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Art Eldred is vice president and growth officer at Vargo. He has over 20 years of supply chain expertise, specializing in e-commerce fulfillment solutions. He leads cross-functional teams, including consultants, mechanical, controls, and software engineers.
Eldred’s early career with a startup electromechanical software company provided invaluable insights into highly successful software organizations. His extensive knowledge of material handling technologies, coupled with software integration, brings valuable experience to his role at Vargo.
Eldred serves as an advisor to numerous supply chain C-level executives, offering insights on best practices, new technologies, and software integration. His designs are often recognized for their impact and have been featured in industry publications and conferences.
David Maloney, Editorial Director, DC Velocity 00:01
Automated storage takes hold. A forecast for holiday spending. And logistics supports our troops. 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 group editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Hyster Company, a global manufacturer with nearly a century of experience designing forklifts and high-capacity materials handling equipment used in the world’s most intense industries. Operations rely on Hyster as a strong partner for everything from choosing the right motive power source to their Edison Award-winning operator-assist solution, Hyster Reaction. For more information, visit hyster.com. That's H-Y-S-T-E-R dot com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insights into the top stories of this week. But to begin today: Automation is increasingly an answer for distribution facilities that need to fulfill a growing number of orders, but can't find enough workers. Automated storage is one of the tried-and-true technologies that is finding even more applications in today's warehouses. To find out what's new with this technology. here's Victoria with today's guest.
Victoria.
Victoria Kickham, Senior Editor, DC Velocity 01:30
Thanks, Dave. Our guest today is Art Eldred, vice president and growth officer at systems integrator Vargo. Welcome, Art.
Art Eldred, Vice President and Growth Officer, Vargo 01:39
Welcome. Thank you. Thank you for having me.
Victoria Kickham, Senior Editor, DC Velocity 01:41
Yeah, thanks for being here. So, I'll just start by saying — repeating a little bit of what Dave said, you know — demand for warehouse automation technology just continues to grow, and automated storage and retrieval systems, or AS/RS, are a huge part of that market. For listeners who may not be familiar with them, can you briefly describe what an AS/RS is and what it does?
Art Eldred, Vice President and Growth Officer, Vargo 02:01
Sure, I'll certainly try, anyway. You know, the terminology if you asked me that five years ago is a lot more narrow than it is today, but today, automatic, you know, ASRS stands for "automatic storage and retrieval systems," and they come in all different flavors and sizes. You know, the previous, or the legacy of that technology has really been cranes, or automatic machines that went in and out and extracted products and cartons from rack, brought it up to a front end, and kind of automated the pallet jacks and the forklifts of the world. And with the evolution of our fulfillment centers and the need for reducing labor or automating the labor processes, we've really taken that automatic storage retrieval systems and we've evolved it into goods-to-person picking and more into the carton-level and even piece-picking areas that are a little different. So, today, you know, I could go back and say, you know, there's 50, 60 companies that are doing some type of automatic storage retrieval for the industry, and of those, there's a legacy bunch that are doing the cranes and the shuttles that take cartons and they bring it from a conveyor into a storage location, they start at maybe 300 feet down an aisle, put it into a rack location, come back out with a carton that is needed for something else, and then they take another carton, they put it back into the rack. But with the evolution of fulfillment and technologies, we're now starting to see these form factors of the automation grow, and no longer are these big cranes with lots of heavy-duty motors and servos and sophisticated control systems, but we're starting to see these mobile robots take take hold where you can store and retrieve a shelving pod on a mobile robot that travels on the floor automatically, or you're even going to start to see these mobile robots automatically scale and climb into the rack, get a carton and put it back down onto the floor, and take it over to some type of operation that you're doing on the carton, where you're pulling an item out of it, or you're sending the carton into a shipping system. So, there's lots of different flavors and sizes of it, but the end goal, at the end of the day, is to automate the storage and retrieval of products and cartons so that humans are no longer walking to and from a location or traveling on some type of mobile equipment. So, I know it's a little lengthy answer, but, um...
Victoria Kickham, Senior Editor, DC Velocity 04:33
No, that's great. That's great. Thank you. And my next question was just, you know, what are the primary benefits of this type of technology? You just mentioned a couple, but, you know, why would a company implement an AS/RS, you know, more specifically, any kind of, you know, bullet-point benefits they'd be looking at?
Art Eldred, Vice President and Growth Officer, Vargo 04:49
Yeah, yeah. There's really two big benefits that I see that we really look at. One is you're densifying the storage space. So, if you think about what you pay for warehousing just from us square footage perspective, you really would love to maximize the use of the cube inside the warehouse, meaning I don't want to just put a carton or a pallet on the floor; I usually have 20 feet above me, sometimes 30 or 40 feet above me, of storage space. And if you could store your cartons from the floor to the ceiling, you'd have an ideal usage of efficiency of your space. AS/RS systems really do that natively with their their systems, and it's a great thing because I'm now making use of all of that cube inside a warehouse, I'm requiring less square footages and less spaces that normally you would be putting on the floor. So, space is one, but the biggest, largest benefit that we're seeing is really in the travel time and the labor associated with travel. So again, if I'm on a forklift, I've got a mobile forklift that I've got to go buy or purchase or lease, I have to put a person on it, I have to train that person, I have to certify that person just to make sure it's not just somebody that says they can operate, but they can, obviously operate it safely, and I'm trying to remove that from the operation. The other side is just taking a person who goes to a location to perform an operation on it, like take the box out, pick three items, push the box back, and then go on to the next location. Well, if I don't have to keep walking all the way around the warehouses, then I'm reducing the amount of labor that's required or making them more efficient. And I will tell you, there are operations that you, we love about Apple, you can go back and look at some of your steps in a day, but you can see some folks in these pick modules that are going to and from pick locations. They're walking 10, 20, even 30 miles a day performing tasks to fulfill products. And if I have a robot or an AS/RS system doing that work for me, I've now reduced that to, I'm standing still and I'm working from a carton on the left and putting to a carton on the right and I'm in a workcell environment, again, being much more productive with the work I'm doing. So, at the end of the day, it's space and travel time are the two big things that I really go after when I'm looking at what the benefits are.
Victoria Kickham, Senior Editor, DC Velocity 07:09
Those are some huge, I had no idea it was that much walking. That's not — I wanted to ask a little more more about the evolution of the technology. You mentioned that in the beginning. You know, typically we think of these as large, complex, and very expensive systems. You talked about the evolution of this a little earlier. You know, who are the prime adopters of this technology and how has it changed in recent years? Maybe a little more on that.
Art Eldred, Vice President and Growth Officer, Vargo 07:30
Yeah, Victoria, that's a that's a great question, because again, it's, this is part of this evolution, that's occurring. But, you know, I would say the evolution started with folks that can really afford and have the capital money to afford some of these systems, and, you know, 10 years ago, 15 years ago, these systems were not cheap. They were very, very heavy investments. You're talking tens of millions of dollars to get one of the typical AS/R systems even up and running just from a startup perspective, and they can grow up to 100 to 200 million, so you have to have a lot of capital to kind of get those started 10 years ago, 15 years ago. With the innovation of the industry, these mobile robots that are coming out, one of the greatest things about that is some of these things that were pretty far to reach in a capital or size for a lot of businesses are no longer — those barriers have been removed. And they've been removed because the robots are, you know, they have a lot of these new pricing models. One of them is RaaS, or "robot as a service," where you're you're paying a monthly fee for that robot either on a transaction basis, saying how many movements it's doing, or just to kind of a rental fee on those. But the key is that you're not outlaying all of the capital anymore. You're using that as part of your operational expenses, not a capital expense. So now the markets kind of really opened up to about anybody who has a fulfillment center of a little bit of volume and is looking to automate those processes. There are still minimum thresholds that make sense, and a lot of it is on the amount of movements that you're doing. In other words, you know, if I'm only going to pick location five times a day, it doesn't do a whole lot to go and buy a robot to do that, because the cost of the human doing it, or the time of the human, is not even a full day's worth of work. So, you're really looking at some minimum scale that you have to go after, but it's exciting where this technology is going and what it's doing to enable it to the folks that work, you know, smaller-scale and lesser-capital positions, so it is — there's a lot to it now.
Victoria Kickham, Senior Editor, DC Velocity 09:36
Yeah, along those lines, what are some questions managers should ask when thinking about implementing one of these solutions? You know, you just mentioned you know, sort of the volume and things like that. What are some, you know, some high-end or top questions they should sort of consider?
Art Eldred, Vice President and Growth Officer, Vargo 09:52
Yeah, I would, I mean I would really start or recommend folks look at you know, automation is things that you know, are highly repeatable. Those are the things that you're very successful on. So, to be highly repeatable, you need to have a lot of continuity into that process. What I mean is, if I had 1,000 different types of cartons that I had in my operation, versus just two cartons that I had to deal with, the candidate to do automation on two cartons is a lot higher, or a lot more probable. When you have 1,000 different cartons in different sizes and shapes and conditions, you know, some of them get squashed and bowed and have different configurations, those are the things that I'm looking at on why I would want to automate or, or somebody who's look[ing] at it. The other thing is the old the old expression, "I'm from Missouri, the show-me state." I want to go see these things in operation. And you're trying to see them in operation with like businesses or like products that you are using in your current operation. And then the last thing I'll kind of tell you is, there's an explosion of automation and technology providers hitting the market. So, if you're going after these bleeding-edge technologies, and what I mean by that is something that's coming out of venture capital funding, and it's looking for its first install or second install, you really have to do your due diligence on the backing of that company. You have to look at the folks that are involved in that organization, make sure they're experienced, both from the robot or the automation side, but also the applied side, meaning that they have warehouse or fulfillment operational experience on their staff, and they're not just a PhD in robotics that's kind of trying to help automate your processes. So, I really look at a lot more of the experience to try and mitigate some of those risks associated with bleeding-edge technology. But, again, probably longevity and automation and repeatability, those are all the things that are important to me.
Victoria Kickham, Senior Editor, DC Velocity 11:48
Great, thank you. Just to sort of wrap up here, you know, I hear quite often that although, you know, automation and technology are all the rage, as we've been discussing, there's still a large percentage of warehouses and distribution centers out there that aren't automated at all or use very little automation. I'm wondering, is that what you see? And kind of sum up what the market's like for these types of solutions we're talking about?
Art Eldred, Vice President and Growth Officer, Vargo 12:10
Yes, yes, indeed, there are, you know, still, the lion's share of fulfillment and warehouse operations are not automated. It is not uncommon to walk into a warehouse and still see a paper pick sheet and a pen and pencil on someone's hand, that are kind of performing operations and taking things into a box to go fulfill to a customer or to a company that they're servicing. Again, it kind of comes back to some of the conversations upon how big is your operation, how much capital can you afford. And really, those operations are going to be great candidates for these newer technologies that are robot as a service and are much more flexible and scalable, and are kind of using price models that coincide with the operational aspects of it. In other words, if I'm going to spend $1 million on labor per year and I'm able to take 200,000 or 300,000 out and put it into the robot as a service and have the rest on my labor pool, you really didn't change any of your daily costs, or your unit costs going out the door, but you've kind of supplemented or mitigated some of the labor problems or woes that are out there.
Victoria Kickham, Senior Editor, DC Velocity 13:18
Terrific. All right. Thanks very much for joining us. We really appreciate your insight.
Art Eldred, Vice President and Growth Officer, Vargo 13:23
I loved being here. Thank you. And again, we, this technology is pretty, pretty exciting to watch, and I think the future's pretty bright. Stay tuned for more and more of these coming out into the world. But thank you for having me. It was a pleasure getting on board.
Victoria Kickham, Senior Editor, DC Velocity 13:37
Great. Sounds great. Thank you. We have been talking with Art Eldred of Vargo. Back to you, Dave.
David Maloney, Editorial Director, DC Velocity 13:44
Thank you Art and Victoria. Now let's take a look at some of the other supply chain news from the week. And Ben, you wrote this week about projections for holiday spending. Are consumers going to have a Merry Christmas, or will the Grinch roll this holiday?
Ben Ames, Senior News Editor, DC Velocity 14:00
That's a great question that's on all of our minds over here, and that's, you know, because as listeners to this podcast know, you know, we're all living through some turbulent economic times together. You know, you can mention diesel prices and interest rates and inflation. So, it was somewhat comforting this week when we heard a forecast that U.S. holiday spending in this coming winter peak season will rise slightly and reach a new high point compared to last year. And that came from the National Retail Federation, or NRF. And of course, you know that rise has been the general trend in these past 20 years or so, with the exception of some extraordinary events like the 2008 recession and credit crisis. But still, in these unpredictable times it's good to know that we're staying on track, and also the NRF pointed out that we're returning to prepandemic growth rates of about a 3 to 4% increase over last year's holiday spending. That's what their forecast calls for. And that's in comparison, of course, though, to huge jumps in these past couple years during pandemic. NRF pointed out that there were trillions of dollars of federal stimulus money, and that led to some huge levels of retail spending. There were leaps in terms of holiday spending of 9%, 12%, 5%, these past handful of years, so looking at this coming year, a 3 to 4% rise looks kind of slow and steady.
David Maloney, Editorial Director, DC Velocity 15:30
Yes, Ben, slow and steady expansion would be an improvement over the peaks and valleys that we saw during the pandemic. Did the NRF say what was driving that growth?
Ben Ames, Senior News Editor, DC Velocity 15:41
Well, the 3 to 4% growth is broad-based, of course, across the entire spectrum of holiday spending, but they did highlight three areas that caught my eye. First, one of the chief areas where shoppers will be looking for their deals is online. Not a big surprise. E-commerce has been in the headlines for years now. The forecast though, for online and other nonstore sales, as NRF describes them, is expected to increase between 7 and 9%, so, you know, two or three times the general amount. Second, an area with fast spending growth this coming holiday season is the service sector, NRF said. Jack Kleinhenz, who's NRF's chief economist, pointed out that for all that the consumer has been doing to keep the economy afloat, the composition of spending is trending, they're changing from goods to services, and that's also going to include holiday sales. So, it's going to be interesting, it'll be, instead of buying more items, you know, physical goods, a bit more — services is you know, concerts, movies, games, trips, that kind of thing. And third, we're seeing a change in how soon shoppers will start to hit those stores and/or, you know, hit the hit the movie theaters or hit the website. NRF did a another survey that showed that almost half — 43% — of holiday shoppers plan to start making those holiday purchases before November. So, looking at my calendar, I guess that means that I'm late already. So, in turn, actually the NRF pointed out that the earlier start could have an effect also on annual retail hiring trends. They pointed out that retailers across the nation will hire somewhere between 345,000, maybe 450,000 seasonal workers. That's about average. But some of that hiring may have been pulled into October to support that trend of shoppers getting out earlier to start their buying this year.
David Maloney, Editorial Director, DC Velocity 17:42
Yeah, it does seem to be earlier every year. And just a reminder, there's only about seven more weeks of shopping left, so start shopping now, Ben,
Ben Ames, Senior News Editor, DC Velocity 17:51
I'll get on it. Thank you.
David Maloney, Editorial Director, DC Velocity 17:53
And Victoria, you wrote about a new way that the trucking industry is honoring those who serve us all. Can you share the details? Victoria, how can truck drivers get involved in this effort?
Victoria Kickham, Senior Editor, DC Velocity 18:00
Absolutely, yeah. So, the Owner-Operator Independent Drivers Association, or OOIDA, is launching its 17th annual Truckers For Troops campaign next week. This is a two-week fundraising effort that supports U.S. military personnel overseas and veterans here at home. The program runs from November 6 through November 20, and it also commemorates Veterans Day, which is coming up on November 11. A little background on all this: So OOIDA represents independent owner-operators and small truckers. The group launched Truckers For Troops in 2007 as a way to support service personnel that were stationed in combat zones, and they did that by sending care packages to troops around the world. Over the years the program has grown to support veterans facilities as well, including those assisting or housing wounded, disabled, or homeless service members. The group has raised thousands of dollars and supported thousands of military members and veterans over those past 17 years, and as I said earlier, they're looking to continue that support as we get ready to mark Veterans Day this year. Well, they can join the effort by making direct donations or via their OOIDA membership. During the two-week event, OOIDA will donate 10% of new-member registration fees or renewals to the program. Truckers can also make donations separate from the membership, and they can do that directly to the association, as I said, and the best way to get information on that is to visit the OOIDA website at OOIDA.com. I mentioned also the thousands raised to date in support of this effort, and I want to just be a little more specific. OOIDA and its members have raised more than $750,000 and sent more than 3,200 care packages to more than 32,000 military members. They've also sent aid packages to 65 facilities caring for those wounded, disabled, and homeless vets, and that includes an organization called Veterans Community Project, which is a group that provides housing and support to veterans in several states. There are links to all of this information in our story at DCVelocity.com. It was posted to our website today, so...
David Maloney, Editorial Director, DC Velocity 20:13
Yeah, those are some very worthwhile efforts and we applaud their work. Thanks, Victoria.
Victoria Kickham, Senior Editor, DC Velocity 20:18
Absolutely. You're welcome.
David Maloney, Editorial Director, DC Velocity 20:19
We encourage listeners to go to DCVelocity.com for more on these and other supply chain stories, and also check out the podcast Notes section for some direct links to read more about the topics that we discussed today.
Again, our thanks to Art Eldred of Vargo for being our guest. We welcome your comments on this topic and our other stories. You can email us at podcast@dcvelocity.com.
We also encourage you to subscribe to Logistics Matters at your favorite podcast platform. Our new episodes are uploaded on Fridays.
Speaking of subscribing, check out our sister podcast series Supply Chain in the Fast Lane, coproduced by the Council of Supply Chain Management Professionals and Supply Chain Quarterly. Search for "Supply Chain in the Fast Lane" wherever you get your podcasts.
And a reminder that Logistics Matters is sponsored by Hyster. With strength, durability, and their continual focus on safety, Hyster is powering your possibilities. For more information, visit hyster.com.
We'll be back again next week with another edition of Logistics Matters. Be sure to join us. Until then, have a great week.
Articles and resources mentioned in this episode:
- NRF holiday spending growth will return to pre-pandemic levels
- OOIDA launches its 17th annual Truckers For Troops Campaign
- OOIDA website (to join, renew, or make direct donations to Truckers For Troops)
- Veterans Community Project
- Visit Supply Chain Quarterly
- Listen to CSCMP and Supply Chain Quarterly's Supply Chain in the Fast Lane podcast
- Listen to Supply Chain Quarterly's Top 10 Supply Chain Threats podcast
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