Buying vs. RaaS: What’s the Best Strategy for Investing in Warehouse Robotics?

Above, see Rohlik Group's Head of Automation, Aleš Malucha, describe the benefits of adopting the AutoStore pay-per-pick (PPP) robotics as a service (RaaS) model. Rohlik is a leading European e-grocery retailer active in the Czech Republic, Hungary, Austria, and Germany.

What is RaaS?

Robotics as a service (RaaS) is a business model that offers robotic capabilities to customers as a service, rather than selling the equipment. It's a relatively new concept in the warehouse automation industry that allows companies to rent robotic equipment on a temporary or ongoing basis, rather than investing capital.

This model can offer several benefits, including increased flexibility, reduced upfront costs, and access to the latest technology. RaaS providers often handle maintenance and support for the equipment, freeing up companies to focus on other areas of their business.

Overall, RaaS is an innovative solution that is gaining traction in the warehouse automation industry as companies seek ways to optimize and balance their operational and capital budgets.

What are the pros and cons of buying robotic warehouse automation vs. RaaS?

If you’re comparing a buy vs. RaaS option, take a minute or two to break down the pros and cons. Here are some key points to consider:

Pros of buying robotic systems:

• Ownership: When you buy a robotic system, you own it outright. This means that you have complete control over how it is used and can customize it to meet your specific needs.
• Long-term cost savings: While the upfront cost of purchasing a robotic system may be higher than using RaaS, it can potentially save you money in the long run. For example, if you use a robotic system for a task that needs to be performed repeatedly, the cost of the robot can be spread out over its lifetime, making it more cost-effective than constantly paying for RaaS.

Cons of buying robotic systems:

• Upfront cost: As mentioned above, the upfront cost of purchasing a robotic system can be higher than using RaaS. This can be a significant barrier for some organizations, especially small businesses or those with limited budgets.
• Limited flexibility: Once you have purchased a robotic system, you are committed to using that specific robot for the tasks it was designed for. This can limit your flexibility to switch to a different robot or use a different type of technology in the future.
• Maintenance and support: As the owner of a robotic system, you are also responsible for maintaining and supporting it. This can require a significant investment of time and resources, especially if you do not have in-house expertise in robotics.

Pros of using RaaS:

• Flexibility: RaaS allows you to use a variety of different robotic systems for different tasks, without the need to purchase them outright. This provides greater flexibility and allows you to switch between different robots as needed.
• No upfront cost: With RaaS, you do not need to make a significant upfront investment in a robotic system. Instead, you pay a recurring fee for the use of the robot, which can be more manageable for some organizations.
• Maintenance and support: When you use RaaS, the provider is responsible for maintaining and supporting the robot. This can save you time and resources, as you do not need to worry about these tasks yourself.

Cons of using RaaS:

• Ongoing cost: While there is less upfront cost with RaaS, you will need to pay a recurring fee for the use of the robots. This can add up over time and may be more expensive than owning a robotic system outright.
• Limited control: When you use RaaS, you do not have complete control over the robot. The provider is often responsible for maintaining and supporting it, and may limit your ability to customize it to meet your specific needs.
• Dependence on the provider: If you use RaaS, you are dependent on the provider for access to the robot. This can be a disadvantage if the provider experiences technical difficulties or goes out of business, leaving you without access to the robot.

Does AutoStore offer RaaS?

AutoStore, in collaboration with its partner network, offers an RaaS model that operates on a pay-per-pick (PPP) basis. This enables customers to acquire the aluminum storage Grid upfront and then lease the most capital-intensive and flexible parts (Robots, Ports, and software) through a subscription fee based on the volume of picking. The Grid typically accounts for 20-40% of the overall cost for an average customer, while the remaining expenses are associated with the PPP service, which may vary depending on the system's design and the level of technology integration required from other vendors.

In today's context, where over 80% of warehouses worldwide lack modern automation, this volume-based pricing approach makes robotics more accessible to a broader range of customers who require automated solutions that are easy to scale up or down with robots and workstations that don't require an outright purchase.

While the AutoStore PPP model is available to all customers for any project, certain project characteristics and segments may benefit more from this pricing option. Specifically, 3PLs can benefit from the PPP model due to time constraints in their customer contracts, and the ease of allocating a PPP cost to end customers. Growth companies can also benefit from the PPP model since it allows for earlier and faster adoption of automation, which can be expensive.

Additionally, the PPP model is particularly advantageous for projects where AutoStore handles the majority of the material flow and Robots and Ports account for a significant portion of the total project cost. This is because the PPP model enables payment on a per-pick basis, significantly reducing capital expenditure (CAPEX) in such projects.

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How does the AutoStore PPP pricing model work?

The AutoStore PPP pricing option is exclusively available through its partner network. This ensures that the buying process, from initial concept and design to installation and commissioning, remains unchanged and customers are fully supported throughout.

The pricing metrics for the PPP model are straightforward, with the upfront investment consisting of the fixed infrastructure (the Grid) and a recurring fee per pick. This pricing model protects customers from demand fluctuations, with monthly recurring fees adjusted based on volume. This minimizes the potential loss in cases of a decline in demand, ensuring that customers only pay for what they need.

In essence, the PPP model allows customers to pay for performance and capacity, aligning incentives between supplier and customer. This ensures that all parties benefit from the system quickly going live, operating at high throughput performance, and maximum uptime.

To ensure alignment between AutoStore, partners, and customers in terms of how much robotic capacity is required to handle customer picking volumes, the PPP model has a minimum term of typically 3-5 years and a flat monthly minimum fee based on the number of operating Robots and Ports. We will continue to monitor success and develop new pricing models that ultimately meets the needs of our customers.

Summary

The choice between buying a warehouse automation system or using RaaS will depend on several factors, such as budget, capital priorities, and overall goals. However, it's important to note that implementing warehouse automation is a costly process that requires careful planning, time, resources, and capital. RaaS offers a lower entry point to test the technology with less capital risk. Once you adopt the system, you can easily scale up or down based on business demands and rely on the RaaS provider to make the necessary investments. This allows you to focus on serving your customers more efficiently and productively while leaving repetitive picking and replenishment tasks to the robots.

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