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Ron Dutt is CEO of battery maker Flux Power. Prior to joining Flux Power, he served in several capacities, including executive vice president, chief financial officer, and treasurer, for various public and private companies, including SOLA International, Directed Electronics, Fritz Companies, DHL Americas, Aptera Motors Inc., and Visa International. He holds an MBA in Finance from the University of Washington and an undergraduate degree in Chemistry from the University of North Carolina. Mr. Dutt also served in the United States Navy and received an honorable discharge as a Lieutenant.
David Maloney, Editorial Director, DC Velocity:
Sustainable practices are gaining momentum. What's the future of battery technology? And Amazon's Prime Day is just around the corner. What does that mean for shippers?
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by DCV-TV. Five channels of streaming video are yours for the viewing on DCV-TV. Major improvements have recently been made to the DCV-TV platform to enhance the viewing experience, provide greater search capabilities, and to expand the capacity of the video library well beyond the 3,000-plus videos already in the archive. Be sure to check it all out at DCVTV.com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of this week. But to begin: What's the future of battery technology? To answer that, here's Victoria with today's guest.
Victoria?
Victoria Kickham, Senior Editor, DC Velocity:
Thanks, Dave. Yes, our guest today is Ron Dutt. Ron is CEO of Flux Power, which makes lithium-ion batteries for industrial applications. We asked Ron to join us today to talk about trends in industrial battery solutions.
So, welcome, Ron.
Ron Dutt, CEO, Flux Power:
Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity:
So I wanted to start off by just saying that lithium-ion battery technology has been used in material handling applications for years, but it really seems to have taken off in terms of more widespread use in the last couple of years. In particular, I wondered if you could talk a little bit about why the conditions might be right at this point for that.
Ron Dutt, CEO, Flux Power:
Sure. You know, not only are the conditions right now, but there have been developments going on for a number of years that make it right for this point.
One is the decreasing cost per kilowatt-hour for lithium, and reflecting the development of the battery cells, the the increases in volume, in particular, you know, you can just look at Tesla and see the volume increasing, and it is kind of a volume game. So the cost per kilowatt-hour is getting, has gotten down to the point now where it's it's—the economics are very attractive. And that cost per kilowatt-hour is going to continue to go down.
Secondly, in terms of the conditions being right at the time are, there has been a lot of press in developments and excitement in the market over the EV sector and electrification sector, and this is all part of that. Its time has come, as we see it. If you go to the trade shows, it's just overflowing with a focus on lithium.
And you know, the last point I would I think of when you ask that question is that there now are vendors like us, or suppliers of lithium battery packs, that are emerging that are meeting the demands of some of these large fleets. You know, we've gotten traction and and can provide a level of quality and service that makes it very realistic for all this to happen.
Victoria Kickham, Senior Editor, DC Velocity:
Thank you. I wanted to ask too, has the pandemic affected this issue at all? For instance, you know, you hear a lot about the low maintenance associated with lithium ion batteries as an added benefit. Does that help at all in today's warehouse where we're trying to be more socially distanced? And are there are other benefits that help at this point?
Ron Dutt, CEO, Flux Power:
I think that's true. There are some benefits. You know, I'd first say the pandemic is, had the impact of—not really affecting the movement of logistics that much around the country. Food, groceries, everything, it still has to move. For example, we've been going full-bore throughout this period.
At the same time, more to your point, the lithium has several advantages that all lend itself to less handling by people in the operation process. For example, lithium doesn't require any watering, like lead acid does, so there's there's less people involved in doing that. Because that has to happen regularly, otherwise the battery doesn't last very long.
Secondly, I would think another driving factor is lithium has a longer life. The chemistry just allows a much longer life, so there's less changeout, there's less involvement in that whole process from a people standpoint. And finally, for these large fleets that have multiple shifts, we've demonstrated with some very large customers that they can use one lithium pack for the whole entire day, for all the all the shifts, and so that eliminates a lot of changing out of batteries each shift, let alone eliminating the need for a battery room. So you have some factors there that certainly help support, you know, [reducing] some of the adverse of forces from the pandemic.
Victoria Kickham, Senior Editor, DC Velocity:
Thank you. More generally, what are some of the newest advancements in the technology? You know, for instance, you know, what can these batteries do today that maybe they couldn't just a few years ago? And you talked a bit about that at the outset, but anything else that's, that's new in terms of advancing this technology?
Ron Dutt, CEO, Flux Power:
There's been a number of key things. One is just the quality of cells coming out from—most of the lithium cells are manufactured in China, there's some in the U.S. and Europe and other places. But you know, over the last 10 years, the quality of these large-format cells—I'm not talking about the ones in your laptop or cell phone, but the large quality has really improved with the increase in volume, increased attention, increased demand. And that's really important, because anybody operating their forklifts in a facility, they do not want any downtime, they hate downtime. So the quality of cells is a very important factor.
Another another driver is that some of us in the industry have gotten UL listing certifications on our packs, and that's important because it makes sure you have a higher level of durability and safety for the packs. And, for example, for us that caused us to go off and make a few design changes and incorporate some aspects of the pack that reached a higher level, which really benefits the customer.
The last, the third thing and last thing I mention that comes to mind in your question, is that our lithium packs actually have a brain on it, as opposed to, you know, the current technology, or software, you know that directs activity, communication with a forklift, and also accommodates the telemetry, and customized telemetry. So our pack can communicate to our platform in the cloud and direct information to both us and the customers, which really provides a paradigm shift in the ability to manage, particularly these large fleets. So yes, we're finding that a very key improvement in the landscape.
Victoria Kickham, Senior Editor, DC Velocity:
Thank you. I wanted to shift gears just a little bit and just note that Flux Power was recently listed on the NASDAQ capital market. I wanted to ask, you know, what does that mean for the company in terms of growth and expansion? I know you had an earnings call earlier this week, if you can tell us a little bit about about that.
Ron Dutt, CEO, Flux Power:
Sure, really, you know, we were very excited to accomplish that. It gave us over $12 million in a capital raise, and being uplisted to NASDAQ gives us a whole quantum step in awareness in the market of who we are, credibility—it allows us, we're currently finalizing a much more cost-effective, better-working capital line to support our high-double-digit annual growth rates. And it also allows us to file for a shelf registration, which provides access, significant access to capital. Really, for, again, to support this growth trajectory we're on, and also support our reaching out to enhance our relationships, whether they're acquisition or partnerships, in terms of leveraging what we're doing to take advantage of this significant increase in demand for lithium. And finally, the other thing that comes to mind, it really gives us credibility with our large customers. Our target market is Fortune 500 companies and Fortune 150. And when any of those companies are making a selection of a supplier to support them and their operation that are scattered all over the country, in fact, even all over the world, they want to look at, is this somebody who's going to be around, who's going to be there to support service and warranty and future orders? So this all gives us kind of credibility that's very, very important.
Victoria Kickham, Senior Editor, DC Velocity:
Great, thank you. I just want to close things out by asking in general, how would you assess demand for material handling equipment, and just really the strength of the overall market, as we sit here, nearing the end of 2020, you know, still in the middle of a pandemic and lots of uncertainty? How would you kind of assess where things are?
Ron Dutt, CEO, Flux Power:
Well, you know, last year, we were looking at the third-party ITA [Industrial Truck Association] data, and their forecasts, and they were, they were outlining an outlook of 68% annual growth through 2024 in the material handling sector, which is no surprise. That kind of meets everybody's expectations. The pandemic has, I think, affected that in some way. I've seen some recent forecasts that still continue to be in that range. But we all know that there's been a dramatic increase of shipments to our front door—Amazon and others. And that requires more depots for those companies to move stuff all around the country, as opposed to just retail outlets. So more depots means more forklifts, so that should help. And then the last thing I'd say is, you know, that's for the industry, and then lithium, we know is early stages of growth of its presence in this marketplace, but it is growing at high-double-digit rates, so we see that as a bright side to the single-digit growth rate in the industry.
Victoria Kickham, Senior Editor, DC Velocity:
Thanks again for joining us today, Ron, and sharing those insights with us. We appreciate it.
Ron Dutt, CEO, Flux Power:
Thank you, Victoria. Glad to jump on this.
Victoria Kickham, Senior Editor, DC Velocity:
Great, thank you.
David Maloney, Editorial Director, DC Velocity:
And thanks, Ron and Victoria.
Now let's take a look at some of the other supply chain news from the week. Ben, Amazon has twice postponed its popular Prime Day sale by several months, due of course to the Covid-19 pandemic. But they've now announced a date. What can you tell us?
Ben Ames, Senior News Editor, DC Velocity:
Hi, Dave. That's right. The annual Prime Day sale is usually held in July. This year, in the midst of the pandemic, Amazon had bumped it, originally until September, and then delayed it again. But this week, the company announced that it will happen on October 13 and 14.
That's a big deal. Prime Day, it's a two-day sale. And it's offered just to subscribers to the Amazon Prime program. However, that doesn't mean that it's an exclusive event, because the number of Amazon Prime households in the U.S. is estimated at 82%, which is enormous. It doesn't mean that all of those people have Prime subscriptions, but at $150 per year, people in households often share them with the rest of the family, so that extends the sale to a really large chunk of the U.S.
Amazon had originally scheduled Prime Day during the summertime in order to create sort of a second peak season that occurred a different time of year than the usual winter holiday peak that we're all familiar with. And that would allow the company to get full utilization out of its huge fulfillment network, instead of building it just to handle that big winter annual pulse between Thanksgiving and New Year's. However, this year because of Covid, Prime Day is happening just six days before Black Friday. before—in other words, it will almost overlap with that same winter peak. So that could be putting a lot of strain on the country's parcel-delivery systems and trucking capacity, both of which are very tight right now.
David Maloney, Editorial Director, DC Velocity:
Well, how will that change affect shippers and retailers?
Ben Ames, Senior News Editor, DC Velocity:
Yeah, it's a great question. As Ron had mentioned just now, logistics didn't stop during the pandemic. As he mentioned, food, groceries essentials, all those things still had to move. So shippers, you know, have found ways to keep things working so far. Also, they've been building up a lot of inventory for the winter holiday peak, although they've had to do it in a compressed schedule, since a lot of regions are just now opening up. But then we've seen, as Victoria has done some coverage for us, that imports have been rising very fast at container ports, and also warehouse space is getting rare. So it's looking like the major retailers might be in a good position to handle the combined Prime Day and winter peak surges.
However, it could be a different picture for small and medium retailers. Many of those had to close down their brick-and-mortar stores during pandemic closures, just because of the recession, reduction in spending, social distancing rules. But a company that's called PingPong payments—and they provide payment services for cross-border e-commerce sellers—said that Prime Day this year could act as a barometer of economic recovery and consumer spending for those. PingPong's CEO said that Amazon's website has become the new virtual mall, which offers a lifeline to retailers that are trying to grow their businesses without being able to have a physical presence. So this late Prime Day could give those merchants a window of opportunity to gain revenue through what would be their first major sales event online after Covid.
David Maloney, Editorial Director, DC Velocity:
Thank you, Ben. It will be interesting to see the total volume of goods that will be moved during Prime Day this year, and also how the other retailers react in the market. Thanks again.
Victoria, you wrote this week about new research that's showing that environmental sustainability is gaining in importance among shippers. Could you share some details of that report?
Victoria Kickham, Senior Editor, DC Velocity:
Sure, absolutely. So we've been seeing that businesses are increasingly focused on this issue of environmental sustainability. And I base that on anecdotal reports, as well as various sort of green programs that companies across the supply chain have been announcing over the last few years, and really over the last year in particular. You know, we've seen fleets investing in alternative-fuel vehicles, people making efforts to be more energy-efficient in the warehouse, and also looking at things like earth-friendly packaging solutions.
So it was really interesting to see this week, a study that kind of put this all into perspective, in terms of its growing importance to the industry as a whole. It was a study by a third-party logistics provider Coyote Logistics, and it specifically looks at the shipping community, as you said, Dave. So they surveyed 250 shippers from around the world in various industries, various company sizes, vertical markets, and seniority levels, to really gauge buying habits, and the perception about the evolution toward a more sustainable supply chain. And they found that 81% of shippers said they're more focused on sustainability today than they were just three years ago, and that their supply chains play a vital role in achieving their sustainability goals.
One point that stood out in particular to me is that almost all of the survey respondents—I think it was something like 98%—said that they now have a team member or associated employee dedicated to sustainability. They also made the point that meeting sustainability goals now requires prioritizing those goals and really collaborating, not just across their own organizations, but across their supply networks as well.
David Maloney, Editorial Director, DC Velocity:
Did the study identify what may be causing this, other than consumer demand, which is what is commonly understood as a key driver?
Victoria Kickham, Senior Editor, DC Velocity:
Yeah, that's right. So consumer preference for environmentally friendly business practices has long been driving this trend, and that's certainly accelerated in recent years, and the study did point to that.
But interestingly, it showed that companies are starting to see a return on their investment in sustainability programs. So shippers said that these programs are driving—I'm sorry, are delivering in three key areas. And that's cost savings—67% of those surveyed said they're saying cost savings from their sustainability efforts. 60% said they're seeing benefits to their company reputation, and more than half said that their efforts are causing the industry to view them as leaders in the issue, in this movement. So those are the top three things that they said they're getting in terms of benefits. So I think we'll certainly hear more about benefits and the ROI companies are experiencing as firms become even more focused on sustainability. And that's, like I said, an interesting development, from my perspective.
David Maloney, Editorial Director, DC Velocity:
It does certainly seem like a step in the right direction for all of us. Thank you, Victoria.
Victoria Kickham, Senior Editor, DC Velocity:
You're welcome.
David Maloney, Editorial Director, DC Velocity:
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories. Go there and check it all out. Thanks, Ben and Victoria, for sharing highlights of the news this week.
Ben Ames, Senior News Editor, DC Velocity:
Thanks, Dave. It's always fun.
Victoria Kickham, Senior Editor, DC Velocity:
Yes, you're welcome.
David Maloney, Editorial Director, DC Velocity:
And again, our thanks to Ron Dutt of Flux Power for being with us today. We encourage your feedback on this topic and our other stories. You can email us at podcast@dcvelocity.com.
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We'll be back again next week with another edition of Logistics Matters, when we'll look at the growth of robotics and their impact on distribution operations. Be sure to join us. Until then, please stay safe and have a great week.
EXHIBIT 1: Market forecast for industrial robots - revenuesInteract Analysis
