Connect with us

Hi, what are you looking for?


Rent-a-robot concept delivers affordable automation to warehouse operators

Time was that a commitment to a logistics warehouse robotics system meant significant up-front capital outlays or costly and inflexible multiyear leases. Today, warehouse users can gain the productivity benefits of a robotics solution, whether they be stationary arms for picking and sorting or autonomous mobile robots that meander around a facility, through customized subscription agreements that don’t wreak havoc with users’’ budgets.

Robots as a service (RaaS) isn’t a Johnny-come-lately. Locus Robotics, based in Wilmington, Massachusetts, pioneered the concept in 2014 and is still considered the leader. The COVID-19 pandemic dramatically accelerated RaaS’ already-growing popularity. Warehouse operators facing sudden spikes in parcel delivery volumes and insufficient manual labor to handle the throughput began seeking affordable automation solutions. Robotics vendors responded with a model patterned after the more established software-as-a-service strategy. 

For little down, businesses can scale their warehouse operations without writing big checks or absorbing the expense of hardware maintenance and upgrades. As with any “as a service” relationship, an RaaS agreement includes ongoing software enhancements, all of which are done in the cloud. 

“At many organizations, there is friction associated with the procurement and adoption of new technology. The main benefit our customers cite when advocating a switch to an RaaS model for AI-powered robotics is that moving away from the capital expenditure significantly reduces risk. It shifts the organization into a state of immediate(return on investment) on day one,” said Peter Chen, co-founder of Covariant AI, a robotics AI company based in Emeryville, California. 

The time frame for a RaaS customer to achieve a full ROI depends on the supplier’s up-front fees. Locus customers typically experience full ROI within six to eight months of installation, said Rick Faulk, the company’s CEO. Mike Futch, president and CEO of Tompkins Robotics, an Orlando, Florida-based manufacturer of autonomous mobile robots (AMR) that launched its RaaS program at last month’s Modex conference in Atlanta, said a full ROI for its system can be as short as 3 months because the proposed start-up charges are nominal. Tompkins will charge a refundable deposit for the machines. The company’s customers will cover the costs of shipping the machines and for dispatching a technician to a site to maintain or repair the equipment.

RaaS contract durations run from 9 months to 3 to 4 years, and there isn’t much wiggle room for users in that area. Everything else, though, is on the table. Contracts can take the form of a fixed monthly fee for each robot deployed to a facility. Or they can be structured on a per-transaction basis depending on a user’s volume. Pricing will vary depending on the number of robots and sortation destinations, as well as the type of items being processed, among other factors. There could be a mix and match process whereby new RaaS technology is bolted on to an existing system that was funded through a capital outlay.

“Every supplier has to be able to adapt their technology to the needs of the customer,” said Futch.

Different ways to go

For a high-volume user, a per-transaction fee could be the way to go because the unit costs  can decline as per-piece throughput increases. A fixed monthly fee structure may be more appropriate if a customer with growing volumes gets more out of the system than originally forecast, experts said. However, a fixed-fee structure may not be cost-effective if half the robots are sitting idle for half the time, experts said.

Most vendors buy the robotic arms from third parties and configure it with artificial intelligence that allows the bots to effectively handle repetitive but necessary tasks. With some level of training, a warehouse worker once tasked to process 400 parcels an hour can oversee a team of 10 robots that in aggregate can process 10 times that volume in the same time span. In theory, fewer workers are needed to run a shift, and those who are can receive better pay to execute more value-added functions.

Flat-fee subscriptions are the most effective way to smooth out the annualized peaks and valleys of warehouse throughput, and they make life much easier for a company’s accounting department, said Jim Liefer, CEO of Ambi Robotics, a Berkeley, California-based robotics technology vendor. 

The RaaS model is suitable for any industry struggling with throughput increases and labor shortages — challenges that apply to almost every industry. “Third-party logistics, omnichannel, apparel, pharmaceutical and electronics are all areas where the RaaS model works well,” said Chen of Covariant AI. 

The 3PL sector is an area of intense focus, especially for the per-transaction model. 3PLs don’t need or want fixed monthly contracts because the duration of their own customers’ agreements can be short-term in nature. With a transactional model, 3PLs can simply mark up each transaction to their customers. Not surprisingly, 3PLs are the cornerstone customer segment of Tompkins’ new RaaS strategy, according to Futch.

There will always be a place for the traditional capital sale agreement in which big firms with large-scale needs find it more beneficial to buy the technology up-front and depreciate it over time. However, the vendors hitting the market in recent years are casting their lots with the RaaS model. 

“If a company like Walmart (NYSE: WMT) wanted to spend a lot of money to buy a solution, we wouldn’t say no,” said Liefer. However, Ambi sees far more market demand for the RaaS model. 

The company announced at Modex a four-year, $23 million RaaS expansion of an existing agreement with mailing, shipping and technology firm Pitney Bowes Inc. (NYSE: PBI) to support its U.S. e-commerce hub network. Ambi deployed AI-powered robots during the 2021 peak season at Pitney Bowes’ Stockton, California, e-commerce hub, where the equipment nearly doubled the parcel sortation throughput, the companies said in a joint statement.

Logistics robotic uptake is surging. The International Federation of Robotics has predicted that $22.5 billion of logistics robots will be sold worldwide this year, more than quintupling 2018’s activity. Robotics solutions are increasingly designed to match complex supply chain processes. Businesses will look for ways to get their hands on automation without breaking the bank. RaaS initiatives are likely just getting started.