Latest / Speaking of Supply Chain / Intralogistics Financing: Enabling Automation Advancements

Transcript

Intralogistics Financing: Enabling Automation Advancements · Speaking of Supply Chain

0:06
You're listening to Speaking of Supply Chain, a Mebach podcast. This is a
0:10
show for logistics professionals looking to learn more about the latest innovations in supply chain.
0:16
Each episode will feature a conversation on topics such as mitigating supply chain disruption
0:20
and reducing risk, current automation trends, sustainability initiatives, and more. Let's
0:26
dive right in. Hello, and welcome to Speaking of Supply Chain, where
0:32
we explore trends, current events, and innovations impacting the logistics and supply chain
0:36
industries. I am your host, Ellen Wood. Today I am joined by
0:41
Marco Wagner and Marcel Reinhart, and we are going to be talking about the
0:47
options for asset financing in automation and logistics. And so welcome Marcel and Marco,
0:56
thanks for having me today. Thanks Hellen, thank you. So I'm
0:59
really looking forward to our topic today. I'm sure that a lot of our
1:02
listeners are interested in the financial aspects of supply chain and what options are available
1:07
out there for them. So we are here today to talk about asset financing.
1:11
And this is a unique way of acquiring some of these automation installations and
1:21
equipment that's different from the typical way that companies go about trying to figure out
1:27
how they're going to pay for upgrades into their facilities. So Marco, can
1:33
you tell us a little bit about yourself and DLL sure. Yeah, my
1:38
name is Marco Watner, located in Germany, coming from the famous Rugaby area,
1:44
and I'm working for Data already for twenty three years del being a global
1:49
asset finance company, and we organize in business units according to the axis we
1:53
are financing. And I'm actually responsible for a global team of intrologistics specialists focusing
2:00
on all the equipment going to the warehouse and especially on the automation side.
2:04
And I said, I think we're coming almost almost from the same region.
2:07
Yeah, that's why, both children of the Ruga bit area where let's say,
2:15
let's say we say we're very direct in a sense. So that's why
2:17
Mark when I we also get along, of course then mostly in German language
2:22
without the big extent German extent. But yeah, you are actually fifty it's
2:25
more than more or less fifty fifty kilometers as a way, but also myself
2:30
try to manage a global the global meback communities. So from a small area
2:36
but going big and globally are basically So why the partnership between the two companies.
2:43
I mean, I can see it from my perspective, But tell our
2:46
listeners a little bit more about why DL would want to partner with Mebach.
2:51
I mean, if if you're just a banking and financing company, what's what's
2:54
the appeal? Yeah, good question, Ellen. Actually, there are two
2:58
main reasons why we are partner with Mebach. First of all, we want
3:01
to support our customers and the customers business case automating their processes very early in
3:06
the process when they start thinking about it. And obviously Mebach is very early
3:12
talking to the customers when they're thinking about automation, so the financing part comes
3:16
also. Then together with the best technology they are looking for, then we're
3:21
helping customers making the business case. The second reason being all of our customers
3:27
thinking about automation at the moment. Historically we're financing manual forklifts, trucks and
3:31
trailers, and with the change in the supply chain technologies, yeah, we
3:37
are making this move with our customers and customers looking for support for advice which
3:42
we as a bank or as a leasing company cannot provide. That is why
3:45
we are partnering with professionals like Marcelle and his team to help our customers making
3:51
the move from a manual operation to an automated operation. And so Marcel on
3:57
me back side, how does this partnership add value? Yeah, that's a
4:01
good one. I mean, as you know, and it's maybe the folks
4:05
out there now we basically design the warehouses, the wares of the future,
4:09
the deg of automation, and then when it comes along that, let's say,
4:13
evaluating different technical alternatives than to the business case. The usual traditional assumptions
4:19
or mindset was those Okay, listen, there's a fifty million invest on the
4:23
table. We need to deliver the cash and then it's a cash out solution
4:26
and basically the money has gone and then maybe you need to wait, let's
4:30
say something stupid five to seven years until this fifty million gets biting because of
4:33
the savings and the technique technique you want to allow yourself in the in the
4:38
warehouse or the production facility doesn't matter. And now with DLLL we have a
4:43
different ball game, so to say, because there are another option and Marco
4:46
can explain this maybe also later to make maybe a finance lease or an operating
4:50
lease to basically fully variablize the cost and then this fifty million is thread across
4:56
five, eight, ten years and then basically have immediate savings and then it's
5:00
a different ball game to our customers and in the end, but ask meach
5:04
also enlightens us is to get the project executed. So it's a different,
5:10
completely different scenario, different business games, UH talks, and this is why
5:15
we definitely appreciate the support of DLEN and I've been also working over the happily
5:20
together the last two years. So I mean, financing is nothing new.
5:26
Anyone who's bought a house or a car or made a large purchase of this
5:30
type is familiar with financing. And Marco you had said you're you're with DLLL
5:35
twenty three years, so this has been around for a while in terms of
5:40
asset financing M and you would also mentioned that you you prefer to come in
5:46
in early in the process when we're starting to work with clients. So is
5:49
that the best time to come in. Is this radically new to some of
5:55
the clients that you're you're working with or in sharing this in formation with you
6:00
know, how is this not more common and more noun No? That's a
6:04
good question. So actually financing is not new. You absolutely spot on deal
6:09
even doing it more than fifty years. I'm only twenty three years with Dealer,
6:13
but even before that they did it. But financing was more let's say,
6:17
for commodity assets for four cliff trucks, trailers, cars where it started
6:23
in the industry. So, but an intro logistics warehouse and high base system
6:28
and fully automated stacker crane system is something very different, and therefore you need
6:32
to have different structures because there are different drivers for the customers how to finance
6:38
it. On a commodity asset, you normally have sixty months down to twenty
6:42
percent residual or what maybe it is. But in the intro logistics space,
6:46
there are so many different drivers for the customers which drive then the decision how
6:53
to finance it. It can be short term, it can be a long
6:55
term, it can be on off balance, it can be financed leads as
6:58
myself operate lease. And the business case is so unique, so you need
7:03
to understand the business case of the customer to come up with the best financial
7:08
solutions. But money behind is not is a commodity, that's for sure.
7:12
But the structure of the lease. This is something unique and where Dealle has
7:15
developed capabilities and market knowledge over the last years doing that. So it really
7:20
does depend on the individual business, their needs for automation and their needs for
7:27
whatever that flexible financing terms are going to be based on those business needs.
7:32
It's not a cookie cutter solution. Spot on, Yeah, absolutely right.
7:36
And so what types of companies do benefit the most from this flexibility. Actually,
7:42
I think there is not a standard customer type. So we are working
7:45
with global multinationals who have different demands in terms again of balance sheet and then
7:51
the cash flow and the budgets, but also small medium sized companies looking for
7:57
automation at the moment they have another they have other drivers to finance with us.
8:01
So it's not a customer who's not thinking about automation these days. So
8:05
because the common thing in the market is there are no labor available, so
8:11
the labor sholtage driving big, small and medium customers into automation and this demand
8:16
getting bigger and bigger and depending again on the needs of the clients. We
8:20
are structuring the financing, but at the end of the day, every customer
8:24
can benefit from it. So Marcelle do we have any any customer stories that
8:28
we can tell of, you know, ways that we've we've brought DLL into
8:33
the conversation and been able to realize some of these these designs that Mebach is
8:39
able to bring to the table and get something going and go live with the
8:43
implementation that they otherwise may have not been able to accomplish. Yeah, actually
8:48
we do. We have a couple of them. Maybe I can also talk
8:52
about a specific one which would be maybe from the f MTG so passon from
8:56
Sumer Goods. But to comment on what Marcus said, I fully agree that
9:01
if you think about the all the industries we have there, I think that
9:03
the degree or sorry, the demand for automation is independent of the industry,
9:09
just the technical alternative, which is different ratem so depending on on the throughput,
9:13
depending on the inventories levels to set for a PP. But yeah,
9:16
it's basically applicable of all industries. To your pointed to your question, alan
9:22
Um, Yeah, we have a we have a big global player on the
9:26
market. We work together with Marco and team. And yeah, besides,
9:31
let's say let's take my fifty million. To imagine how to finance the fifty
9:35
million. I think it's for us mebach starts together with the other starts one
9:39
step earlier, because we also have sometimes the problem the check in act problem.
9:43
Then where a service provider three pl is involved to say traditionally, let's
9:48
say customer x y Z, which is specifically i FM the G driven,
9:52
but applies again for all other industries that they say, okay, we usually
9:54
want to outsource our operations. We want to outsource our magical HANDIB equipment.
10:00
And then you're sometimes to check an a problem there. They said, okay,
10:01
we know the location is great, we go, we know that's going
10:05
to be our warehous of production facility of the future. But then there's revealed
10:07
says okay, listen, hey, if you really want to if you really
10:11
should invest into this technique, we want to have the fifteen years commitment on
10:15
this plot and for this for this invest right and then maybe there's readers that
10:18
place. You know, we also want fifteen years. So with this like
10:22
deep coupling, basically operation the technique and the plots from each other and have
10:28
different players at and then the L jumps into the automation. You're basically for
10:31
the end customer view, you make yourself less dependent on it. And to
10:35
come back to your come back to your question. So we did this for
10:39
a big player and they actually changed this about to change so purely three pl
10:43
dependent in the past, always this dependency and now with this option of the
10:48
L we have first of all the option to fund it to be able to
10:52
fully ter raise the cost, which is a completely different business case. They
10:56
add to an earlier point to make to example, the way for seven years
11:00
until the first savings tick in for the payback of seven years UM. We
11:05
now have basically savings from day one. Plus we have another feature that they
11:11
take basically the equipment which has been bought by YELLL and leads it from DLLL,
11:16
which is a different kind of relationship, different argumentation. So one other
11:20
question that that that made me think of, so does this mean that when
11:24
companies are looking at these these automated solutions and they're leasing them essentially from DLL,
11:33
that that protects them against some obsolescence of the technology. As as time
11:39
moves on, we're seeing that some of this automation is advancing at light speed.
11:43
It's going so fast it seems um does does this asset financing also give
11:50
them obsolescence protection? In that if they need to adjust or change or renew
11:56
some of those those automation solutions, that they can do that more easily than
12:01
a cash purchase. Absolutely, and so there are various potential obsolescence. It's
12:07
one is the technology obsolescent, that the technology doesn't will not be supported anymore
12:11
by this by the supplier or the software. But also in the case of
12:18
three Pail, maybe the three Pail loses his contract or the contracts won't be
12:22
extended, so they have equipment purchase, but they don't have the right customer
12:26
for that anymore. So then also the equipment becomes obsolescence. And also maybe
12:31
if talking about an end user, if he's just he's changing his businesses or
12:37
any other types of supply chain operations, so he may need to change equipment
12:43
or d equipment. Then in a leasing solution, it's much more flexible rather
12:48
than buying it. If you bought something, yeah it's yours and you need
12:50
to deal with it if something changes, if if it's on a lease,
12:56
we can deal with it and we can help the customer changing it or adopting
13:00
to the new requirements. So what does this mean for companies in the near
13:05
future? I mean in the next let's say five, ten years, or
13:09
even the long term future. I mean right now, interest rates are all
13:13
over the place. They've they've been high for a little while. They're starting
13:16
to come back down. But what does this mean for clients as they're making
13:20
decisions today, but also as they're looking out into those planning horizons. Yeah,
13:26
actually, I wouldn't say necessarily interest rates are high. We are just
13:28
used to very low interest rate over the last year. So in my age
13:33
I saw interest rates of ten fifteen percent in the past. So what is
13:37
still the cases that bank funding or leasing is still cheaper than equity, and
13:43
using your own equity, the return on investment, I guess is less than
13:48
using thought party money, which makes a business case much more attractive. So
13:54
and because of the simple demand, there is also not enough cash anymore in
14:00
the company, so there is fight and a competition for budgets. But there's
14:03
on the other hand, so much demand to invest in automation, so that
14:09
we strongly believe that together with Viva, we can be a project enabler helping
14:13
the customers. Really to do the investment then you need to do now.
14:16
And the good thing was it is you're still securing the interest rate of today,
14:22
So whoever knows what we're happening with the interest rate one, two,
14:24
three years from now. So as soon as the least facility has been signed,
14:30
the monthly costs are fixed for a term of five, six, seven
14:33
years, so there is no inflation on that. So we're fixing the leasing
14:37
rates at the day when customers signing the agreement with us, so that protects
14:43
customers also for inflation on costs during the entire term of the financing. So
14:48
there are pros and cons. You're right, interest rate a bit higher than
14:50
we were used, but it's still very attractive if you're compare it to equity
14:56
for example. Yeah, we were pretty spoiled by that slow interest rates for
15:00
a few years. So Mark, Marcel, what do you see in terms
15:07
of trends with industries? Is anything going to be changing industry wise? Um?
15:11
You know you had mentioned FMCG and of course logistics service providers. Are
15:18
those the two biggest industries that utilize this this capability or are other industries going
15:24
to be jumping on board and saying yes, me too, me too.
15:28
Yeah, I think I highlighted or flesh that the earlier. So I think
15:33
let's say the demand for automation is fall industry the same as in a sense
15:39
that universal exactly so because the drivers are the same as Markus spotted on the
15:43
right, labor short just increased or not only number of labor, but also
15:48
specialized labor. Right, So this is there's another one which then also plays
15:52
in two cards when I say we talk about automations, so you also need
15:54
people to let's say in the best gusts to know too to use the stuff
15:58
right, which is in the warehouse. As I said, industry wise,
16:02
I think that the technique alternatives are just different. And this is of course
16:06
what we do with me Bach day by day too, based on troop but
16:10
based on imagory levels and so on and on to determine what's what's the right
16:14
one. Um, but I think exactly what they need is and but the
16:18
macroeconomic drivers are are the same, which enforces UM automation M one hundred percent.
16:25
And that's why I think this. Yeah, I think when you would
16:29
ask Marco for the future predictions of leasing or financing amount, I think Marco
16:33
can confirm that you're talking about that single digit growth numbers more double digit.
16:40
So um, yeah, that's the future undred percent. Definitely, this trend
16:47
can only accelerate. I said, the market is accelerating, growing eleven twelve
16:51
percent year over a year on the equipment sale. I think also the demand
16:55
for financing will accelerate. And as we figured out or ready, I think
17:00
that the need for flexibility will also accelerate because three PR contracts getting shorter,
17:07
ses the cycles and the predictability of the business getting shorter. So companies need
17:11
more flexibility. On one side in terms of technology, so from a very
17:15
static automation system to a more agile and maybe adaptable systems like AMR system which
17:22
you can scale up and scale down pretty easily. But also in terms of
17:26
again financing, rather than using KPEX which is static and then you you've paid
17:32
it and it's out of the door and then will not come back again,
17:36
two more flexible solutions. So we see these flexibility need at every discussion we're
17:41
having with our customers. So all right, so in terms of the partnership
17:47
and the joint value proposition between ME BACK and DLL, what can our customers
17:52
expect from you? What can our potential customers expect from you? I can
17:56
go first, mark, when then you jump in right away. So basically
18:00
as as you know island that we have supply chain consultancy, suppled chain engineers
18:06
how we used to like to con us that's double past and anyhow, so
18:11
this is a supply chain dimension. So to really determine the best into logistics
18:17
or the best material flows, so the internatural the best cost per unit,
18:21
cost per palette what it is. But then we're bringing another angle. It's
18:23
another dimension to the business skate, which financing element right, and then as
18:27
I explained or earlier like basically you don't need to you don't need to calculate
18:33
two different business cases. And just basically I wouldn't say financial trick. It's
18:38
not a trick. It's just just a different view on the numbers. It's
18:42
instead of the kepex out you basically create and I have to say, you
18:45
asked me for the joint better position, and we work too glad together,
18:51
not necessarily an old project from the start because for some project doesn't make sense.
18:53
We also have to be very fair that there are customers out there always
18:57
want to own the equipment, right and if this is a pretty clear then
19:00
I mean we can still somehow finance it and then later they will finance lease
19:04
and then have the equipment. But they are customers out there wo prefer to
19:07
take their own cash. Right, So just to say that, my point
19:11
is that of course we can, we can include Marco and team and talk
19:17
about okay um and this I also have to give Marco and the team.
19:19
They have a very quick turnaround. So we when we work together and the
19:23
question comes okay, this is now the fifty million and based this is in
19:26
country X y Z and based on the current interest rates and based on what
19:30
the preferences of the customers they usually have, let's say turn around of let's
19:34
say, what is the twenty four or forty hours to come up with a
19:37
with a quote, and which helps of course our customers that they don't need
19:41
to wait, I don't know four weeks and say no, I need to
19:44
go to my own finance department and check this. So basically we try to
19:48
check all the boxes of the customers say oh, they could ask this question,
19:52
Oh wait a minute, we have already answered to this one question.
19:55
So this is how we work together. And then of course it brings a
19:57
huge value and times even customers surprise as us as known as the supply chain
20:03
the play chainners as we also have financing topics on our radar am of course
20:08
with the ether, Yeah that we've already anticipated that need. Yeah, just
20:14
a complimentary then it was spot on, I guess. So, yeah,
20:17
the customer just can expect making their life easier. So we want to enable
20:22
their projects and not leaving them alone on the consultancy side or on the financing
20:26
side. So it's three sixty solution we are providing which is tailored again to
20:32
the business case of the customers, and not leaving the percuma manager alone with
20:34
yeah, how we get paid for it or how we are paying for this,
20:38
So it takes one burden off the shoulders of the percuma or warehouse manager
20:45
and enables us as a lease can be also to helping our customers with questions
20:49
they may have in house which we cannot answer. So it's a mutual partnership
20:56
that me both customers benefiting from payments, illusions and investment solutions and all customers
21:02
betting from the advice when customers thinking about automational sure. Yeah, and I
21:07
also wanted to point out for our listeners out there, just because you know
21:11
this, this podcast is put on by me back and we've got Marcel here
21:15
and and there is a partnership between the two companies. Customers do not have
21:18
to use me bak to be able to benefit from the DLL financing options.
21:25
You can you can go just to DLL and use that. Of course,
21:27
Mebak wants your business as well, and if there, if there is a
21:30
need for it, Marco's going to point you in our direction. But um,
21:34
it's not a requirement that you use me bak to to go to be
21:40
able to access the financing from DLL. And just to compliment all and if
21:44
I may, if we have some timeline, um, just to give the
21:48
folks also some numbers, right, I mean, let's we looked into actually
21:52
while let's say implement hearing, sorry, into our concept design studies, so
21:56
the face where we plan a wales and then say, okay, this is
22:00
so stick again with my example that's the fifty million, and then looked around
22:03
after one year and asked the customer sometimes you know it, right, has
22:07
the project been implemented? So has the where has been realized? Right?
22:10
Has it the fact we've been realized? Yes or no? And of course
22:12
we don't know this to the to all the truth and to all the feedbacks,
22:15
but if we asked our customers, what was the reason why you haven't
22:18
implemented? Right? Um, oftentimes it was the reason. Further, even
22:22
that the customers, okay, listen, the plan was really good, but
22:26
the stakeholer changed. We put this somewhere in the cupboard somewhere. It's still
22:30
a good concept, but the timing was not right. What they said then
22:34
it's now exactly what Marco was saying. That is, Yeah, the invest
22:37
was why the payback was to payback time was too too long. So if
22:42
you would do this again as a high level, we would assume that we
22:45
would have thirty to fifty percent of the project we have been designing for could
22:49
have been implemented. So of course it's it's a lot down, but hypothetically,
22:56
based on the based on the answers we get them from the customers,
22:59
it's a pretty solid number. Right So um, yeah, we could have
23:03
we could have even more automation already out there. Right now. That's interesting
23:10
because you know that these these clients didn't come to us or to any you
23:14
know, design firm to ask for this design or to ask for this this
23:18
new facility. Um and and just to spend the money on this design project.
23:23
They don't make a design project for no reason. They obviously have a
23:27
need and a desire to see this through once they have a plan, and
23:33
the fact that that many of them are not able to realize these plans is
23:37
very disappointing. So that makes me very glad that that DLLL and Marco are
23:41
here to be able to offer them another option that would get them across that
23:45
finish line und percent. And also what I can say is that also into
23:51
ut with Mebach. I think to all the MEBA folks who are listening to
23:53
this podcast, I hope that many they think there's also nothing worse than plan,
24:00
plan, plan, but nothing is execular right, So in the same
24:03
of course, the customers comes first. But this is also something where it's
24:07
always nice to see, let's say your baby fly right. So if you
24:11
plan something, you will exactly all that hard work for nothing. So I
24:17
know that that Mebak is global. We have offices around the world and DLL
24:22
also has a very large footprint. Are there any of the areas that we
24:29
service that are not able to ask or they are not able to get the
24:34
financing options through through Mebak or I guess to Marco, you know where where
24:41
is this available to clients? Are there any geographies where you don't work?
24:47
Yeah, obviously we cannot service all the world. Unfortunately, we would love
24:49
to. But we have our global footprint which is nine percent by coincidence,
24:56
the same footprint as Mebach has. So we actually we are in Europe in
25:00
all Western European countries, and we have Poland Hungary in the America's region.
25:06
We are in Canada, US, Mexico, Brazil and Chile to see some
25:10
of the flags behind me, and in an Asia peck. We are also
25:15
in New Zealand, Australia, career in Singapore. So actually in these countries
25:19
we can support me by customers and our customers with into logistics financing. In
25:25
countries where we don't have a present, unfortunately we cannot. Simple reason being
25:30
we need to avoid in this business tax and legal issues. If you do
25:36
these things cross border, the burden onto the customer investigating legal and tax issues
25:41
are too high, so we say better quick no in a country where we
25:45
are not But I guess eighty percent of the global economy we can cover.
25:51
That's fantastic. That's fantastic. So where can our listeners reach out to you
25:56
on LinkedIn absolutely, so I have a LinkedIn profile deal l as website,
26:02
dalagroup dot com and yeah, more than happy to take contact with any customer
26:08
who's interested in exploring opportunities. So of course this is something which is available
26:15
and for free, so our services are for free when we're getting the deal,
26:19
so we are not charging any any advisory fees. So but you're happy
26:25
to do any any phone calls or emails. It's everything is on LinkedIn now,
26:30
well fantastic. I will make sure we have those links to your your
26:33
website and your LinkedIn profile in the in the podcast description. Well that brings
26:37
us to the end of this episode. Thank you so much Marco and Marcelf
26:42
for joining us and sharing your insights on what I'm sure many of our listeners
26:47
have come up against in their facility designs and plans and updates in the past.
26:52
I hope our listeners have enjoyed the discussion as much as I did and
26:55
found some useful information for their next project. So they have a way to
27:00
get in touch with you now if you have a suggestion for a topic or
27:03
would like to be a guest on our show. We'd love to hear from
27:06
you. You can contact me at podcast at mebach anytime. As always,
27:11
thank you for listening and tune in next time. Thank you so much again
27:14
for you, Thank you, Thanks Aileen. Mebak Consulting is one of the
27:22
largest and most globally recognized supply chain consulting, engineering, and advisory firms.
27:27
For nearly fifty years, we've helped clients achieved supply chain excellence and sustainable competitive
27:33
advantage across the entire spectrum of the supply chain by delivering improvements and innovation strategically,
27:40
tactically, and digitally. To learn more, visit meebach dot com.
27:45
You've been listening to Speaking of Supply Chain, a mebok podcast, keep connected
27:49
with us by subscribing to the show in your favorite podcast player. If you
27:52
like what you've heard, please rate the show that helps us to keep delivering
27:56
the latest in supply chain information. Thanks for listening. Until next time. M