In this episode of the Futurum Tech Webcast I’m joined by George Koutsaftes, President and CEO of Honeywell Safety and Productivity Solutions for a conversation about the future of warehouses. George joined me from ProMat, one of the biggest manufacturing and supply chain tradeshows, which took place in Chicago last week, and in addition to talking about the future of dark warehouses, he also shared insights on some of the key trends he’s observed there.
We live in an increasingly digital economy, which includes a massive web of packaging, shipping, warehousing, and distribution designed systems to help meet customer needs. In fact, without this physical infrastructure, the digital economy would grind to a sudden halt.
Over the course of the last few years and in order to combat labor shortages and deal with increased e-commerce demand, many companies have moved quickly to add automation and robotics to warehouse operations. In fact, it’s not at all surprising that the global market for warehouse automation technology is anticipated to reach $21.7 billion this year, which could lead to dark warehouses — which is a very good thing.
Our conversation covered the following:
- What a dark warehouse is, and what that looks like in practice.
- There’s been a significant investment in new warehouses, both physical buildings and the technology within them. We discussed the driving forces behind that and how dark warehouses can alleviate the challenge.
- We explored the Interoperability Gap and why it’s such a major challenge for the industry.
- We discussed some of Honeywell’s extended capabilities designed to address the Interoperability Gap and how those are being received in the market.
- We talked about customer challenges throughout the industry and the key challenges George and his team at Honeywell seek to address.
It was a great conversation and it’s clear that addressing warehouse automation is on the minds of many throughout the industry, and with good reason.
Watch the conversation with Honeywell’s George Koutsaftes here:
Or stream the audio here:
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Transcript:
Shelly Kramer: Hello, and welcome to The Futurum Tech Webcast. I’m Shelly Kramer, Principal Analyst here at Futurum Research, and today I’m joined by George Koutsaftes, President and CEO of Honeywell Safety and Productivity Solutions. We are going to have a conversation about the future of warehouses. Before we dive into that conversation, I’ll preface this by saying it’s probably not news that we live in an increasingly digital economy. This includes a massive web of packaging and shipping and warehousing and distribution systems designed to meet consumer needs. Without this physical infrastructure, the digital economy wouldn’t happen. It would grind to a halt.
In the last few years, we’ve had all kinds of challenges, labor shortages, increased E-commerce demand, all of those sorts of things. We’ve seen companies rush to add automation and robotics to warehouse operations. In fact, the global market for warehouse automation technology is anticipated to reach about 21.7 billion this year. That’s a big number, and this could lead to dark warehouses, which is exactly what George and I are going to be talking about today. George, welcome to the show.
George Koutsaftes: Thank you, Shelly. It’s great to be here.
Shelly Kramer: I know you’re at an event and you’re swamped with things to do, so thank you so much for making time for me. I really appreciate it.
George Koutsaftes: I’m glad to do it.
Shelly Kramer: Well, tell us a little bit if you would, about… I’d like to know your backstory. Share a little bit about your career journey, maybe some personal information. Let’s hear it.
George Koutsaftes: All right, all right. Well, so starting backward, I’ve been with Honeywell for over 15 years, but my career started after I graduated an undergrad in 1991, and I was an internal auditor for Dun & Bradstreet and had an accounting degree. I did that for about five or six years and then decided I wanted to become an… merge as an acquisition advisor. I went to business school, got my MBA in finance, and went down that path. I covered the chemicals and life sciences industry for over a decade as an investment banker, mergers and acquisition advisor. Actually, that’s what led me to Honeywell ultimately. They ended up want… needed somebody to run mergers and acquisitions and business development for one of their divisions. I was interested in joining a company like Honeywell because I wanted to develop my career to be a general manager. I took the role as an opportunity to do that.
I ran mergers and acquisitions and business development for about four years. Then, I started my career journey of taking different roles of varying responsibility of running different businesses. Also, I led a procurement function, which I never was involved in procurement before in my life. It’s a testimony about how Honeywell challenges their people and taking on different roles and challenges to development, which is a great example. I’m a living example. Now, I became a president of a business, which I never imagined in my life I’d be doing, and it’s been a fun journey.
Shelly Kramer: That’s awesome. I am sort of a fan of the non-planned plan. That’s kind of been my career journey and, like you, I have never said no to an opportunity that came along and a lot of times something has happened. I started my first company when I was 34, so I’ve been doing this for a long time, but if I had a dollar for every time my phone rang or I got an email that said, “Hey, I need somebody who can do this, what do you think?” You know?
George Koutsaftes: Yeah, yeah.
Shelly Kramer: Yeah, my answer is always yes because I love learning and I love new challenges and all that sort of thing. It is a testament very much to the culture at Honeywell, and I think that’s awesome. Very cool. That’s why I like people to share their backstory. I think it’s so interesting to kind of hear the career progressions that we all go through. Thank you for that.
George Koutsaftes: Yeah, yeah. No, my pleasure, my pleasure.
Shelly Kramer: Dark warehouses-
George Koutsaftes: Yeah.
Shelly Kramer: … what is a dark warehouse? What does this look like?
George Koutsaftes: It’s as it would sound. It’s a warehouse that is populated with a wave in a symmetry of automated solutions or robotics, all working in a synchronized fashion to basically move parcels into a facility, into storage, into picking, and then out the facility. It’s synchronized between robotics that would be utilized to offload trailers that would arrive at the facility to robots bringing those pallets to de-palletize them and then bring those boxes onto conveyance and then bring those boxes from conveyance, and then bring those boxes in from conveyance and portation, and then from portation to picking. It’s a highly synchronized future. We’re not there yet. It’s a long way away, but the technologies are existing today and it’s going to become something that everyone’s really moving toward.
Shelly Kramer: Dark warehouses, who knew? Warehouses in general, we’re seeing, as I said when I kicked off the show, we’re seeing tons of investment in new warehouses, both in physical buildings and into technology that powers them. What’s driving that? I mean, obviously, a huge customer demand and a shift in our world in general, but what else is driving that?
George Koutsaftes: Well, yeah, so the first thing, as you mentioned, is there was a massive wave of growth in E-commerce before the pandemic, but the pandemic really kind of accentuated that, and so many of our customers were trying to stand up automated warehouses as the fast as they could to keep up. What they saw was growing demand. We’ve kind of gone through that wave now, and now our customers need to do a couple of things.
One is they need to extract the highest possible value of those investments they made, and it’s by augmenting those investments either with robotic solutions that go on the front end or the back end of sortation , or put software to help to drive interoperability of different assets. The other piece they’re solving for is labor scarcity. Labor scarcity is a big problem today in the workforce and the warehouse industry is no different. There is a study done that said over 73% of warehouse operators say they’re dealing with scarce labor workforce issues.
Shelly Kramer: Right. It’s funny, when you started answering this question, the first thing I was thinking about is labor issues, so very much a reality really across every industry.
George Koutsaftes: Indeed. Yeah.
Shelly Kramer: Yeah, it makes perfect sense. Dark warehouses, then, serve to alleviate some of these challenges.
George Koutsaftes: They do, they do, and we can really help a customer navigate that journey ultimately to a dark warehouse. Like I said, the technologies are being developed today, but they do have to achieve a certain scale and efficiency and cost. All three have to kind of come in together at the same time to have a truly dark warehouse. However, the pieces are here. You have robotic unloaders for tractor trailers that take all those massive pallets off the trailer. Robots exist for that. Then, we have robots that can actually depalletize that pallet. Think of those pallets as like Jenga, like a Jenga game with boxes of different shapes and weights.
You need machine learning and algorithms to be smart enough to know how to pick up the right box and know what its size and weight is and move it to the right… to the next direction. We have that technology exists, and then you have these robots will move single boxes or totes from one picking lane to another picking lane. Then, you have sortation. This is… Sorry, storage. This is a massive grid where totes can be stored in the grid, and then you have robots moving inside the grid to move the totes from place to place. The technologies exist. We have to mature them to get the scale, cost, and efficiency to meet the dark warehouse requirements, and that’s what the industry’s been working towards.
Shelly Kramer: Got it. Let’s talk a little bit about interoperability because that’s kind of a major buzzword today across all industries, interoperability, but I believe that what we’re dealing with here is a bit of an interoperability gap, and that’s such a big challenge for this industry. Can you speak to that just a little bit?
George Koutsaftes: Yeah, so if you think about what’s happened thus far, companies have been adopting new technologies to automate their warehouse. With a massive chain change of technology and innovation, new technologies will crop up two or three or four years later that they may be able to adopt to help improve productivity, improve output, and yet they may be on a different system. What you have now is many warehouses with a web of disparate assets that need to be able to communicate better than they are currently. We’ve launched a suite of offerings to kind of help drive that. We have our Honeywell Robotic Control System, which helps robots learn from learning algorithm machine vision of how to work amongst each other and not basically crash, that work instructions so they can work effectively and more efficiently.
Then, you have what’s called Momentum Warehouse Execution system, and what that does, it allows an operator to basically choreograph different assets, whether it’s an unloader to a sortation system, from a sortation system to an AMR that’s going to move boxes. It does all the planning of the different assets that exist in a facility in a seamless fashion. Then, below that is machine control, which is the ability to control the individual unit operation in an efficient and effective manner. You need those three layers of a software stack to drive interoperability. Otherwise, a warehouse operator will be lost.
To tie all of that together is what we call Honeywell Forge Performance Plus. That’s a software system that allows a warehouse operator to plan their day based upon predictive and preventive analytics we’re providing them on the uptime and reliability on all those disparate assets and workers because we can provide guided work instructions to those workers and then inform the warehouse manager about how those workers are performing efficiently or effectively. Efficiency software, then you have software to make the different assets communicate and work together. Then, you have software that actually makes the robots kind of work interchangeably within each other so they don’t basically confuse or create inefficiencies, and we could do that.
Shelly Kramer: As a business owner, what I’m hearing here that is attractive to me is that I have this technology stack within my warehouse powering different things, and what I don’t have to do is go in and rip and replace to be able to use some of this technology from Honeywell. It can work and be connected within this system of solutions. Is that right?
George Koutsaftes: Absolutely.
Shelly Kramer: That’s a beautiful thing. That’s a beautiful thing.
George Koutsaftes: … that’s a very important proposition for our customers to know so they don’t have to rip out existing investments. We can help them take best advantage of it right through the software stack of interoperability.
Shelly Kramer: Well, and it sounds like, too, that the solutions allow a glimpse in visibility into where we’re getting snagged, where there’s a problem, where there’s an adoption problem where kind of identifies these issues in a way that continually helps streamline and optimize and be more efficient within the system as a whole. Is that right?
George Koutsaftes: It is, so when we go into a warehouse and they adopt our Honeywell Forge Performance Plus application, we will generate what’s called a digital twin.
Shelly Kramer: Yeah.
George Koutsaftes: It’s a digital persona of that whole warehouse of every asset in that facility, including the workers. We baseline that digital twin with performance metrics that we were given that historical basis. Then, from that, our algorithms get smarter and smarter as every day goes, and now we’re providing everyday insights to the warehouse manager about what assets are robbing them of productivity, where they have leading indicators of downtime, or where employees aren’t working as effectively or efficiently. Where we can tell them, “Hey, this group of employees had downtime. They didn’t have planned work go their way today.” We see that and we can actually help provide solutions for solving for that.
Shelly Kramer: Well, again, as a business owner and as a leader of and manager of people, this is music to my ears because that’s what you’re looking for, right? That, you know-
George Koutsaftes: That’s right.
Shelly Kramer: … technology that does the heavy lifting, the technology that does the identification of issues, and so I can take all this information and strategically make decisions moving forward that with this technology is sort of my strategic partner, so I like that.
George Koutsaftes: Yeah, think of it as a dashboard that allows you to see and make those decisions on a daily basis, monthly basis, and then an hourly basis.
Shelly Kramer: Yeah, absolutely. Well, I’m a fan, so let’s talk about customers. What are… I know you are immersed in conversations with the customers on a daily basis, so talk with me a little bit about what customers are sharing in terms of their key pain points and challenges that they immediately need to address be and then what’s in the future.
George Koutsaftes: Sure, so there are two big themes that our customers are trying to address as major pain points. One is the labor scarcity issue we spoke of earlier, and that’s real for our customers. They’re trying to address that in a couple ways. One is how to take better use of automation that relies less on workers. Secondly, they’re looking for solutions like what we can provide, which is guided work construction. We actually help develop standardized work instructions based upon our customers’ input that can allow workers to follow work procedures in a standard fashion that gives them more productivity. You get more productive output. You need less workers in that regard, too. That’s one area of major pain points, labor scarcity and solutions they need for that, which is robotics and software to alleviate the pain point of labor scarcity.
The second big thing that they’re trying to really drive is, as I mentioned earlier, a lot of our customers made massive investments in capacity to stay ahead of the massive wave of growth in E-commerce. Now, they’re at the point where those investments need some tweaking or upgrades to make more productive so they get more return on investment. They’re always trying to squeeze return on investment out of assets, right?
Shelly Kramer: Right.
George Koutsaftes: We call these brownfield upgrades. We will walk into a site. We’ll do a site audit. We’ll emulate and simulate their operations for our own software and we’ll make recommendations on, “Well, you can augment your operation through a Smart Flex Depalletizer, or you can augment your operation through our Guided Work Instruction Software package. Or you can augment your operation through a auto unloader from the truck.” We will look for those opportunities to help the customer make good return investment decisions to upgrade the return on the assets.
The second thing that’s happening is most people commonly kind of like think about the massive wave of investment that’s made recently, but we’ve had customers that have made investments in automation decade-plus ago, right?
Shelly Kramer: Right.
George Koutsaftes: Those assets are starting to reach retirement age and they need to be replaced and upgraded, and so we’re seeing opportunities there for that as well because, again, our customers are not looking to do expansions as much anymore. They’re looking to kind of get more ROI out of the existing assets that they have.
Shelly Kramer: Right. Makes perfect sense, so at what point does an asset reach retirement age? Is it, and I’m really bring this up as much for somebody listening to or watching this conversation to maybe spur thinking about that. Is it a decade? I mean, the pace of technology advancement is so rapid when you look at just what’s happened in the last five years alone. It used to be you could kind of develop a strategy that would last you a certain amount of times, and now, I think for me anyway, a strategic exercise is an always-evolving exercise. I’m always evaluating. Here’s what I thought, here’s where we are, here’s what I need to shift. If you have a warehouse manufacturing facility and your equipment is a decade old, it’s probably time for an assessment for some kind of an audit, isn’t it? If you haven’t already.
George Koutsaftes: Absolutely. Absolutely, but more over age, it’s really what, to your point earlier, about the rate of change in innovation that might have impacted the assets that they currently have and whether or not they’re keeping up with their competition in terms of throughput and productivity, right?
Shelly Kramer: Right.
George Koutsaftes: That to me, more than anything else, really drives the decision-making that our customers have. Now, don’t get me wrong, I do have customers that are looking just to make upgrades to assets that are a decade old and they like where they’re at and they want to just kind of keep them to continue and that’s good. Those opportunities do exist as well and we can provide that to them in a seamless fashion, but we do audits. We have a whole service organization that will go in and do customer audits for free to help them understand what their options are. Now, certainly we hope they choose Honeywell as their solution provider, but they don’t have to.
Shelly Kramer: Well, what I like about that, though, is again, and I spent a career as a strategist, so this is what I’m honing in on. Part of the beauty of working with a vendor partner, even on that first step that’s an audit, is the conversation that you’re able to have when you’re looking at that audit is your team at Honeywell is able to give you kind of a snapshot of what else is happening in the industry. I think that it’s wonderful and it’s understandable wanting to preserve investments in legacy systems and all that sort of thing. Again, I am not a fan of rip and replace at all being the only solution because in many cases that’s not a viable solution for a lot of businesses, but understanding beyond my own facility or facilities and what legacy equipment I have and what I may have an interest in or a budget in potentially replacing or augmenting or whatever, I feel like another part of that, what I look for from trusted vendor partners is I want to know what’s going on in the industry.
That doesn’t necessarily mean I want you to tell me competitive information that yo have under NDA, but when you work with someone who is immersed in providing these solutions across the industry, what you get is insight into here’s what’s happening across the industry. Here’s what some of your competitors are doing. Here’s where they are perhaps in a position to develop a competitive advantage. You want to be thinking about that because that can impact your business, and I think those are the conversations that excite me as much as anything from just an initial starting point of an audit, you know?
George Koutsaftes: Yeah, it’s interesting. I speak with customers every week and when I speak with them, they’re asking me like, “What are our,” you know, they want to know what their-
Shelly Kramer: They want to know.
George Koutsaftes: … competitors are doing, like, “Are my problems the same as everybody else? Or am I unique?”, and it’s these are interesting conversations to have because it really kind of really helps us to identify what their true pain points are, what they’re trying to solve, but secondly, that they know that they’re not falling behind. Sometimes I will tell them, “Hey, you’re falling behind.” You know”
Shelly Kramer: Yeah.
George Koutsaftes: Again, you don’t need to use us, but I would highly recommend you consider this sort of solution, right?
Shelly Kramer: Right.
George Koutsaftes: It’s a valuable part of the engagement. It builds trust and ultimately leads to good outcomes for our customers.
Shelly Kramer: Yeah, I agree. I agree. I’m a big fan of… I mean, we audit our systems all the time, whether it’s what we’re doing, different parts of our technology stack, or all of that stuff. That’s the only way you know is taking those deep dives-
George Koutsaftes: That’s right.
Shelly Kramer: … and looking and also working with… working… As I said, trusted vendor partners to me are so important because that’s really how taking those first looks, taking those audits, taking those dives, getting those recommendations, that’s how you can plot a path forward. I think it’s a really important part of the equation, so-
George Koutsaftes: Yeah, indeed.
Shelly Kramer: … you are speaking to us from ProMat, which happens to be one of the biggest manufacturing and supply chain trade shows, and it’s in Chicago this week. My daughter lives in Chicago and she said yesterday that it’s a little chilly there.
George Koutsaftes: Yeah.
Shelly Kramer: You keep that.
George Koutsaftes: A little cold, yeah.
Shelly Kramer: Just a tiny bit, right? Tell us if you… I know you’ve been out on the show floor. I know you’ve been talking with customers. Oh, tell us what are some of the big trends that you’re seeing at ProMat.
George Koutsaftes: Well, again, I hate to sound like a broken record, but the big trend is around labor scarcity and brownfield upgrades. That’s what it is. This is this and how… There’s a greater and greater focus around how robotics can augment their problem solving, right? So I’ve seen just from last year’s to this year’s show a change in the depth and level of interest in robotic solutions as the technology continues to mature. We have a couple of things we’re pretty proud of. One is our Smart Flex Depalletizer, which I mentioned earlier. This is a unit operation that, as I mentioned earlier, we can take a pallet, it looks like a Jenga thing, and with smart machine learning and machine vision capability can detect the size and weight of the box and grab it in the right way and put it in the right place. We’ve been able to replace a manual operation and drive 30 to 40% throughput improvement overall at that part of the operation of a warehouse. Not only that, but our customers have told us that operation depalletizing that was manual is the area where the biggest safety issues, too.
Shelly Kramer: Oh good.
George Koutsaftes: Now, we’re helping them improve employee engagement as well as better productivity.
Shelly Kramer: Well, and by the way-
George Koutsaftes: That’s really fantastic.
Shelly Kramer: … no, I think it’s terrific. The thing about it is people talk a lot of times. I mean, I’ve been covering the automation space for many years, and when this conversation comes up, there’s always an uproar about replacing jobs, and so this is a twofold conversation. On one hand, in some instances we have a labor shortage, and filling these kind of jobs is increasingly difficult, but equally as important, when you have conversations with people working in warehouses who are unloading pallets and you say, “Hey, how much do you miss unloading pallets?” I’m pretty sure that the answer is, “We don’t miss it at all,” because that was not the most fun job and it is a dangerous job. I mean, these advancements play a big role. You mentioned culture and employee experience. I mean, when you can deploy employees to do jobs that require more critical thinking and less physical labor, I think that that makes for not only a safer work environment, but for a happier work culture, too, and that’s important.
George Koutsaftes: That’s a really good point. While we are reducing jobs like depalletizing, which is a heavy labor sort of job for people, which they don’t really want to do, it allows us to redeploy them towards other jobs in the facility to apply critical thinking skills. This will just generally increase employee engagement. This is a good thing.
Shelly Kramer: I agree. I 100% agree, and that’s kind of what I preach on a regular basis. As we wrap up this show, George, tell us if there’s anything on your mind that you think that to expect from warehouse automation this year. What’s the big thing that we can look for?
George Koutsaftes: I think one of the things that is a big trend that you’re going to see developed this year is the fact that there are large, sophisticated customers we talk about every day who are making these investments in large warehouse automation robotics, but there are classic customers who are trying to climb the automation journey themselves. What’s important to them is that it’s both aligning cost to productivity to scale, and standard solutions, we think, are going to be a trend setting into the future here.
The importance of building standard solutions is tying a standard offering of automation, sortation, robotic with software and scaling it. That’s going to be the big trend. Allowing somebody that… You know, we’re not solving for a million-dollar square house facilities. Maybe we’re solving for a hundred-thousand-square-feet facility. That’s a different design model, a different need-
Shelly Kramer: Right.
George Koutsaftes: … but they need that, too. They need that automation, too, and so it’s important that we do our job to provide a standard scale solution that they can get in a quick turnkey fashion. That’s going to be a big trend, I think.
Shelly Kramer: That grows as you grow, grows as you need it … and I think that’s the beauty to me of technology solutions today. Unlike a lot of legacy equipment, you had to figure out what you need and you bought it and it had to serve you, right? The cool thing about software technology solutions is that they can scale up, they can scale down. They can grow as you grow, and I think that that is a tremendous value-add in terms of when you’re looking at the ROI of your investments, that’s pretty important.
George Koutsaftes: Big time, and not everybody can afford making massive investments up front. They want to buy their way up, buy their way up the curve.
Shelly Kramer: All right. This has been a fantastic conversation, George, and I really appreciate you making time while you are at this event in Chicago to spend time with us. To our listening audience, this is George Koutsaftes, President and CEO of Honeywell Safety and Productivity Solutions. I will include in our show notes a link to some more information about the solutions that Honeywell just released, along with some information on where to find George if you want to reach out and have any questions. George, thank you so much for sharing with me today. It’s been a terrific conversation, and I wish you a great rest of the week at this event.
George Koutsaftes: Shelly, thank you so much. It was a pleasure meeting you. I enjoyed our conversation as well. Have a great day.
Shelly Kramer: All right, we’ll do it again soon.
Author Information
Shelly Kramer is a Principal Analyst and Founding Partner at Futurum Research. A serial entrepreneur with a technology centric focus, she has worked alongside some of the world’s largest brands to embrace disruption and spur innovation, understand and address the realities of the connected customer, and help navigate the process of digital transformation. She brings 20 years' experience as a brand strategist to her work at Futurum, and has deep experience helping global companies with marketing challenges, GTM strategies, messaging development, and driving strategy and digital transformation for B2B brands across multiple verticals. Shelly's coverage areas include Collaboration/CX/SaaS, platforms, ESG, and Cybersecurity, as well as topics and trends related to the Future of Work, the transformation of the workplace and how people and technology are driving that transformation. A transplanted New Yorker, she has learned to love life in the Midwest, and has firsthand experience that some of the most innovative minds and most successful companies in the world also happen to live in “flyover country.”
