By Melanie Stone
The idea of renting as opposed to purchasing vehicles is growing quickly and has started to gain traction in material handling businesses — this idea is known as Robotics as a Service (RaaS) and it represents a new paradigm in the industry. In fact, ABI Research predicts that there will be 1.3 million RaaS installations by 2016, generating over 34 billion in revenue.
Let’s look into what Robotics as a Service really is, the challenges to adoption, and the ways this shifting paradigm will make it easier to tap into new technologies and get work done.
What Is Robotics as a Service?
First, anything that’s “as a service” means that the business model is moving from ownership, where you buy an asset outright, to a license, lease, or rental model with a subscription service. When you buy equipment or vehicles, you become responsible for maintaining and upgrading the asset over time. Conversely, when you rent, you change the pattern of how you use the equipment and your relationship with the seller or service provider. Instead, the service supplier will offer everything from maintenance to updates and upgrades.
For Cyngn, Robotics as a Service represents the easiest way for us to put autonomous vehicle technology into a customer's hands without requiring our customers to staff up a maintenance team or hire engineers to get the most value out of such a cutting edge investment.
Why Is This Shift Happening?
Over the years, we have seen the “as a service” paradigm move from cloud-based software to hardware. Today, RaaS is growing rapidly as organizations are looking for new solutions to cope with change. Whether these changes arise from a shifting business model or an increase in demand that leaves organizations scrambling to scale, businesses across material handling and manufacturing have been forced to explore new solutions.
More broadly, economic challenges like supply chain bottlenecks and labor shortages also exacerbate the need to change. We are currently seeing fluctuations in supply chain problems and lead times being extended from two months to four months. These types of economic problems force companies to search for solutions that allow them to become more resilient and resistant to these sorts of changes, now and in the future.
Unfortunately, managing these changes can be expensive. The automation of vehicles particularly requires high capital expenditures. When an organization is looking to buy a new vehicle, typically, they need to purchase not just one vehicle, but instead a fleet of multiple, similar ones. This large capital outlay results in it becoming a difficult and costly buy decision.
Robotics as a Service provides a new solution for businesses to tap into autonomy while avoiding the upfront investment required to shift their business. While the concept of renting vehicles for industrial use cases isn’t new, autonomous vehicles represent a novel option for businesses and their leaders.
What Are The Benefits of RaaS?
In the past, industrial vehicles have depended on the “Buy It and Use It” model. But as the “As a Service” model has grown and become a more widely available option, material handling organizations are beginning to see its many advantages.
One of the biggest advantages of the RaaS model is that vehicles are maintained by the service provider. We can look at self-driving vehicles as an example. For the end-user, autonomous vehicles are very simple to operate. You simply push a couple of buttons and the vehicle drives to the next station, effectively completing its desired tasks.
However, under the hood, the technology is very complex. Thus, offloading all of that maintenance to an outside organization makes the vehicles much easier to work with. The end-user gets to take advantage of advanced technology without having to staff up and train a maintenance crew. This further allows workers to shift their efforts to other, more productive tasks, making processes more efficient without disrupting workflows.
In addition, RaaS users can expand or contract their fleets, based on changing demand. For example, a business may choose to bring in more autonomous vehicles during the holidays to increase the speed by which goods can be processed. But, after this, they can then scale down their operations to meet their standard demand. This creates a more flexible, “just-in-time” solution where you’re matching throughput capability to what’s required, rather than overbuilding or playing catch up to your true demand. Specifically at Cyngn, we have designed our software platform in a way that allows the end-customer to see the business case in action and then scale the deployment later on.
The final advantage of the RaaS model is that by shifting from purchasing assets to a rental model, costs not only become more predictable but they can also be spread out. Instead of purchasing an autonomous vehicle outright, an organization can reduce its payments by extending them out over time.
What Are The Obstacles With RaaS?
As with any new, advanced technology, there are several obstacles to making this shift that make it more difficult for businesses to switch to RaaS. One roadblock to adoption is how an organization currently structures their capital. Many businesses budget for vehicles in a particular way but RaaS represents a shift from CapEx to Opex. Therefore, some companies have to consider how they’re changing their investment structure or how they lay out capital for their year in order to accommodate this new type of business model.
Talent and adoption is another roadblock to implementation. While new technology is a great way to retain and upskill talent, it requires additional training to enable workers to use the new technology.
Third, implementing this new technology can be undesirable for a customer that has been buying assets that have, for instance, a 10-year useful life-span. If an organization purchased a vehicle last year, it may not make sense for them to integrate a fleet of new vehicles before the shelf-life expires on the legacy fleet.
How Does Cyngn Ease Roadblocks to Adoption?
At Cyngn, we have built our products to be as simple and usable as possible. Yet, we recognize that it is still a new piece of technology that may have obstacles associated with implementation. It can result in a slight or big change in the way that organizations design their operations and can take time. Therefore, our job is to ensure that these changes are as minimized as possible in order to maximize the value that comes out of this technology.
A part of this is our ability to help businesses that have existing vehicles. Cyngn is able to support retrofits. It’s an “in-between” solution that means companies don’t have to retire their assets or overhaul their entire procurement department in order to (a) turn on autonomous and also (b) pay for it using RaaS. Rather than looking for a problem to solve, this approach allows us to lead with our solution and apply it to a variety of applications.
We are specifically seeing the most traction right now in very high-utilization applications. For instance, a fulfillment center where there is 16 to 24 hours of uptime. In this scenario, Cyngn could implement a simple, high-level service model where the organization utilizes a vehicle every single day for a year. This results in high-utilization and the company would be charged according to a monthly or annual type license.
As the “As a Service” model continues to rapidly grow and we see continuous innovations in the AV space, we expect to see many new options for how to use products as rentals. In turn, we will continue to see companies benefit from these service models, increasing the utilization of their assets, decreasing inefficiencies, and remaining focused on their core competencies. This shift will ultimately create different opportunities for us to change the way that we use products.