How Sumitomo Drive Technologies Is Fitting 30,000 Square Feet of Inventory Into 7,500
Manufacturing Happy Hour
Sumitomo Drive Technologies is rebuilding its distribution center around automation. The goal is to fit a growing business into the building it already has. On an episode of Manufacturing Happy Hour, host Chris Luecke spoke with two leaders of the project, Tony and Shawn. The central question was how a manufacturer that still runs its warehouse largely on paper can move to a high-density, robot-served system. Tony and Shawn share one position: automation lets the company grow without adding floor space or many more people. They also say that the workforce, the data infrastructure, and the long-term benefits still have to be managed and learned along the way. The project was not finished at the time of the conversation.
The Walmart Analogy
Tony described the project through a shopping trip. Normally you get a list, drive to Walmart, and walk the store to find each item: toothpaste, shampoo, something from electronics, something from sporting goods. The automation project reverses that. You stand at the checkout counter, say "toothpaste," and it appears. The same happens for items from sporting goods or the garden department. Everything arrives organized. You can then take it home, or send parts of it to other people, such as your wife, sister, aunt, or uncle, without going anywhere yourself.
In the warehouse, the system brings goods to the material handlers. Automated guided vehicles (AGVs) then carry the goods to their destination. That might be a manufacturing location, an assembly cell, a parts order, or a shipping truck.
What the System Actually Does
Shawn gave the more literal version, starting with why the project exists: "We're a growing company, and we're running out of space." The system they chose lets them take almost 30,000 square feet of material and put it into a 7,500-square-foot footprint. (He misspoke several times as "75,000" before landing on the correct figure, to some laughter.) That compression frees up inventory space across the building. It lets the company grow without physically expanding.
He walked through the flow. Inventory comes in the back door and is scanned. The system says exactly where to put it, so material is not handled several times. It goes directly from receiving into either the AutoStore system or the high racks. For orders, small parts come out of the AutoStore. An operator scans an order that might include four or five SKUs, and the system brings all of those parts to the operator. The operator places them in a bucket, which moves down the line to consolidators. Heavier material still comes from the high racks. It is combined with the small-parts order, loaded onto an AGV, and sent to assembly or manufacturing areas to complete the order.
Shawn also described the current setup. Today, all those small parts sit in racks about 30 feet tall. Operators ride order pickers 30 feet into the air to pull parts off shelves, bring them down, and then consolidate. So besides efficiency and space, the new system adds a safety benefit.
Origins: COVID Demand and a Warehouse Running Out of Room
Tony traced the project back to 2021. Sumitomo Drive Technologies is heavily involved in the material handling industry, especially parcel handling. During COVID, people ordered everything online and shipped through UPS, FedEx, and DHL, and the company's business grew significantly. Because it makes parts and units, that growth pushed inventory to levels it had not seen before, even though the company tries to keep inventory low.
The company had already expanded its headquarters by 100,000 square feet in 2018. By 2021 it was again facing expansion just to hold inventory. Its warehouse is 100,000 square feet of high-bay racking reaching 35 feet. Tony said it did not make much sense to keep expanding the plant for inventory, and the team figured "there had to be a better way."
The idea came from a customer who showed them an AutoStore installation. It was a similar application, with industrial and heavy products, and the team asked, "Why not us?" They partnered with Swisslog as the integrator, which Tony called a major asset. The plan takes 30,000 square feet of high-bay racking holding what Tony described as thousands, even hundreds of thousands, of boxes and moves it into a 7,500-square-foot cube. Fourteen robots run on top of the cube and deliver product to material handlers. From there, AGVs carry it to the assembly line.
The decision was made in 2021, but actual execution began around 2025. Tony explained the gap as deliberate. The team needed time to get comfortable with the project's economics and to plan for the process change. They also needed to communicate with employees so that people would not see the project as "you're taking my job from me." He said the team was diligent and measured, which may explain the five-year gap. It was important to have a solid business case and to bring employees along.
Measuring Success: Automation and Density
Luecke summarized Tony's framing of the project as having two parts: automation and density. Turning 30,000 square feet into 7,500 means the storage uses 25% of its former space. He asked how each part is measured.
On automation, Tony pointed to labor. He said the shortage of skilled labor is real, but the shortage of entry-level material handlers is "very real" for the company. Applicants tell them they don't want to go 30 feet in the air to pick a 75-pound box. Under the new system, a new employee instead stands at a terminal. Tony called it "almost video game-like." The employee clicks a button, performs quality checks, and places items in a bin that goes onto an AGV. The company expects picking accuracy and output to rise. It also expects to need fewer people in material handling, with those who are no longer needed there redeployed elsewhere in the business.
On density, Tony said the benefit "just can't be overlooked." About 25% of the warehouse space becomes available for growth. That could mean more inventory to support a larger business, or more value-added work such as assembly lines or manufacturing.
The Workforce Question
Shawn added that the company does not plan, and never has planned, to eliminate its workforce. Once the system is running at full speed, he estimated it will need about 65 to 75% of the current warehouse workforce. He said the facility has enough openings to more than employ the rest in other roles. Reducing headcount for profit is "not the goal at all," in his words. The bigger benefit, he said, is that the company can scale without adding many people. It will still hire as it grows, just not as many as a fully manual process would need.
Tony tied this to a concrete target. The company wants to grow 50% over the next five years. Under its plan, the same number of people it has today would support that larger business through 2029. Tony called this the "light bulb moment." Historically, the company added people every time it grew. Efficiency improvements helped only incrementally, and this was a chance to do something different.
Luecke noted that Tony had previously named attrition as one of the business's top challenges. He added that the company has not been able to hire all the people it would like.
From Pen and Paper to a Single Interface
Asked what it's like to introduce technology into an environment with little of it, Shawn described the present as almost entirely manual. Orders come out of the ERP system, but very few warehouse transactions happen electronically. Everything is printed. Orders are matched on paper, labels are printed to match the paperwork, and the paperwork is handed from operator to operator through the whole process. The ERP exists, but it is not easy for floor operators to use at a terminal, so they print everything.
In the new setup, Swisslog's software system connects to the ERP and becomes a single point of access for all warehouse services. Workers will have handheld computers, wrist-mounted tablets, and forklift-mounted tablets, so everything is electronic. An operator logs in and the screen shows exactly what to do. When the task is finished, it assigns the next task by priority. Shawn described it as one interface from the time material comes in the door to the time it goes out.
Recruiting and Onboarding a New Generation
Luecke asked how the company plans to attract people who would rather work in a "high-tech logistics environment" than ride a lift 30 feet up. Shawn spoke bluntly about younger workers. In his view, they are not the workforce of 20 years ago, which was willing to "sweat it out" to provide for their families. Younger workers, he said, want to do things as easily as possible with the least effort and still get the same or more pay. Since the company still needs these positions filled, he said, it has to make the work as easy and interesting as possible for new employees.
Tony framed it around turnover. The company would like entry-level hires to stay for life, and he believes its environment and value proposition allow that. But "we're not naive enough to know that everybody that we bring in is going to be an employee for life." The system shortens onboarding and makes training easier and more visual. "It's not like playing a video game, but it's like playing a video game," he said. He compared it to the difference between digging a hole and working at a computer. He stressed that operators don't need to be computer experts. He called the system intuitive and visual, and said most entry-level hires are younger and comfortable with technology.
In the paper-based process, a trainer has to explain which part is which, and a worker who doesn't know a part number can pick the wrong item. Tony said those problems largely go away when the process is automated and screen-driven. Training becomes more on-the-job. When someone leaves, a replacement can be brought up to speed, by his estimate, within the first or second shift.
Luecke added his own view. He sees manufacturing and logistics finally catching up to how people interact with technology in daily life. Generations raised on smartphones expect easy digital interfaces. However long an employee stays, the business benefits from getting them effective quickly.
The Longer Arc: From Distribution to Manufacturing to Automation
Asked for a story showing how more technical work changes a workplace, Tony gave some company history. Around 2013, Sumitomo Drive Technologies was mainly an assembly and distribution company in North America. It decided that model was not sustainable long term and began bringing manufacturing back to the US. That meant moving some operations to satellite locations to make room for manufacturing. It also meant retraining many material handlers and assemblers for more skilled work, including CNC manufacturing. Tony said this got employees excited about a company that was committing to manufacturing for the long term.
When the first round of tariffs hit in 2019, the company accelerated. It built a factory of almost 200,000 square feet in Mexico to support nearshoring and more manufacturing. It is also continuing to invest in large-scale manufacturing in Chesapeake, Virginia, for the larger industrial gear drive units it sells into mining, steelmaking, power generation, and other industries. Tony said the shift created both technological opportunity and general excitement about a growing company. He described it as a company recognizing that a purely global supply chain "maybe was a thing of the past." He sees the AutoStore project as the next step: from manufacturing to a more automated warehouse and a more automated company.
Where AI Fits and Where It Doesn't Yet
Since the project started in 2021 and ran through what Luecke called the first AI boom, he asked whether AI had changed it. Shawn said it had not changed the scope much. The underlying technology has existed for a while. Apart from helping the team get answers to questions faster, the newest AI developments have not changed the physical scope. He added that he "almost guarantee[s]" AI will affect the project in the very near future.
Luecke suggested the project is building the infrastructure for AI later, and Shawn agreed. "AI doesn't do anything for you when you're dealing with pen and paper." With the operation moved onto software systems, decisions that are now manual or fixed by programming could later become dynamic decisions supported by some kind of AI.
Tony agreed. He said the system will produce more data, which should help the company manage the business better, and AI will build on that. But he stressed how much is unknown. If they spoke again 12 or 18 months later, he expected the team would find benefits nobody can foresee today, because "we just aren't that smart" yet about what will happen. He described a flood of new AI tools, mentioning Claude and Gamma as examples he sees on LinkedIn. He called the AutoStore effort "very traditional automation." As for how AI plugs into it, he said, "I just am not sure that we know quite yet." Luecke suggested a second conversation in two or three years to cover lessons from a running facility.
Shawn's Lesson: Do the Homework Early and in Detail
For Shawn, the biggest lesson is education. The team started in 2021 and spent more than a year deciding which technology to use before choosing AutoStore. It then had to select a vendor and begin the actual process. Despite that preparation, he said he and his team are still learning every day. There were things they did not know and assumptions they made.
His advice is to start studying early and plan beyond installing the automation itself. Teams should work out how the system connects to the existing ERP, how processes communicate with each other and with the AGVs, and how the system will be used in the future. A clearly structured plan at the start leads to a better result. He credited Swisslog with steering the team and said the project would have been impossible with internal resources alone. He also urged leaders to get their teams "into the weeds." In his view, the decisions that matter are made at that level, and a small detail there can affect much larger systems.
Tony's Advice: Problem First, Communication, Scalability, and Action
Tony framed his answer as advice for anyone considering automation, in several points.
First, start with the problem. In his view the technology is easy and the solution is generally simple, so the real question is what you're trying to solve. For Sumitomo Drive Technologies, the problems were scaling without adding a lot of fixed cost and dealing with labor shortages that the company faces now and expects to continue.
Second, communicate early and often. Automation is still a frightening word for people whose jobs it affects. Employees need to understand that the aim is not to displace them but to make their jobs easier and more efficient. If someone needs to move to another role or function, the company has the ability to do that.
Third, plan for scale. Tony described AutoStore as modular, "kind of like a Lego." Capacity can be added on top or to the side. If the business grows faster than expected, or in five to eight years, the company could extend the system rather than start over.
Finally, "just do it." Teams can spend a long time on spreadsheets, meetings, economic cases, and vendor pitches, but at some point they have to commit. In his view, companies not pursuing automation are "missing the boat," because it is the wave of the future. He ended on the labor situation that drove the project. He does not expect labor shortages and the difficulty of bringing people into the workforce to go away, and said the problem is "probably only going to get more difficult."
People coming in entry-level. We want them to come in and then be an employee for life. But we're not naive enough to know that everybody that we bring in is going to be an employee for life. This system allows us to shorten the onboarding, make the training a little bit easier. It's like playing a video game.
We have another case study here for you on Manufacturing Happy Hour. Today, we're taking you inside a warehouse automation project. Sumitomo Drive Technologies has been revamping their distribution center to be more automated, higher density, and an operation that's a high-tech type of environment where people really want to work. Let's pull back the curtain and meet up with two of the leaders that are on the front line of this project. Tony, Shawn, welcome to Manufacturing Happy Hour.
In the spirit of the podcast, we were chatting before we hit record here this morning and we were like, "Gosh, I wish we could be doing this over a beer in the afternoon." Since we're not doing that today, let's paint the picture. Shawn, if you want to go first, if we were having this conversation over a drink, where would that be?
I'm a fan of kind of laid-back local brewery type places. So, one of my favorites is Nansemond River Brewing down in Suffolk, Virginia. Kind of laid-back, comfortable, cozy spot.
All right. So, we got a comfortable, chill craft brewery. Tony, what would your answer be to this question?
Yeah, so I actually have a little bit of a backstory, and you mentioned in the afternoon, and it doesn't need to be afternoon for me. It could always be in the morning as well, you know, depending on the circumstance. But from my perspective, I went to school at the University of Georgia. Very fond of Athens, Georgia. It's the greatest city in the world, in my opinion. And they have a lot of bars that you can go to, but one of my favorites that I used to go to a lot is a place called All Good Lounge. You could watch the game. You could get a little wild if you want to do that, but All Good Lounge is a great spot to go have a drink.
All right. Well, for this next question, Tony, this one's for you. Let's say we're hanging out there at All Good Lounge. As we dive into today's conversation around the warehouse automation project that you're currently in the middle of, how would you describe that as if you're having a beer with someone? You know, I think, Tony, when we had chatted before the interview, you had a pretty good analogy for what a project like this looks like. So, take us down to the All Good Lounge.
Yeah, so this automation project that we kicked off here last year, actually, is a really important project for us. And if I were to sort of describe it to anybody, I would describe it as something that everyone can relate to, whether you're a guy or a girl. Somebody gives you a list of things that you need to get. And traditionally, you get the list, get in your car, you go to Walmart, and you start hunting down the list, right? And it's toothpaste, it's shampoo, it's oh, I got to grab something from the electronic section, I got to get something from the sporting goods section. And that's just traditionally how you would do it.
Well, this automation project sort of flips the script and basically has everything coming to you. So, you're standing at the checkout counter in Walmart, and you're like, "Hey, I need toothpaste." And you say, "Toothpaste." And toothpaste shows up. Or I need, you know, something from sporting goods, and that shows up. Or I need something from the garden department, and that shows up. And it all shows up to you. It's all organized, ready to go. And then from there, you could do one of two things. You could put it all in your car, and you could go home. Or if you had to pick up stuff for other people, you could say, "Okay, send this to my wife, send this to my sister, send this to my aunt, send this to my uncle," and you don't have to do anything, right? You don't have to travel anywhere, it's all done autonomously. And in the very truest sense, that's what this project is. It's bringing goods to our material handlers, and then we've got automated guided vehicles that are taking it to its appropriate location, whether that be a manufacturing location, that be an assembly cell, that be a parts order, that be to a shipping truck. So, basically, that's what this is.
Yeah, I appreciate you putting that in the real world terms of like an everyday experience. Now, Shawn, if we're hanging out at your brewery, describe this maybe in some more literal terms as well. Tony started touching on it, right? There's material handling, there's software, there's AGVs. What is, you know, take us under the hood a little bit.
Okay, so let me start off with the main drivers for this project. Main drivers is we're a growing company, and we're running out of space. So, the biggest benefit of the system that we chose is we're able to take, I mean, almost 30,000 square foot of material and put it inside of a 750 or 75,000, 75,000 square foot box.
Good. 7,500. 7,500.
Okay, seriously. Can't get it out of my mouth. 7,500 square foot box, and basically optimize our inventory footprint throughout the building. So, this gives us the ability to grow our business without having to expand from a physical building standpoint. So, this system, I mean, as Tony alluded to in a very simplistic version for everybody, is exactly that. It's a very simplistic process that basically brings the material to the operators through the benefits of technology and software.
So, inventory comes in the back door. We scan the inventory. It tells us exactly where to put it. We're not touching it multiple times. We take it right from the back door to the AutoStore system or to our high stack racks, and we put it inside there. When it comes to the ordering process, from the smaller parts, all the smaller parts are coming out of the AutoStore. They're basically scanning an order. The order has, let's say, four or five different SKUs associated with that order. It brings all the parts to them. They put it into a bucket and send it down the line for the consolidators to put it together. Now, there's still stuff coming out of our racks, or our high racks, the heavier material. So, we're kind of combining it with that heavier material, putting it onto an AGV and sending it up to our assembly or manufacturing areas to process the final order.
So, just something to add to that. Today, all of those small parts that we're pulling are in racks that are 30 ft tall. So, we have operators on order pickers basically going 30 ft up in the air to grab parts off the shelf, bring them down, and then do this consolidation process. So, not only does it add the efficiency factor and benefits of space constraints, it also adds a safety factor in there, too.
Yeah, and we'll cover all of those at different points during this conversation. You know, take us back 5 years to 2021. Tony, it would be great if you could lead us off on this one. I think Shawn touched on some of these in his answer, but what was the original impetus for this project? All the great reasons and all the great things this is going to provide. What was the story of how it started?
Yeah, so if you sort of hearken back to 2021, we're coming out of COVID and we are heavily entrenched in the material handling industry, specifically parcel handling. And obviously during COVID, nobody was going anywhere, so everybody was ordering everything from, you know, Amazon and it was coming UPS, FedEx, DHL, you name it. And our business saw significant growth during those COVID years. And of course, we make stuff, right? We make parts and we make units and that requires inventory. And, you know, we certainly try to keep our inventory low, but when you see the spike in business that we've seen and that we saw, it made our inventory jump to levels that we hadn't seen. And we had just expanded our headquarters an additional 100,000 square feet in 2018. And we were getting to the point where we were going to have to think about expansion again just for inventory purposes. And Shawn alluded to this, we have a 100,000 square foot warehouse, and that's high bay racking, 35 feet in the air. And we just didn't see that it made a ton of sense for us to continue to expand our plant for inventory purposes. We figured there had to be a better way.
And so we actually had one of our customers show us the AutoStore, and it was a very similar application, right? Industrial products, heavy stuff. And we said, "Why not us?" So, we started down this path of looking at automation in the AutoStore and it just really fit what we needed. We partnered with Swisslog, who is sort of the integrator, and they've been a real big asset to us. But anyway, Shawn said it. We are able to sort of have the growth that we want to have in the current footprint that we already have today. So, taking that 30,000 square feet of high bay racking that has thousands, hundreds of thousands of boxes on it, and put it into a 7,500 square foot cube that is run by robots, you know, 14 robots on top that's delivering product to our material handlers that ultimately automated guided vehicles can take to the assembly line. It just checked all the boxes for us and we said, "Hey, in 2021, this is something we got to do." And then, of course, you know, fast forward to 2025, we're sort of getting into the actual execution of it.
So, that kind of gives you this sense of what it took for us to kind of get comfortable with the economics of the project, but also what it would take for us to manage the change that we knew would happen from a process standpoint, but also communicating with our employees and making sure that they're coming along for the ride and they just don't see this automation project as, you know, you're taking my job from me. And so, we were really diligent and really measured in sort of how we did that, which is maybe why there's, you know, this five-year gap, but for us it was really important to make sure we had a good business case, a good justification, and also making sure our employees were coming along for the ride.
Yeah, one follow-up question to that, and I think just to summarize this a little bit for the audience out there learning about this project for the first time. Tony, you've described this as like a twofold play before. There's an automation angle to this, and there's a density angle to this. And Shawn, you were just talking about that density angle not too long ago, right? You're turning basically a 30,000 square foot facility into a 7,500 square foot facility. That's 25% of the size it was before. So, Tony, back to you. How are you measuring success from both an automation standpoint and a density standpoint?
Yeah, so, you know, I think from our standpoint, from an automation perspective, the labor shortage in skilled labor is real, but the labor shortage in maybe the entry-level position, the material handling position, is very real for us. We have people who come in and say, "I don't want to go up 30 ft in the air and pick boxes, pick the 75-lb box 30 ft in the air," right? So, we sort of recognize that that's something that we were going to have to address, and, you know, obviously there was a labor shortage during COVID and then the sort of coming out of COVID, but we're seeing this now, right? So, from an automation success standpoint, you know, we see this as having an entry-level employee come into our business and instead of telling them, "Hey, you got to go up 30 ft in the air and pick this box," it's "Hey, you need to sort of stand here in front of this terminal." It's almost video game-like in many ways. "And you need to click this button and do some quality checks and stick it in this bin, and then it's going to go on this AGV." So, we sort of see that, you know, the accuracy of what we're going to pick from a material handling standpoint is going to go up. We feel like our output's going to go up, so we're going to see some reduction in the labor force in terms of what's needed to manage our business and then redeploy the people who maybe aren't a part of the material handling side of things into a different part of our business. And then again, as you mentioned, the density component just can't be overlooked, right? 25% of our warehouse space is now going to be available for us to continue to grow, whether it be in inventory, maybe more inventory to support our growing business, or in more value add, whether that be assembly lines or more manufacturing.
Yeah, and I'm going to ask you about the human element in a little bit, right? You've both highlighted the benefits of not sending your team members 30 ft up in the air. Shawn, it looks like you have something to add. I have a follow-up question for you, but Shawn, if you want to jump in first with some of your thoughts, then I'll get to my question after that.
Yeah, so I mean, that's a very important factor for us to talk about, is the workforce. So, our plan never has been and never will be basically eliminating our workforce. So, as Tony said, it's a challenge to get the entry-level people in the door. And this process moving forward, once it's up and running at full speed, is realistically only going to take about 65 to 75% of our current workforce to do it. Now, we have enough opportunity and openings across this manufacturing facility to more than employ those people doing other things. So, I mean, there's never an intention of basically minimizing our workforce or gaining profit from minimizing our workforce. That's not the goal at all. Now, the biggest factor, the biggest benefit to us is this project is going to allow us to scale our business without adding a ton of additional people. So, we're going to have to add some people in the future as we grow, but we're not going to have to add as many as we would have if this was at a 100% manual process as it is today.
I appreciate you being real about that. Tony, what are your thoughts on that?
Yeah, I was just going to mention I think that's a really important point, is, you know, of course in a manufacturing setting, as you grow, right, you're generally going to have to add people to support your growth. And what this automation system allows for us, in essence, what we've sort of, you know, mapped out, is the amount of people that we have supporting our business today, and we want to grow 50% over the next 5 years. We see the amount of people that we have today being the same to support that business 50% greater as we sort of scale into 2029. So, that piece for us I think was kind of like the light bulb moment, right? It was like, "Hey, this is going to change the game for us," right? Historically, we grow, we have to add people. We grow, we have to add people. Of course, we want to get more efficient and do all the things, right? But that's incremental. This was like a big opportunity for us to say, "Hey, if we want to see the growth that we want to see, we need to do something different." And this automation component is really that sort of light bulb moment for us.
Yeah, I'm interested to, and first of all, thank you again for being so candid around the human side, the scaling, the being more efficient. I mean, if I recall, you've mentioned attrition is one of your number one challenges as the business stands today. So, at the end of
the day, I know your business hasn't been able to hire on all the people that you wish could fill all these roles as well. But maybe we talk about that in terms of the technology as well. Let's talk about tech first, then we'll talk about the human side of the tech.
So, Shawn, one of my questions for you is can you describe what it's been like adding tech to an environment that didn't have much of it previously, right? We've talked about some of the safety challenges before. As I understand it, most of the operation operates on pen and paper. But now, you're creating a more common interface that may be able to help with recruitment, getting people up to speed faster, you've mentioned. Can you paint a picture of the then and the now, or the then and what's to come?
Yeah, it's more so the now versus the future. So, today, everything is really manual. So, we've got our orders coming out of our ERP system, but nothing is, or a very minimal amount of our transactions are being done electronically in the warehouse. Everything's coming out on paper. We're matching up orders on paper. We're printing out labels on printers to match it up to the paper. We're manually handing that paperwork from operator to operator and all the way through the process.
So, today, we have our ERP system, but I mean, obviously, it's not very easy for the operators on the floor to go to a terminal and work with the ERP system. So, they're printing everything out and having it in hand.
Moving forward, it's going to be a simple, or excuse me, a single point of access for all of our warehouse services. And that's going through the Swisslog Sync system, which is tying into our ERP. It's going to put the handheld computers in each person's hand, the wrist-mounted tablets and forklift-mounted tablets to where everything is electronic. The operator is going to log into a screen and it's going to tell him exactly what he should be doing. And when he finishes that task, it gives him the exact task from a priority standpoint that he should be working on next. So, it's one interface from basically the time it comes in the door to the time it goes out the door.
Yeah, and I'd be curious. Let's talk about the people now. What's your plan for finding people that are more excited to work in this, let's call it a high-tech logistics environment, rather than going 30 ft up in the air, moving a box from point A to point B? I'd like to get both of your perspectives on this. So, Shawn, if you want to continue and then Tony, if you want to jump in after that, that'd be perfect.
I mean, this definitely, the younger workforce nowadays is a very challenging aspect to, I guess, life in general. So, the younger workforce is not the workforce we had 20 years ago. They're willing to come in and sweat it out and get it done and provide for their families. They want to come in and do things as easily as possible, put in the least amount of effort as possible, and still get the same amount of pay, or excuse me, more pay, and get it done.
So, we're really trying. We know that that's a challenge that we're going to have to deal with moving forward, and we still have to have these types of positions. So, we've got to make it as easy and interesting for the newer employee as possible.
Yeah, Tony, what would you add?
Yeah, you know, I think we are really aware of the reality, right? So, we understand that people coming in entry-level, we want them to come in and then be an employee for life, right? That's what we want. We feel like we have an environment, we have a value proposition that can allow that employee to come in, and if that's what they want to do, they can do that. But, we're not naive enough to not know that everybody that we bring in is going to be an employee for life.
So, what this system allows is for us to shorten the onboarding, make the training a little bit easier, make it more visual, make it, you know, it's not like playing a video game, but it's like playing a video game, right? If you were to liken going out and digging a hole or sitting in front of a computer and messing around on the computer, right? Those are very different things. One's very manual and one is very technical. This is very technical.
And I think the other component here is you don't have to be a computer genius, right, to run this system. I think it's very intuitive. It's very visual, as I mentioned. And, you know, most people who are coming in on the entry-level side have some exposure to technology. And so they're younger and it's very comfortable for them.
So, from my standpoint, fast onboarding, standardized process, you know, the training is a lot easier. It's probably more on the job than sort of having to be with someone and be like, "Hey, this part is this and this part is that and this part number is this and if you don't know this part number, then you could pick it wrong." And all those things sort of just go away, right? It all is very automated, very visual, very computer-based, and just allows for us to bring people into our business and then when they decide to exit for whatever reason, bring somebody else in and they can be ramped up, I would say, within the first or second shift that they're here. It should not take us that long to onboard employees going forward on the entry-level side.
Yeah, I think very fair points from both of you. Kind of the way I think about it is manufacturing and logistics and the industrial space in general is finally getting caught up to behaving the real way that we do in our day-to-day lives, right? You know, Shawn, you were mentioning the next generation there, right? You know, there's an expectation that, you know, for Gen Zs and soon Gen Alphas that grew up their whole lives having access to a smartphone, right? They expect that ease of interacting with a digital interface and, you know, every generation has different expectations when you get into work, right?
And I think we are now at that point, as we were all alluding to in some way, shape or form, that the next generation expects a high-tech solution, and from the business standpoint, it's to your benefit at the end of the day to have something that someone can get ramped up on quickly, because whether they stay forever, for 5 years, for 3 years, whatever that time frame of their career that they spend serving your organization, you know, you want them to be as effective as possible, as quick as possible. So, I think you both brought up excellent points in that capacity.
Now, a follow-up question to this. This project is still ongoing, I understand that, but do you have a story that illustrates how creating, let's say, a more automated job, a more tech-influenced job creates a work environment that people are more excited to work in? Tony, I think you had a story that goes along with this from some of your past experiences.
Yeah, that's a great question, Chris. So, maybe a little bit of a history lesson here for us. In 2013, we sort of set out to bring manufacturing back to the US and North America. And so, we were primarily an assembly and distribution company and we said that that's not sustainable for us longer term.
So, in 2013, we started to make some efforts to bring manufacturing back to the US and that required us to make some different shifts and move some things out to some of our other satellite locations to make room for manufacturing, which also allowed us to retrain a lot of our employees on the manufacturing side. So, we had a lot of material handlers, we had a lot of assemblers, but we needed maybe more skilled labor from, you know, a manufacturing standpoint, from a CNC manufacturing standpoint. So, that allowed us to retrain a lot of our employees and get them excited about, hey, this is a business that's really digging in to the manufacturing side of things and is kind of here for the long term. So, we did that starting in 2013.
Of course, when tariffs hit the first go-round in 2019, we needed to accelerate again. That was in 2019, so we ended up building almost a 200,000 sq ft factory in Mexico to support additional nearshoring and manufacturing footprint. And then we're continuing to invest in manufacturing here in Chesapeake, Virginia with additional large-scale manufacturing projects that support some of our larger industrial drive units that we sell to mining or steel making or power gen. You know, name your industry, we're sort of in it when it comes to these large industrial gear drive units.
But, you know, that transition from assembly distribution to a manufacturing company has opened, from a technology standpoint, of course, but also just from a general excitement of like, hey, this is a company that's growing and recognizes that maybe a global supply chain was a thing of the past and maybe it's not the way forward. So, for us that's sort of been our effort, and then this AutoStore project is just sort of that next evolution, right? Instead of going from assembly distribution to manufacturing, now we're going from manufacturing to maybe a more automated warehouse and a more automated company.
Yeah. Well, let's talk about one other evolution in all of this. When this project started, 2021, I mean, we weren't talking about artificial intelligence the way we are today. This project has been taking place, let's say, throughout this, we'll call it this first AI boom. How has this project evolved in the last four or five years, if it has, to account for this? Shawn, if you could lead us off and then Tony, if you could clean up on this one, we'll go that route.
I mean, honestly, I don't think the AI boom has really impacted the scope of this project much at all. I mean, this technology's been around for a little while. We're obviously catering it to us, but some of the newest and best benefits of AI are not directly impacting this project today. Now, that being said, will it impact this project in the very near future? I almost guarantee you it's going to be. But as of the scope of the original project, other than helping us answer questions quicker than we did in the past, it really hasn't changed the physical scope of the project.
So, that's a refreshing answer because with all the trend chasing that I see sometimes, right? It's very nice to hear someone talking about staying the course in a project. But maybe I'm reading into this too much, but I feel like I'm hearing you mention that, "Hey, we're prepared to be able to implement some of these technologies in the future based on the type of infrastructure, the type of architecture we've built." Am I on the right track there, Shawn?
Exactly. Exactly. So, as we talked about earlier, I mean, AI doesn't do anything for you when you're dealing with pen and paper. So, obviously, bringing us into a more technological age and software systems, now we can integrate AI in the future to help us make the decisions that may be still manual decisions or programmed decisions today that are static, and could be a dynamic decision in the future using some kind of AI resource.
Yeah. Tony, what are your thoughts here?
Yeah, I think Shawn nailed it. I mean, I think at the end of the day, this allows us to get more data. We can probably better manage our business now with this data and then of course AI is going to support that, obviously. But I think with any automation effort there's a lot of unknowns, right? There's a lot of things that we think we know, right? We think we're going to know what the benefits are today sitting here.
But if we were to spin this forward 12 months or 18 months and, Chris, we do this again and we sort of circle back and say, "Okay, guys, this is what we talked about in March 2026. It's now April 2027. Tell us what really happened." And I think what you'll find is there's things that we don't even know, the benefits that we're going to see, because we just aren't that smart. We're not that good yet in terms of what is going to be happening, and even with this AI thing, right?
Man, as quickly as things are changing, it seems like every time I pull up LinkedIn, it's some new AI thing that's, you know, Claude and Gamma and all these companies, right, are just flooding the market with all these things that can improve your day-to-day. And this automation effort is very traditional automation, but how we plug AI in, I just am not sure that we know quite yet.
Sure. Yeah, it's a learning experience for all and you're right, at some point there will need to be a round two, you know, two or three years down the line when this facility has been up and running and we can share lessons learned.
Speaking of round two, whether we're at the brewery in Virginia, whether we're at the bar in Athens, Georgia, I am guessing our beverages are getting a little low here. So, we probably only have time for one more question before we get a refill, but my last question I want to ask is what are some of the lessons learned that you've both picked up from this project so far? Something to share with the manufacturing leaders out there that are listening to this looking for actionable insights that they can apply to their own businesses and careers. Shawn, if you want to take this first and then Tony, if you want to take it home, we'll go that direction.
No problem, Chris. Basically, education, I think, is the biggest lesson learned here. We jumped into this in 2021. We spent a little over a year really trying to understand which technology we wanted to use to move forward. So, then we honed in on the AutoStore. We made that selection, then we had to work through selecting a vendor and getting into the actual process.
So, even though we put that much effort into really trying to understand what the future is going to look like, it's still something that I'm learning, my team and I are learning every day. I mean, there's something that we just did not know. We made an assumption. And you can't start looking into this soon enough. The more prepared you are for a project of this scale, the better off you're going to be.
So, not only from just plugging in the automation, but how does that plug into your current ERP system? How is this going to talk to that process? How is that process going to talk to the AGVs? How are you going to utilize this in the future? And the better off you are with that really structured plan at the beginning, the better product you're going to have at the end.
So, we didn't know. We teamed up with the resource at Swisslog and they've kind of steered us in the right direction, but without them, I mean, this project would have been impossible. There's no way we could have done this from an internal resource standpoint in the project.
So, yeah, basically my suggestion to anybody else doing this is start doing your homework today. Really get your team into the weeds, because that's where a lot of these decisions have to be made. I mean, you can't really think about it from a very high level, because that little change that's in the weeds could impact a lot of bigger systems. So, yeah, just do the homework on the front end and really be as educated as you possibly can.
Yeah, I appreciate your focus on attention to detail, doing the homework. Also, I mean, you've given shout-outs to, I mean, this is an AutoStore project. So, shout-out to AutoStore as well as your integration partner in this project as well. I think there's a great lesson about picking the right folks that know what they're doing and can partner with your team to guide you through the steps you need to take to make it a success. Excellent advice
Sean. Tony, what would you add? Yeah, I would maybe reframe the question as maybe not a lessons learned but some advice at least that we would impart upon anybody who's thinking about an automation project. So I really have like three or four.
So the first one would be start with the problem, right? The tech is easy. The solution generally is pretty simple. But what problem are you trying to solve? In our case, it was the ability to scale our business with not adding a bunch of fixed costs. And the ability to address the labor force shortages that we experience today and know we'll experience going forward. So we started with sort of that and then we figured out, okay, how do we bridge that gap?
I mentioned that the tech side is super simple, but automation is still a scary word for a lot of people who have jobs impacted by automation. And so making sure that you communicate early and often and really make sure that they understand that the effort here and the spirit of this project is not to displace your job, it's to make your job easier and you can be more efficient. And then if for some reason we need to redeploy you in some other location or some other function of the business, we have the ability and are well equipped to do that.
And then maybe the last one would be plan for sort of this ability to scale, right? So the AutoStore is very modular. So if for some reason our business takes off even more than we're already expecting, this is kind of like a Lego, right? You can add on top, you can add to the side. So we can scale this thing to support our business as we go forward. So, we've made this large investment obviously for now, right? But in 5, 6, 7, 8 years if we want to add on top of it, right? And do the exact same thing on top to support our business going forward, it's scalable. So we're ready for that next evolution of growth that we're expecting.
And then sorry, maybe the last thing is just do it. Like get in there and make it happen, right? Because you can sit behind spreadsheets and all these meetings and all the economic cases and all the vendors come in and talk about how great their product is. Ultimately, you got to jump in and do it cuz if you're not doing this thing from an automation standpoint, you're missing the boat cuz it is the wave of the future. This labor force shortages and issues with having people come in to the labor force is not going away. It's probably only going to get more difficult.
Yeah, well, Tony started us off with a Walmart analogy to explain the project. We're ending with a Lego analogy to explain the future possibilities. Hey, I appreciate you both taking the time to jump on Manufacturing Happy Hour today. So, cheers and looking forward to chatting again in the future and I can't wait to see how this project turns out.
Thanks, Chris. Appreciate your time. Thanks, Chris.
Article published