Industrial Insights with Parth Pethani

Parth Pethani 00:54

Now, thank you, Justin for having me and I appreciate you. I appreciate the little shout out there. I think it's always good to connect with the peers in the industry, learn from each other. So I appreciate this opportunity to come and talk and just chat robotics, which is always fun.

Parth Pethani 01:12

I like the origin stories, right? it all began, I think, so started working for a tier one WMS provider like 10 years ago. Company's name is Manhattan Associates. It's a pretty solid company when it comes to WMS space. So a lot of retailers started using it. So was designing the warehouses for them, implementing software. Yes, Manhattan Associates. Yeah. Yeah. And they started out of Manhattan Beach, California, actually. That's where Manhattan Associates.

Parth Pethani 01:42

Yeah, so as I was working for them, designed warehouses, implemented software, it basically implemented business process flows into the software of a WMS. So learned a lot of things doing those things, moved to a consulting company, implemented robots, started implementing robots there. So I did the first implementation of, or also early implementation of AMRs with an on-demand packaging machines, implementing with a WMS software. So that was one project we did. right before COVID 2018-19. Then realized that I enjoy robotics. And because even at Manhattan, used to work with like unit sorters, put walls and stuff like the physical design or material flow of it. Moved to Berkshire Gray, another robotics company out of it. So learned a lot.

Parth Pethani 02:32

So eventually it has been, think the origin story goes back to this way. during my undergrad, I used to play with robots, never found a place to implement. Yeah. So now I can play with robots again at Prologis. That's what the goal is to help. So there is a term that I'd like to use called designing robot forward warehousing or robot forward warehouses, because I'm of a belief right now that

Parth Pethani 02:58

the completely lights out warehouse is still far. I think today is going to be mostly robot forward warehouses because as simple as like the safety around the buildings, the safety aspect of it, the maintenance aspect of it, that's all still is human driven and will be human driven. So I'm still a believer in robot forward, still trying to figure out if that lights out warehouse is still in the future or not.

Parth Pethani 03:25

Yeah. Yeah, will be pretty exciting but I feel like you still need maintenance team to support those robots. I still feel like there is gonna be human aspect until and unless humanoids come over and take the maintenance aspect of it.

Parth Pethani 04:19

Yeah.

Parth Pethani 04:44

Yes.

Parth Pethani 05:05

Nice. Mm-hmm. No, I think that's a great point. And I think that's something that even though I would love to put as many robots in the warehouse as possible, I'm also cognizant of like, I've grown from like the bottom up approach. that any implementations or anything that I try to wish. I also think from a perspective of that, Hey, when the rubber meets the road, how the things will be. So I think when it comes to warehousing space, at least I'm a believer that every warehouse goes through like a maturity curve. So If you are a simple warehouse just starting off right, it doesn't make sense robots to have you because you're trying to figure it out. But as you go through that maturity curve, and I tried to divide it like five stages, fourth is where you, third, between three and four is when you really start thinking about robots. Second, it's still like just setting up technology piece like the network infrastructure, the WMS piece of it or some kind of technology piece around that. And then you went into three and four when you start thinking about optimization, putting more robots, trying to really gain the max out of the capacity along with the technology piece, but also from the material flow perspective.

Parth Pethani 06:49

you Correct, yeah think that's the fun part of this job, just the challenges, right? Everyone, even though warehousing, like there is a thing that I believe is like, even though warehousing on a... Material flow is just a rectangle. If you look at it from the sky, 30,000 feet level, but within each rectangle, there is so many different things that go into it. And that makes it each challenge a unique challenge, because if I'm shipping furniture, I have a different problem than shipping a cosmetic or a pharmaceutical. So it's always fun. And as you said, like working with the big names, just understanding the unique pain points and trying to solve for it using technology, using robots, it seems as simple as like. like racking job is always fun to solve for that.

Parth Pethani 07:47

Most common problems, mean, even though it's like, it's coming from a prologist, it's kind of sound a little funny. It's like, rents are going up and labor is going up. So that's something, it has been going up since I would say, it's not something that happened this year. It's since I think, yeah.

Parth Pethani 08:08

Correct. And I remember the early days before COVID, like 2018, 19, where we were trying to make a business case for robots or some kind of automation. It was the play around, like labor saying that, it's becoming Uberization of everything. everyone was going for the right reasons. were all going for... So it's like they were looking for driving for Uber, would give $20 an hour versus working in a warehouse, right?

Parth Pethani 08:38

That happened and COVID happened and everyone started expanding. They were all busting out of their seams. So all look for space. And now this year was election year. So a lot of uncertainty because everyone was sitting on their cash. So to answer your question, what problems I've been seeing is A, because of so much uncertainty in last few years. And it's a cyclic. Every few years we have this cycle. But COVID was of course one in decades, if you will. The thing that happened with that was people are little, customers are really trying to try to figure out the plan and uncertainties that has happened in the last four years. While planning around the uncertainties, they have so many network or same way issues around or open challenges around their network where they have like five buildings, now they need to consolidate or they were at six building, I need to go eight buildings because their business plan changed. So the problem is A, they need to get. control over their network. think that's something that I've seen a lot, lot of conversations around that, that what should we do in 2025? Labor and rent is always perennial, always there, nothing changes. And going into 2025, I think it's still like the first quarter as well. I feel like it's going to be a little bit of a challenge for companies who are relying very heavily on tariffs because they have to, they have, they have a tool, they are going to be walking on a tightrope, right? They're like,

Parth Pethani 10:04

Should I front load my inventory or should I go and invest in something that can grow my business? mean, front loading inventory is still going to be helpful for them because they can eventually sell it. So that's going to be a decision making point. Yeah, one time shot. Yeah. So that's something I'm looking forward to 2025, like how folks are going to solve for it because that means that they have need more space. Similar early COVID days, if you will, where not everyone will be impacted, but companies who are relying heavily.

Parth Pethani 10:34

might need more space or go vertical try to use more vertical space in the.

Parth Pethani 11:06

Yeah, yeah, so with Prology is one thing that we and you a market can attest to that like we we talk to brokers every day we love our brokers so we always make sure that our brokers knows about the things that we are doing. The second thing is we have someone a job person or job title called Essential Solutions Manager. These individuals are pretty much in every

Parth Pethani 11:33

Yeah. Correct. So we have a team. Yeah. Yeah. So they are pretty much on road every day meeting clients, visiting each buildings and they are talking to customer about their pain points that bubbles up eventually to me or someone someone in my team who is product specialist about their Lexellet network or electrical or physical security stuff like that. But eventually it bubbles up to us. That's the bottoms up approach. Then we try to do. top-down approaches meaning that we try to talk to decision-makers and big companies like, guys, this is what we are seeing in the market. What are you seeing? Is there anything you having problems with it? We can help you out. We have the real estate access. We understand the warehousing space and we can be really that growth partner for them right now. In this goes, yeah.

Parth Pethani 12:31

Correct. this is not something new in the market. Shopify is doing it. lot of 3PLs are saying that we're going to be a growth partner. And you can see from the industry itself, 3PLs will help with the fulfillment phase. They'll have the tech space. They'll help do all the SEO marketing and everything, even the OMS space of it, because they are helping brands to just focus on meeting their customers or reaching their customers. So that's the eventual, I think the value prop or the things that we are trying to do at Prologis for our customers or tenants.

Parth Pethani 13:01

facial customers is guys, we're gonna be a growth partner. Come to us, we understand where I was in space. We can help out. We have ecosystems from all the way to doctors, to brokers, to all the way to automation and robotics.

Parth Pethani 13:17

Yes, yes, Modex you'll see for sure. Modex and Chromat I can never miss. I went to PacEx for recently. First few of my leadership is gonna be at Manifest as well. I'm not that important. I just know a thing or two. That's it.

Parth Pethani 13:41

Yeah, for sure. Yeah. Being close to a lot of startups, just because of the role and the conversations that I have, usually I get to know a lot of things that are happening in the robotics space and the tech space. So I'm blessed for that for sure.

Parth Pethani 14:05

So systems from a systems perspective or a robotics systems perspective, very, I'm and people folks know it like there is always going to be new entrants, new solutions that are always going to be in the market. What I'm very excited about is like how there are so many new solutions using the cube of the building, trying to solve using the robot side. Initially, in early days, we had racks, we went to VNA. Now we are going from VNA to a more of a ASRS solution, a cube ASRS solutions where getting denser and denser and denser that is always helpful. that I'm very...

Parth Pethani 14:43

Correct. Exactly. And that's one of the things that I'm always excited about because that's it's a common sense, the dollars to invest in that to make that happen is always high. So even though I walk a building and I like, hey, guys, can you use the cube? I can't say that I need to understand the dynamics of their business. Like, hey, guys, what are.

Parth Pethani 15:12

Yeah, because I can always say that, I can I need to be I don't understand the business dynamics. I need to ask those questions to understand that because it's very common for anyone to come walk the building and say, hey, you're not using the space. But did you ask the right questions to understand why not they're using it right? So coming back to the question, I think one of the things I'm very excited about solutions that go high cube solutions are pretty exciting. And there are many good players in this space. Like one of one comes to mind is Auto Store. 20 years in the market, a strong presence across all the different verticals. So I'm very bullish on them. I'm very excited to see their implementation. So we have been working with AutoStore and Ternary Prologists as well. So that's exciting for us. And we have a solid partnership.

Parth Pethani 16:33

Yeah, fine.

Parth Pethani 16:50

Yeah.

Parth Pethani 17:03

I know, and that's exactly where I want to, I might have a question for you as well. It's like right now, one of the things that I'm noticing from the industry, I was an end user for a couple of years. I used to have 14 buildings and I opened up a building in Terrell, Texas as well. And as I was working with this, as I went through this journey, I realized there are two transactions that happens like. on a higher level, one is that you have this real estate transaction that happens to find a lease to get into building and to sign the lease, get the TI dollars. And then you have the second transaction, is your within the four walls, what are the solutions you're implementing? it a racking forklifts and stuff like that, or is it an automation solution or robotic solution? So. Looking at that, it feels like there could be some efficiency gains can be made if it's a one transaction. And as you think about the industry, as you talk to a lot of other industry veterans in this space, like, do you see a value there? Is there a value in being one transaction going to someone, landlord who does all the thing and what are the concerns or what are the benefits there? Any insights on that?

Parth Pethani 18:54

Makes sense. That's interesting, yeah. I always was curious about that. Is there a value? How is the industry happening? Because I talk to customers once they're in the building and trying to help them out or they are trying to get into the buildings and help them out. But I was always curious at a higher level if that was a conversation that was happening.

Parth Pethani 19:26

Yes, we do have financing on that we can help them. Mm. Correct. mean, yeah, I'm not typically thinking just one document, like can be the synergies can be achieved with two work, work parallel work streams.

Parth Pethani 20:09

Mix in. Hahaha

Parth Pethani 20:28

Makes sense. Yeah. And that's what we are doing. And to your point, I think I can validate that data point as well, because one of the things that we do just because of the real estate team that we have, we coordinate a lot with our real estate teams to help us understand the lay of the building, like a fire suppression systems, power requirements, floor flatness for a Cubase RS solution like an auto store. Those are things that come on the building. So we try to work with our real estate team to really have those answers even before for the tenants or tenant doesn't have to tap two different people to answer that question.

Parth Pethani 21:32

Correct. Yeah, and this goes back to that and that's one of the data point of conversation I came internally as well is like, hey, what happens if you're an automation piece of automation in the building and you are trying to sublease it or trying to lease it to a new tenant? Usually that's when the conversation happened about how do we make that happen? Why is that? It goes back to the saying of cold storage is right. If it's a cold storage building, if the landlord is investing in, it the next client next tenant be a cold storage client as well? So yeah, those are the conversion happening as well. So I can see.

Parth Pethani 22:27

Yeah. Very interesting.

Parth Pethani 23:04

Yeah. Yeah.

Parth Pethani 23:18

Yeah, so when it comes to robots, can go as simple as like just a QBSRS solution. It's not simple, but like Forma Q's ASRS as a point solution. But then there are also solutions where you combine a QBSRS with an on-demand packaging with an AMR and pretty much make the whole outbound process automated to a level where everything comes to a packer and the packer just has to put everything into a box. and seal it and even for the sealing you can push it through a seal taper and you can tape it. That does a nicer one as well but then I also worked on like robotic picking arms, picking from the tote, picking from a box, putting into a tote, putting in a poly bag, inducting into a unit solder. But robotic arms, AMRs, Cubase RS, truck unloading, loading, those are all the different use cases I've been. worked with it or I'm actually pursuing right now. So many applications at the end, it's a business case that drives and the data drives the solution. So we'll figure out based on the data what we really want to go towards.

Parth Pethani 24:47

Yeah, so there are four or five steps that usually we go through when it comes to discovery. Yeah, and that's helps. One of the things that I learned in my lead is like, you can, simple is hard. If you can make it simple, that means you understand the field really well. So that's how I think about it. So for our discovery side of the world, the way we engage or the things that I think about from a steps perspective is like.

Parth Pethani 25:15

Initially, the first step is usually engaging with the customer, really understand the business problem. If it's like a greenfield implementation, then you want to understand what they're trying to solve for. If it's a brownfield as well. So understand the business problem, understand their operating characteristics, like how much throughput that you're looking for, what are the numbers, volume, skew data, all those data, understanding operating characteristics. Then we go into the second step where I feel like more of a rigorous data analysis. So that's where the exercise of data analysis happened. it's an up once during the peak, during the first step, if we identify typically for most of the customers, picking is where they want to start because 50 to 5 to 65 % of labor goes there. So if we identify picking operation needs a hell, we will then try to ask data around picking operation, the orders, the order volume for last one year skewed data on hand inventory snapshots. how much was was shipped and all those nice things around it. Then we have a data analytics team that can help us crunch data pretty easily. Once we crunch it, we bring it to our team where we look at the data and now to start to use our expertise around like, hey, you know, this customer, even though during the first step, are... Yeah, correct. So at step one, if we identify this customer, you know, even though they are saying picking is a problem and they want to go...

Parth Pethani 26:39

too deep and they have a three million dollar budget. We look at the data and we say I don't think so too deep makes sense to them because they don't have forks, that, don't have that much skew depth. I think they're still selective pilot racking or maybe they should go pilot the carton flow or ASRS solution because in three million dollars we can give an ASRS solution right. Solutioning happens during that so solution design happens during that phase three process and even Once we do the internal solution design, we try to go to customer and make it more iterative that, guys, we looked at the data, you asked for this, this very business problem, this is very operating characteristics. We looked at it, we feel based on our expectation that I wanted to recommendation and where you are leaning towards, why you're leaning towards one versus the other, what are the thoughts and make it more consultative at that point. And at the end of that step, which is I feel like a four step, we have a solid design that we feel like. pretty solid that this will solve the business problem the customer is trying to solve for within the parameters they gave. And then at that point, will final step would be pretty much presenting him a proposal with all the numbers around it. During that step three and four is when we try to engage our partners as well. So just in case, if the opportunity comes along and we identify a auto store solution is a great solution, we will. After step two, will tap onto our partners that, guys, we feel like this client with this operating characteristic business problem, it's solid opportunity for AutoStore. Can we work together, validate the solution and go to the customer, go to the tenant in front of tenant and try to make a case for that.

Parth Pethani 28:20

Yeah. For picking, so going back to that maturity curve, one of the things that I've noticed is not everyone has lot of dollars to spend for a new solution right away, especially solution which needs integration with the WMS. what they, if capital is always, everyone doesn't, no one wants to overspend anything and there is always anything.

Parth Pethani 28:58

Correct and also WMS is something that everyone thinks about before taking any project. So knowing those two as considering those two as a constraint typically folks starts with like a pick assist AMR like a six river robots locus robots fetch robotics and stuff like that.

Parth Pethani 29:20

That's where they start because they can see immediate improvement. They might be doing 60 units per hour in picking. They can go to 100, 120 and on a good days they can go up to around 150, 160. So that's a pretty nice improvement with a less involvement or less invasiveness if you will to our existing operations. But then there are customers who are like, you know, I'm going to be busting out of seams next year because I'm going to do a lot of acquisitions. And at that point, they're like, I need to spend dollars on it. I need to prepare for it because of the lead times. I know that any solution that I need to bring in and just start today. I have seen some customers also are some tenants looking into like going vertical as QBAS solution and like, guys, I know I'm going to grow next year. I know I'm going to acquisition. lot of inventory is going to come in. I need to plan for you right now because Many solutions also have a lead time, right? For example, AMRs could be a 3 to 6 month project if your IT resources are aligned. And an ASRS solution could...

Parth Pethani 30:28

Yeah and then an ASRS solution could be a year from now right so lead time is so important so those calculations come into

Parth Pethani 30:41

Yeah, so from the design to the first order that can be picked, it's usually 9 to 12 months that will have seen.

Parth Pethani 30:55

Yeah. Yeah. So that's why like this year I feel like this year was most of the tenants that I talked to most of customers I talked to they were really started assessing what kind of what kind of solution is the right solution for them because I feel like in 2025 or second half of 2025 once the tariff conversations are clear to everyone I think they will like okay I would use my 2024 to really figure out what I want. 2025 is clear to me. Let's go and now spread it.

Parth Pethani 31:28

I know, I know. I think this year was, I just was reading Prologist's report. was like, yeah, this year demand was less. Southern California saw a rent decrease of 3%, which was very interesting. I'm like, wow. a little bit. Yeah, so that was interesting data inside that I read. yeah, overall, it's still on a higher trajectory.

Parth Pethani 31:58

Go back to it.

Parth Pethani 32:30

Yeah. Correct, and just to give you a couple of data points on that, the RAS model, Robots as a Service model, the way I've seen it, there are at least two different versions to that, meaning that one is that you have a flat rental rate that you pay, and then the second one is like. based on the picking that you do. So if you say the picking assist AMR is like, if you're gonna do 1000 units per hour, that's what your dollars are gonna be. If it's gonna be 2000 units per hour, your dollar increases or reduces, stuff like that.

Parth Pethani 33:07

Yeah, that's a nice one. Correct.

Parth Pethani 33:36

so QubeASRS solutions have auto store as for example has a solution called PIO or PO I think they do as a service model as well. They pretty much they ask you to pay some install fee for the first time and after that is pretty much the pay per pick fee that they have. I think yes.

Parth Pethani 34:03

correct the credit check around that to make sure that you guys are going to keep paying your whatever the rental contract is.

Parth Pethani 34:35

Yeah, that's something, it's very new to be honest. think it's very, they just started two years ago, think, for a specific use case or specific company.

Parth Pethani 34:57

But then it's always the conversation when it goes to CFO of any end user. They're like, okay, I'm going to pay over the five years, $1 million where I can buy this thing for 750K right now. Where should I put my dollars? And not everyone is...

Parth Pethani 35:14

thinking about Ras models because even with Ras, one of the things that I at least or the industry unfortunately learned was as a startup and not established players, but as a startup, you take on a lot of debt because now your robots are in the field, they're not paid for. So you are crash crunched because you cannot, your dollars are. stuck into the equipment and now you cannot do any more R &D around it, bring new functionalities and stuff like that. we unfortunately we have seen few startups close down just because of this reason that they led with Ras model and they were just having crash problems, cash problems.

Parth Pethani 35:58

They leased it everything. They leased everything. now if you're leasing, don't get like if it's a robotic arm, let's say $300,000 robotic arm, industrial grade robotic arm. Now you're leasing it. That dollar is not going to come to you until that whole rental contract is completed.

Parth Pethani 36:22

No, the providers, sorry, for the providers, for the startups, yeah. Correct, yes, for the startups here.

Parth Pethani 36:41

Hahaha. And that's one of the reasons I think, as I said, 2024, lot of companies, if you walk the ProMed this year, sorry, MODX this year, the concern was like, hey, what's my maintenance plan? How are you like, and that gives you, if you, the undertone is, are you gonna be there five years from now? Right? That's the undertone. Yeah. So that's, yeah.

Parth Pethani 37:23

One thing that I always try to say in all my conversations is like robots is automation is like if you walk the floor of MODX and ProMan, it's going to be your drinking from a fire hose or maybe five fire hoses if you will. It's so much information and so much data out there. think at the end it's a tool that you've got to solve for. There are companies who can help you solve for it. Of course, the soft plug of Prologis Essentials. But overall, I think there are companies, there are many players in the market who can really help you cut through the noise and help you out there. Remember, one thing that I always think is like self-education is important for any transformation. And if you're trying to transform your warehouse, no doubt you can rely on external partners, external expertise. You need to have at least one-on-one on that. please understand that space a little bit so you can now when you're talking to someone you are able to talk you know that they're going to help you and so like self-education is something I always try to push end users to do.

Parth Pethani 38:27

Yeah, I have one probably that's why.

Parth Pethani 38:42

cool new toys I think I'm going to be excited to see this year is like the adoption of chat GDP kind of solution into WMS space because I feel like they are they're ripe for that I remember my days initially when implementing WMS I had to write queries to figure out some data if I can talk to chat GDP or some something like chat GDP or claw like hey guys tell me about this data and they just do all the exercise for me that can really help me

Parth Pethani 39:19

Yes, tell me about it. Design me and the whole system. I'm telling you so many opportunities with that thing.

Parth Pethani 39:32

So that's what I'm excited about, yeah. I'll be surprised if in next one year none of these tier 1 WMS providers come out with something like that because it's a right away use case.

Parth Pethani 39:59

interesting to see that. No doubt I want to put more robots but I'm also coming from a WMS world. I feel like there are many opportunities for use CHI-GDP LLMs kind of solutions in the WMS side as well.

Parth Pethani 40:15

We bought actually one, that's funny you mentioned that we actually just bought an upgraded house cleaning robot.

Parth Pethani 40:40

Awesome, thank you for having me and it was a great conversation and thank you everyone for listening in.

Parth Pethani 40:54

Yeah, I do. I'm trying to get some. Just Thanksgiving time was super busy for us. I'm trying to get more shows around. I probably I should bring you on as well. But overall, I think I'm still pretty much deep, knee deep into like just figuring out in the prologies, how can I create value for our tenants, just really help them from being that growth partner, as I mentioned in the beginning, and not just look at as a real estate because we have a strong, sustainable presence. We want to be a strong solution provider as well within the buildings.

Parth Pethani 41:37

Yeah. Hahaha Now appreciate that. I'm sure that once my marketing team is going to hear that, they'll be so excited to hear that.

Parth Pethani 41:59

Happy holidays, Justin. Thank you so much. Bye.