses. I’m thinking I’m gonna go get a really good job at a warehouse. I’m gonna be a picker.” I think what you’d end up saying to them is, “Go somewhere with w- with technology,” ’cause there’s a future in that. Going to a, a small warehouse that doesn’t utilize not only the, the information technologies that we’ve come, gotten used to, the warehouse management systems, the [00:04:00] warehouse execution systems, but you’d say also the automation, the stuff that Dematic makes.

There’s a career in that. Th- there is no career in I lift things and I walk across the building and put things in boxes and pack them up. We do it, but there’s, that’s not a career path.

Adam Brown: That’s interesting you say that because that’s where everybody has to really have the appreciation of the flashy things and the robotic things, the stuff that you see in the news and your your anecdote [00:04:30] about Amazon. To really appreciate those automation things that we use to make things more efficient, you gotta have the appreciation of how laborious it is to do a lot of this order fulfillment.

A lot of the things that traditionally has been done in warehousing it’s good for people to experience that in order to appreciate, what automation can bring and what we can empower them to do.

Joe Lynch: Yeah, I had lots of jobs as a young person that I called college motivation jobs that you go, “Oh, I gotta [00:05:00] get some education so I don’t continue doing this.” And now I don’t think college is absolutely, positively necessary for everybody. We’ve gotten off that weird that weird hill. But there are still this, this work is not going away.

I think we’ve seen Walmart showing more and more of their stuff selling through their e-commerce business. Obviously, Amazon continues to grow. We as consumers, we know what we do. And [00:05:30] so we don’t have to wonder are people gonna buy online? Is this a fad? No. And, when we first started seeing e-commerce, it was e-commerce business to consumer, and now it’s business to business.

And, recently I bought some stuff from Staples. I didn’t go to Staples to buy it. I bought it on staples.com. And that, that’s, it bi- Not that we’re not gonna have retail, we’re [00:06:00] certainly gonna have retail, we’re still gonna have other forms to buy stuff, but this is going to be a big part of our world going forward

Adam Brown: Yeah, it, that you– it’s interesting that you talk about that, especially about the education level. I’m Dematic’s ambassador typically for our larger trade shows for ProMat and MODEX, where we have the, the students walk around with MHI. And I always say I, I wanna at least make one student really contemplate getting into this business, not because it’s not a good industry to get into, [00:06:30] but the contemplation really is, you working in supply chain also basically adapts your needs as an end consumer to your work.

So me and my buying patterns through my phone, I’ll I’ll jump into how are orders being selected, how are orders being sent to me, me wanting to pick it up at the store, like you just mentioned, or sending it to my house or groceries being sent to my house. All that is game-changing stuff. But when I’m working in logistics field, it always comes back down [00:07:00] to, how are we providing that, that value to customers through the order fulfillment?

And I’m talking about the retailers, getting more getting closer to their end consumer. And, there are more opportunities than just lifting boxes or picking orders. There’s, maintenance opportunities. There’s advanced analytic opportunities on optimization on how buildings work.

There’s myriad of things that didn’t exist even 10 years ago in our industry that are here that really make this a, an exciting field to work in

Joe Lynch: We’ll talk about all that in a [00:07:30] minute, but first, tell us a little bit about you, Adam. Where’d you grow up? Where’d you go to school? Some career highlights before you joined the mothership Dematic, and why did you join Dematic?

Adam Brown: It’s it– my background is pretty unconventional. I– growing up in a Navy family moving to multiple bases on the East Coast and really helped me understand a lot around, multiple cultures, where we’re going, how is this whole melting pot of the world being put together.

But it also got me [00:08:00] interested in automation and especially with my father being in the Navy and being a weapons officer, he really being– also being an electrical engineer, he really introduced me to a lot of technology that’s out there. And my mother also being a school teacher was instrumental on my in, in vast curious nature of technology.

So going through school I came up mainly you would call the blue-collar route traditional trade school of automated manufacturing and building work cells and jumped directly into the supply chain. My goal has [00:08:30] always been what kind of automation can I get my hands on? I wanna get into robotics.

And it stems always from my c- my childhood. So after college jumped into moved up to here to Charlotte, North Carolina, where I’ve been since I started this journey back in, ’98, ’99. Got into the automated guided vehicle industry and worked the globe with that. Automated forklifts that run inside of manufacturing facilities, distribution facilities ran everything from, developing systems on sites to running service [00:09:00] to being that firefighter at two o’clock in the morning and really understanding what challenges are.

And then that helped me get that basis of material movement. How are things actually getting from point A to point B, and what does that kinda connect for my customers? And then moving into order fulfillment went from the AGV world and my first, I say, big position in order fulfillment has been solution concepting or s- automation engineering for Schaefer SSI Schaefer in the pharmaceutical world.

So really getting into the world of, [00:09:30] you wanna say high f- high-paced order fulfillment, pharmaceutical distribution is where it’s at. I don’t think I’ve ever seen anything faster than that kind of distribution in the

Joe Lynch: then a lot of compliance too. So it’s not like you just go fast and loose. You’re fast and tight.

Adam Brown: Oh, yeah. And they’re mission critical too, right? All the products are not just, eh, if you pick it it’s okay. No, they’re mission critical, orders that you’re putting out. So there’s a lot of things that you had to learn really quickly in that job. And then moved into sales and one of my big areas in there was also [00:10:00] running an integrator department.

So training, other integrators to say, “Hey, where’s the i- where’s the place where automation can fit?” And helping them work on that vocabulary and how to talk to the customer and find out their needs. And I ran that for a couple years for Schaefer and learned a lot about integrators across the globe and their capabilities, and also that hunger in this industry of trying to solve problems.

And then I moved to the, like you said, moved to the mothership. I had an opportunity to come to Dematic [00:10:30] as a market development director, so specializing in 3PL, pharmaceutical wholesale B2B, and parcel networks. So providing that subject matter expertise to our customers as well as our our internal workings of Dematic.

And then, escalating into this pr- current position into market intelligence, where we’re really trying to get a sense of the market models. Where are customers spending for automation? Where are automation trends? Who are the major players, both startup and traditional, that are [00:11:00] inside this place?

To really understand what are customers wanting in relation to automation spend, but also what kind of challenges are they really trying to solve for. And then also being over corporate development, so really understanding who’s out there, what’s best for Dematic’s customers that we need to pay attention to in order for us to bring it on board and offer those types of I would say services and goods and technology that provide value for our customer to us, the end consumer.

Joe Lynch: I love it. I love it. Before we [00:11:30] get in, I know we identified five topics I wanna talk to you about, but before we get into that I was thinking about this before we hit the record button, is we’ve just begun this, I’m gonna use the word journey. It’s, I’m sorry, I apologize in advance. We’ve just begun this journey in automating our warehouses.

But you’re old enough to if you went into a warehouse 20 years ago I know I walked into warehouses, it was stuff on the shelves from World War II. It was just ancient. They were [00:12:00] dirty, dusty not particularly well organized. It’s just, that was just the nature of it. We didn’t have all of the cool tech that allows us to keep track of it.

We didn’t have the the scanners that allow us to scan things when they get in, and we have everything nice, neat, and orderly. But that’s all changed. As you just mentioned your work in the pharma space, that stuff has to be clean, it has to be lit, it has to be compliant with very stringent [00:12:30] rules.

This industry’s changed a lot, but I would say when it comes to automation I’m just gonna put you on the spot here. Have we gotten, are we 5% automated, 1% automated? It seems like we’ve just begun.

Adam Brown: Yeah, the, there’s a lot of opinions on how much automation’s actually in the marketplace, and there are anywhere between… you can get answers anywhere between 10% and 16% automation within where it’s just [00:13:00] begun. And but that barrier to entry for automation has come down so low to be attainable, and the, the market economics to be able to afford it has really shifted.

Yeah, I would say, within the last 10 years, there’s been a drastic shift in the economics on how do I pay for this in relation to labor? Where do I actually get it? We’ll get into the other stuff i-in a few minutes. But, all those different elements, I always say in-inside of our company, the recipe is constantly changing.

We have the same [00:13:30] ingredients. It’s a little bit here, a little bit more here, and it really depends on all of these different balance ratios on where automation is. But to your answer, yeah, it– we’re just starting, and we’re starting to actually pick up steam

Joe Lynch: Yeah. And this is maybe an analogy, maybe just a stupid story. Years ago, I was in China, and they were localizing some parts that they were– You have to localize auto components to make the car there. And I remember they were wanting to localize something, and [00:14:00] it… I forgot exactly what it was. But it basically had a lot of coils, and they had to be wrapped around a, a part.

And I remember going, and I said, “You’re gonna have to buy the robot. You’re gonna have to buy the robot to do that, ’cause you can’t do it by hand.” And I remember the engineer said, “Oh, we got a really strong guy.” And I go, “It’s not gonna be consistent. It’s not– He’s not gonna be strong enough to do that all day.

It’s just… You gotta buy the robot.” And then I remember getting over there, and they had this [00:14:30] guy, and he goes, “Let me show you, Joe.” And this guy’s wrapping this, these coils around. And I was like, “It’s just, it’s not gonna work.” And the whole idea of it just seemed so ridiculous that they weren’t using a robot.

But I get it. There was not… They were only selling 50,000 units at that da- on that product. But, so it was hard to afford the automation. And I understand what they were trying to do. They were trying to avoid buying the technology that you needed to do it right. We do the same thing in our [00:15:00] warehouses right now, because somebody says ideally, we’d have a robot do this because it’s difficult, but that robot costs this much money.

I’d rather hire five guys to do it. And, no, they aren’t as consistent. They might quit. They might do all the things humans do, but at least I can go hire these guys for 20 bucks an hour, $25 or $30, whatever they’re making per hour.” And also, we understand that. I don’t need to go get a Adam Brown to explain how do these seven [00:15:30] guys l-lift this stuff up and put it on shelves.

Adam Brown: I think that’s a, that’s an important point there is I think fundamentally everybody that I’ve experienced, all of our customers in my entire tenure i-in this industry, I’ve been very impressed with the entrepreneurial spirit of, “I just need to get it done,” right? I have a task, I need to get it done.”

And they have a thousand things to think about. One of the least things that they can think about is to interact with a person. “I need you to do this,” right? And that goes to your comment [00:16:00] of “This is what I can, this is what I can understand. This is what I can do in the myriad of all the other things that I’m faced with,” right?

And I think now there is a massive inflection point where we’re seeing automation become more tenable, more easy to understand, more the conversation on economics and the conversation of operation and maintenance has become digestible with customers being able to enter in into it immediately.

Joe Lynch: Yep. I’m also assuming that when I buy Dematic, I get the Dematic [00:16:30] team. So I’m not all of a sudden go, “Hey, I bought this technology, and now I have to become a technology whiz,” and I’ll never see those guys again. I’m assuming you guys are there from the be- time they engage with you till time to buy new product

Adam Brown: It really– that, that’s one of the things that we pride ourselves on is making sure that there is a very seamless handoff of all through the conte- the concepting phase of this is what needs to meet your business needs to, okay, [00:17:00] let us work with you on making sure you understand how the system works and giving them the guidance and the capabilities and the technology to maintain that operation, and even services to help them maintain that operation.

So when you buy one of our systems, you buy into that ecosystem, and that’s really the viewpoint that our company shares is that’s we want to put you in this comfort zone that we can definitely help you be that partner to get your business done.

Joe Lynch: Yeah, I use the term partner, and I say it all the time on my podcast. You need to vet your technology [00:17:30] partners ’cause you’re gonna be with them for a long time. A- and this is, sounds very outdated, but earlier in my career when I still worked in automotive, w- you would buy robotic stuff. You’d buy stuff that there was no support after the implementation.

And that, that is not the way the world works anymore.

Adam Brown: Running that service department back in my in my I would say younger days really gave me that perspective of we need to make sure that anybody that provides [00:18:00] automation inside of our industry needs to have that commitment to the customer because they rely on us to get their business to their end customer

Joe Lynch: So wanna get into some of these topics. So the first topic is and I’ll just describe… I’ll give you the… I got headers here. So I’ll read the header, and then I want you to describe this problem. So the problem is the infinite labor drain versus the unforgiving throughput demands. Talk about that.

What’s that problem?

Adam Brown: Oh, man. It’s interesting when we talk [00:18:30] about labor drains in, in, in relation to throughput. It’s the, the really exciting stuff is I need to get this stuff out the door. I need to I need to make more money, and I need to satisfy my customers. But it goes back to our original question, too.

It’s like, okay I need to do this. I can draw… I can grab Joe and Susie off the street and try to get this done. But the, at the scale, at the way that businesses are scaling now with e-commerce being the major platform rather than a retail spot being a major platform, that e-commerce really magnifies the [00:19:00] demand for our cus- for our customers and their demand to their end customer.

So you can’t necessarily just grab somebody off the street anymore. Labor pools are shrinking across the world. Right now, I think in… it was reported that we have 400 and, around, around 400,000 open job spots when you talk about warehousing, parcel, and utilities that within our industry. Now, you can’t really pull out warehousing directly out of that, but you can understand right now we have about a hund- 1.8 million working within the space that’s a [00:19:30] pretty significant gap of trying to provide that labor, right?

So when you’re running a facility like this, the biggest thing is, one, can I get my labor, right? Actually understanding the labor pools. Where do I put my facility? If my facility is is legacy, what’s going on with my comp- my community, and how can I get people into my facility to operate it? And the second thing is I need to retain my labor.

There, there’s a constant wage battle that’s happening when any company that comes within [00:20:00] range of your workforce are all battling for the same labor pool with the same skills. So it’s not that they’re tapping into different areas. They’re all tapping within the same areas here. So these are areas specifically where automation can help because automation the conversation that I’ve been having with customers almost for, gosh, almost 15 years now, has always been, “I need to retain the people I can get, and I need to reduce the amount of people that are running between all these different facilities, [00:20:30] the rotational labor.

What can I do?” Automation is there to help. So automation is there to empower the labor that you can get and to quickly train up the labor that you are going to get based on that rotational labor. So those aspects of– are specifically important when we talk about also the market economics, because in order to win this wage war, you’re gonna have to raise your wages in relation to all the competition that’s around you, which makes the economics also better for, I can also [00:21:00] get…

If I can’t get this labor, it’s at the same price it’d be attaining the automation that I need to do it. So it’s a mixture here of who can you actually attract? How do you set up your workforce and your environment to retain your labor? But also the automation selection’s important because that’s part of the ecosystem and the environment the labor works within.

So that’s part of the attractiveness of cust- of your labor wanting to stay within your workforce.

Joe Lynch: Yeah, if you could tell somebody, “Hey we just, we’re buying [00:21:30] some Dematic automation and we’re gonna train you to use it or to oversee it or to s- do scheduled maintenance or work alongside it,” that’s a more attractive deal ’cause you’re learning something. You’re a- attached to technology, and obviously young people you can do the physically demanding, exhausting jobs that may be punishing, especially in the cold chain.

But we have to compete against the new data centers being built [00:22:00] and the supply chains moving home. This has to become a good job or they’re gone.

Adam Brown: Yeah, and I think that’s the way that de- technology is being deployed to empower the workforce is really speaking into that attainment and retainment level. When we deploy a goods-to-person system if you haven’t ever been in one, it’s basically a workstation that product is brought to you.

You do the best things humans are really, if you consolidate what we do, binocular vision, [00:22:30] we have a decision-making engine between our ears, and we have opposable thumbs, right? All three of those put together make you one of the best picking engines on the planet when you factor in speed and versatility, right?

So as a picker, if I’m new off the street, I can get you to the same level of a picker at the same rates within probably, less than a week, if not within a couple days a- as somebody who’s been there for twenty years. So the way that the ergonomics are done, the way the software is done, the [00:23:00] way that we do all the planning really takes and focuses the, the person to do what they can do specifically, and it really negates a lot of the training that is typically needed in systems.

Joe Lynch: So when I think of a warehouse, I’m gonna be very simplistic here. Somebody, s- a warehousing guy told me this a long time ago. He says, “Joe, our job is simple. Stuff arrives by truck. We take it off the truck. We put it on a shelf. At some point, we take it off the shelf we t- take it out [00:23:30] of the big box, put it in a little box, and ship it.”

And he said, “That’s it. That’s all we’re doing here.” And he said, “Sometimes you take it and put it in multiple boxes.” He goes, “It’s just taking things.” But when I think about what you guys are doing, are you helping me get it off the truck? Are you helping me get it onto the shelf? Is that part of what you guys do?

Adam Brown: So that’s a great question because when you’re thinking about what does automation do in my facility, it really depends on the type of business that you run. So the [00:24:00] application of technology is gonna be different from an e-commerce retailer that deals with pens and calculators and phones than it is with pharmaceutical distribution if I wanna move cases, right?

Automation is available to do everything from receiving applications, moving pallets and cases out of a truck to go through receiving process that could be automated, that basically does your data capture and your quality control and then ultimately get it into what we call a pick face.

So that could be an automated pick face within a, a automated [00:24:30] storage retrieval machine that has many forms, or in a side channel that that basically a human walks up to do and pick it out of, or just totally devoid of humans and takes it towards a, a robotic picking element. So you could take it from the receiving door through quality control, then decant it and get it into a place where you can pick it all without touching it, and then the picking happens.

That’s when your orders drop. That’s when the real mass chaos and pandemonium happens of, variability of needing everything brought to [00:25:00] you. The biggest thing that automation can do is it take out repetitive motion, take out travel. You’d be imagined, if you’ve ever worked in those spaces when we talked earlier about walking around a, a warehouse with a cart and just a clipboard and trying to check things off.

Those days are done, frankly. So when we’re looking at this, taking out all the motion of people walking through the facility and focusing them where they’re needed the most to actually use their opposable thumbs, that’s really where we’re trying to do it. We could [00:25:30] take all that travel out with automation, but it really comes down to the specific recipe for that customer for what they’re trying to do.

Joe Lynch: So you guys will customize it to, to my needs, and I’m assuming it’s flexible enough that it can work with multiple processes within my building?

Adam Brown: Yeah. So we mainly see three processes within the major within any major facility, and we break it down by pallets, and by cases, and by eachs. And really, when you look at those dynamics [00:26:00] of

Joe Lynch: You said pallets. What was the other one?

Adam Brown: So pallets, and then cases, and by eachs. This is part of that, that the spiel I have for K-

Joe Lynch: Wait, what is eaches?

Adam Brown: Eachs is is a pen one mouse,

Joe Lynch: one u- one unit.

Adam Brown: Yep, one unit. So eachs is the vernacular used of that particular area ’cause I’m understanding I have one single unit of one thing outside of a subpack, right? So if you look at the world through those three areas, it is extremely [00:26:30] easy how to focus on what is my process that needs to happen, what technology’s available to help solve it, and then how do I mix that into my facility?

‘Cause you always bring it in, like you just said, you break it apart, you keep it in a pallet or you ship a pallet out, you break down a pallet into cases, you repack the cases again, or you take things out of cases, put them in a pick face, and then repack an order, and then send it out the door.

So if you really look at it really granularly, those three pillars are [00:27:00] core to understanding any of the automation challenges you have

Joe Lynch: Yeah it’s interesting ’cause sometimes when I think about like a warehouse, and this is true for all the technologies we’ve adopted over the last 30 years with our our IT stuff, the digital stuff. It doesn’t necessarily say, “Yes, I’ll do it exactly like you did it, Joe,” ’cause it’s not.

It’s technology. So I think probably the same applies for in the warehouse. It might not [00:27:30] s- say, “We’re gonna replace this process exactly as you did it,” because we’re gonna do it more efficiently ’cause we’re a machine. And I think also you start to push the humans into where the humans are, what they’re best at, as you said.

It’s the thinking and the picking, and leave the hard stuff to the machines. The stuff, I shouldn’t say the hard stuff, I should say the physically demanding, the repetitive, the [00:28:00] potentially dangerous stuff we’ll leave to the machines

Adam Brown: Yeah. And when people see think about automation they get a picture in their head, I believe, of humanoids walking around or manufacturing robotics moving at great speed. It’s actually not the case. A lot of things that are deployed for customers really take the travel out of things. So that’s why the term automated storage and retrieval machine is so large and covers so many different technologies, is that removing travel is the A number one thing automation does, [00:28:30] and then it goes on from there.

I think a lot of people will be quite surprised walking into what deemed an automated warehouse is of not necessarily seeing, C-3PO walking across the street and trying to get everybody a coffee

Joe Lynch: Right. Yeah it’s gonna be different because technology’s different than… It’s gonna approach it the different way. I wanna talk about the second thing, which is this real estate. Real estate we outgrow our space that or the space becomes a problem all the time. [00:29:00] And I know also as we talk about micro fulfillment, which is usually in a high density area where there’s a lot of people, so I have…

I wanna move my products as, and my inventory, as close to the consumers as possible, which is by the way, how you do same day, next day. So if you order something and it shows up at your house an hour later, we’re always shocked by that. But recognize that means the fulfillment center is within an hour of your house.

And [00:29:30] that space can get very expensive, and it’s not always easy to get. You’re competing with a lot of other businesses, so you have to be really efficient in the way you’re using that space. But also depending where we’re talk… we’ve seen huge increases in certain markets on real estate.

And before we hit record, I told you about my friend who had a place in Reno, warehousing space, and when Tesla [00:30:00] moved in there, the rents went up everywhere, the warehousing sp- for the warehousing space, but also for homes. So everyone was driving f- who worked at that warehouse, driving 45 minutes. If you’re driving 45 minutes to a warehouse job, you’re like, “How many warehouses do I pass on my way there?”

And suddenly he’s stuck at a price that he committed to prior to the inflation and the rent and the labor, and [00:30:30] he had to at some point just say, “I’m out. I can’t do this anymore.” But anyway, enough of my blather. Talk about this outgrowing our space.

Adam Brown: I think that there’s two angles that you can look at that. One is let’s look at it within the four walls, right? Companies typically outgrow their space because of inefficient use of the space, and one of my favorite taglines in material handling is comes from AutoStore. It says, “Stop air housing, start warehousing.”

I thought that was a really interesting tagline for [00:31:00] them being a cube storage provider. But it’s very apt. The vast majority of what customers are constantly challenged with is where do I put my product in order to do operations? Okay. So the– when your customers are typically trying to have the smallest footprint, not necessarily because they want to use the full cube of their building, but they’re probably wanting to put a second business or some other operation inside the same footprint, and they don’t necessarily want to move because they now have a locked-in labor pool that they can pull from, [00:31:30] right?

So it’s that recipe again. So looking at it from the four walls, the really reducing that footprint can come into effect based on the type of business that you are. So if you’re in e-commerce, you’re gonna do a lot of eachs picking or unit picking to the customer, so a lot of technology can be applied there.

Or you’re in wholesale busin-business to business, and you’re doing more case loads, and mixed case palletizing, where you would have a similar type of technology that would take the cases out of the pallet, put it inside of [00:32:00] a sequencing buffer, and then put them out to a manual palletizer or whatever.

So it really comes down to the type of business that you are and what you’re trying to seek. But when you’re looking internally, that floor space is premium, but not all customers want to use the full cube of their building, which is shocking because their business is so volatile. They may have fluctuation in their channels of their business that n-that necessitate changes in how they want to have different [00:32:30] picking modules based on where their business is growing.

So the change of flexibility of the technology also weighs into that footprint. But as we look at external the things that you were talking about that I think are really what are driving a lot of our big box retailers of how do I get dark stores? How do I get closer to my consumer in order to shorten that gap for me, from them to order to get it in their hands?

And that’s really comes to supply chain node pr- planning and understanding where you wanna put [00:33:00] facilities. And an interesting note, that’s different for every re- every industry. So retail space, absolutely. I wanna be closer to my consumer because they’re gonna drop an order, and I’m gonna get it.

But would it shock you to know that in pharmaceuticals you actually have one distribution center that may be mid mid of the coast that operates both sides of the up and down the coast within fifteen-minute delivery? That means my execution window has to be within fifteen minutes of my dock to [00:33:30] drive the six hours or eight hours to get to my pharmacy within a fifteen-minute window.

And if I’m out of that window, I can’t check into my pharmacy. So it really comes into what type of business are you and the challenges that feed into network planning and node planning of how do I get to my consumer, but also down to the internal workings of is my business fluctuating differently that I need to plan for that?

So footprint and space is pre premium no matter which country you’re in and where you are. [00:34:00] It’s the planning that really comes in and the technology selection that helps you accommodate where you want your business to go.

Joe Lynch: Yeah, n- y- traditionally where we look at warehouses, they’re kinda in maybe an industrial park, out in the country, more rural areas. We still probably have some of those for good reason. They work. But the micro-fulfillment, you’re gonna put that in a big city, and big city real estate costs more, and that’s why we ended up out an hour away from the big city.

It costs more [00:34:30] and people cost more. Y- you might have a very small space footprint and say, “We have to maximize not only effectiveness, which is getting the job done, but efficiency, getting it done with the minimum amount of resources.” And I can see I can see, where … when we talk about dark warehouses, it’s not…

the dark warehouse, I’m just thinking out loud here. You tell me if I’m wrong. Try and stay in the shallow end over here. It’s a lot easier if you say, “Okay, the only thing we’re doing in this [00:35:00] facility is pharmaceuticals from one of our customers.” That is more likely to be able to go dark as opposed to we’re an e-commerce fulfillment company, and we have 75 different customers with slightly different processes here.

I’m assuming it wouldn’t be 75 different processes, but some different products might, some might be a little bigger and bulkier. Some will be, light as a feather

Adam Brown: Before I got into order fulfillment, I think that I would have a very [00:35:30] similar approach, right? But as I’ve worked in various industries throughout my lifetime here I would actually say it’s quite opposite. Working in pharmaceuticals with the s- the standardized packaging that you have makes it easier to actually have more automated systems that work lights out or without human touch, right?

The more diversified the packaging is the more intensive you would need human labor at the current time to do it, right?

Joe Lynch: that’s what I think I was saying.

Adam Brown: [00:36:00] Yeah. So in, in e-commerce, I would need more people to do that because the diversity of order profile and of packaging. Pharmaceutical, I still have variability in the order, but the packaging is similar that I can then dispense it with automation

Joe Lynch: It makes sense. So it’s yeah, it’s ve- very interesting. It’s very interesting because I can see when we talk about those dark warehouses, y- we started hearing that term a few years back. You probably heard it a lo- long time ago, but now I’ve [00:36:30] heard people push back on it. But there’s reasons we’re talking that way, because we do know we have some labor issues.

And by the way, you also see dark factories happening in China, where the machines are building the machines , which is where we’re head- headed with this. And the cost of the machine’s gone down so much that we can talk that way The next thing I wanna talk to you about, and this is near and dear to me ’cause I always hear about it around Thanksgiving, is the peak s- [00:37:00] season system collapse.

So on Black Friday or leading up to Black Friday, there’s now it’s Cyber Monday and all the other stuff, but we spend the majority of our money on retail, I think, in six weeks of the year. That… It’s called Black Friday because that’s wh- that’s when retailers went into the black, not because it was a disaster.

It was a positive. So this is when we w- left the red, went into the [00:37:30] black. But the problem I have is, and maybe Amazon day is probably the same way, I have crazy demand, and I don’t know how to support it with my normal team. How does Dematic help me solve that problem, this, the peak system, the peak season system collapse?

Adam Brown: The it’s interesting you, to see you talk about that because just over the weekend I was helping my son paint a parking spot at his high school. It’s one of the traditions that [00:38:00] they have there. And going into a hardware store, I was already confronted with, not only Halloween stuff, but then they were also breaking out Thanksgiving, and I’m like, “Oh, okay,” okay. I’m not necessarily a planner like that, but I get the gist, right? So the retailers are trying to move behavioral processes of us as end consumers to move it earlier in the year in order to maximize not only getting their inventory out before the season’s over but also to lessen that peak, to your point.

[00:38:30] As Dematic and the systems that we can provide, th- those are cus- those are conversations that we have directly with our customers of when do you see your peak? Peak is not peak for everybody. I don’t know if you know that. So when you’re talking about cosmetics, it was interesting when I was working in that field, the peak is there in s- in September, and the reason why is that everybody’s buying cosmetics in order for the holiday season.

It really just depends on the type of products that you are selling drives your peak [00:39:00] within your industry. Now, within the system, there’s kind of two methods of thought. There’s one you build the church for Easter Sunday. I’m sure you’ve heard that, that phrase. You build an entire system that sits dormant, half of it, or a quar- three quarters of it sits dormant for the most of the year.

And then it gets populated just before peak, and you turn it on and the whole thing is running only humming only about 12 weeks or, somewhere about 12 weeks out of the year. Or typically what we do with customers is really learn what their [00:39:30] peak is, and we know that not everybody has an infinite checkbook.

So it’s one of those things of how can we s- create your system for your average your average use during the year, and then how do you scale and add shifts to the same automation in order to meet those peak challenges? Now, the one thing about peak in today’s society is a little bit different, too Social media peaks, right?

I’m sure that there’s other terms around there too, but, you have back in my day it was always Oprah [00:40:00] coming out with a new product, and everybody’s ordering that immediately and what we call a D mover, which is just something that slow moves once every two months or something like that, goes to a double A mover overnight.

How do you accommodate that? So these are things that we talk with our customers about to say, “Okay, do you have channels into your social media? Do you have channels into marketing that can help us inform what they’re, where, how do they want to go to market?” So we can accommodate not only pre-planning those SKUs up front, but there are systems you can put in place that you [00:40:30] can do these mass, what we call cubic velocity picking areas.

So if I need to put a whole bunch of stuff out the door quickly, you can put in a person-to-goods module that can bring those SKUs to those areas and pick it efficiently so you’re not adding extra labor. You’re repurposing the labor in a different method in order to achieve the need. So peak is handled in those real three ways.

Joe Lynch: Yeah. So is, when you say, so we could, the automation can work three shifts, and [00:41:00] I’m assuming this type of technology kind of enables the users kinda to have, let’s just say, a picking rate that’s much higher than it would be without Dematic. So I’m kinda have three shifts with each one of those shifts having superpowers that they wouldn’t otherwise have.

Adam Brown: You really build in consistency when you do that. So when you’re deploying the automation, it’s not only getting your labor up to speed as quick as possible, you’re also [00:41:30] building in that consistency of flow, consistency of order management, and consistency of order picking that you can really judge the basis of how do, how can you accommodate orders for your customers

Joe Lynch: So the order quality is better with this technology, and it’s much faster, which is what we’re all looking for. Because one of the challenges with, traditional peak season is, “Oh, get your brother and your brother-in-law and anyone you know who’s looking for a few extra bucks, we’ll get them here on night [00:42:00] shift, and yeah, we’ll train them up real well over the next two hours, and then we’ll put them to work.”

And then you wonder why you have, a disaster in not only picking rates, but also in the quality of the pick. Which, let’s face it, those, those returns are deadly, and late is bad, but not nearly as bad as wrong.

Adam Brown: Exactly right. The wrong thing, I think, really speaks to nobody wants it wrong because that kills your [00:42:30] brand credibility, right? It’s not just your product, it’s how do you get the product to you, and it has to be right. And myself, as an end consumer, I demand that of any company I buy from. But as a system provider, I need to make sure that my customer, my retail customer, has the systems in place to catch those things before they even make it out the door.

So this is really where you bake in not only the software processes of making sure you’re bringing the right goods to the right picker to the right order. All that synchronization [00:43:00] is done through our systems. But it’s also having the real-time audit checking of, hey, I know that you’re gonna pick the last thing out of that bin.

I’m gonna ask the picker to confirm zero out of that. Do– Is there nothing in there? And if you, if that person says yes or no, depending on, “Hey, yes, there’s nothing in there,” great, audit’s done. We’re good to go. If they said, “No, there’s two in here,” they can actually increment that to two. Now that’s flagged to my quality control, and it drastically reduces my searching and my audits that I need to [00:43:30] have, and also caught that order before it left the building.

So now I know that I can if it’s a short pick, I can already reroute more inventory to that order. So those things have been in our systems from, gosh, I, I don’t even know when it wasn’t in the systems. But those have been mainstays in automation that customers have really relied on to maintain their brand credibility of not only the you’re getting the great product that you ordered, but you’re getting it on time, and you’re getting what you need.

And but the returns area [00:44:00] that returns area is always a Wild West. Right now there’s a lot of things that we can do to help sort those on the inbounds and get them into position where you can resell them, because those, if you don’t get them into a pos- a position to resell, you’re basically sitting on inventory, and that’s, those are things that you can’t turn into dollars, and we understand that for our customers.

So that’s the, the big thing to tackle with all customers.

Joe Lynch: Yep. So there’s another problem I wanna talk to you about, which is the too many brains, the [00:44:30] operational blind spot, which is all these silos that we have in supply chain, I say it all the time. The manufacturers that we work with, what they want from logistics and transportation and warehousing is flow, and what we give them is a whole bunch of silos.

And it doesn’t lend itself to flow. And I know this has been a challenge with warehousing, is I have a warehouse management system, I have a [00:45:00] warehouse execution system. I have all sorts of systems in my building that all suggest do this first, and it’s s- somewhat it’s a, an localized optimum, which is, hey, this is very best for the system right here, but it’s, but it might define the system as the shelf or and what I need is to optimize from the time I got the order to the time it got on the truck.

So how do you guys help [00:45:30] me get past the silo brain that we have in my facility?

Adam Brown: It, the simplest way to explain that is software. I know that’s probably a gimmicky term that anybody says, but really software is the key here, and the connection to the modules and the processes and the functional areas is key because rather… Most people speak about a warehouse and the flow from receiving to shipping.

It’s actually not the best way to look at it. [00:46:00] Any good WES, and I know all of ours do the same thing, we will look from shipping backwards. So everything that we do is judged on when do orders need to leave that truck door? When is that truck leaving? We better have it on that truck. And that goes towards how does it how much time it takes to consolidate, how much time does it take to pick?

Do I have the right inventory in the right location to pick the order for that order line? And do I have the replenishment processes already done? So our systems actually monitor [00:46:30] that quite regularly. It depends on the speed of the system that we could do it every 30 seconds to all the way up to doing it every 15 minutes.

But it’s in that constant flow of reorganization of orders that helps us understand, okay, it’s not just picking, it’s also replenishment, it’s also receiving. It’s how do we dictate that flow throughout the system? So to your point, the silos are important to, to collapse, but it’s not necessarily a collapse, it’s connect, and those connection of silos are the things [00:47:00] that that we specialize in.

Joe Lynch: Yeah, what I want is I wanna be able to not only have it work right, I wanna also have visibility into it and be able to track it and say, “Yep, this, this thing’s working,” which basically means we’re unifying everything, and that’s kinda what we want. That’s the flow that I want to see in my facility.

And I think the whole industry’s moving to this. And by the way, I’ll just throw this out there. I’m an automotive guy originally. We look at the– So this is the way lean is. Lean looks from order to [00:47:30] cash. And when you think about from order to cash on a product, we have so many systems, and in a lot of ways, if we were to start over again, we might say, “Let’s just have one system from order to cash,” and everything is subservient to that order-to-cash system.

But instead, we have a TMS, we have a WMS, we have our order management system, and I think a lot of the ERPs are saying, “Okay, we’ll pull all this information into [00:48:00] this.” But but it’s the… Those were all so- silver bullets when we got ’em. When I s- the first time somebody described a warehouse management system to me, I was like, “Oh, boy, that’s it.

That is it. That’s all we need.” And then when somebody says, “What about the ERP?” Yeah, that too. And the, there’s a TMS module. Oh, yeah, of course. We’re all set. And then

Adam Brown: add one more.

Joe Lynch: Then and what we have now is what I always call the killer apps. The killer apps, [00:48:30] we don’t even know what the next killer app is.

All we know is as soon as someone brings it, we’re gonna go, “Oh my God, of course we need something for vetting my suppliers. Of course I need something for tracking.” Anyway it’s these, these operational tools are great. It’s just I need to unify, and that’s what you guys can help me do. So is everything unified under…

So if I have other systems within my building, do they all unify under the Dematic [00:49:00] flag, so to speak?

Adam Brown: Yeah. And w- when we accommodate our customers of where they need to be too, some s- some processes that we feel are great, we don’t wanna touch it because that, that’s just added cost for our customers to replace it. We can connect to those systems and what we call a system, total system orchestration is what we specialize in.

So if either under the Dematic ba- banner or direct control or linked to our system so we can get visibility of inventory and movements and things like that, so we can help orchestrate from front [00:49:30] to end of the operations of the building.

Joe Lynch: Like it. I like it. So we touched on this earlier, but I want to touch on it again, is this whole idea of miss picks. So that’s the miss pick or the slow order. If you have humans, you’re gonna have some number of errors because that’s a very difficult job. It’s also repetitive, and I can imagine how easy it is to go, “Did I put three in the box?

I… Yeah, I always put three in a box.” And then you go, “Oh, I didn’t [00:50:00] that time.” But y- we- we’re just prone to daydreaming and doing other stuff, and if we’re really focused, we might go too slow and have a whole bunch of late orders. ‘Cause a lot of e-commerce now is if it’s in by 2:00 or 3:00, it ships that day, and there’s thousands and thousands of orders coming in, and somehow, some way, it’s…

we’re getting that done, I suspect, through a lot of [00:50:30] heroics. And I worked in automotive and for a long time I remember they said, “We’re gonna stop having heroes in our process. We’re gonna have a process that says nobody’s, nobody stayed up all night and went to a, a fab shop. The parts were done a f- a week before we needed them,” right?

And I suspect there’s a lot of heroics now, and heroics can cause miss picks and [00:51:00] slow deliveries when it doesn’t work quite the way we want. How does Dematic help me around that?

Adam Brown: The automation that is proposed turns everybody into a hero, frankly. Because it ’cause we’re, what we’re doing is we’re directing them to

Joe Lynch: Hallelujah. Superheroes

Adam Brown: do exactly what they need to do based on the specific function that they can do, right? So when we’re talking about, a huge onslaught of orders that are coming in, the automation and the software is figuring out the best place to take [00:51:30] it, the ov- the inventory best to bring to workstations or to tell the operator to go to.

It also tracks what they’re picking. So when I pick I can have different tiers of pickers too. So new people, I would have to make sure that they they actually count one, two, three into an order, and I have light curtains that can count that. More experienced pickers that prove that they can work more efficiently, we take those restrictions off so they can actually speed up.

So the, the operator learns they need their [00:52:00] accuracy with their job, and they take it very seriously. I don’t think I’ve ever met a, a customer site that those pickers are not taking that job seriously. They know that mispicks cost the company money. The systems that we put in place help catch when that is actually doesn’t happen for some reason.

So when I say we turn everybody into a superhero, we really do. We can pick sustained rates of 500

Joe Lynch: that’s what we want from our tech.

Adam Brown: That’s right. Yeah

Joe Lynch: Yeah and d- and we haven’t said it in a minute, but it’s, this is automated storage [00:52:30] and retrieval systems. And I think one of the reasons, if I was at one of those warehouses and they say, “Hey, we’re getting, we’re gonna get these Dematic’s gonna work with us,” I believe my job just got better.

And I know some people say yeah, that job’s gonna replace a whole bunch of humans.” Maybe at some point, but in, in the short run, you’re not gonna be replaced by a machine. You’re gonna be replaced by a person who’s using a technology, using a machine, and that’s the same with AI. [00:53:00] When somebody says, “Oh, AI’s gonna replace you,” nope, a guy using AI really might replace you.

And at one time we had people in the fields picking weeds and then picking vegetables. We don’t s- we don’t see that anymore, and nobody says, “God, that was a whole bunch of jobs.” Those are jobs that our great-grandparents did or great-great-grandparents, and they would say, if they were alive today, “Adam, Joe, congratulations on not having to pick corn.”[00:53:30]

Adam Brown: Yeah, when you’re talking about the automation, the, I think I said it earlier, that the, the conversation I have with customers doesn’t enter the realm of if I put in this automation I need to release these people. That conversation’s done. Never will happen again, in my opinion. It’s more about how can I get people to come work for me by putting this automation in?

And it really becomes an attraction to the

labor force of, hey, my, the job [00:54:00] is easier, it’s less fatigue. I do have the things in place to make me successful and make the company successful. Those type of things attract the workforce. So when we’re talking about the difference between now and then the attraction of the automated automation the automation inside the facility really comes down to empowering the workforce that we, that can be attained to do the business.

Joe Lynch: Yep. Yep. I love it. I love it. Adam, I’m gonna summarize what we talked about today, then I wanna get your final thoughts on the [00:54:30] topic. So I’m talking to my friend Adam Brown, and we’re talking about future-proofing warehousing, warehouses against real estate and labor crunches. What we’re talking about today is Dematic, and Dematic makes automated storage and retrieval systems for warehousing.

And we are going to have real estate crunches. We’re seeing those all over the place, and I think we’re gonna run into more as we say, “How do we get inventory closer to consumers?” [00:55:00] And I think we’re gonna run into it for other reasons. Who knows what the next trend is that’s going to demand more of the warehousing business?

The warehousing business is growing up. It used to be a very low-tech business. It used to be kind of a dirty, grimy business. Not anymore. Now we’re expecting warehouses to be very professional places. They’re gonna be clean. They’re gonna be well-lit. They’re gonna have the right technologies for the job, and increasingly the right technology’s gonna be these automated r- storage and retrieval [00:55:30] systems.

And I think these make for better jobs for the individuals who are working in those facilities. Again, if I had a choice I’m gonna work somewhere where there’s technology that makes me much more effective, much more efficient, also not going to physically exhaust me or make me wander around inside a cold chain warehouse all day.

We talked about f- five points. The first one is just the labor. We have a labor problem, and these are… When we have a labor problem, and you say, “Yeah, and this job [00:56:00] is physically demanding,” guess what? They’re going to leave for a job that’s less physically demanding, one that doesn’t make my back hurt at the end of the week.

Next we talked about real estate. Depending where you’re talking about, real estate is a constraint. If I have to open up a warehouse in New York City or downtown Dallas to support same day, next day, that’s expensive. I have to get my, I [00:56:30] gotta get my money’s worth out of those facilities. Dematic lets me do that.

We talked about peak syst- peak season. We always see it every year around, November, where Amazon’s hiring this many people to… And they’re gonna try and train them up and get them to be very effective and efficient for the next six weeks. I’m sure they do as good a job as anyone with the training, but it is not easy to get a whole bunch of people up to speed.

Better to say we have a [00:57:00] system that enables people to follow the process, and in that new process that’s automated, they’re gonna be more effective, more efficient. Exactly what they wanna be, but also what we need them to be. We talked about the silos. There’s so many silos, and each one kind of creates a local optimum, meaning I made it good for this one function, but maybe bad for the overall system.

When I’m working with Dematic, Dematic is the main system. Everything is aligned to it. Last but not least, we talked about [00:57:30] slow deliveries and missed picks. That’s what we have in warehouses. Even the very best warehouses have those. If you’re using Dematic, you’re going to have a lot less of that. Anyway, enough of my blather.

Put a big old bow on this one, Adam Brown. Final thoughts on the topic.

Adam Brown: I think the, the topics that you covered are some of the most important that I would say any retailer, anybody in the warehousing industry suffers from every day. It’s part of the challenges that we look to strive to, to [00:58:00] reduce for our customers. But it’s also our partnership with those customers to help adapt to what their business challenges will become, and delivering the technology and the solutions, and more often the s- the, the processes that can be repeatable that they can build and grow their business with with a system provider like Dematic.

We constantly understand that the world is changing and technology is changing, evolution is changing when we’re talking about [00:58:30] processes on how to actually fulfill. We’re here and committed to understand how do we work with our customers, proactively connect with them to say, “Look, where are you going?”

And walk with them on their journey from anywhere they say that they are within their warehousing and order fulfillment needs, all the way out to lights out, fully robotic, I wanna make sure that I attack and provide my customers with the best value for my brand, and we’re here to support them with that.

So through warehousing [00:59:00] distribution, through software, through service, we’re here for our customers day in and day out.

Joe Lynch: I love it. I love it. And I’ll make sure I put a link to your LinkedIn profile, link to your website, and it links you when you go to MarketTeam. Give me, we’ll put those in the show notes. So in case someone wants to reach out, they can talk to you. What conference will we see you guys at in the near future?

Adam Brown: The big ones that I’m d- destined to go after, of course, is our ProMat show next year for in Chicago. I think everybody will be there in the industry. It’s always a good time to see. We’ll also be at CeMAT [00:59:30] in Shanghai this year. Automation show there

Joe Lynch: I love it. I love it. So I didn’t ask this specifically, I wanna ask it now. Do you work with a lot of 3PLs or are you usually working more directly with the the shippers, the, the manufacturers, distributors, et cetera?

Adam Brown: We work with both. So the– we view basically 3PLs as the cons- as the consolidated or concentrated retailer because they have all the problems of a retailer, but they’re also doing it within the bounds of their contracts with their customer. So [01:00:00] there’s a lot of dynamics in the 3PL world that we provide, multi-client facilities, trying to help them maximize the dollars for their business as well as their customer too.

But we have equal share in those spaces.

Joe Lynch: I love it. I love it. Adam, thank you so much for taking the time. This is such an important topic and again, you said it early on, we have just begun. We’re 15, 16% of our warehouses are automated, and if we’re talking 20 years from now I suspect it’s gonna [01:00:30] be a very automated business by then

Adam Brown: We’re looking forward to it

Joe Lynch: Yeah.

Thank you for taking the time.

Adam Brown: Thank you

Joe Lynch: And thank all of you for listening to my podcast. Your support’s very much appreciated. Until next time, onward and upward