July 2021

F-LOG´s Industry Perspective #1: How warehouses become smart

This is the first article of our new blog series, F-LOG´s Industry Perspectives, which we want to use to irregularly share our view and industry insights on some of the hottest topics in the LogTech space. We start with an overview of the current situation of robotics in intralogistics.

Again and again, we have encountered business models and technologies around the topic of smart warehousing and robotics in intralogistics in the past months. We took this as an occasion to dig a little deeper into intralogistics use-cases for robotics and how they drive the trend of smart warehousing.

Macro-level trends as a key driver for more automation

Demand for more automation in intralogistics is rising because the ever-growing e-commerce sector is transforming order structures and buying habits of consumers. Consumer expectations are shifting towards faster and cheaper delivery services, reinforced by Amazon’s business model of these past years.

Another important factor is the human resources problem — rising costs and a shortage of workers support the need for more automation. Especially after Covid-19, investments in robotics and automation are economically more attractive since a larger share of value creation will again take place directly in industrialized countries, where labour costs are already at a very high level.

Overall, logistics service providers have to take advantage of using robots in their warehouses to tackle these challenges, reduce operational costs and increase productivity.

Massive growth ambitions of the robotics market

The trend for more automation is also reflected in the market numbers and forecast for the next years. The robotics market is expected to grow from USD 76.6 billion in 2020 to USD 176.8 billion by 2025; that corresponds to a CAGR of 18.2%. Especially collaborative robots are expected to grow at the highest CAGR during the forecast period. Therefore, this blog article will have a closer look at the technology that takes on dangerous, repetitive and difficult jobs and which enables humans to perform their jobs with more creativity and flexibility, leading to more efficiency and productivity in the warehouse.

Three key technologies and relevant startups that enable smarter warehouses today

There are various types of robots that are used for intralogistics solutions to handle tasks such as picking and delivery, stock movement and material handling or quality inspections. In the following we will focus on three key technologies such as Autonomous Mobile Robots (AMRs), Articulated Robot Arms (ARAs), Unmanned Aerial Vehicles (UAVs) and their practical impact on daily operations today.

1. Autonomous Mobile Robots (AMR)

AMRs are used especially for materials handling and evolved from Automated Guided Vehicles (AGV). While conventional AGVs can only follow fixed paths and move to predefined points on the guided path, the vision-based system of AMRs uses touch-based sensors, onboard computers, and AI to move in dynamic warehouse environments to any accessible location. Yet, AMRs not only present a great chance to improve intralogistics processes but also a huge market opportunity. The AMR market comes with double-digit growth and more than USD 10 billion in revenue in 2023.

One practical example of AMRs that work collaboratively alongside warehouse associates is Locus Robotics, a robotic unicorn funded with over USD 250 million. Locus offers a Robots as a Service (RaaS) subscription-based program that makes it easy to add AMRs to warehouse operations and shift capital expenses for automation to operational or labour expenses.

Its AMRs act as picking assistants but contrary to other systems, the warehouse associate does not follow the robot after the pick — instead, he is directed to the closest robot nearby for more work while the initial robot moves on to the next task, often with a different associate. This process enables shorter cycle times, 2–3 times greater productivity and a 129% greater ROI.

Other well-funded AMR startups are 6 River Systems, founded in 2015 and acquired by Shopify in 2019 for USD 450 million, InVia Robotics (USD 29 million funding) or Magazino (USD 50 million funding), to name a few.

2. Articulated Robotic Arms (ARA)

ARAs have flexible joints and articulated robotic arms to move and lift items in the warehouse. They’re typically used for picking and placing packages onto racks, palletizing, loading and unloading inventory as well as sorting packages. The challenges that make these tasks extremely complex are the diversity in packaging materials, the identification of single items within a box, and the different shapes of each product or package. That’s why ARA startups are creating robots that come very close to human capabilities, both in terms of hardware and software. Most labour (up to 80%) in a warehouse is dedicated to picking and packing, and ARAs have become very efficient in performing these tasks. Today, most ARAs are used in manufacturing since the tasks are more standardized and not as complex as in intralogistics. To deliver the results described above, ARAs rely on enabling technology, which is why the right software for these robotic arms is as important as the hardware itself.

A good example of this use case is Osaro, a San Francisco-based artificial intelligence startup, funded with more than USD 60 million whose software powers practical robotics automation solutions using technology such as advanced machine learning for visual perception and easy to integrate APIs. It enables the robotic arms to adapt automatically to moderate task variations, to detect all types of objects and to deploy easily and fast. The result is a scalable solution that works accurately (successful grip rate >99.5%) with cycle times as low as 3.5 seconds, delivering higher productivity and improved supply chain resilience. Another startup that provides an ARA end-to-end solution including software and hardware for e-commerce order fulfilment is RightHand Robotics, based in the US and funded with more than USD 30 million.

3. Unmanned Aerial Vehicles (UAV)

Unmanned Aerial Vehicles, or drones, can handle tasks that other robots cannot due to gravity. Use of UAVs is increasing although they are not as widespread as the other types of robots. Their main purpose at the moment is inventory checking. However, they can also analyze safety requirements such as racking and fire hazard inspections. Since they can execute their tasks at great heights and in dangerous environments, they also increase the safety of workers. Accidents often result in serious injuries that come with serious costs and a loss in revenue. The average work-related injury results in USD 38,000 indirect expenses and USD 150,000 in indirect costs. Therefore, higher safety levels produce an economic advantage over time.

The FIEGE Group, a leading European logistics company that specializes in efficient supply chain solutions, already completed a successful trial with UAVs when automating stocktaking at one of its multi-user warehouses. doks. innovation GmbH, a German early-stage startup, provided the technology: drones equipped with a barcode scanner and a camera that process the relevant data and forward them to the Warehouse Management System as well as a connected AGV enabling flying times of up to five hours. Stocktaking at this specific warehouse with 30,000 pallet spaces would usually require considerable personnel resources. Having the drone handling the actual job all by itself, it only required three shifts and one supervisor to intervene in case of an emergency. This results in two advantages: decreased labour costs and clearly fewer staff on site, which in times of strict hygiene protocols and a risk of a COVID-19 outbreak is definitely a positive.

What can we take from this?

Robotic applications across intralogistics are definitely an important topic when it comes to process automation and improved productivity.

Logistics service providers should evaluate to what degree they can use robots to keep up with a competitive market environment and rising challenges such as labour shortages, changing customer expectations or fluctuating order structures.

The market potential is huge, and the recent decade has shown that the technology is evolving fast. Also, new business models might come up: Companies do not want to acquire automation assets anymore. Robotics as a Service could be interesting to reduce CAPEX, facilitate more flexible cost structures, and reduce one-time investments, thereby lowering the entry barrier and making technology applications more scalable.

The human workforce remains essential. Robots are there to support human workers on tasks that are dangerous, repetitive or difficult, so they are free for tasks that involve creativity or demanding decision making. Human-robot collaboration shall empower humans and robots to exploit their intrinsic strengths.

Let´s talk!

However, robotics not only present an opportunity for logistics providers but also for venture capital firms (see the startups mentioned above). Therefore, we are very happy to talk to founders that focus on making warehouses smarter and advancing automation across intralogistics. Just drop us a line on LinkedIn or send us an e-mail.

May 2021

How VCs can make a difference for Europe’s LogTech Ecosystem

If you, too, are one of the many whose latest, feverishly awaited online purchase didn’t quite make it to your doorstep at the promised time and had to walk to the nearest post office for collection — well, welcome to the club. The last mile issue is one of logistics’ most apparent ones — but surely not its biggest! Let’s take a look at your “new love in a box” and its journey of challenges:

  • Today, road transport accounts for more than 20% of the world’s total greenhouse gases. This figure is expected to double by 2050. At the same time, the average truck on the road is heavily underutilized, hauling only 60% of what it could carry. One in four is completely empty because no suitable consignment was found that matched its outward journey.
  • Whereas professional logistics players are increasingly automating their warehousing operations, only 18% of online and omnichannel retailers use digital helpers to pick, pack, and ship their goods. The other 82% use a tool called pen and paper.
  • Logistics relies heavily on human workers — not just today, but tomorrow, too. The fact that 94% of Germany’s top 100 logistics companies consider a shortage of manpower a critical challenge is rather distressing. This, in turn, increases the costs of not only road transport but the entire supply chain and simultaneously underlines the need for new, more efficient processes.
  • Further up the stream, alarm bells are ringing: Almost 75% of industrial companies suffered a shortage of critical parts during the Covid-19 crisis because most have only a poor overview of stock levels and expectations about demands on their supply chain.
  • Taking a more global perspective, the process of international shipping involves 25 different parties, such as forwarders, terminal operators, shipping lines, and many more. Shippers continue to complain about a lack of transparency, reliability, and communication in international logistics chains. Digitalization failed to create a common ground.
  • In the end, the likelihood that you will return your product reaches 30%. In the US, returns in 2020 grew by 70%, weighing in at over 2 billion kilograms. Returns not only pose a serious cost and complex burden on a retailer’s logistical operations but are also a real pain for their customers. And to add fuel to the fire, many returned goods are disposed of without ever being in use.
Are traditional T&L companies asleep?

“Wake up, all you logistics giants out there! Pull yourself together and tap these great market opportunities!” You’ll be forgiven for thinking that established logistics players are in a strong position to turn these challenges into chances. Larger logistics companies in particular take a very proactive approach and invest heavily in digitalizing their core. But because margins within the industry are small, established players are strong with exploiting but struggle with exploring. Reinventing yourself while keeping operations at the highest possible level of efficiency is a heroic feat that only few achieve.

Low-hanging fruits for newcomers?

While traditional logistics companies seem unable to address these challenges, technology-driven start-ups with digital business models push into the market with no less a goal than to disrupt the logistics industry. Digital freight forwarders like Sennder or CargoX aim to transform and improve the inefficiency in road cargo for the better. Start-ups like instabox or Gophr work toward a more efficient and convenient delivery on the last mile. And even though freight platforms and last-mile start-ups appear to be venture capital favourites (in terms of funding), areas like warehousing, fleet management, or supply chain visibility are equally challenged by start-ups like Flexe, Smartlane or e2log.

Yet even these young challengers face many problems along the way: a shortage of B2B insights; very long sales cycles; digital infrastructures based on legacy IT systems and a lack of standardization, data availability and quality needed to automate process flows or facilitate new technology like artificial intelligence. Another pain point is the market’s fragmentation and emotional barriers preventing the digitalization of operations. Today, especially small players benefit from their personal network and fail to see the urgency in using digital products. The start-ups’ road to growth is filled with many hurdles and risks. Sufficient venture capital is therefore urgently needed to increase their stamina and punch.

Logistics: A major VC playground?

The many well-funded LogTech grown-ups and unicorns may give rise to the impression that logistics and venture capital have been symbiotically tied to each other for a very long time. Fact is, investors discovered logistics in 2015 only. But they seem to be making up for lost time: According to a recent McKinsey study, logistics start-ups received more than 25 billion USD in funding over the past 6 years. The funding volume grew 17-fold compared to 2014, therefore outperforming overall venture funding growth by far.

Even though there is a lot of money in the market, most of those resources (46%) are allocated to the 10 best-funded start-ups. Among them are names like Lalamove or Manbang. These names may not sound very familiar to you — but six of the ten best-funded logistics start-ups hail from China. No surprise there, since the APAC region accounts for 57% of funding for logistics, while North America contributes 35%. Europe’s overall piece of the global VC cake is negligible (13%), and its share in the logistics segment of 5% is hardly worth mentioning.

Europe therefore lags far behind its Asian and US counterparts, making European logistics start-ups only dream of the money raised in other parts of the world. Yet despite its strong position within the world’s 50 top-ranking logistics service providers, and European companies contributing almost half of the sector’s revenue, it’s surprising that the funding of logistics start-ups is dramatically low compared to the US and China.

This reflects the urgent need for Europe’s tech-based ecosystem to dedicate more funds to logistics start-ups, to minimize the previously mentioned hurdles and risks, and especially to prevent the drain of disruptive technology. Venture capital is a key pillar in defending Europe’s title as logistics champion. We believe a specialized LogTech VC is the right answer to the current situation.

But is it just a lack of money?

Due to this traditional complexity of the industry, where an extensive network is often more important than low prices or service quality, it takes more than cash to advance a start-up to the next level. Venture capital firms must instead provide smart money in relation to networks, industry insights, or access to potential customers to really make a difference for LogTech start-ups. Also, a venture capital firm relies on logistical expertise and industry knowledge to evaluate deal flows and make the right decisions.

How could this even work in practice? Imagine a venture capital firm backed by numerous outstanding logistics corporates. These industry veterans would not only provide the cash but would also pro-actively open doors to the industry. They would share their knowledge and valuable B2B insights to speed up sales cycles and revenue growth. Such an industry network could truly be a shortcut to scaling a LogTech business.

Join the club!

What can we take away from this? Well, for start-ups and venture capitalists, logistics and supply chains are a highly interesting playground!

You need to remember that disrupting an established industry like the logistics sector is not something you do lightly. It’s a supreme discipline that requires both start-ups and VCs to take the right approach and involve industry specialties.

Here at F-LOG Ventures, we give logistics start-ups the very backing that they need: With money on the one hand, but above all with our deeply rooted industry network and expertise on the other.

In fact, we are right where we need to be, at the right time! You’re a LogTech fan or founder? Let’s expedite Europe’s logistics ecosystem together!

Questions, comments, feedback? Or just would like to talk? Find us on LinkedIn (Michael / Daniel)or shoot us a message at michael.geers@f-log.vc / daniel.voss@f-log.vc.

April 2021

Final Closing der F-LOG Ventures

Schwerpunkt Seed und Series-A-Investments in LogTech-Startups

Greven/Münster, 23. April 202

F-LOG Ventures gibt heute offiziell das Final Closing seines neuen LogTech-Fonds bekannt. Dieser Fonds wird vorwiegend in junge internationale, primär europäische Start-ups investieren, die sich in der Seed- oder Series-A-Phase befinden. F-LOG plant initial ab 500.000 Euro in Early-Stage-Unternehmen zu investieren, mit der Absicht, die Portfolio-Unternehmen in Folgerunden weiter zu unterstützen. F-LOG versteht sich nicht nur als vorübergehender Partner von Start-ups, sondern begleitet erfolgreiche Unternehmer bis hin zum Exit mit Logistik-Knowhow und der Möglichkeit des Netzwerk-Zugangs zu seinem Ankerinvestor FIEGE Logistik.

„Wir investieren Venture Capital in eine Branche, in der wir uns auskennen. Mit unserer Erfahrung und unserem Netzwerk entwickeln wir die Start-ups gemeinsam mit den Gründern auf die nächste Stufe, mit dem Ziel, am Ende auch gemeinsam Geld zu verdienen“, sagt Tanja Rosendahl, Managing Partner der F-LOG Ventures. Neben ihr leiten Tim Gudelj als Managing Partner sowie Andreas Pott als CEO den Fonds. Gudelj ergänzt: „Als Finanzinvestor unterstützen wir junge Unternehmen bei der Schaffung von herausragenden Werten, welche einen nachhaltigen Einfluss auf die Logistik und verwandte Branchen haben.“ Dafür bringt das Team langjährige Erfahrung im Bereich Venture Capital als Fondsmanager, Investoren und Gründer mit.

Der USP der F-LOG Ventures zeigt sich vor allem in einem starken Smart-Money-Ansatz. F-LOG bietet nicht nur Kapital für seine Portfoliounternehmen, sondern setzt sich zum Ziel, diesen durch sein starkes Branchennetzwerk sowie -Knowhow proaktiv als Sparringspartner zur Verfügung zu stehen. Andreas Pott: „Wir suchen nach skalierbaren Geschäftsideen, die sich innovativ mit logistischen Informations-, Material- oder Finanzflüssen auseinandersetzen. Wer hier etwas auf die Beine stellt, weckt unser Interesse“.

Weitere Informationen zu F-Log Ventures unter: www.f-log.vc.

Tanja Rosendahl

F-LOG Ventures Management GmbH
Joan-Joseph-Fiege-Straße 1
48268 Greven
Phone +49 (0) 2571 999–0
Mail to: tanja.rosendahl@f-log.vc

Lukas Wilke
Sputnik GmbH
Presse- und Öffentlichkeitsarbeit
Hafenweg 9
48155 Münster
Phone: +49 (251) 62 55 62 23
Mail to: wilke@sputnik-agentur.de

©2022  |  F-LOG Ventures Management GmbH