Emerging Robotics Technologies Poised to Ease Labor Concerns
When we’re speaking with a company CEO or founder—whether in the distribution, agriculture, manufacturing, or public safety sector—finding and managing quality workers is almost always mentioned as one of their top challenges. These company leaders want to do right by their employees, provide them a living wage, and build their businesses at the same time—but the current workforce management trajectory is not financially sustainable.
Management teams must navigate relationships with unions, employees’ personal issues, rising wages, healthcare benefits, and retention—meanwhile balancing all of this with profitability, operations, and customer care. Managing a labor force in today’s environment is difficult and costly, and the COVID-19 pandemic has added additional items to the list, including employee medical issues and health-related safety concerns.
The significant time, brainpower, and funds company owners dedicate to people-related issues have made the idea of substituting capital for labor very attractive in recent years. As the ability to meet business needs through workforce growth becomes increasingly less viable, company owners are looking to technological alternatives.
The robotics technology advancements we are seeing are promising—there are many solutions that work well today in lab environments. The challenge will be to transition the technology from the lab to the work environment. In the tree fruit sector, for example, it’s easy for a robotic harvester to work on the flat ground in a controlled space. Efficacy declines, however, when the robot is faced with rough, rocky terrain on an incline or decline. The technology still does not determine with enough accuracy whether the object in front of it is a leaf versus a piece of fruit, and when the fruit is picked, the robotic harvester does not yet handle the fruit in a way that minimizes damage.
Many of these “real world” challenges are being addressed as scientists and engineers gain the critical feedback needed to optimize these tools. Advancements in machine vision and machine learning are likely within six to 36-months, in some cases, of practical application in “real world” settings. Once the technical kinks are worked out, these tools need to be sold at scale in order to bring the price point down to a more affordable level and drive return on investment.
In the tree fruit industry, for example, there is a huge push to move away from a reliance on large labor forces and instead incorporate more machinery and technology. As the technology becomes better, smarter, and cheaper, business models will be built around this structural shift.
Some of the robotic harvesting equipment on the market today would require a CapEx investment of $1 million or more—and the equipment is only needed for three to four months per year. We expect to see robotics equipment leasing or rental firms created to stand in the gap between a seasonal use case and ROI. These companies will buy the equipment and lease it to the farmer for harvesting season, then relocate the equipment to another region, for example South America, for their harvesting season.
These technology advancements will also spur a shift in the labor market, creating more advanced manufacturing and skilled labor positions in the factories producing the robotics equipment. Production of these technologies will be mostly domestic, generating opportunities for America’s Rust Belt, and reviving communities in Pennsylvania and Ohio, like Eerie, Pittsburgh, and Akron. These industry changes will serve to bring higher-paying jobs to those regions for skilled workers.
Emerging robotics companies are still mostly in the financing phase. Large manufacturing companies are keeping a close eye on technology developments, but we are a few years away from a robust strategic M&A environment in this space. Once the products have been optimized and are ready for prime time, they will need to be produced at scale and will require a capital infusion, or more likely a partnership with a larger manufacturer, to reach that point.
What’s Your Why?
I was raised in the blue-collar middle class, and I have an affinity and respect for the work ethic of people who build things and bring their lunchboxes to work. The trends and robotics and AI have the potential to renew America’s Rust Belt, which will be game-changing for a lot of hard-working people. Our firm also has a history of developing expertise and deep relationships within emerging sectors in order to provide the nuanced guidance business owners need to navigate capital markets transactions. We are excited to be plugged into the robotics and AI sector to best serve our clients now and in the future.
About Michael Butler, Chairman & CEO
The Co-founder and Chairman of Cascadia Capital, Michael manages the firm and co-leads the firm’s Energy & Applied Technology and Food, Beverage, & Agribusiness practices. Michael has been involved in over 100 transactions at Cascadia Capital. Michael’s focus is working with business owners who have spent all, or a good part, of their lives building their companies and have found themselves at an inflection point, bringing an objective and experienced perspective to assist them with their decision-making process. Read Michael’s full bio here.