Installing and maintaining robotics for a company’s automation needs may not be affordable for everyone, but what if there were a service to help narrow that cost-benefit gap?
While industry analysts forecast a dip in the growth of the mobile robot market through 2027, automation still appears to be breaking new ground. Last week, Washington-based industrial automation company Lab0 launched the first industrial humanoid-inspired system designed to fully automate inbound warehouse operations.
And in Chicago, robotics solutions company Formic has established itself as a niche provider of automation for smaller businesses with its robots-as-a-service rental program.
FreightWaves recently spoke with Formic CEO Saman Farid in a virtual interview about this program and his outlook for the future of the robotics industry.
Farid said robotics and AI have seen big technological advancements the past several years, but adoption has been slow.
“We started Formic about five years ago really with the intention of drastically increasing the rate of adoption of robotics and making it much more accessible,” he said.
Helping automate smaller business
Formic’s main customers include over 120 small to medium-size factories across the U.S. in sectors ranging from aerospace components to snacks, dog food and cat litter.
“The typical profile of [our customers] is that they have been struggling with labor availability for the last 10 years,” Farid said. “They’ve been trying to grow their businesses but have been [operating on] razor-thin margins and have really been struggling with meeting the demand of their customers.”
That’s where Formic says it can offer a solution without breaking the bank.
“We built a business model that is pretty unique where we just charge an hourly rate, or a monthly rate, for the usage of that robot and take over all the complexities,” Farid said.
He explained that customers can treat Formic as a kind of “robot staffing agency” to help fill head count for a manufacturer.
“What we’ve seen as a result of that is these businesses are able to rapidly scale because of their access to automation,” Farid said. “They’re able to have a higher-quality product, better working conditions for their existing available labor, and generally, we’ve seen these businesses go from really struggling to suddenly much more successful.”
While the companies may be small in terms of the macroeconomy, they can be vital to their local economies. Farid gave an example of one of his customers that facilitates walnut processing.
“They’re a few-hundred-million-dollar-per-year business, but they employ about 40% of the people in the town that they’re based in,” he said. “So you can imagine, all the ups and downs of that business have an immediate impact on the economy of that town.”
How robots-as-a-service works
Farid said small businesses often run into several roadblocks when it comes to adopting robotics:
- Knowing what to automate.
- Evaluating vendors and deploying the robots – often spending hundreds of thousands to millions of dollars of capital.
- Keeping the equipment working continually, which is especially difficult for companies without in-house robotics engineers.
“Each of those three steps comes with costs and risk involved,” he said. “Most factories – if you’re not GM or Ford – it’s really hard to know how to do all three of those. That’s really a lot of the emphasis of Formic coming with the subscription model. We take care of all the complexity.”
Formic works with manufacturers on all three challenges to help determine what should be automated and install the necessary equipment.
“Once it’s up and running and we hit the performance targets – let’s say we commit to doing five boxes per minute – once we hit that five boxes per minute, that’s the only time we start getting paid,” Farid said. “So there really is no risk on the customer side. They’re not shelling out a bunch of money and getting stuck with something that doesn’t work.”
This changes the dynamic from just selling robots to selling automation as a service.
The business model is working. Farid said 70% of the customers that Formic works with have never had a robot before.
“That’s evidence to us that we’re really expanding the accessibility of robotics and automation to a new segment,” he said.
Where is robotics going?
Farid said he’s seen “incredible” and “rapid” growth in the robotics and automation space.
“We are tripling this year compared to last year,” he said. “I think there’s tons of demand and tons of growth in the market. I think if you’re talking about the traditional model of automation, it has been shrinking, and that’s really because they’ve only been selling to the very big companies. Eighty percent of robots in America today are sold to the automotive sector, and even when you look there, it’s only sold to the biggest companies.”
Farid cited market saturation among the largest companies as the main reason robotics as a whole has slowed in growth. The smaller companies are where the “untapped demand” is.
“Currently in America, there’s 1.5 million unfilled manufacturing jobs,” he said. “That’s increasing at a very high rate where factories are bringing more business to the U.S. … More production is trying to happen in America, but at the same time, the demographic shifts are such that labor is not becoming any more available than it was in the past. From the small to medium business side of things, the demand [for automation] is extremely high.”
“I think we’re going to see massive growth,” he continued. “All of last year, globally, about 600,000 robots were deployed. 450,000 of those were in China. Only about 30,000 robots were deployed in the U.S. America is severely lacking when it comes to automating – and America has as good a reason if not better reasons to automate compared to China or anywhere else.”
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