July 11, 2019
Magazino Robotics announced that they are now offering their TORU autonomous mobile robot (AMR) with a new robots-as-a-service (RaaS) model, featuring a 6 cent per pick service fee. The “per-pick” key performance indicator (KPI) is a classic way of measuring throughput for warehouses, and this announcement simplifies the payment cost calculation for Magazino customers. The TORU AMR is capable of picking, transporting and placing items about the size of a shoe box, within the warehouse or distribution center.
RaaS is a competitive model
“There is an enormous demand in the logistics market for a performance-based pricing. We are proud to offer not only a unique automation technology but also a payment model, that provides flexibility and planning reliability at the same time. Pay-per-pick goes way beyond of usual Software-as-a-Service models. We strongly belief, that flexibility becomes the most crucial asset for fulfillment operations in ecommerce.”
Frederik Brantner, CEO and Co-Founder of Magazino
According to Magazino, the customer will pay €55,000 (~$63,000) for the TORU robot and THEN pay €0.06 per pick. The fixed payment of €55,000 is much less than what the unit might cost if the variable cost component wasn’t included. According to the company spokesperson, the €55,000 covers the base cost of the unit and then Magazino makes their profit from the variable per pick fee.
For the target markets in which Magazino is playing, performance based pricing is emerging as a competitive model. There are several other competitors in this space who offer their solutions in a RaaS model also.
A Pseudo-RaaS Business Model Emerges
Here at The Mobile Robot Guide, we’re surprised by this economic varient. However, we’re very interested to see how Magazino succeeds with it. By our calculations this is a “pseudo-RaaS” model where the customer is required to purchase the hardware and THEN continue to pay in perpetuity on a per-pick basis. The ongoing per-pick fee entitles the customer to the remote service and ongoing software/AI updates. In essense the per-pick fee is an ongoing maintenance fee based on the metric of pick volume rather than a fixed maintenance fee as percentage of the system price.
Let’s examine the costs to own a Magazino TORU robot in this business model:
If we assume several initial conditions for this model:
1. Throughput: 20 picks per hour, 2 shifts/day, 5 days per week, 52 weeks/year.
2. Human Worker: Average cost is EUR 12.37 per hour
3. 5 year asset lifespan for the robot. No throughput increase over the 5 year period.
Figure 1 (below) illustrates the “Cost per Pick” over a 5 year span for the TORU robot with an initial EUR 55K purchase plus EUR 0.06 cost per pick versus a human warehouse worker making EUR 12.37 per hour. The comparison is at a sample pick rate of 20 picks per hour.
Figure 1 – Per Pick Costs: TORU vs Human Worker over 5 years
Analysis
The new Magazino business model is interesting in that over a five year span the TORU system is a better economic choice vs a human warehouse worker. However, there will be a capital hardware replacement charge at some point which will reset the calculations. This RaaS variant is a mixed CAPEX / OPEX model. As a result, the CAPEX element will subject the Magazino sales cycle to the demands of getting capital expenditure approvals from their customers buying team. From our experience sellling enterprise solutions and automation projects in the past, this will not shorten the sales cycle by any measure.
We think that a better model would be to go with a pure RaaS business model and simply charge a fixed rate per pick, without the initial lump sum payment. The pure RaaS model provides the warehouse owner with a more predictable cost in handling the product in the warehouse. It also dramatically shortens the sales cycle as it’s a pure OPEX decision. This is the model used by Magazino competitor InVia Robotics.
For more information: https://www.magazino.eu/pay-per-pick/?lang=en
