1 00:00:00,056 --> 00:00:04,369 Alright, today I'm joined by Marc Wolfrat, founder and president of 2 00:00:04,509 --> 00:00:08,652 MWPVL International. And Marc works on distribution network strategy, 3 00:00:09,213 --> 00:00:11,034 facility design, automation, 4 00:00:11,595 --> 00:00:16,098 and then studies the logistics behind Amazon and Walmart, amongst 5 00:00:16,098 --> 00:00:16,518 others. 6 00:00:17,079 --> 00:00:20,031 And so I'm excited to connect with you today, Mark, to 7 00:00:20,031 --> 00:00:22,162 talk about all the operating decisions 8 00:00:22,563 --> 00:00:25,495 that people make. For me, I'm in industrial real estate, so 9 00:00:25,495 --> 00:00:26,916 I deal with the envelope. 10 00:00:27,566 --> 00:00:30,587 And with people finding the right envelope or building the right 11 00:00:30,587 --> 00:00:34,678 envelope and our worlds collide oftentimes, which is what led me 12 00:00:34,678 --> 00:00:35,188 to you 13 00:00:35,689 --> 00:00:37,989 and to make sure I'm learning 14 00:00:38,710 --> 00:00:41,240 and doing the best I can to have good contacts and 15 00:00:41,240 --> 00:00:44,601 good advice when people are asking questions that have to do 16 00:00:44,601 --> 00:00:49,133 with automation and with what's going on inside the building and 17 00:00:49,513 --> 00:00:52,624 perhaps outside the building too. So Mark, thank you for joining 18 00:00:52,624 --> 00:00:52,774 me. 19 00:00:53,134 --> 00:00:54,155 It's my pleasure, Justin. 20 00:00:54,515 --> 00:00:58,728 and then you put out a president's letter every year, 21 00:00:59,269 --> 00:01:01,590 it would appear. I feel like that's the best. 22 00:01:01,831 --> 00:01:04,452 Warren Buffett puts one out or put one out. 23 00:01:04,853 --> 00:01:07,534 And I love reading everyone's look back on the year. 24 00:01:07,915 --> 00:01:10,927 And then you said a bunch of things that were great 25 00:01:10,927 --> 00:01:14,710 that was about being profitable every year, no debt, not taking 26 00:01:14,710 --> 00:01:16,261 any commissions from vendors 27 00:01:16,961 --> 00:01:18,642 and software providers 28 00:01:19,143 --> 00:01:22,375 and fees along the way, like a referral fees. 29 00:01:22,843 --> 00:01:24,347 So what made you think of that? 30 00:01:24,347 --> 00:01:25,326 Why is that important? 31 00:01:25,686 --> 00:01:29,108 Well, I I've been in the consulting business for supply chain 32 00:01:29,136 --> 00:01:31,399 well, going back to really was my first job 33 00:01:31,840 --> 00:01:34,464 out of university, so close to thirty eight years ago and 34 00:01:34,824 --> 00:01:38,056 the very first firm I worked for was a company that 35 00:01:38,056 --> 00:01:39,916 was an independent 36 00:01:40,346 --> 00:01:43,407 agnostic boutique consulting firm and 37 00:01:44,187 --> 00:01:46,108 that became my fabric, I guess. 38 00:01:46,108 --> 00:01:49,990 I just carried the torch forward with that business model after 39 00:01:49,990 --> 00:01:51,231 I started my own company 40 00:01:51,871 --> 00:01:55,342 you know twenty years ago. And I think it's all about 41 00:01:55,342 --> 00:01:57,393 trust, Justin. At the end of the day, 42 00:01:57,822 --> 00:02:01,705 if I'm trying to if you hire me as a consultant 43 00:02:01,705 --> 00:02:04,505 and I'm trying to you know my my agenda is to 44 00:02:04,505 --> 00:02:05,956 decide to sell you a 45 00:02:06,696 --> 00:02:10,537 a 3PL service or to sell you a particular type of 46 00:02:10,537 --> 00:02:15,329 automation system or anything. It's pretty difficult to remain unbiased 47 00:02:15,329 --> 00:02:17,239 when you put together your storyboard. 48 00:02:17,660 --> 00:02:19,721 and I don't think that's what people really want to pay 49 00:02:19,721 --> 00:02:21,822 for, right? At the end of the day I think they 50 00:02:21,822 --> 00:02:24,594 want honest advice as though you were the owner of their 51 00:02:24,594 --> 00:02:25,125 company. 52 00:02:25,745 --> 00:02:27,607 What would you do if you were in my shoes? 53 00:02:27,847 --> 00:02:30,379 And and that seems to be the model that works best 54 00:02:30,379 --> 00:02:30,789 for us. 55 00:02:31,149 --> 00:02:35,551 Yeah. I love it. That's it's a huge risk for 56 00:02:35,551 --> 00:02:39,504 people to take your advice and not your advice, but other 57 00:02:39,504 --> 00:02:42,456 people's advice and to know like they have done the best 58 00:02:42,456 --> 00:02:44,978 that they can to know they're working with the right person 59 00:02:44,978 --> 00:02:49,492 who takes the responsibility seriously, like and is accountable for 60 00:02:49,492 --> 00:02:52,414 that specific decision is everything. That's a big deal. 61 00:02:52,774 --> 00:02:56,029 what could go wrong there? If you got a million dollar 62 00:02:56,029 --> 00:02:59,587 fee from something, how would that change someone's experience? 63 00:02:59,947 --> 00:03:00,939 Well, you know, the 64 00:03:01,520 --> 00:03:02,442 I think the 65 00:03:03,083 --> 00:03:07,692 counter argument might be, well, my role in life is to 66 00:03:07,692 --> 00:03:10,027 sell more consulting services, right? Yeah. 67 00:03:10,260 --> 00:03:13,071 So there's always something somebody's trying to sell somewhere. 68 00:03:13,431 --> 00:03:17,773 Fortunately, we oftentimes if we bill underneath 69 00:03:17,913 --> 00:03:18,753 what the 70 00:03:19,233 --> 00:03:22,495 agreed-to amount is, we actually don't charge the full amount. 71 00:03:22,495 --> 00:03:22,835 We 72 00:03:23,435 --> 00:03:25,916 say, look, we didn't need the hours we thought we would, 73 00:03:25,916 --> 00:03:26,556 so we'll 74 00:03:27,077 --> 00:03:30,178 we'll just end the engagement here and you only have to 75 00:03:30,178 --> 00:03:31,199 bill for what we did. 76 00:03:31,779 --> 00:03:33,840 So that's not our our gain. 77 00:03:34,230 --> 00:03:37,641 and I think what ultimately comes out of that is goodwill. 78 00:03:38,222 --> 00:03:42,273 And goodwill translates itself into many positive things downstream. 79 00:03:42,273 --> 00:03:43,255 It could be word of mouth. 80 00:03:43,255 --> 00:03:46,428 You know, the number one sales rep we have is word 81 00:03:46,428 --> 00:03:49,429 of mouth from past clients that tell other clients 82 00:03:50,170 --> 00:03:52,451 we really enjoyed working with so-and-so. 83 00:03:53,132 --> 00:03:56,104 They they gave us good advice and they were really fair 84 00:03:56,104 --> 00:03:56,364 about 85 00:03:56,815 --> 00:03:59,797 what they charged us. all too often the complaint I get 86 00:03:59,797 --> 00:04:02,933 about Consultants in general is, you know, the school bus driver 87 00:04:02,933 --> 00:04:03,595 shows up 88 00:04:04,317 --> 00:04:07,375 at the sales cycle and drops the kiddies off after the 89 00:04:07,375 --> 00:04:10,069 deal is signed, right? And a lot of these kiddies don't 90 00:04:10,069 --> 00:04:12,570 even know what a pallet looks like or anything like that. 91 00:04:12,570 --> 00:04:13,570 And in our business, 92 00:04:14,191 --> 00:04:17,542 having some gray hair or no hair is kind of is 93 00:04:17,542 --> 00:04:19,272 kind of the is kind of 94 00:04:19,742 --> 00:04:23,834 something that, you know, people I think appreciate just having that 95 00:04:23,834 --> 00:04:26,005 experience where you've seen 96 00:04:26,486 --> 00:04:30,267 especially with automation, Justin. I mean we're into a very complicated 97 00:04:30,267 --> 00:04:33,877 topic. the promise doesn't always get delivered. 98 00:04:34,237 --> 00:04:37,409 people wanna know ahead of time if there's something they have 99 00:04:37,409 --> 00:04:41,824 to be really careful about or cautious of because they don't 100 00:04:41,824 --> 00:04:43,545 want to be the one that gets fired after they made 101 00:04:43,545 --> 00:04:44,426 the wrong decision. 102 00:04:45,247 --> 00:04:45,767 So 103 00:04:46,347 --> 00:04:48,539 but it like I say it goes back to experience and 104 00:04:48,539 --> 00:04:51,130 trust and in order to get that you just have to 105 00:04:51,130 --> 00:04:51,511 be 106 00:04:52,111 --> 00:04:55,193 as honest as you can with people and as trustworthy as 107 00:04:55,193 --> 00:04:58,065 you can with people. Bad mistakes along the way where you're 108 00:04:58,065 --> 00:05:01,117 just out for money or or or some something like that. 109 00:05:01,477 --> 00:05:02,828 ultimately will in the end 110 00:05:03,548 --> 00:05:05,746 you know, you won't stay in business very long if that's 111 00:05:05,746 --> 00:05:06,508 the game you play. 112 00:05:07,113 --> 00:05:11,304 Yeah. Do I know I saw all of the great options 113 00:05:11,304 --> 00:05:15,295 that were available if you're only a channel partner to a 114 00:05:15,295 --> 00:05:16,765 few of the providers. 115 00:05:17,446 --> 00:05:17,766 And 116 00:05:17,696 --> 00:05:17,968 Mm-hmm. 117 00:05:18,006 --> 00:05:19,756 I could totally see that be a big 118 00:05:20,456 --> 00:05:23,907 conflict of interest for sure. They like being upfront about that. 119 00:05:24,267 --> 00:05:27,088 and then another thing, Amazon and Walmart. 120 00:05:27,088 --> 00:05:29,229 So this is your business within a business. 121 00:05:29,669 --> 00:05:33,060 I could only imagine what it takes to know what those 122 00:05:33,060 --> 00:05:34,570 companies are doing, though 123 00:05:35,130 --> 00:05:39,261 Like Amazon may be public and a high profile, like that's 124 00:05:39,261 --> 00:05:42,362 a lot of facilities, a lot of decisions, and you've been 125 00:05:42,362 --> 00:05:43,633 tracking it over time. 126 00:05:44,053 --> 00:05:47,014 Can you help people understand what it is you do there, 127 00:05:47,014 --> 00:05:48,864 why you do it, how long you've been doing it and 128 00:05:48,864 --> 00:05:50,155 what you've learned along the way? 129 00:05:50,315 --> 00:05:52,736 I know it's a it's a big question, but 130 00:05:53,156 --> 00:05:55,757 it's pretty cool, it's super unique, people don't know, and we 131 00:05:55,757 --> 00:05:58,097 see Amazon like everybody in our markets, 132 00:05:58,558 --> 00:06:02,274 and I'm in Southern California. So they had last I counted 133 00:06:02,274 --> 00:06:04,426 was thirty four. I can't even keep up with it. 134 00:06:04,426 --> 00:06:06,268 And they're back in the market today. 135 00:06:06,548 --> 00:06:09,361 And so it is always for us industrial real estate brokers, 136 00:06:09,361 --> 00:06:11,713 like we pay attention to what Amazon's doing. 137 00:06:11,893 --> 00:06:14,656 They compete with us on buildings and not with us, but 138 00:06:14,656 --> 00:06:19,260 with clients that we're representing. So it's always important 139 00:06:19,551 --> 00:06:20,942 learn from them, no doubt. 140 00:06:21,302 --> 00:06:22,945 Well, to tell you the truth, 141 00:06:23,506 --> 00:06:25,949 it's I accidentally stumbled across 142 00:06:26,730 --> 00:06:28,353 what we're doing here. It wasn't a 143 00:06:28,893 --> 00:06:30,549 a stroke of genius or anything like that. 144 00:06:30,549 --> 00:06:31,577 It was just kind of luck. 145 00:06:31,937 --> 00:06:33,628 So I kinda go back to 146 00:06:34,048 --> 00:06:36,559 2006 for the story that 147 00:06:37,079 --> 00:06:39,841 will unfold here is, you know, I was 148 00:06:40,421 --> 00:06:43,182 hearing more and more at the trade shows and from clients, 149 00:06:43,182 --> 00:06:45,974 you know, these guys at Amazon, they're losing money, they'll never 150 00:06:45,974 --> 00:06:49,015 make it. You know, that was kind of the thought process 151 00:06:49,015 --> 00:06:50,505 at that time. and 152 00:06:50,935 --> 00:06:54,237 and so everybody was interested to know how they were going 153 00:06:54,237 --> 00:06:57,198 to market, but nobody knew because they were so secretive. 154 00:06:57,659 --> 00:06:59,669 Quite often they'd even put a sign on the outside of 155 00:06:59,669 --> 00:07:00,800 the building, that kind of thing. 156 00:07:01,160 --> 00:07:04,604 So I I hunkered down in my basement and said, gee, 157 00:07:05,405 --> 00:07:07,628 you know, I was just starting my own company. 158 00:07:07,628 --> 00:07:10,211 I said, I wonder how these guys go to market and 159 00:07:10,894 --> 00:07:13,045 We didn't have AI or anything like that back then. 160 00:07:13,325 --> 00:07:16,196 so it was just hard work, you know, figuring out where 161 00:07:16,196 --> 00:07:19,317 they were, how big the buildings were, what was inside those 162 00:07:19,317 --> 00:07:21,278 buildings, how many people worked there, 163 00:07:21,698 --> 00:07:24,079 what did it cost for them to operate the place, 164 00:07:24,539 --> 00:07:26,800 how much capital did it take to set it up, 165 00:07:27,241 --> 00:07:30,842 what type of automation or mechanization were they using in the 166 00:07:30,842 --> 00:07:33,544 building, and so on. and so what started out as a 167 00:07:33,544 --> 00:07:34,854 little grassroots hobby, 168 00:07:35,315 --> 00:07:37,545 and it was easy back then, there was maybe 20 buildings 169 00:07:37,545 --> 00:07:39,472 to speak of, and they were all in What they called 170 00:07:39,472 --> 00:07:43,308 non are or sorry, tax friendly states, you know, places where 171 00:07:43,688 --> 00:07:46,419 they wouldn't have to charge retail sales tax when they sold 172 00:07:46,419 --> 00:07:49,590 something. so there was nothing in California, you know, it was 173 00:07:49,590 --> 00:07:51,568 all places like Arizona and whatnot. 174 00:07:51,568 --> 00:07:55,323 They were they were really wherever the the tax legislation said 175 00:07:55,323 --> 00:07:58,325 you didn't have to charge sales tax upon selling something, that's 176 00:07:58,325 --> 00:08:00,245 where they've located. anyhow, 177 00:08:00,665 --> 00:08:03,787 what what started out as as being twenty buildings, we've now 178 00:08:03,787 --> 00:08:04,347 got over 179 00:08:04,827 --> 00:08:07,992 close to three thousand or or three more than three thousand 180 00:08:07,992 --> 00:08:08,472 buildings 181 00:08:09,012 --> 00:08:11,933 in a data set that we've compiled over twenty years 182 00:08:12,533 --> 00:08:16,494 where we're updating it daily and it's it's all over the 183 00:08:16,494 --> 00:08:17,795 world, you know. So 184 00:08:18,235 --> 00:08:22,486 whether you're talking about the US or Japan, they've got massive 185 00:08:22,486 --> 00:08:26,277 infrastructure. in all these different countries where they operate. 186 00:08:26,338 --> 00:08:29,159 And it's not just fulfillment centers, you know, a lot of 187 00:08:29,159 --> 00:08:31,880 people get get confused between the different rules of the buildings. 188 00:08:32,200 --> 00:08:36,762 there's sortation centers, there's delivery stations, there's cross-dock facilities, there's all 189 00:08:36,762 --> 00:08:39,703 kinds of supporting transportation infrastructure. 190 00:08:40,384 --> 00:08:44,136 And there's other types of stocking locations like inbound receiving centers 191 00:08:44,136 --> 00:08:44,766 and so on. 192 00:08:45,326 --> 00:08:48,658 So figuring all of that out as it evolved over time 193 00:08:48,658 --> 00:08:50,729 has been almost a full-time job. 194 00:08:50,729 --> 00:08:51,249 And so 195 00:08:51,702 --> 00:08:54,463 It started with Amazon and we've since you know 196 00:08:54,783 --> 00:08:56,921 You wanted to do more than Amazon. 197 00:08:56,921 --> 00:08:57,363 Yeah. 198 00:08:57,429 --> 00:08:59,640 Well, I you know, the next obvious question was well how 199 00:08:59,640 --> 00:09:02,981 does Walmart go to market? What's their cost structure look like 200 00:09:02,981 --> 00:09:06,473 and who has the competitive advantage and you know, Wall Street 201 00:09:06,473 --> 00:09:08,874 was clamoring for this type of information. 202 00:09:09,512 --> 00:09:12,666 And so that's kind of how it all got started was 203 00:09:13,026 --> 00:09:17,169 frequent presentations with the investment community, finding out what they were 204 00:09:17,169 --> 00:09:19,959 interested to learn, you know, what's the cost to serve and 205 00:09:19,959 --> 00:09:20,430 so on. 206 00:09:21,311 --> 00:09:23,542 and that just led us further down the garden path. 207 00:09:23,542 --> 00:09:26,133 And we're really the only people that are doing this. 208 00:09:26,133 --> 00:09:28,324 There's been a lot of people that are plagiarized our work, 209 00:09:28,324 --> 00:09:31,530 but we're really the only people that maintain f our finger 210 00:09:31,530 --> 00:09:33,201 on the pulse of what these companies are doing. 211 00:09:33,201 --> 00:09:35,082 And I'm not to say we're perfect at it because you 212 00:09:35,082 --> 00:09:36,092 can't be unless you're 213 00:09:36,632 --> 00:09:38,043 on the inside with all the 214 00:09:38,753 --> 00:09:40,234 you know the general ledger, but 215 00:09:40,774 --> 00:09:42,945 we do the best we can with the public information that's 216 00:09:42,945 --> 00:09:43,496 available. 217 00:09:44,136 --> 00:09:46,507 And I have to tell you, you know, there's weeks go 218 00:09:46,507 --> 00:09:48,918 by where Amazon adds four or five million square feet a 219 00:09:48,918 --> 00:09:49,278 week. 220 00:09:49,799 --> 00:09:52,820 So it's a it's a story that is definitely not 221 00:09:53,240 --> 00:09:56,982 done and over with. And by the same token, Amazon closes 222 00:09:57,703 --> 00:10:00,224 a huge number of buildings. So for them a warehouse is 223 00:10:00,224 --> 00:10:01,785 like a store for anybody else. 224 00:10:02,145 --> 00:10:05,086 If it's not if it's not making money or it's if 225 00:10:05,086 --> 00:10:06,226 they don't need it, they'll 226 00:10:06,647 --> 00:10:08,888 they'll abandon ship and they'll go somewhere else. 227 00:10:09,248 --> 00:10:11,269 so anyway, it's been a really 228 00:10:11,710 --> 00:10:13,141 it's been a really interesting ride. 229 00:10:13,141 --> 00:10:15,833 It's taught me a lot about supply chain strategy. 230 00:10:15,833 --> 00:10:18,674 If you're gonna learn about supply chain strategy, you might as 231 00:10:18,674 --> 00:10:20,556 well follow the best in the business 232 00:10:20,996 --> 00:10:22,397 and the biggest in the business. 233 00:10:22,397 --> 00:10:23,278 So that's kind of 234 00:10:23,898 --> 00:10:26,240 one of the major incentives for for doing this in the 235 00:10:26,240 --> 00:10:26,830 first place. 236 00:10:27,588 --> 00:10:28,599 Yeah, that's 237 00:10:29,370 --> 00:10:33,433 true story. If you think about a few things you recognize 238 00:10:33,433 --> 00:10:36,735 about what they're doing today or within the last twelve months, 239 00:10:37,256 --> 00:10:40,659 I know that's what most people think of for us like 240 00:10:41,019 --> 00:10:44,022 data helps going back only so far 241 00:10:44,542 --> 00:10:47,385 at present when we're thinking about like market rates 242 00:10:47,885 --> 00:10:50,957 or what the market is today for someone making a decision 243 00:10:50,957 --> 00:10:51,478 today. 244 00:10:52,279 --> 00:10:54,250 is there anything that comes to mind when you think of 245 00:10:54,250 --> 00:10:56,971 what they're doing? I've noticed them back in the market where 246 00:10:56,971 --> 00:10:58,632 we are for certain centers, 247 00:10:59,362 --> 00:11:02,413 whereas they were shedding some space a little while back. 248 00:11:02,613 --> 00:11:05,084 I don't track it on the daily, but I'm sure we 249 00:11:05,084 --> 00:11:07,965 can learn like where they're at in the cycle given interest 250 00:11:07,965 --> 00:11:11,427 rates or economics or politics. I would imagine there's 251 00:11:12,057 --> 00:11:16,049 they have initiative now that they're in the middle of like 252 00:11:16,049 --> 00:11:18,160 a deploying. What what would you say we can learn from 253 00:11:18,160 --> 00:11:19,050 what they're doing at present? 254 00:11:19,410 --> 00:11:22,812 Well, going back to twenty twenty two, Q one when their 255 00:11:22,812 --> 00:11:26,245 quarterly results came out and they were they were not good 256 00:11:26,525 --> 00:11:26,865 on 257 00:11:27,526 --> 00:11:30,698 Amazon immediately slammed the brakes on and said, Okay, we gotta 258 00:11:30,698 --> 00:11:32,659 shed assets, we've got to shed 259 00:11:33,459 --> 00:11:35,711 operating expenses and so that's when that 260 00:11:36,335 --> 00:11:40,137 Massive closure of facilities started happening right about that time. 261 00:11:40,817 --> 00:11:44,039 And so they peaked at around two hundred million 262 00:11:44,579 --> 00:11:47,320 square feet, net new square feet per year 263 00:11:47,861 --> 00:11:50,982 in twenty twenty one. And then when I say that number, 264 00:11:50,982 --> 00:11:54,334 I'm including upper levels of the building, not just what's sitting 265 00:11:54,334 --> 00:11:55,124 on the ground level. 266 00:11:55,437 --> 00:11:58,294 Two hundred million net per 267 00:11:58,166 --> 00:11:58,436 two 268 00:11:58,294 --> 00:11:58,705 year. 269 00:11:58,436 --> 00:12:00,427 hundred million net new, so that's 270 00:12:01,061 --> 00:12:03,713 That's you know, how much they added minus what they closed 271 00:12:03,713 --> 00:12:05,692 down in one year. Which 272 00:12:06,155 --> 00:12:10,027 you know, is is unprecedented in the history of of anything. 273 00:12:10,067 --> 00:12:11,668 That that was a world record. 274 00:12:12,559 --> 00:12:14,870 so if Guinness published a record, that would have been it. 275 00:12:15,110 --> 00:12:15,390 any 276 00:12:15,217 --> 00:12:15,427 I was 277 00:12:15,390 --> 00:12:15,790 case, 278 00:12:15,427 --> 00:12:18,404 gonna say what we're expecting I thought in a as a 279 00:12:18,404 --> 00:12:21,901 nation was like a two hundred million like for the nation 280 00:12:21,901 --> 00:12:22,532 this year. 281 00:12:22,937 --> 00:12:23,213 So 282 00:12:23,329 --> 00:12:23,940 Oh well that 283 00:12:23,895 --> 00:12:24,476 mm 284 00:12:23,940 --> 00:12:26,043 was one company in one year and that was 285 00:12:26,544 --> 00:12:28,756 the height of COVID, right? We were all hunkered down and 286 00:12:28,756 --> 00:12:31,550 we couldn't go to the stores and we were ordering and 287 00:12:31,550 --> 00:12:33,811 it was a a one time bonanza and 288 00:12:34,282 --> 00:12:35,363 for the company and 289 00:12:36,104 --> 00:12:39,298 so anything that looked like a warehouse basically Amazon grabbed up 290 00:12:39,298 --> 00:12:42,330 at that time. but they overshot the mark, you know, 291 00:12:42,760 --> 00:12:46,172 ultimately COVID became a memory and people wanted to go back 292 00:12:46,172 --> 00:12:50,104 to the stores and sales started declining within the e-commerce sector. 293 00:12:50,104 --> 00:12:53,405 So since that time, you know, the the net new square 294 00:12:53,405 --> 00:12:56,186 footage has still been astronomical. You know, we're talking fifty to 295 00:12:56,186 --> 00:12:57,687 seventy million square feet a year. 296 00:12:58,167 --> 00:13:00,618 But it's been significantly reduced since that 297 00:13:01,349 --> 00:13:02,909 that peak here in twenty twenty-one. 298 00:13:03,509 --> 00:13:07,031 So it dropped to about fifty-four million in twenty twenty five. 299 00:13:07,031 --> 00:13:09,012 That that was kind of of the lowest 300 00:13:09,462 --> 00:13:13,115 post COVID number. and this year we're c estimating it'll go 301 00:13:13,115 --> 00:13:15,437 back up to eighty five. So about a forty five percent 302 00:13:15,437 --> 00:13:16,038 increase 303 00:13:15,976 --> 00:13:17,252 And again, this is net 304 00:13:16,819 --> 00:13:17,660 over last year. 305 00:13:17,615 --> 00:13:18,518 net new. 306 00:13:18,056 --> 00:13:21,619 This is net, yeah, this is this is global net new 307 00:13:21,619 --> 00:13:25,532 square footage of space. Roughly seventy percent of the space is 308 00:13:25,532 --> 00:13:26,843 gonna always be in the US. 309 00:13:27,483 --> 00:13:31,897 But call it about eighty five million net new global square 310 00:13:31,897 --> 00:13:34,209 feet this year in twenty twenty six. 311 00:13:34,289 --> 00:13:35,830 Next year probably gonna look a lot 312 00:13:36,351 --> 00:13:37,251 similar to this year. 313 00:13:38,004 --> 00:13:39,605 based on what we can see so far. 314 00:13:39,965 --> 00:13:43,067 so, you know, one has to imagine most companies don't even 315 00:13:43,067 --> 00:13:45,328 have anywhere close to that amount of space in their total 316 00:13:45,328 --> 00:13:47,890 network, never mind adding that much in one year, right? 317 00:13:48,210 --> 00:13:48,710 so 318 00:13:49,271 --> 00:13:53,143 you know what's the driving force behind that right now, currently 319 00:13:53,143 --> 00:13:53,713 right now, 320 00:13:54,294 --> 00:13:58,995 is there's been this announcement they made about Amazon supply chain 321 00:13:58,995 --> 00:14:01,419 services. which is we will 322 00:14:02,211 --> 00:14:04,506 you know go the the Amazon going to all of the 323 00:14:04,506 --> 00:14:06,890 merchants, the 3P merchants around the world. 324 00:14:07,664 --> 00:14:09,945 And let's say you're a merchant in China and you have 325 00:14:09,945 --> 00:14:12,246 to satisfy numerous sales channels 326 00:14:12,666 --> 00:14:15,117 that are online because you don't have any stores in the 327 00:14:15,117 --> 00:14:15,588 US. 328 00:14:16,088 --> 00:14:19,690 So you're moving merchandise to the Walmart channel, to the Target 329 00:14:19,690 --> 00:14:24,102 channel, you know, Shopify, eBay, Amazon, all these different sales 330 00:14:24,102 --> 00:14:24,642 channels. 331 00:14:25,263 --> 00:14:29,705 And so that means you've got inventory repositories on North American 332 00:14:29,705 --> 00:14:30,305 soil 333 00:14:30,946 --> 00:14:34,007 for all these different companies, and inevitably you're going to get 334 00:14:34,007 --> 00:14:36,308 it wrong. You will have too much here and not enough. 335 00:14:36,331 --> 00:14:40,965 there or losing sales on one channel and and having dead 336 00:14:40,965 --> 00:14:45,188 stock in another and furthermore in the wrong locations, right? 337 00:14:45,188 --> 00:14:47,399 So too much on the west, not enough on the east. 338 00:14:47,399 --> 00:14:47,569 And 339 00:14:48,030 --> 00:14:50,051 and you can imagine how complicated 340 00:14:50,492 --> 00:14:53,154 it must be for some of these merchants who have to 341 00:14:53,514 --> 00:14:56,476 move merchant merchandise from twenty five thousand miles away to a 342 00:14:56,476 --> 00:14:58,707 geography they're not familiar with. 343 00:14:59,247 --> 00:15:01,508 and then furthermore that they have to pay penalties 344 00:15:02,168 --> 00:15:05,650 with some of these retailers if they're overstocked or or understocked 345 00:15:05,650 --> 00:15:08,812 on specific SKUs during specific months of the year. 346 00:15:08,812 --> 00:15:11,403 And so it it's it's a complex world they live in 347 00:15:11,503 --> 00:15:13,924 and what Amazon is saying is well take all that away 348 00:15:13,924 --> 00:15:17,946 from you. You know, we'll we'll be your sole provider of 349 00:15:17,966 --> 00:15:20,187 third party logistics everything. 350 00:15:20,928 --> 00:15:23,779 Send us a hundred percent We will decide where to move 351 00:15:23,779 --> 00:15:26,010 it within our network so you don't have any more of 352 00:15:26,010 --> 00:15:29,772 these stocking penalties. We'll we have AI, we've got big data, 353 00:15:29,772 --> 00:15:31,222 we'll figure it all out for you. 354 00:15:31,262 --> 00:15:31,980 We got this. 355 00:15:31,863 --> 00:15:35,164 We'll have you know, we'll we'll even move your goods to 356 00:15:35,164 --> 00:15:36,925 other sales channels for you 357 00:15:37,325 --> 00:15:38,866 when you need us to do so. 358 00:15:38,866 --> 00:15:39,766 So if you want us to 359 00:15:40,347 --> 00:15:43,818 send a a truckload of goods over to Walmart.com, we'll we'll 360 00:15:43,818 --> 00:15:46,930 be your third party logistics company, one-stop shopping for 361 00:15:47,550 --> 00:15:50,741 all the freight, all of the warehousing, and then on on 362 00:15:50,741 --> 00:15:53,213 top of that the FBA. Fulfillment by Amazon. 363 00:15:53,693 --> 00:15:57,226 So they're becoming a pure soup to nuts 3PL, not just 364 00:15:57,226 --> 00:16:01,629 fulfillment by Amazon, but a pure 3PL, which means a boatload 365 00:16:01,629 --> 00:16:04,300 more warehouse storage capacity 366 00:16:04,720 --> 00:16:05,521 is needed 367 00:16:06,101 --> 00:16:09,703 to do what they call Amazon warehousing and distribution, AWD. 368 00:16:10,063 --> 00:16:13,966 And that is the explosion of space, which they branded as 369 00:16:13,966 --> 00:16:17,628 being their IXD network or inbound cross-dock network. 370 00:16:17,628 --> 00:16:19,029 These are all the buildings 371 00:16:19,509 --> 00:16:21,751 that stock merchandise in advance 372 00:16:22,411 --> 00:16:24,013 of the fulfillment center. 373 00:16:24,713 --> 00:16:27,355 So they bring the goods in at the ports, they move 374 00:16:27,355 --> 00:16:30,437 them into these national inbound cross-docks centers 375 00:16:30,838 --> 00:16:32,419 or NIXD buildings. 376 00:16:32,859 --> 00:16:36,122 They hold them there, think of these as long term storage 377 00:16:36,122 --> 00:16:36,602 tanks, 378 00:16:37,123 --> 00:16:38,884 and then they move them to 379 00:16:39,304 --> 00:16:39,555 RIXD 380 00:16:40,145 --> 00:16:44,058 buildings, which are regional inbound cross-docks, closer to where the action 381 00:16:44,058 --> 00:16:46,810 is, and then from there it moves to the fulfillment center. 382 00:16:47,511 --> 00:16:49,863 So it's a it's the first time I've seem kind of 383 00:16:49,863 --> 00:16:50,534 a two 384 00:16:51,276 --> 00:16:54,942 step inbound process even before it gets to the 385 00:16:55,443 --> 00:16:57,887 you know the point of sale or or in this case 386 00:16:57,887 --> 00:17:01,290 the fulfillment center. most of the other big retailers out there 387 00:17:01,290 --> 00:17:05,351 will have an import distribution center that feeds the regional distribution 388 00:17:05,351 --> 00:17:08,573 center that feeds the store. That's kind of the flow there. 389 00:17:08,573 --> 00:17:10,694 So in a way it's a two-step process as well. 390 00:17:10,694 --> 00:17:12,985 But in the case of Amazon, you've got 391 00:17:13,565 --> 00:17:17,507 NIXD to RIXD to FC. And that's a that's a you 392 00:17:17,818 --> 00:17:21,408 know, that's an involved process, but it it it also means 393 00:17:21,408 --> 00:17:24,972 you've got you know, tens of millions of square feet being 394 00:17:24,972 --> 00:17:29,198 added just to support that that inbound network and optimize 395 00:17:29,759 --> 00:17:31,300 where goods are positioned. 396 00:17:32,007 --> 00:17:35,720 within the the country in order to minimize ultimately 397 00:17:36,161 --> 00:17:39,804 the outbound transportation shipping expense. Because if you can get goods 398 00:17:40,524 --> 00:17:43,687 positioned strategically in the right places around the country, 399 00:17:44,267 --> 00:17:47,570 that means you're shipping less you know, you're less packed ton 400 00:17:47,570 --> 00:17:50,432 miles when you actually have the sales order in hand. 401 00:17:50,873 --> 00:17:52,785 And and so that's at the name of the game is 402 00:17:52,785 --> 00:17:55,156 to get shipping expense down to a minimum outbound. 403 00:17:55,995 --> 00:17:58,966 minimize the amount of air freight you gotta send because you're 404 00:17:58,966 --> 00:18:02,108 moving something across the country a long distance. 405 00:18:02,688 --> 00:18:04,349 And all of these things are panning out. 406 00:18:04,349 --> 00:18:07,790 They're paying off. The idea is now with all this additional 407 00:18:07,790 --> 00:18:09,671 capacity, Amazon will drive more 408 00:18:10,151 --> 00:18:11,912 3P services revenue 409 00:18:12,352 --> 00:18:13,753 to help pay for it all. 410 00:18:14,113 --> 00:18:17,059 So now they'll not only have this additional capacity for third 411 00:18:17,059 --> 00:18:19,655 party vendors, but they'll have it for themselves as well. 412 00:18:20,136 --> 00:18:22,767 And Amazon's business model has always been get the other guy 413 00:18:22,767 --> 00:18:24,257 to pay for it the fixed 414 00:18:24,758 --> 00:18:25,318 expense. 415 00:18:26,079 --> 00:18:28,869 And then I can leverage my own I can use that 416 00:18:28,869 --> 00:18:30,621 to to make my own business 417 00:18:31,473 --> 00:18:32,224 pay for itself. 418 00:18:32,584 --> 00:18:33,044 Yeah. 419 00:18:33,725 --> 00:18:36,426 That's awesome. That's a hell of a breakdown right there. 420 00:18:37,306 --> 00:18:40,327 And I could totally see how then that's that paves the 421 00:18:40,327 --> 00:18:42,248 way for the next evolution of growth. 422 00:18:42,608 --> 00:18:45,489 And I would think that would also have a big impact 423 00:18:45,489 --> 00:18:47,149 on the 3PL business in general. 424 00:18:47,450 --> 00:18:50,851 If you think of in our market for industrial real estate, 425 00:18:50,851 --> 00:18:55,013 a third or larger, like a percentage of all deals done 426 00:18:55,473 --> 00:18:58,134 above a hundred thousand feet is the 3PL segment. 427 00:18:58,718 --> 00:19:01,890 And I know 3PL is taking two hundred thousand, five hundred 428 00:19:01,890 --> 00:19:03,971 thousand feet per building 429 00:19:04,571 --> 00:19:09,064 is nothing when you compare it to having a few 430 00:19:09,064 --> 00:19:13,806 three and four million square footers that plus all of these 431 00:19:13,806 --> 00:19:18,099 supporting cross-dock operations that you mentioned, that that's that's the eight 432 00:19:18,099 --> 00:19:20,670 hundred pound gorilla. So yeah, it'd be interesting to think of 433 00:19:20,670 --> 00:19:22,942 if that's really difficult for other 3PLs. 434 00:19:23,824 --> 00:19:26,797 Or rather other 3PLs just have to continue to play in 435 00:19:26,797 --> 00:19:30,101 space where they have an advantage and that market 436 00:19:30,822 --> 00:19:33,604 is big enough still for that to be healthy for the 437 00:19:33,604 --> 00:19:35,056 independent 3PL market. 438 00:19:35,416 --> 00:19:36,758 Right. Well there may be some 439 00:19:37,258 --> 00:19:39,621 market share erosion. I would expect there would be. 440 00:19:40,282 --> 00:19:43,365 But one has to also remember, you know, e-commerce in general 441 00:19:43,365 --> 00:19:44,227 as a market 442 00:19:44,868 --> 00:19:45,809 is still growing. 443 00:19:46,550 --> 00:19:48,592 Amazon's latest unit sales volumes 444 00:19:48,993 --> 00:19:50,935 fifteen percent year over year. So 445 00:19:51,792 --> 00:19:53,593 You know, it's still a sizable market. 446 00:19:53,593 --> 00:19:56,576 There's still plenty of room for sales growth and 447 00:19:57,137 --> 00:19:59,899 I don't think the full shock of Amazon moving into the 448 00:20:00,600 --> 00:20:03,032 sort of the pure 3PL market has really been felt yet 449 00:20:03,032 --> 00:20:04,763 'cause we're still in the first inning on this one. 450 00:20:05,123 --> 00:20:08,415 I love that. You're like first inning of AI, first inning 451 00:20:08,415 --> 00:20:11,488 of Amazon's move into the 3PL space. 452 00:20:11,768 --> 00:20:14,370 That's that means there's a lot of change coming our way. 453 00:20:14,730 --> 00:20:17,862 tell me, you have when I think of your explanation and 454 00:20:17,862 --> 00:20:22,416 breakdown of Amazon, like it makes me think of network design 455 00:20:22,416 --> 00:20:23,457 and optimization 456 00:20:23,877 --> 00:20:26,589 and warehouse automation, and just think of all the things that 457 00:20:26,589 --> 00:20:29,281 it does well. I'm assuming those are the 458 00:20:30,181 --> 00:20:33,383 Consulting services that you provide for other companies that don't have 459 00:20:33,383 --> 00:20:36,004 that skill set in house and they need help designing. 460 00:20:36,405 --> 00:20:39,887 which segment do you find you're busiest in or makes up 461 00:20:39,887 --> 00:20:42,138 the bulk of your book of business when it comes to 462 00:20:42,138 --> 00:20:43,929 the different services that you provide? 463 00:20:44,289 --> 00:20:44,949 Is it warehouse 464 00:20:44,683 --> 00:20:45,152 Gosh, 465 00:20:44,949 --> 00:20:47,311 automation or is it more the network or is it kind 466 00:20:47,311 --> 00:20:48,211 of for you it's 467 00:20:48,511 --> 00:20:50,362 Kind of half and half for us, I'd say. 468 00:20:50,631 --> 00:20:54,909 they're they're very closely intertwined because let's say you're a company 469 00:20:54,909 --> 00:20:57,822 when you have fifteen, twenty billion dollars of sales. 470 00:20:58,603 --> 00:21:03,245 And you're operating multiple distribution centers and they're they're expensive buildings. 471 00:21:03,685 --> 00:21:05,606 They have a lot of people inside of them. 472 00:21:06,087 --> 00:21:10,449 Let's say you've always done things conventionally, like you've never 473 00:21:10,849 --> 00:21:14,681 deployed automation. you might be asking questions, or at least maybe 474 00:21:14,681 --> 00:21:17,452 the ownership of the business is asking questions to say, 475 00:21:18,052 --> 00:21:20,594 are we operating the right number of warehouses? 476 00:21:20,594 --> 00:21:24,345 Or should we reduce the the facility count that we have, 477 00:21:24,705 --> 00:21:27,776 put more volume under one roof and And and that'll give 478 00:21:27,776 --> 00:21:29,068 us the ability to 479 00:21:29,889 --> 00:21:32,751 cost justify automation because automation needs 480 00:21:33,272 --> 00:21:35,213 automation needs volume to pay for itself. 481 00:21:35,994 --> 00:21:40,228 And and so there's always that question that nags I think 482 00:21:40,228 --> 00:21:42,099 CEOs to say, are we set up 483 00:21:42,640 --> 00:21:44,632 from a supply chain perspective? Possibly. 484 00:21:44,632 --> 00:21:45,462 So you have the 485 00:21:46,163 --> 00:21:47,344 automation. 486 00:21:46,379 --> 00:21:48,454 No. We're we're we're never done. 487 00:21:49,226 --> 00:21:51,407 We're never done. Yeah, and I mean automation says 488 00:21:52,202 --> 00:21:55,786 Centralize more volume under one roof, get more volume under into 489 00:21:55,786 --> 00:21:59,429 one building so that we can put the automation in, reduce 490 00:21:59,429 --> 00:22:00,620 the warehouse headcount 491 00:22:01,181 --> 00:22:05,485 accordingly. but there's this pendulum swinging in the opposite direction that 492 00:22:05,485 --> 00:22:08,827 says we need faster speed. You know, it's great having one 493 00:22:08,827 --> 00:22:11,648 warehouse to service the whole country and getting efficiency inside 494 00:22:11,554 --> 00:22:11,745 And 495 00:22:11,648 --> 00:22:11,747 the 496 00:22:11,745 --> 00:22:12,177 shorter 497 00:22:11,747 --> 00:22:12,288 four walls. 498 00:22:12,177 --> 00:22:13,071 transportation. 499 00:22:13,649 --> 00:22:15,800 We want two-day service level, right? 500 00:22:15,800 --> 00:22:16,430 And so 501 00:22:17,070 --> 00:22:20,082 you're not gonna do that if you put everything in Indianapolis 502 00:22:20,082 --> 00:22:23,903 or something like that. So now you got the opposite tug 503 00:22:23,903 --> 00:22:26,084 of war happening where the dynamic is. 504 00:22:26,084 --> 00:22:28,435 We want to be in more places closer to the market. 505 00:22:28,795 --> 00:22:31,336 should we do that for all of the SKUs we sell? 506 00:22:31,336 --> 00:22:33,247 You know, if you have a hundred thousand SKUs 507 00:22:33,867 --> 00:22:34,147 and 508 00:22:34,548 --> 00:22:37,131 fifteen or twenty thousand of them cause all the excitement. 509 00:22:37,963 --> 00:22:40,277 do you need to have all hundred thousand replicated in every 510 00:22:40,277 --> 00:22:43,063 building or should you really go with the fastest velocity items? 511 00:22:43,423 --> 00:22:44,956 close to market. So there's 512 00:22:45,521 --> 00:22:48,892 There's all these different angles people want to understand. 513 00:22:48,892 --> 00:22:50,883 What happens to my transportation expense, 514 00:22:51,443 --> 00:22:53,944 inbound and outbound, what happens to my warehousing expense? 515 00:22:53,944 --> 00:22:56,265 What's the capex of the automation? 516 00:22:56,485 --> 00:22:58,566 Will I shrink my building footprint 517 00:22:59,026 --> 00:22:59,886 and go higher? 518 00:23:00,427 --> 00:23:03,248 And how does that impact the capex story? 519 00:23:04,068 --> 00:23:07,229 so you know and and then what if something breaks? 520 00:23:07,229 --> 00:23:09,420 What's the risk of me not being able to sell my 521 00:23:09,420 --> 00:23:10,060 products 522 00:23:10,560 --> 00:23:13,102 if the automation goes down? You know, think of an AS/RS 523 00:23:13,292 --> 00:23:14,982 crane. If that crane goes down, 524 00:23:15,523 --> 00:23:18,114 everything in that aisle is shut off from being sold. 525 00:23:18,474 --> 00:23:20,665 and and that's just one example of many. 526 00:23:20,665 --> 00:23:21,215 And so, 527 00:23:21,755 --> 00:23:24,777 you know, risk is plays a big role in all this 528 00:23:24,777 --> 00:23:28,648 decision making process too. So CapEx interest rates, uncertainty in the 529 00:23:28,648 --> 00:23:29,579 marketplace, 530 00:23:30,159 --> 00:23:33,401 whether that be political uncertainty, whether that be 531 00:23:34,142 --> 00:23:36,917 you know, interest rates not being locked and loaded for the 532 00:23:36,917 --> 00:23:37,287 next 533 00:23:37,708 --> 00:23:38,991 twelve to twenty four months 534 00:23:39,472 --> 00:23:41,649 or high interest rates. you know 535 00:23:42,391 --> 00:23:45,873 All these dynamics changed every single day. 536 00:23:45,893 --> 00:23:49,178 And when we saw boats trapped out on the water during 537 00:23:49,178 --> 00:23:51,449 the COVID time period, you know, remember all the ships they 538 00:23:51,449 --> 00:23:52,659 couldn't get into the ports. 539 00:23:53,159 --> 00:23:55,591 People had inventory sitting out there on the water that they 540 00:23:55,591 --> 00:23:57,611 couldn't get a hold of. They were starting the shelves were 541 00:23:57,611 --> 00:23:58,622 starting to line barren 542 00:23:59,062 --> 00:24:02,424 and there's there's the risk of not having enough inventory on 543 00:24:02,424 --> 00:24:05,365 domestic soil, right? Being too lean. 544 00:24:05,365 --> 00:24:08,977 And people learn from that. So maybe I need to have 545 00:24:08,977 --> 00:24:11,548 more inventory, fatten up a bit just in case. 546 00:24:12,262 --> 00:24:15,643 bad things happen. so this is the world we live in 547 00:24:15,784 --> 00:24:18,745 and y yesterday's answer may not be tomorrow's answer. 548 00:24:18,745 --> 00:24:21,147 That's the thing that makes it exciting and interesting is 549 00:24:22,008 --> 00:24:24,740 you know every b almost always before somebody signs a check 550 00:24:24,740 --> 00:24:27,201 for automation say, you know, is there going to be something 551 00:24:27,201 --> 00:24:29,052 better that comes down the pipe tomorrow? 552 00:24:29,412 --> 00:24:32,173 So that makes this system we're buying redundant. 553 00:24:32,173 --> 00:24:33,384 And the answer is of course. 554 00:24:33,924 --> 00:24:37,256 You know, we we don't have a crystal ball, we can't 555 00:24:37,256 --> 00:24:39,197 tell, but there's always going to be something better down the 556 00:24:39,197 --> 00:24:39,707 horizon. 557 00:24:40,547 --> 00:24:43,128 fact of the matter is if you don't do something now, 558 00:24:43,709 --> 00:24:47,060 your competitors are busy working on it and and you're gonna 559 00:24:47,060 --> 00:24:49,752 be more reliant on human labor than they will be, and 560 00:24:49,752 --> 00:24:53,123 that's a disadvantage. Look at you know, by way of example, 561 00:24:53,123 --> 00:24:55,634 look at Amazon today, over a million robots in the field 562 00:24:55,634 --> 00:24:58,756 deployed, right? they manufacture their own 563 00:24:59,237 --> 00:25:03,880 robotic capacity. They're adding more plants to roll that out at 564 00:25:03,880 --> 00:25:07,742 an even faster pace so that they can internally produce faster. 565 00:25:08,102 --> 00:25:11,865 Versus Walmart that's really reliant on third-party vendors to 566 00:25:12,545 --> 00:25:13,846 get automation done. 567 00:25:14,286 --> 00:25:18,479 And the capacity of those third-party vendors becomes their Achilles heel. 568 00:25:18,479 --> 00:25:21,671 It becomes their limiting factor in terms of rollout 569 00:25:22,072 --> 00:25:23,532 and their speed to go to market. 570 00:25:23,793 --> 00:25:27,335 There's a big, big competitive disadvantage that they're experiencing. 571 00:25:27,595 --> 00:25:28,456 in my opinion, 572 00:25:28,856 --> 00:25:29,336 because 573 00:25:28,910 --> 00:25:29,381 This is like 574 00:25:29,336 --> 00:25:29,497 they 575 00:25:29,381 --> 00:25:29,973 the vertical 576 00:25:29,497 --> 00:25:30,217 don't own. 577 00:25:29,973 --> 00:25:30,705 integration. 578 00:25:31,018 --> 00:25:33,940 It's like vertical integration and and exactly right. 579 00:25:33,940 --> 00:25:36,831 And so a million robots, I mean that's bigger than any 580 00:25:36,831 --> 00:25:39,643 automation company's ever deployed, and this is a retailer. 581 00:25:40,003 --> 00:25:43,315 So you begin to get the to the sense that, okay, 582 00:25:43,315 --> 00:25:46,386 it's not just about being automated, it's how fast can you 583 00:25:46,386 --> 00:25:48,587 do this? How much can you control? 584 00:25:49,068 --> 00:25:51,669 and and therefore innovate. And I have R and D people 585 00:25:51,669 --> 00:25:54,410 working on the latest generation of newer things, 586 00:25:54,870 --> 00:25:58,752 taking that robot, the Kiva robot they bought and modifying it 587 00:25:58,752 --> 00:26:00,253 six different ways from Sunday 588 00:26:00,653 --> 00:26:02,154 to get it to do different things. 589 00:26:02,514 --> 00:26:04,015 And it's really worked out well for them. 590 00:26:04,870 --> 00:26:07,682 So if you're not automating, your competitors, all right, that's the 591 00:26:07,682 --> 00:26:10,723 moral of the story. And you know, I've seen 592 00:26:11,404 --> 00:26:12,134 automation 593 00:26:12,544 --> 00:26:13,345 get deployed 594 00:26:13,925 --> 00:26:17,907 things like robotic picking in companies as small as fifty people. 595 00:26:18,268 --> 00:26:20,409 So you don't have to be Walmart or Amazon to do 596 00:26:20,409 --> 00:26:23,170 this. You can be you can be small, mid-size and and 597 00:26:23,190 --> 00:26:24,111 and still 598 00:26:24,771 --> 00:26:27,123 get your you know, stick your foot in the water your 599 00:26:27,123 --> 00:26:29,677 toe in the water and get a sense of it of 600 00:26:29,987 --> 00:26:30,818 what it's all about. 601 00:26:31,178 --> 00:26:34,430 I'm always on the lookout as I'm going through people's buildings 602 00:26:34,430 --> 00:26:38,362 of what they have deployed. And outside of the big names, 603 00:26:38,362 --> 00:26:42,055 it's amazing how few have or how much more room there 604 00:26:42,055 --> 00:26:45,647 is for that to proliferate, like to the fifty thousand feet 605 00:26:45,647 --> 00:26:49,168 or the hundred thousand feet. Like gosh, I would guess like 606 00:26:49,168 --> 00:26:50,609 a market penetration is like 607 00:26:51,330 --> 00:26:53,451 ten percent or something like 608 00:26:53,856 --> 00:26:53,988 I 609 00:26:53,971 --> 00:26:55,012 surprisingly 610 00:26:53,988 --> 00:26:55,085 think you're in the ballpark. 611 00:26:55,012 --> 00:26:56,833 like ridiculously small. Yeah. 612 00:26:57,408 --> 00:26:58,518 Yeah. At least 613 00:26:59,119 --> 00:27:02,110 you know, when you start traveling the world and seeing beyond 614 00:27:02,110 --> 00:27:03,200 North American soil, 615 00:27:03,681 --> 00:27:07,662 you start to realize Western Europe, China, Japan. 616 00:27:08,183 --> 00:27:10,844 These are markets where automation has been 617 00:27:11,564 --> 00:27:12,444 rolling out 618 00:27:13,065 --> 00:27:16,546 in a in a big wave for twenty years before us 619 00:27:16,546 --> 00:27:19,607 even in fact all the great automation vendors came out of 620 00:27:19,607 --> 00:27:21,708 those markets. And and there's a reason. 621 00:27:21,708 --> 00:27:24,129 I mean one reason number one is World War Two, they 622 00:27:24,129 --> 00:27:27,071 lost a lot of people. in in the war and so 623 00:27:27,071 --> 00:27:30,154 the labor pool available to do the work is not the 624 00:27:30,154 --> 00:27:31,235 same as what we have here. 625 00:27:31,595 --> 00:27:35,038 number two is the cost of land and the availability of 626 00:27:35,038 --> 00:27:38,952 land is much lower. Like, you know, they don't have those 627 00:27:38,952 --> 00:27:40,133 big fields in Texas 628 00:27:40,079 --> 00:27:40,301 Cost 629 00:27:40,133 --> 00:27:40,335 where you 630 00:27:40,301 --> 00:27:40,443 is 631 00:27:40,335 --> 00:27:40,463 can 632 00:27:40,443 --> 00:27:40,695 higher, 633 00:27:40,463 --> 00:27:40,703 throw a 634 00:27:40,695 --> 00:27:41,302 availability 635 00:27:40,703 --> 00:27:41,063 million. 636 00:27:41,302 --> 00:27:42,242 is lower. Yeah, yeah. 637 00:27:42,295 --> 00:27:43,836 Yeah, availability is low cost is high. 638 00:27:43,836 --> 00:27:46,287 So you got to build up and it's expensive 639 00:27:46,787 --> 00:27:51,299 to get the space, right? So automation is a natural for 640 00:27:51,299 --> 00:27:53,850 the European, especially the Japanese market, where 641 00:27:54,310 --> 00:27:56,611 85% of Japan is not even habitable. 642 00:27:56,611 --> 00:27:59,733 It's just mountains. so you end up in in these markets 643 00:27:59,733 --> 00:28:02,754 where they've been pushing the automation button for decades well in 644 00:28:02,754 --> 00:28:04,155 advance of us. And 645 00:28:04,695 --> 00:28:05,736 we're just starting 646 00:28:06,236 --> 00:28:09,477 to arrive at that destiny now, and the fundamental reason is 647 00:28:09,477 --> 00:28:13,499 the changing population dynamics. You know, I always talk about the 648 00:28:14,079 --> 00:28:16,981 age dependency ratio ADR as being the number one thing to 649 00:28:16,981 --> 00:28:18,182 watch out for, which is 650 00:28:18,822 --> 00:28:21,414 how many people under the age of 16 and over the 651 00:28:21,414 --> 00:28:24,836 age of 65 depend on the people that are actually in 652 00:28:24,836 --> 00:28:25,627 the workforce. 653 00:28:26,067 --> 00:28:29,489 And the more that number rises, the higher the ratio gets. 654 00:28:29,849 --> 00:28:31,730 the less people you have to do the work to pay 655 00:28:31,730 --> 00:28:33,542 the bills for everybody else that isn't working. 656 00:28:34,137 --> 00:28:35,086 And it's rising 657 00:28:34,502 --> 00:28:35,203 and that's where we're 658 00:28:35,088 --> 00:28:35,389 and 659 00:28:35,203 --> 00:28:38,674 arriving, you know. We're arriving at the point now where US 660 00:28:38,674 --> 00:28:40,334 is starting to look a lot more like Europe. 661 00:28:40,334 --> 00:28:40,834 Hence 662 00:28:41,394 --> 00:28:43,255 there will be a big push for automation. 663 00:28:43,255 --> 00:28:44,835 And the thing is you don't want to be 664 00:28:45,315 --> 00:28:48,226 at the back of the bus on the at the eleventh 665 00:28:48,226 --> 00:28:51,457 hour saying, Guess what, we can't find people, we better automate 666 00:28:51,677 --> 00:28:54,268 'cause those vendors are going to be sold out for three, 667 00:28:54,268 --> 00:28:57,359 four years. We're already seeing signs of that now where the 668 00:28:57,359 --> 00:28:59,699 vendors are sold out. You know, come back, 669 00:29:00,159 --> 00:29:01,450 you want something from us, 2031 670 00:29:01,890 --> 00:29:02,810 is the earliest we can do it. 671 00:29:03,170 --> 00:29:05,411 and and so it's becoming, you know 672 00:29:06,117 --> 00:29:08,609 Labor and the ability to find the labor, 673 00:29:09,050 --> 00:29:12,793 the ability to reduce turnover and keep a steady crew, is 674 00:29:12,793 --> 00:29:15,716 getting expensive. You have to keep ahead of the Joneses with 675 00:29:15,716 --> 00:29:16,636 your wage rates. 676 00:29:17,337 --> 00:29:19,639 All these labor pressures are upon us. 677 00:29:19,999 --> 00:29:21,560 So the US, like I say, is starting to look a 678 00:29:21,560 --> 00:29:24,892 lot more like Europe. And automation is going to become warehouse 679 00:29:24,892 --> 00:29:27,624 automation is going to become like what it is in manufacturing. 680 00:29:27,985 --> 00:29:28,806 It's inevitable. 681 00:29:29,166 --> 00:29:31,907 Yeah, it it's funny you bring up time, right? 682 00:29:31,907 --> 00:29:35,779 So some things you've written about and some things I've experienced. 683 00:29:35,779 --> 00:29:38,850 Time on one hand is like how long it takes to 684 00:29:39,094 --> 00:29:43,606 design, to purchase, to implement, and then to go 685 00:29:43,606 --> 00:29:46,987 live and then time being on the other side, like return 686 00:29:46,987 --> 00:29:50,518 on investment and how long it takes for the investment to 687 00:29:50,518 --> 00:29:54,030 have been worth it. And for me my time frames are 688 00:29:54,030 --> 00:29:56,921 five, seven and ten year increments for leases. 689 00:29:57,421 --> 00:30:00,284 For all the companies that don't own their properties, which is 690 00:30:00,284 --> 00:30:04,429 increasingly the vast majority, especially for like a big box. 691 00:30:04,869 --> 00:30:07,452 And so, you've written a little bit about like 692 00:30:08,193 --> 00:30:12,478 Europe versus the US and thinking about those ROIs, like being 693 00:30:12,478 --> 00:30:15,020 more comfortable with longer time horizons, 694 00:30:15,581 --> 00:30:19,294 like it's funny that you bring up vendors possibly being sold 695 00:30:19,294 --> 00:30:23,146 out or increasingly being sold out being another time aspect. 696 00:30:23,447 --> 00:30:28,209 So all of that is like start sooner, prepare for longer 697 00:30:28,450 --> 00:30:32,692 and be willing, like have your capital structured to allow for 698 00:30:32,692 --> 00:30:36,374 a longer payback period. And that I would think that goes 699 00:30:36,374 --> 00:30:38,916 against what the vast majority of people want 700 00:30:39,396 --> 00:30:42,268 and what they're thinking and how they operate today. 701 00:30:42,628 --> 00:30:45,481 Well, you know, Justin, when I was a a kid and 702 00:30:45,481 --> 00:30:48,214 I remember starting out in the business in the eighties and 703 00:30:48,925 --> 00:30:51,507 the CFO would be at the boardroom table, you know, and 704 00:30:51,507 --> 00:30:54,030 if you came back to him with a storyboard that said, 705 00:30:54,030 --> 00:30:55,151 This'll take five years 706 00:30:55,972 --> 00:30:58,074 to pay back, you know, and especially if it was a 707 00:30:58,074 --> 00:30:59,556 publicly traded company, they'd 708 00:31:00,136 --> 00:31:01,358 they'd throw you out, you know, 709 00:31:01,818 --> 00:31:04,321 get out, just do it conventionally, you know, kind of thing. 710 00:31:04,338 --> 00:31:05,328 This is ridiculous. 711 00:31:05,762 --> 00:31:07,363 Yeah, yeah, that's ridiculous, you know. 712 00:31:07,363 --> 00:31:11,826 With five years, you know. Today I'm regularly presenting to, 713 00:31:12,086 --> 00:31:13,567 you know, executives and saying, 714 00:31:14,287 --> 00:31:16,018 you know, we've really done our homework here. 715 00:31:16,018 --> 00:31:19,890 We know what not only the capex is gonna be, we 716 00:31:19,890 --> 00:31:22,431 know the ongoing opex implications for the next 717 00:31:23,072 --> 00:31:25,452 decade and beyond. and we've really 718 00:31:25,873 --> 00:31:28,074 dotted the I's and crossed the T's on this and it's 719 00:31:28,074 --> 00:31:30,155 gonna be a minimum of a twelve year payback. 720 00:31:30,515 --> 00:31:32,236 You know what, no one's throwing me out of the room 721 00:31:32,236 --> 00:31:33,846 anymore. they're saying, 722 00:31:33,543 --> 00:31:33,985 Twelve 723 00:31:33,846 --> 00:31:34,406 okay, 724 00:31:33,985 --> 00:31:35,292 years. I I yeah. 725 00:31:35,087 --> 00:31:35,457 twelve 726 00:31:35,454 --> 00:31:36,780 Okay. 727 00:31:35,457 --> 00:31:35,827 years. 728 00:31:36,287 --> 00:31:40,830 Twelve years. Yeah, because you know, once you plug that 729 00:31:40,830 --> 00:31:44,512 automation engine into a warehouse, it doesn't run by itself. 730 00:31:44,872 --> 00:31:48,053 The engineers that are needed to keep it going and the 731 00:31:48,053 --> 00:31:51,005 maintenance, the wrench turners, and all of the 732 00:31:51,475 --> 00:31:53,876 upgrades and the parts that were out and the 733 00:31:54,356 --> 00:31:58,158 spare parts consumption and all and and the IT support and 734 00:31:58,618 --> 00:32:00,499 all these additional costs. 735 00:32:00,959 --> 00:32:03,610 If you don't do your homework, you're gonna not catch those 736 00:32:03,610 --> 00:32:05,181 and then you'll find out when it's too late. 737 00:32:05,721 --> 00:32:08,392 But catch them up front and do your homework. 738 00:32:08,392 --> 00:32:10,703 And yes, you're gonna save on headcount, but you're gonna add 739 00:32:10,703 --> 00:32:12,484 back all this other cost structure. 740 00:32:12,884 --> 00:32:15,316 And the capex isn't going down, it is what it is. 741 00:32:15,316 --> 00:32:18,740 And so when you really do your proper, responsible job on 742 00:32:18,740 --> 00:32:20,453 this, you're gonna see it's ten to twelve years. 743 00:32:20,814 --> 00:32:23,197 Wage rates play a big role in that number, right? 744 00:32:23,197 --> 00:32:25,350 If you're paying twenty five dollars an hour, if you're paying 745 00:32:25,350 --> 00:32:26,481 forty five dollars an hour 746 00:32:27,350 --> 00:32:29,112 You know, obviously the more you pay for for 747 00:32:29,933 --> 00:32:31,755 base wage rate and benefits 748 00:32:32,275 --> 00:32:35,939 will accelerate the the the the payback time frame. 749 00:32:36,300 --> 00:32:37,421 But no, twelve years is 750 00:32:37,982 --> 00:32:41,245 not an unusual number for payback and companies aren't batting an 751 00:32:41,245 --> 00:32:43,788 eyelash with twelve years anymore. It's it used to be 752 00:32:44,268 --> 00:32:45,870 five. Now twelve years, okay. 753 00:32:46,571 --> 00:32:48,983 We gotta do this. You know, we gotta do this. 754 00:32:48,983 --> 00:32:49,474 We can't 755 00:32:49,928 --> 00:32:52,419 Look, we've got thirty new faces showing up on the receiving 756 00:32:52,419 --> 00:32:54,920 dock for training. Every Monday morning it's ridiculous. 757 00:32:55,278 --> 00:32:57,760 You know, we can't operate this way anymore. 758 00:32:58,201 --> 00:32:58,581 And 759 00:32:59,071 --> 00:33:02,532 and so that's the hue and cry is if if you can't 760 00:33:02,532 --> 00:33:05,293 service the stores or you can't service the customers, 761 00:33:05,873 --> 00:33:07,144 then what are you doing in business? 762 00:33:07,144 --> 00:33:09,194 The warehouse is a critical function towards 763 00:33:09,615 --> 00:33:13,435 selling and and supporting sales. so if you're struggling 764 00:33:13,320 --> 00:33:14,136 Scaling. 765 00:33:13,505 --> 00:33:16,537 to m to p to put the manpower into the building 766 00:33:16,858 --> 00:33:18,408 there's no future for you, right? 767 00:33:18,408 --> 00:33:20,120 You're gonna go to the way of the dodo bird. 768 00:33:20,641 --> 00:33:23,913 So that's what everybody's look focused on is just how do 769 00:33:23,913 --> 00:33:24,904 we get this in 770 00:33:25,404 --> 00:33:27,586 so that we don't risk the business. 771 00:33:28,147 --> 00:33:31,179 Because there's plenty of horror stories out there about automation projects 772 00:33:31,179 --> 00:33:32,890 that did not go well. so 773 00:33:32,763 --> 00:33:33,004 There's 774 00:33:32,890 --> 00:33:33,130 that's 775 00:33:33,004 --> 00:33:33,235 quite 776 00:33:33,130 --> 00:33:33,420 I think 777 00:33:33,235 --> 00:33:33,607 a few. 778 00:33:33,420 --> 00:33:35,612 the foremost concern. Yeah there are there are there. 779 00:33:35,932 --> 00:33:39,423 I mean the ones that fail inevitably were the ones that 780 00:33:39,423 --> 00:33:41,914 were rushed. You know, I hate to generalize but 781 00:33:42,748 --> 00:33:44,609 That's quite often. You we need it we need it up 782 00:33:44,609 --> 00:33:48,184 and running by by December, you know, and and nothing happens 783 00:33:48,184 --> 00:33:51,297 by December. You know, you have to we you have to 784 00:33:51,297 --> 00:33:53,179 troubleshoot and QA 785 00:33:53,679 --> 00:33:55,501 the heck out of these things before you 786 00:33:56,022 --> 00:33:58,334 even start to do any type of sales volume in them. 787 00:33:58,694 --> 00:34:00,286 and if you do your homework and you do it right 788 00:34:00,286 --> 00:34:03,189 and your responsible, automation's a wonderful tool, right? 789 00:34:03,189 --> 00:34:05,061 It really is a game changer. 790 00:34:05,421 --> 00:34:09,124 Yeah, it's amazing cause we certainly don't see the majority of 791 00:34:09,124 --> 00:34:12,608 leases starting to turn into twelve year leases 792 00:34:13,041 --> 00:34:17,491 or it is interesting when you go into negotiation with a 793 00:34:17,491 --> 00:34:21,695 landlord who knows you have this installed in your 794 00:34:21,695 --> 00:34:22,315 building 795 00:34:22,916 --> 00:34:27,371 and not be overcharged or gouged because you're 796 00:34:27,371 --> 00:34:28,862 hostage, 'cause the 797 00:34:29,352 --> 00:34:32,464 chance that you're gonna spend fifty percent of your CapEx over 798 00:34:32,464 --> 00:34:34,385 again to move it to a different building. 799 00:34:34,745 --> 00:34:36,166 like you better be doubling 800 00:34:36,586 --> 00:34:40,268 or halving or consolidating for that to be like a 801 00:34:40,669 --> 00:34:44,290 legitimate alternative to the current status quo. 802 00:34:44,771 --> 00:34:48,102 So I could see on one hand like that would cause 803 00:34:48,102 --> 00:34:52,054 you to go longer and on another perhaps you still require 804 00:34:52,054 --> 00:34:55,316 flexibility and if the price of flexibility is 805 00:34:56,136 --> 00:34:57,537 you pay a little bit more 806 00:34:57,991 --> 00:34:59,862 monthly on your building 807 00:35:00,263 --> 00:35:00,963 and that's 808 00:35:01,564 --> 00:35:03,495 like a risk you're willing to to take. 809 00:35:03,495 --> 00:35:06,298 That seems like that's like the leases are getting a little 810 00:35:06,298 --> 00:35:07,549 longer but like 811 00:35:08,129 --> 00:35:11,852 not not as pervasive. Or perhaps I just haven't done enough 812 00:35:11,852 --> 00:35:15,876 of the deals that have heavy automation and like that will 813 00:35:15,876 --> 00:35:18,368 continue to flow into the market and we'll see more of 814 00:35:18,368 --> 00:35:21,840 them and that should cause lease terms to start to expand 815 00:35:21,840 --> 00:35:22,681 and and be longer. 816 00:35:23,041 --> 00:35:26,013 Yeah, real estate strategy and automation are go hand in hand 817 00:35:26,013 --> 00:35:27,374 as far as topics are concerned. 818 00:35:27,374 --> 00:35:30,176 And you're you're on you're you are focused on the topic 819 00:35:30,176 --> 00:35:32,247 with what you just said, that's very, very crucial. 820 00:35:32,747 --> 00:35:35,189 If I'm bolting automation to the floor, 821 00:35:35,889 --> 00:35:38,211 let's say it's AutoStore for the sake of discussion, 822 00:35:38,891 --> 00:35:41,233 that's a system that takes months to install. 823 00:35:41,233 --> 00:35:42,564 You've bolted it to the floor. 824 00:35:42,564 --> 00:35:45,075 Okay, the 10-year lease is up. 825 00:35:45,276 --> 00:35:46,316 I've decided that 826 00:35:46,837 --> 00:35:48,858 I'm gonna move across the street to a bigger building. 827 00:35:48,921 --> 00:35:50,599 So I've outgrown the one I'm in. 828 00:35:50,959 --> 00:35:51,750 I can't just 829 00:35:52,211 --> 00:35:53,353 shut down the AutoStore 830 00:35:53,883 --> 00:35:56,663 and have the vendor come in and over the weekend 831 00:35:57,439 --> 00:35:59,682 take it all down and move it across the street. 832 00:35:59,682 --> 00:36:01,665 You know, that that's a multi month process. 833 00:36:02,466 --> 00:36:04,869 And and so what do you do 834 00:36:05,270 --> 00:36:08,933 in that time period when you relocated to the other building 835 00:36:09,153 --> 00:36:11,414 and now you're without this piece of automation. 836 00:36:11,795 --> 00:36:14,196 All the inventory that's in that automation is not easy to 837 00:36:14,196 --> 00:36:16,557 get to. You got to get it all out, right? 838 00:36:16,557 --> 00:36:18,438 Because it's a big cube of dense storage. 839 00:36:18,858 --> 00:36:22,069 It's not so complicated if it's an AMR type system where 840 00:36:22,069 --> 00:36:24,901 the robots are autonomously moving around the warehouse, right? 841 00:36:25,481 --> 00:36:27,412 You put those on a truck, you move them across the 842 00:36:27,412 --> 00:36:30,123 street, they digitally map the new building and then they're ready 843 00:36:30,123 --> 00:36:33,545 to roll. That's the beauty of the AMR, is it's flexible. 844 00:36:33,905 --> 00:36:37,017 but anything bolted to the ground, whether be a sophisticated conveyor 845 00:36:37,017 --> 00:36:37,637 system, 846 00:36:38,057 --> 00:36:41,879 an AutoStore, any other type of fixed material handling system. 847 00:36:42,359 --> 00:36:44,200 Boy, that's tough. You know, and so 848 00:36:45,080 --> 00:36:47,852 you know I don't know if you've noticed, but when you 849 00:36:47,852 --> 00:36:50,263 look at all of the big Amazon buildings that have gone 850 00:36:50,263 --> 00:36:52,384 up really over the last five years, 851 00:36:53,004 --> 00:36:56,005 so many of them have been owned rather than leased. 852 00:36:56,365 --> 00:36:59,727 They're built to suit the Amazon Robotics Small Sortable Facilities, 853 00:37:00,147 --> 00:37:03,008 custom built for Amazon, and they're not rent leasing them the 854 00:37:03,008 --> 00:37:04,885 way they used to. They're owning it. 855 00:37:05,389 --> 00:37:07,590 I don't know if I think they figure 856 00:37:08,190 --> 00:37:10,251 we're gonna be here for more than twenty-five years, 857 00:37:10,992 --> 00:37:13,072 right? So why pay for the whole thing twice? 858 00:37:13,072 --> 00:37:16,034 Let's just own it and at the end of the day 859 00:37:16,034 --> 00:37:16,974 we'll save money 860 00:37:17,635 --> 00:37:21,786 because once we've paid off the depreciation, it's ours, right? 861 00:37:21,786 --> 00:37:23,197 And we're printing money. 862 00:37:24,024 --> 00:37:27,375 So maybe the market in general, as we go more towards 863 00:37:27,375 --> 00:37:29,702 automation, we'll see more ownership play a role 864 00:37:30,322 --> 00:37:31,122 in the market. 865 00:37:31,583 --> 00:37:36,055 or maybe we'll see people learn you know negotiating longer-term lease 866 00:37:36,055 --> 00:37:36,965 deals where 867 00:37:37,586 --> 00:37:39,016 they want the first 10 years. 868 00:37:39,016 --> 00:37:42,188 Here's the you know the inflation riser we're going to agree 869 00:37:42,188 --> 00:37:44,909 to, and we want first right of refusal in the year 870 00:37:44,909 --> 00:37:45,409 10. 871 00:37:46,129 --> 00:37:48,100 And we want to set up the terms for years 10 872 00:37:48,100 --> 00:37:51,751 to 20 as part of our upfront negotiation strategy so that 873 00:37:51,751 --> 00:37:51,871 we're 874 00:37:52,231 --> 00:37:55,217 Yeah. I I've had a couple of companies when they do 875 00:37:55,217 --> 00:37:57,078 the math on to purchase 876 00:37:57,558 --> 00:38:00,640 and to automate and if you wanna automate you wanna purchase 877 00:38:00,960 --> 00:38:02,991 and then all of a sudden when their hands are in 878 00:38:02,991 --> 00:38:05,613 both of their pockets they realize their pockets aren't as deep 879 00:38:05,613 --> 00:38:08,994 as they were when they started the conversation because both can 880 00:38:08,994 --> 00:38:13,086 be incredibly expensive. And so to try and like do one 881 00:38:13,086 --> 00:38:17,099 then the other, like y usually I would guess it requires 882 00:38:17,099 --> 00:38:20,792 debt is perhaps the answer to half of those questions. 883 00:38:21,152 --> 00:38:24,003 I've seen it stop a lot of those conversations because then 884 00:38:24,003 --> 00:38:25,333 they can't quite rationalize 885 00:38:25,943 --> 00:38:29,085 doing one without the other. Yeah. 886 00:38:29,965 --> 00:38:31,445 I would imagine with 887 00:38:32,066 --> 00:38:36,307 vertical integration and you thinking about Amazon and seeing those examples 888 00:38:36,307 --> 00:38:40,920 that you would be a student of like Elon, Tesla, SpaceX 889 00:38:41,458 --> 00:38:45,196 Vertical integration, robots building robots. Is that anything on your radar? 890 00:38:45,196 --> 00:38:48,555 Is that with all your spare time gonna be your next 891 00:38:48,785 --> 00:38:49,464 business within 892 00:38:49,284 --> 00:38:49,501 Like 893 00:38:49,464 --> 00:38:49,524 a 894 00:38:49,501 --> 00:38:49,750 that. 895 00:38:49,524 --> 00:38:52,110 business? Or what are some of your thoughts of what you 896 00:38:52,110 --> 00:38:53,092 notice and see there? 897 00:38:53,452 --> 00:38:56,084 I I have to be honest with you, there you know, 898 00:38:56,084 --> 00:38:59,427 there there's only so many hours in a week that that 899 00:38:59,427 --> 00:39:02,751 I can dedicate towards, you know, after I still have my 900 00:39:02,751 --> 00:39:05,653 consulting practice on money and then to to doing all this 901 00:39:06,013 --> 00:39:08,836 almost like PhD type work, if you will. 902 00:39:09,237 --> 00:39:09,547 almost 903 00:39:09,417 --> 00:39:09,872 It's 904 00:39:09,547 --> 00:39:09,887 like being 905 00:39:09,872 --> 00:39:10,059 your 906 00:39:09,887 --> 00:39:10,508 a professor. 907 00:39:10,059 --> 00:39:10,795 dissertation. 908 00:39:10,508 --> 00:39:14,960 Yeah. You know, there's there's a lot of subjects that are 909 00:39:14,960 --> 00:39:15,661 out there. 910 00:39:16,181 --> 00:39:17,481 The parcel industry 911 00:39:18,002 --> 00:39:20,873 is a big example where there's a huge interest to understand 912 00:39:20,873 --> 00:39:23,254 what the dynamics are taking place in the parcel industry right 913 00:39:23,254 --> 00:39:26,546 now. And you know, I know enough to be dangerous. 914 00:39:26,546 --> 00:39:29,763 I can talk to to about all the different companies, the 915 00:39:29,763 --> 00:39:30,928 volumes of cost structure. 916 00:39:31,408 --> 00:39:33,729 But I could spend you could spend your entire career just 917 00:39:33,729 --> 00:39:35,674 doing the parcel industry and 918 00:39:36,130 --> 00:39:40,512 to gain expertise in that. So supply chain being the size 919 00:39:40,512 --> 00:39:43,238 of subject that it is. is so huge. 920 00:39:44,035 --> 00:39:46,276 That you really got to pick your battles in terms of 921 00:39:46,276 --> 00:39:48,677 where you focus. And if you want to go deep in 922 00:39:48,677 --> 00:39:51,468 and narrow in a given area, it's kind of where what 923 00:39:51,468 --> 00:39:51,909 I do. 924 00:39:52,389 --> 00:39:55,560 I chose strategy as being my my the area that interests 925 00:39:55,560 --> 00:39:56,211 me the most. 926 00:39:56,691 --> 00:40:00,113 But I also get into facility design down to the down 927 00:40:00,113 --> 00:40:02,863 to the inch, right? so we were doing all these AutoCAD 928 00:40:03,123 --> 00:40:06,115 layouts for very, very complex buildings, over a million square feet 929 00:40:06,115 --> 00:40:06,355 and 930 00:40:06,775 --> 00:40:09,987 lots of automation that real one off type projects. 931 00:40:09,987 --> 00:40:13,659 And so the design engineering work on all the supply chain strategy 932 00:40:13,659 --> 00:40:14,920 that even leads up to that. 933 00:40:15,280 --> 00:40:18,793 That's a lifetime right there. So I don't have the time 934 00:40:18,793 --> 00:40:19,243 to 935 00:40:19,925 --> 00:40:22,388 think about what what they're doing over at 936 00:40:22,809 --> 00:40:26,302 you know satellite production facilities or Elon Musk or any of 937 00:40:26,302 --> 00:40:28,845 the things there. I'm I'm like most people I just read 938 00:40:28,845 --> 00:40:29,516 the headlines. 939 00:40:29,876 --> 00:40:31,637 Yes. There it's 940 00:40:32,107 --> 00:40:35,239 no doubt totally interesting and I figured right up your alley, 941 00:40:35,239 --> 00:40:38,747 but I get it. If I'm being judicious with our time 942 00:40:38,747 --> 00:40:41,508 together, I would use our last couple minutes to go into 943 00:40:41,508 --> 00:40:44,740 facility design since that's down to the inch. 944 00:40:45,301 --> 00:40:49,403 That's pretty specific, but I totally get that space is precious 945 00:40:49,763 --> 00:40:53,465 and process and flow is increasingly important and like 946 00:40:53,835 --> 00:40:56,487 utilization and efficiency and everybody like 947 00:40:57,250 --> 00:40:58,201 It's hard to get 948 00:40:58,681 --> 00:41:01,163 your square foot. So once you got it, you gotta make 949 00:41:01,163 --> 00:41:03,625 the best use of it. So if you were thinking of 950 00:41:03,625 --> 00:41:06,977 the couple of categories in facility design that jump out as 951 00:41:06,977 --> 00:41:10,110 being ones that are noteworthy for now, maybe what's 952 00:41:10,560 --> 00:41:13,832 I would I would think like just c the conceptual design 953 00:41:13,832 --> 00:41:16,764 is probably a whole lot of where the returns are of 954 00:41:16,764 --> 00:41:21,428 just thinking through things thoroughly, like and thinking through scenarios. 955 00:41:21,966 --> 00:41:24,931 And laying out space over time would be where a lot 956 00:41:24,931 --> 00:41:26,343 of people would get returns from. 957 00:41:26,816 --> 00:41:28,822 Is that true or how do you think about it? 958 00:41:29,182 --> 00:41:31,334 No, I mean it's it's you're right. 959 00:41:31,334 --> 00:41:34,296 Yeah when you're doing one of these projects you tend to 960 00:41:34,296 --> 00:41:37,259 look out into the future as best you can, right? 961 00:41:37,259 --> 00:41:38,730 If nobody really knows the future. 962 00:41:38,730 --> 00:41:41,462 So you start with assumptions around growth and 963 00:41:42,299 --> 00:41:44,200 We gather data on the existing business, 964 00:41:44,760 --> 00:41:45,540 if it's there, 965 00:41:46,141 --> 00:41:49,732 and then you use that to start simulating and modeling what 966 00:41:49,732 --> 00:41:53,965 different types of materials, handling systems, and options are available for 967 00:41:53,965 --> 00:41:57,466 the customer. and if you're starting with a greenfield clean sheet 968 00:41:57,466 --> 00:41:59,847 of paper, you can build utopia, right? 969 00:41:59,847 --> 00:42:02,548 Say here, let's go find something that looks that looks like 970 00:42:02,548 --> 00:42:05,429 this. but then all the reality starts to come into play. 971 00:42:05,429 --> 00:42:07,230 Well, these Marc, these are the ones that are available on 972 00:42:07,230 --> 00:42:08,170 the market to market 973 00:42:08,837 --> 00:42:11,272 then the building. building columns and everything start to play a 974 00:42:11,272 --> 00:42:13,263 role, the depth, the width of the building, number of dock 975 00:42:13,263 --> 00:42:15,933 doors, size of the yard, and and so 976 00:42:16,573 --> 00:42:19,094 as soon as you find a potential site you're trying to 977 00:42:19,094 --> 00:42:22,096 make it fit, and you know, eventually you're you're deviating away 978 00:42:22,096 --> 00:42:23,877 from utopia from perfect, right? 979 00:42:24,696 --> 00:42:25,577 so that's why built 980 00:42:26,438 --> 00:42:30,840 when you're talking about highly complex projects like automation, build-to-suit facilities 981 00:42:30,840 --> 00:42:31,620 oftentimes 982 00:42:32,197 --> 00:42:35,768 play an an extensive role there because they want the glove 983 00:42:35,768 --> 00:42:38,018 to fit around the hands, so to speak. 984 00:42:38,378 --> 00:42:41,007 but you know, when you're talking about going out and leasing 985 00:42:41,007 --> 00:42:44,639 a a brownfield or greenfield building and making it work, that's 986 00:42:44,639 --> 00:42:47,180 a big reality for for what's a big part of the 987 00:42:47,180 --> 00:42:48,140 work we do as well. 988 00:42:48,840 --> 00:42:53,052 So you know, I can't un underemphasize building column 989 00:42:53,052 --> 00:42:56,222 spacings, looking for something like if you want to go with 990 00:42:56,222 --> 00:42:59,073 a twenty foot column spacing. you're not gonna get a lot 991 00:42:59,073 --> 00:43:01,227 of options out of that. If you wanna go fifty six 992 00:43:01,227 --> 00:43:03,149 feet, you're gonna have more options. 993 00:43:03,210 --> 00:43:03,760 So it's 994 00:43:04,562 --> 00:43:06,255 I would think it's all fifty six. 995 00:43:06,335 --> 00:43:09,680 Just that's how we do it now, but that's perhaps only 996 00:43:09,680 --> 00:43:11,834 in the last five years or ten years, maybe. 997 00:43:11,863 --> 00:43:15,205 Yeah, fifty six by fifty is kind of a standard, 998 00:43:15,785 --> 00:43:16,286 you know, 999 00:43:16,747 --> 00:43:19,519 grid pattern or fifty six by sixty and 1000 00:43:20,299 --> 00:43:22,781 forty foot clear height. You know, the boxes they're coming out 1001 00:43:22,781 --> 00:43:25,133 with today are are you know 1002 00:43:25,613 --> 00:43:28,736 good good boxes for flexibility 'cause you can go single deep, 1003 00:43:28,736 --> 00:43:31,528 double deep, very narrow all in that same column space and 1004 00:43:31,888 --> 00:43:33,470 so you've got some options there. 1005 00:43:33,470 --> 00:43:35,731 You gotta multiple zones in the building that do the different 1006 00:43:35,731 --> 00:43:36,562 things. So 1007 00:43:37,182 --> 00:43:37,563 yeah. 1008 00:43:38,155 --> 00:43:40,529 We're we're smarter today than we were even a decade ago 1009 00:43:40,529 --> 00:43:42,222 about generic building design. 1010 00:43:42,582 --> 00:43:46,553 And it is interesting that like a last mile, like being 1011 00:43:46,553 --> 00:43:50,314 closer to population centers, is usually where the older buildings are, 1012 00:43:50,314 --> 00:43:52,845 and to try and like deal with that reality. 1013 00:43:53,265 --> 00:43:56,174 I'm thankful on this last real estate cycle, there's a lot 1014 00:43:56,174 --> 00:43:59,617 of new class A that has been an infill now as 1015 00:43:59,617 --> 00:44:01,898 there's been like more teardowns and redevelopment. 1016 00:44:01,898 --> 00:44:03,528 So I feel like that's helped a lot of people be 1017 00:44:03,528 --> 00:44:07,049 able to service the last mile with modern class A. 1018 00:44:07,409 --> 00:44:11,341 That last mile, you know, I think there's different flavors of 1019 00:44:11,341 --> 00:44:12,992 that too, right? Like we've got this 1020 00:44:13,472 --> 00:44:15,373 Amazon Now rapid 1021 00:44:15,773 --> 00:44:18,415 fulfillment center, they're rolling out a thousand of these across the 1022 00:44:18,415 --> 00:44:19,115 country, right? 1023 00:44:19,636 --> 00:44:23,478 What's what's one of that's a five thousand square foot ugly 1024 00:44:23,858 --> 00:44:27,260 brownfield building in the inner core of a city somewhere. 1025 00:44:27,541 --> 00:44:29,342 Could be an old dollar store, for example. 1026 00:44:29,342 --> 00:44:29,962 Walmart's 1027 00:44:30,322 --> 00:44:30,755 You said 1028 00:44:30,652 --> 00:44:31,123 behind 1029 00:44:30,755 --> 00:44:31,621 five thousand? 1030 00:44:31,981 --> 00:44:33,182 Roughly, that's the average. 1031 00:44:33,683 --> 00:44:36,515 And Walmart's right behind them doing the exact same thing. 1032 00:44:36,515 --> 00:44:37,906 So they're gonna do the same thing. 1033 00:44:37,906 --> 00:44:39,928 They're gonna have little tiny dark stores 1034 00:44:40,428 --> 00:44:44,021 spread across the country. in order to do 15- to 30-minute service 1035 00:44:44,021 --> 00:44:46,643 level. so that's a new spin on things. 1036 00:44:46,643 --> 00:44:48,975 We you know, these ugly old buildings that have been abandoned 1037 00:44:48,975 --> 00:44:51,397 for a long time are suddenly worth, you know, eighteen, twenty, 1038 00:44:51,397 --> 00:44:53,728 thirty bucks a square foot. and, you know, 1039 00:44:53,628 --> 00:44:54,251 Finally. 1040 00:44:53,728 --> 00:44:55,330 they're in hot demand. Yeah. 1041 00:44:56,030 --> 00:44:59,481 So so anyway, another just when you thought you had it 1042 00:44:59,481 --> 00:45:01,432 all figured out, something new comes along. 1043 00:45:02,012 --> 00:45:04,022 Whether or not any of this makes money is the real 1044 00:45:04,022 --> 00:45:06,833 question. I mean what the are they gonna shut it down 1045 00:45:07,414 --> 00:45:09,944 a year or two from now because it's all shooting ourselves 1046 00:45:09,944 --> 00:45:12,004 in the foot whenever we get a sales order we're losing 1047 00:45:12,004 --> 00:45:12,295 money. 1048 00:45:12,755 --> 00:45:14,656 That's to be seen, you know. 1049 00:45:15,456 --> 00:45:18,847 none of this high speed stuff in the past has really 1050 00:45:18,847 --> 00:45:19,217 been 1051 00:45:19,637 --> 00:45:21,858 economically astounding. 1052 00:45:22,598 --> 00:45:24,971 A lot of it is is red ink, to be honest 1053 00:45:24,971 --> 00:45:25,361 with you. 1054 00:45:25,861 --> 00:45:28,718 You're paying for speed. Yeah. And speed might be 1055 00:45:28,284 --> 00:45:29,125 it it's cost 1056 00:45:28,918 --> 00:45:29,199 entry 1057 00:45:29,125 --> 00:45:29,385 money 1058 00:45:29,199 --> 00:45:29,549 level 1059 00:45:29,385 --> 00:45:32,337 for speed. Right. That the guy in the car who makes 1060 00:45:32,337 --> 00:45:33,178 the delivery, 1061 00:45:33,598 --> 00:45:36,040 the manual work done in the store to fill the order, 1062 00:45:36,040 --> 00:45:39,212 the cost to replenish the store in the first place from 1063 00:45:39,212 --> 00:45:41,193 another building, all of that adds up. 1064 00:45:41,193 --> 00:45:41,474 And 1065 00:45:42,224 --> 00:45:45,246 the order size is not a hundred bucks, it's it's thirty 1066 00:45:45,246 --> 00:45:46,847 bucks or twenty bucks. And so 1067 00:45:47,248 --> 00:45:50,380 you start throwing ten, fifteen dollars of labor at at a 1068 00:45:50,380 --> 00:45:50,930 problem 1069 00:45:51,331 --> 00:45:53,344 at a thirty dollar order and you're not making money. 1070 00:45:53,344 --> 00:45:55,954 I'm gonna assure you that. So we'll see. 1071 00:45:55,954 --> 00:45:57,935 We'll see what the future holds for some of these things. 1072 00:45:58,295 --> 00:46:01,719 Yes. Well if we podcast too long we won't be making 1073 00:46:01,719 --> 00:46:02,941 any money either, Marc. 1074 00:46:03,401 --> 00:46:03,912 So I would 1075 00:46:03,753 --> 00:46:04,119 Okay, 1076 00:46:03,912 --> 00:46:04,262 think 1077 00:46:04,119 --> 00:46:04,493 Justin. 1078 00:46:04,843 --> 00:46:07,546 yeah, this would be a great place to put a pin 1079 00:46:07,546 --> 00:46:09,389 in it. And how fun is that? 1080 00:46:09,389 --> 00:46:11,532 Those are great topics. I feel like you get to do 1081 00:46:11,532 --> 00:46:13,945 the fun stuff, learning of what people are doing and then 1082 00:46:13,945 --> 00:46:15,557 working on big projects is 1083 00:46:16,178 --> 00:46:17,399 nothing more fun than that. 1084 00:46:17,759 --> 00:46:18,932 Well thank you for having me. 1085 00:46:19,732 --> 00:46:22,134 Yeah, wonderful. Well we'll catch you later and I look forward 1086 00:46:22,134 --> 00:46:23,996 to connecting with you and I'll follow up with you. 1087 00:46:23,996 --> 00:46:25,918 I probably have a couple of questions and I'd love to 1088 00:46:25,918 --> 00:46:27,540 see if I could get a project your way. 1089 00:46:27,900 --> 00:46:29,600 Okay. That sounds awesome. 1090 00:46:29,243 --> 00:46:29,685 Alright, 1091 00:46:29,661 --> 00:46:29,931 Bye 1092 00:46:29,706 --> 00:46:29,976 take 1093 00:46:29,931 --> 00:46:30,141 now. 1094 00:46:29,976 --> 00:46:30,950 care, Marc. Bye bye. 1095 00:46:30,942 --> 00:46:31,322 Bye.