I’ve recently completed a market study on the autonomous mobile robot market. When doing this kind of study, you talk to as many executives as you can to better understand the dynamics of the industry. An interview with Matt Rendall, the CEO of OTTO Motors, was particularly intriguing.
There is a mish mash of terms used to describe vehicles that can flexibly move from point A to B without human drivers. “Flexibility” in this context means that these vehicles navigate without having to rely on a preexisting infrastructure that both tightly defines and confines a vehicle’s path. The technologies used in vehicles that navigate indoors clearly overlaps with the technologies being used by the companies developing autonomous cars, like Google
Clearpath, the parent company of OTTO Motors, is a Canadian company founded in 2008 as a spin off from the University of Waterloo. “At that time,” Mr. Rendall said, “autonomous vehicles were only a sparkle in the eye of a few military organizations. Transformational technologies often have long gestational periods, with the R&D (research and development) funded by defense organizations.” For five years, Clearpath’s funding came in part from defense contracts, but large companies in mining and other industries also became clients. In 2014, the company built their first prototype OTTO, a self-driving vehicle built to automate material movement inside busy factories and warehouses. “We did this three years before anyone else,” Mr. Rendall said.
OTTO is focused on material movement jobs like bringing raw materials to the line, cross docking pallets, and moving parts between processes. OTTO can reduce or eliminate labor spend on low-value work through innovative and flexible automation so manufacturers can redeploy their workers to higher-impact jobs.
The company got venture capital in 2015 to support productizing The OTTO Self-Driving Vehicle Platform. Crunchbase reports that the company has received a total of $41.2 million USD across two funding rounds. OTTO Motors was spun out of Clearpath with a tight focus on material handling applications. Clearpath continues to provide less productized robotic services for research companies.
Venture capitalists expect high growth from the companies they invest in. “Our aspiration is to double growth every year for the foreseeable future. That is a common growth profile for VC backed companies. We’ve been on this track since 2014,” Mr. Rendall stated. “It is possible to grow faster than that.” Growth is being fueled by the difficulty many companies are having hiring people to work in their warehouses or factories.
Mr. Rendall also pointed out that the automated guided vehicle market in the U.S. has grown to less than $200 million in thirty years. Bolted to ground warehouse automation has its limitations. “There is a pressing need for flexibility.” Take Amazon for example, their throughput at peak is 4 to 5 times what it is for most of the year. If a company like this sizes automation for the throughput they need five years from now during peak season, they are investing in a throughput capacity 10 to 15 times bigger than what they currently need. They better hope their assumptions are right.”
Their self-driving vehicles can be redeployed as processes change. If a Tier 1 automotive supplier gets a new contract, they need to retool the entire line. “It is hard to apply a dollar amount to flexibility. But I was on one panel where the question of how to price or quantify flexibility came up. One panelist cited a survey which said some industries are willing to pay a 30 percent premium for flexibility.” AGVs can be cost effective, Mr. Rendall asserts, but only in “simple” applications.
But how autonomous do vehicles that move pallets really need to be? Whereas robots that support ecommerce operations may navigate warehouses in an intricate orchestration that supports human pickers, do pallet moves really need to be that complex? In lean manufacturing operations, manufacturers have a specific time frame they are looking for material to be delivered to the line. If a robot picks a new path to avoid an obstacle, the desired sequence of material delivery to the line can be disrupted.
Mr. Rendall disagrees. “The supply chain inside an automotive plant is elegant from a process perspective. Kitting operations, where a kit is built for a specific station on a factory floor, can resemble order picking in ecommerce.” Further, the more products built on the same assembly line, the more the process requires multiple origin and destination points. “There is a large queue of potential pickup and drop off locations. A conveyor or AGV can’t do that.” Further, it is public information that Toyota, the father of lean in automotive, is a customer of theirs. “I wish we could talk about what our innovative clients are doing.”
This market is poised to grow explosively. That opens up some interesting opportunities for flexibility in the pricing of this technology. More than just Robots as a Service pricing, which will come to this market as surely as Software as a Service has come to dominate the enterprise software market. “We could deliver solutions that offer surge capacity for finite periods of time.”
While in many industries the seasonal surges occur during the runup to Christmas, and there might be somewhat limited opportunities to rebalance capacity during other times of the year, that matters less in a fast growing industry like robotics. “If you are growing, you bring the machines back and then send them to the next client that needs them.” With RaaS, if a machine breaks, the supplier provides a new one. Customers would be “buying productivity at a compelling price. This could be a model that works,” Mr. Rendall concluded.