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The Agile Brand with Greg Kihlström®: Expert Mode Marketing Technology, AI, & CX
#552: Fulfillment, logistics, and the e-commerce experience with Jon Schecter, Autostore
00:19:52
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- [00:01]
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Greg Kilstrom
Welcome to Season six of the Agile Brand where we discuss marketing, technology and customer experience, trends, insights and ideas with enterprise and technology platform leaders. We focus on the people, processes, data and platforms that make brands successful, scalable, customer focused and sustainable. This is what makes an agile brand. I'm your host Greg Kilstrom, advising Fortune 1000 brands on martech, marketing operations and CX, best selling author and speaker. The Agile Brand podcast is brought to you by Tech Systems, an industry leader in full stack technology services, talent services and real world application. For more information go to Tek Systems. Before we get started, I wanted to let you know that my latest book, Priority is seven Principles for Better Strategies, Decisions and Outcomes is now available. In it, I give ideas and insights for leaders and teams that need to make meaningful progress on their priorities. After all, our priorities are what we do, not what we say we'd like to do. You can find Priority as action on Amazon or learn more on my website greggkilstrom.com now let's get on to the show.
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Interviewer/Host Assistant
In the fast paced world of E commerce, efficiency and fulfillment and logistics is more crucial than ever.
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Greg Kilstrom
Today we're joined by John Schechter, VP
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Interviewer/Host Assistant
of Fulfillment at Autostore, to discuss how their innovative solutions are revolutionizing the industry.
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Greg Kilstrom
John, welcome to the show.
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John Schechter
Thanks Greg. Great to be here. Yeah.
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Interviewer/Host Assistant
So as VP of Fulfillment at Auto Store, could you share a little bit about your background and you know how you've seen some of the these demands of E commerce evolve and just kind of start there.
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John Schechter
Yeah, Happy to Greg. You know, I've been fortunate to be part of fulfillment for E Commerce since I graduated mit and I've seen, you know, the rapid growth and rise since 2008 of people wanting things shipped directly to their home. But even further than that, retailers and various industries are looking at how they can be leaner in their supply chain and that means breaking down the manufacturing cases further down to the each level, to the piece level so they can be more precise. And so what that then drives is this really cool transformation in a warehouse where you need new tools to handle each or to handle the less than case volumes that are flowing. And I started my career at Kiva Systems doing that for a number of fast growing e commerce players. We were then acquired by Amazon and helped Amazon scale up its automation efforts. You know, it really started as a manual first organization until about 2012. They had layered in certain kinds of sortation, but they really ramped up the robotics in 2012. And then I spent a little bit of time doing piece picking, helping customers further automate their, you know, kind of bleeding edge labor challenge they're seeing with E commerce Fulfillment. And, and now at Autostore for the last four years leading our business development efforts, helping automation all kinds of customers discover how automation might help solve some of their space and labor challenges.
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Interviewer/Host Assistant
Yeah, yeah. So yeah, I think we're gonna, and we're gonna get a little bit to some of the drivers of automation and things as well. But why don't, why don't we start with, you know, just kind of talking about the, the e commerce sector. As I mentioned at the top of the show, you know, unprecedented demand for faster delivery times. I know we all want our, our next day delivery and things like that, but this can pose some challenges for retailers. So with consumers increasingly expecting things like next day or other things, sometimes even same day at this point, how has this shifted the landscape for retailers in terms of order fulfillment?
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John Schechter
Yeah, it's such a key driver for their brand's demand and capturing the business that they're out there to selling products to people. And if you can't deliver fast enough, you know, 30% of carts, I was just at Home Delivery World, 30% of carts get abandoned if the shipping speed isn't fast enough. And that starts with inventory placement, getting the right inventory in the right regions and stores. It then goes to, you know, what are the carriers and transportation and freight methods that you have to deliver that cost effectively. And then the last thing is just how quickly and flexibly can you turn around and order when somebody clicks to ship on their website? Can you feed the cycle time information right up to the purchase decision and then can you actually follow through on that customer promise? And so that's really put a lot more dynamic pressure on operations leaders to deliver on these E commerce and sort of fast retail promises.
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Interviewer/Host Assistant
Yeah. And so auto store plays a role here. So can you explain a little bit how Autostore solution, how does it enhance the speed, accuracy of storage and retrieval? Obviously that storage and retrieval seems like a Key part of getting the right thing to the right place at the right time. So what's the role of auto store there?
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John Schechter
Yeah, we're like a hard drive for someone's physical inventory. We're the engine of most people's order fulfillment and what that means is helping them maximize the space they have, the store inventory so they can store four times as much in the same footprint and also maximizing the productivity of the people that are involved in the process. So helping people eliminate wasted motion like walking, searching and really, you know, non value added activities and really focus on order fulfillment that, you know, that first part, the sort of storage piece comes from our roots actually. We were ourselves an electronics distributor and we kept filling up warehouses and being disappointed in the space utilization. So we invented the system but we still wanted to be able to access all the inventory at any time and fulfill orders dynamically. And so the whole fundamental of any bin to any operator allows for you to really have software driven decision making in your fulfillment process and prioritize the most important orders now, the ones that can save you on the freight end, the ones that are most important customers or high value goods. And those two fundamental principles are still kind of the core underlying thing after 27 years of delivering systems like this to customers. And yeah, nowadays customers have the same kind of challenge we saw ourselves internally, but even ramped up with the E commerce trends we just talked about. So operators that used to plan one, two, three days, maybe a weekly distribution and fulfillment plan are now looking at orders that are just streaming into their facility on a minute by minute basis. So when you're clicking on a website to order something and assuming that company can follow through, you're really reaching into the warehouse and driving the next activities for the operation there. So it's a really close customer relationship that you know, even though you're not standing there in the store, you're really close to the fulfillment operation when you're working with an E commerce retailer.
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Interviewer/Host Assistant
Yeah, and I would imagine, you know, as you've described so far too, automation is a key component. I mean this is, this is moving, moving way too quick for some, you know, older methods of manual processes and all those things. So you know, my understanding there's robotic systems, there's automation, there's, you know, it's, you mentioned a fourfold increase in storage capacity just based on kind of auto stores own experience and leveraging that. Can you talk a little bit more about, you know, businesses that are moving from maybe a more traditional approach to one that uses your technology and your approach, like what impact does this have on operational efficiency, cost savings, all of that stuff.
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John Schechter
Yeah, yeah. And I think, you know, in a recent episode you did with Laura Richie of Radio, like, you know, that's one of the paths people use to get, you know, get kind of access to automation and sort of advance fulfillment through a third party. But for many other companies, they're looking at that option in comparison to upgrading their existing operations or you know, finding other ways to partner in between. And the first thing of course is good people in process and fulfillment and distribution centers that don't have those skills, you know, that sort of core management and you know, execution. Like you can't layer any technology on top of that and expect good outcomes. The second thing to that is really making it software enabled. And whether that's a warehouse management software, whether that's an homegrown in house kind of solution for connecting the tasks that need to happen within the facility with the demands being put on the business at the website or within the erp. And so that's kind of software layer is another key requirement. And then you can start to layer in where are the wasted activities within our process? How do we reduce the touches? How do we streamline the end to end supply chain from manufacturer to the customer's doorstep? And yeah, the auto store is a piece of that supply chain within the fulfillment center, kind of in the center of the fulfillment center. But there's a lot of pieces of automation and some of it is just good continuous improvement to reduce wasted movements and reduce maybe touches in a network design. And a lot of it is within the four walls of the facility where we mostly operate.
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Interviewer/Host Assistant
And so one topic that, that I don't think we talk about nearly enough on this show is robots. So we're going to, let's, let's talk a little bit about that. How do auto stores robots play into this helping the storage and retrieval process? All the efficiencies that you've mentioned, what does that look like?
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John Schechter
Yeah, thanks Greg. And I'll never shy away from a chance to talk about robots. That's kind of new core. So you could probably sense from the first part of our discussion resisted to think about the problems we solved. But you know, the robots are really cool and it's one of the most mesmerizing and you know, just fun to watch, fun to have in your operation. And I think when it's implemented well in collaboration with good people in process, it's a really powerful like force multiplier. So I'll Tell. Let me talk a little bit about, like, the auto store and the robots and what they're doing and how they're supporting people and then maybe automation more broadly. You know, this is a collaborative tool. This is like a forklift for the modern age. So you need to provide tools for people working in your company, whether if that's somebody at a desk, they have a laptop. If it's somebody in a manufacturing process, they have certain tools of the trade and 5s and continuous improvement methodologies. And if they're material handling, doing fulfillment or distribution, they have a forklift, they have conveyors, they have automation tools that work alongside them and so on. A store fleet is out there going and retrieving bins, delivering those bins of inventory to the workstations where people are filling orders, they're counting, they're validating the right product, they're folding, gift wrapping, making the orders. But the walking time and the searching and finding time has been eliminated because the inventory is now walking and talking and making its way over to the fulfillment process instead of the other way around.
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Interviewer/Host Assistant
Yeah, yeah. So with that also, I would assume, I mean, every, every situation is a little bit different. So we need to talk about modularity as well. So, you know, one what, what one robot is doing in one place is probably very different than another. So how do you account for just, I assume you're working with vastly different types of things and everything depending on the situation. So, you know, what role does modularity play?
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John Schechter
Yeah, you know, we made a really clear design choice to basically center around a certain bin design, certain, you know, unifying unit of measure, which is an auto store bin. And our robots can carry that, dig for those, stack them, deliver them anywhere in the grid very, very reliably. And so that was a simplifying sort of environmental consideration that we made. There are other kinds of robots that work with different form factors, but we chose the bin. And that really unlocks, like, a certain level of robustness that you can rely on this thing day to day.
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Interviewer/Host Assistant
Yeah, yeah. So there's a lot of issues, obviously, with logistics and supply, demand and some of the things that we're talking about when we're talking about augmenting human teams and things. There's still labor shortage issues, and certainly that's a pressing issue even in uncertain economic climates. So how do you, you know, how do you and your customers look at this as, as far as, you know, as far as labor shortages and ebbs and flows and all of that? You know, how, how do you think of that as a solution to some of those challenges.
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John Schechter
Yeah. So as, as E commerce has grown and this sort of each is challenge I described at the beginning, there's a huge, huge labor content that goes along with that and there just aren't enough warehouse fulfillment associates to do those jobs. So you need tools like this to really get the throughput out of your building further. You know, furthermore, when companies tend to build their locations and their network design based around transportation optimization because that's such a high cost driver, but then they end up with these clusters where you can have this very, very extreme unemployment at the, you know, single digit one, 2% because there's such a fight for the limited labor force there. And so the, the only answer to get more throughput is to add tools like warehouse robotics to enhance what you know, your team can get done. So most of the time that we're getting installed, it's because somebody's outgrown their workforce. They need to be able to do more with the team that they have. They need to use their space better so they don't have to buy a second facility or expand their facility or just their workforce.
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Interviewer/Host Assistant
Yeah, and I would imagine then that, I mean the same goes when, if the system's modular, you can scale up, but you could also scale down.
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Greg Kilstrom
Right.
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Interviewer/Host Assistant
So in other words, economy could be really good, really not so good. And the technology can kind of adapt. Is that safe to say?
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John Schechter
Yes, that's a great point. And that kind of gets back to what I was describing to Ben like that our modularity is really that whatever the requirement of your facility is, we can customize the grid with the right amount of robots, the right workstations, the right amount of bins for that exact operation. So like no two operations look the same. And that's a really important value driver. So you're not, you know, building overbuilding for some capacity that you don't need for a few years. And then what's really powerful when this, with the modular system like this, if you have a network, I'll give you an example of one of our great customers, Best Buy. They have eight different facilities leveraging auto store and they've been able to readjust the capacity of all those buildings by just shipping the robots between the buildings. So you know, during holiday season they can push robots to the end of the node to fulfill closer to customers for E comm orders. Earlier in the peak season they might shift those robots back to the central DCs where they're really focused on restocking stores. And so you end up with this fungible asset or capacity that you can move around with a modular system that's really powerful.
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Interviewer/Host Assistant
Yeah, yeah, that's, that's interesting. And from an ROI perspective, I mean, you've touched on several things here as far as potential roi, as well as the, you know, the fourfold increase in efficiency and stuff like that. How do, how do some of your customers look at ROI and you know, what do they typically see? You know, we didn't specifically mention real estate costs as well. So, you know, being able to shrink facility size and stuff like that too, is certainly another consideration. So, you know, what's, what's the, what is the thinking of as in terms of how ROI is measured?
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John Schechter
Yeah, real estate, of course, is, you know, one of the largest value drivers. Especially if you're in a warehouse and you're full because you're in a healthy business that continues growing, you're adding inventory, you need to be able to keep up with that inventory growth. And the obvious answer for most people is, well, let's buy a new building and move. But that turns out to be super costly. So any life extension of an existing warehouse and operating team can be really, really big built in roi. In addition to that, of course, getting more throughput with the same number of people. You know, a lot of operations use a very simple total throughput over total labor pool or you know, lines per hour, boxes per hour, something like that. And you can really have almost a double of the boxes per hour that you can ship out with the same workforce. By implementing the right kind of automation tools. We've even seen higher ratios when someone that also implements packaging automation and other things depending on the industry.
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Interviewer/Host Assistant
Yeah, yeah. Wow. Well, as we look towards the future, one last question for you here. What do you see as the next big steps for warehouse automation for Autostore? How should companies be thinking in terms of what's coming down the pike?
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John Schechter
Yeah, I think the first thing to realize is as cool as warehouse robots are and how obvious it is to me that they should all operate in this way. With robotic fleets, most facilities still don't have this stuff. Many of the businesses that you buy from are still fulfilling with clipboards and no software, let alone automation. So, you know, we think 85% of warehouses globally are mostly manual people walking around with carts and paper. So there's a huge opportunity just in the core like challenge we've been talking about here. I think as we go beyond that, the really advanced end users that have been in automation for a few decades now, are thinking about either their next generation is something like an auto store that's more modular, or they're pushing us to do larger and larger auto stores. So one of the big initiatives for us has been delivering these high throughput facilities that are shipping 20,000, 30,000, 40,000 order lines every hour. And that's really the kind of critical max scale that you'd see at the largest fulfillment centers of anyone. And so we're able to grow our system to fleets of over a thousand robots, over a million bins of inventory. And most people that have that much, they end up with a second building when they go beyond those limits. So it's really been fun to see the scale increases, especially over the last four years that I've been here, but really over the last 27 years since we started this.
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Interviewer/Host Assistant
Yeah, yeah, that's exciting. Well, again, I'd like to thank John Schechter, VP of Fulfillment at Autostore, for joining the show. You can learn more about John and how Autostor is transforming logistics with robotic automation by following the links in the show notes.
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Greg Kilstrom
Thanks again for listening to the Agile Brand brought to you by Tech Systems. If you enjoyed the show, please take a minute to subscribe and leave us a rating so that others can find the show more easily. You can access more episodes of the show at www.greggilstrom.com. that's G-R-E G K-I H L S T R O M.com While you're there, check out my series of best selling Agile brand guides covering a wide variety of marketing technology topics. Or you can search for Greg Kilstrom on Amazon. The Agile Brand is produced by Missing Link, a Latina owned, strategy driven, creatively fueled production co. Op. From ideation to creation, they craft human connections through intelligent, engaging and informative content. Until next time, Stay Agile.
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