Join me, Tom Raftery, in this episode of the Digital Supply Chain podcast as I sit down with Steven Dana, a Partner at Drake Star Partners, a technology-focused investment bank. We dive deep into the world of supply chain automation, discussing the latest trends, challenges, and the impact of technology disruption on the industry.
In this conversation, we cover the labor shortages affecting the supply chain, the adoption of automation in various industries, and how the competitive landscape is evolving for both established players and new entrants in the market. We also discuss the increasing focus on sustainability, electrification, and environmentally friendly practices in supply chain automation.
Steven shares insights on what investors are looking for in this space, from profitability and scale to innovative technologies like vision-based solutions that combine machine learning and computer vision. As a bonus, we touch upon how ChatGPT and robotics could potentially revolutionize the industry even further.
If you're interested in understanding the future of supply chain automation, the role of technology, and how it affects businesses worldwide, this episode is a must-watch!
Or if you prefer to listen, check out the audio-only version of this podcast https://www.digitalsupplychainpodcast.com/354320/12691354-meeting-supply-chain-labor-shortages-with-cutting-edge-automation-solutions
🔗 Find Steven Dana on LinkedIn: https://www.linkedin.com/in/stevenjdana/
🔗 Read Drake Star Partners' Supply Chain Automation Report: https://www.drakestar.com/sector-expertise/industrial-tech
Keywords: Supply Chain, Automation, Robotics, Technology, Investment, Sustainability, E-commerce, Labor Shortage, Warehouse, Digitization, ChatGPT, Electrification, Drake Star Partners, Machine Learning, Computer Vision
Tom Raftery: Hi everyone. Welcome to the Digital
Supply Chain podcast. My name is Tom Raftery, and
with me on the show today, I have my special guest, Steve. Steve, welcome to the podcast. Would you like to introduce yourself? Steven Dana: Thanks, Tom. Glad to be here. I am Steven Dana. I'm a partner at Drake Star
Partners, and we are a technology focused investment bank. Tom Raftery: In over 300 or so
episodes of this podcast, Steve, I've never had a technology focused
investment bank on the po
dcast before. What's that got to do with
supply chain number one and what is it an investment bank does? A technology focused investment bank does? So two questions. What, what do you guys do and what's
that got to do with supply chain? Steven Dana: We help companies raise
money and we help, when they're going to get sold or seeking an exit and sometimes
something in between quite often actually. And then, supply chain, as you know very
well, is being disrupted by technology and there's, that me
ans there's tons of
change and tons of disruption and tons of new companies forming and growing. And I'm part of that ecosystem,
helping, those companies, raise money and, and exit. Tom Raftery: Okay. And do you specialize in supply chain
or does your company specialize in supply chain or, you know, where
where does supply chain fit into the whole, the whole picture? Steven Dana: I focus on
supply chain automation. It's kind of a broad term, sort
of what does that really mean? To me it's, the te
chnology, particularly
for me, it's emerging and advanced technology that is in the warehouse and in
the factory primarily around, robotics and sensing software and advanced services. And my firm, Drake Star, we're. Our technology focus covers a variety of
areas, and I lead that focus around the industrial technology, supply chain area. Tom Raftery: Okay, cool. And you recently came out with your
supply chain automation report. Can you talk to me a little bit
about what kind of, findings you cam
e out with that that report? Steven Dana: Yes, it's an interesting
time in the financial markets. And you know, it's been definitely,
I've been part of, as an advisor, for I guess the better part of 20 years now. And so I've seen a few of these
cycles, each being unique, but there's some, you know, some
lessons to be learned across them. In this current one, and from, you can
see in our, in our, report, deal volumes. So companies, you know, the number
of companies raising money, let's say mm-hmm
, or selling broadly around
technology, have decreased sharply, since, call it summer of 2000, you know, 22. But if you peel back the onion a bit
there around this area that I cover, supply chain automation, deal volumes
were actually slightly up from what was record levels already, going into the
beginning of 2022, and then in 2021. The dollar value of those deals has
come down a bit and that mostly is from a reduction in the very large deals. But we are talking about you know, smaller
growth t
ype companies, which is, you know, growth and mid-cap companies, what,
what we focus on, not so much, companies going public or those sorts of things. In that area, there's been a lot of
energy continuing, and a lot of deals. So that was one large takeaway. Some of my clients are realizing when
they just read sort of the headlines. It, it's not as obvious. Tom Raftery: Okay. So there's more happening in supply
chain than in a lot of other sectors. Steven Dana: Yes, exactly. It's in, say, FinTech
and, and other areas. There's been a dramatic reduction
even in those other, smaller midcap deals that don't rely as much
on debts or the public markets. Even in that area, you know, other
technology sectors there's been a, a large decline, but in supply chain
automation, it's still going strong. Why? There are, well first of all, there,
there are a couple macro factors. So one there aren't enough people
to do the work that needs to be done in a factory, in a warehouse. Okay. And the companies
that I'm working
with often are helping, not replacing people by any means. They were mostly, they're, keeping
people in the loop, but helping those people do so much more and
helping you know, customers satisfy demand without, having those, people. So that's helpful. Also there's been a movement
towards you know, reshoring. factories and production processes
back to, to the US, and we tend to have a kind of a global view, but
just thinking from the US perspective, that's another thing affecting
things. And also the tech is just
getting better, right? Um mm-hmm. What to be sort of science
project stuff or, you know, pilot, we call it pilot purgatory. It's now, you know, production
scale things that are occurring. Tom Raftery: Okay. Fascinating. You were at ProMat this year the, the, the
big conference in Chicago, I think it is. What were the takeaways you got from that? Steven Dana: There were a couple themes
that jumped out from, ProMat and around technology and I think are worth. And
I think, you know, quite
different from the last time I was there, which, which was, you know,
admittedly a couple years ago. The first being electrification. So the industrial, a lot of the industrial
world is turning to is electrifying. And that, obviously there were more sort
of battery storage, electric storage systems, charging systems and that
sort of thing than I would've expected. The robotics companies, which, you know,
used to have sort of smaller booths and weren't as core to the sho
w are now
massive booths all in the center with huge lines and a lot of energy around that. And becoming, very large, companies. And I think those were actually
the two, you know, main technology themes that I, that I noticed. Tom Raftery: And when you say
electrification, is it like electrification for electric
vehicles or is it like electric arc furnaces for for smelting iron
or, or where, where are we there? Or, or somewhere in between or all of the
above or, what kind of electrification? Ste
ven Dana: So electrification of
the charging infrastructure and of OEM vehicle would be the simple way to put it. And then the digitization of those
vehicles and allowing them to be intelligent and know where everyone
is and the safety elements of it. So I guess would be broad. A more, I guess a better way to say it
is the digitization of, of the vehicles within the supply chain and then all the
data and intelligence that's around that. Tom Raftery: And the
other one is robotics. So there's a hu
ge uptick in interest
around robotics, at least at ProMat. And are, is that reflected in,
in deals you're seeing as well? Steven Dana: Yeah, I mean we we recently
plug, we, it's my plug, but we recently raised money for a company That's that's
in the robotic space that does sort of welding automation, which is in that
factory side of what I, what I focus on. But also on the supply chain side
there's been, you know, an increase in very large deals around robotics,
though we have a company like L
ocus Robotics or Auto Store that are now,
you know, becoming quite massive. Tom Raftery: Okay. What are some emerging technologies or
trends that you think will have an impact on the future of supply chain automation? Steven Dana: I think the machine
machine learning algorithms integrating with autonomy is
something that's been happening. But it really feels like we're on the
precipice of something even greater. And it, it's been certainly been in
the news lately around, you know, ChatGPT and, y
ou know, language models. And it's not clear I haven't seen that
world merge yet with the autonomous companies in supply chain automation. But it's really interesting to imagine
how that, could start, happening. But on the more, you know, practical
day to day basis, it's just everything's being digitized and there's the, the
different equipment and even people right, are becoming part of larger sort of
data platforms that are being optimized. In a way as maybe several years back,
it was a bunch
of point solutions. Nothing was really integrated. And now you're getting credible
you know, real solutions that are looking at this digitized warehouse
more as a whole holistically. Tom Raftery: Yeah. Yeah. you mentioned ChatGPT there, and
I, I, I think it's fascinating. It has been revolutionary, obviously,
I mean, fastest app to, was it a hundred million users ever? Combining that with robotics. If you could have a kind of a humanoid
robot or a robot with a kind of a human face interface that
can then
can then speak back to you because we've got text of audio is no problem. Now we've got these large language models
as well, so suddenly you could have these helper robots that you can interact with. You can speak to them potentially. I mean, this is, hasn't arrived yet,
but you know, this is where I see the two of them coming together. You know, you get your robot
and you get your large language model with a, with a ui. Mix the two of those together,
and suddenly you're speaking in na
tural language to a robot, and
it's replying to you in the way that ChatGPT replies to you in text today. The robot replies to you in the same
way, and understands and carries out the tasks that you ask it to do. I mean, that's gotta be the next
big thing, right, in automation? Steven Dana: If it is it would be
really interesting to see which companies you know, which players. So how does that disrupt the existing
ecosystem of those companies that are, you know, making a lot of
money selling tec
hnology into warehouses and, and, and factories,
of course, more broadly than that. Because I think those are very different,
kind of companies that are than the ones that are, doing that today. And I can't sit here and pretend to
know how all that's gonna play out, but I, I love just, it just, you know,
gets me out of bed in the morning. Being part of all this technology
disruption which is seems to be changing at even faster pace every day. Mm-hmm. And I know guys like you are, are,
you know,
keeping up with all of this and that's, it becomes harder
and harder every day, I'll tell you, but it's super interesting. Tom Raftery: Sure. Are there, are there any
industries in particular that are adopting these kind of automation
technologies, better than others? You know, who, who are kind of the,
I don't wanna say the winners, but who, who are the, the leaders in
the space taking up automation and who are the bit of the laggards Steven Dana: In the, so the, one
of the most demanding areas
of the supply chain is around e-commerce. And also there's just a lot of you
know, dollars going into that process. And therefore what we've seen is the
companies that are focusing in on the e-commerce you know, section of, of
logistics tended to be the ones that grew up, you know, faster and therefore,
you know, attracted more capital. And there's a bit of a
reinforcing cycle there. So with the, you know, consumers want
what they want, when they want it, and that meanwhile we don't have enough
people, as we mentioned earlier. So technology's so needed
in that world, right? So that's been the area where we see the
most adoption, the biggest companies. But there's other areas that are, growing
very quickly, like a harder or another area which hasn't had as much adoption
perhaps would be areas where there's smaller volumes with each thing or unit
being unique because you, you wouldn't make sense maybe to set up a robotic cell
for, you know, something where you're gonna have to change it
in an hour, right? Because you're making a different
thing, a widget, whatever it is. Sure. I heard about an example
of that with cabinets. So apparently cabinets
are often custom made. I've never had custom cabinets. I think I'm actually doing
something wrong, so that's an area where it's really been very. You know, manual, right? But there are companies that are emerging
that are helping you program robots very quickly and using cobots versus a
large industrial kind of kind of robot. And so a
reas like that are areas where we
we're seeing the technology get to a point It's good enough or will be very soon. Right. So that even those, well maybe we
can call it the long tail of the supply chain will also be automated. And I've heard, I can't verify
this, but that portion of the supply chain is actually larger. Right. In terms of maybe people
or you know, total dollars. Tom Raftery: Okay. Okay. The e-commerce one makes a lot of
sense, I guess, because many e-commerce companies would be d
igital native
anyway, they would've started off you know, being, be, being an e-commerce,
they would've started off being digital. And of course it's a very
low margin space as well. And so, and you know, to your point, it
is quite warehouse and labor intensive. So in a time of labor shortages,
I can see how they would jump on automation very, very quickly. Steven Dana: Far. Yeah. They bought, you know, like
Kiva, like Amazon bought early on and Shopify bought Six River. Just underscoring that,
that
point that you just made. Tom Raftery: Yeah, absolutely. So Steve, as, as the supply chain
automation, as it starts to become more widespread, how do you see
the competitive landscape evolving for both the established players
and new entrants in the market? Steven Dana: I think it's really
interesting because whenever you have this kind of level of disruption, you have
the opportunity, you know, of technology disruption, you have the opportunity for
new players to emerge, right, that were o
nce, you know, just startups, right? That become big companies. And we are seeing that with some of
the companies I'd mentioned earlier, but many more that I didn't mention. Yeah. So I do think that we'll continue
to see some larger players become mammoth companies. In addition to that, there have been
a lot of companies that have raised, you know, a lot of money over the
years and may find a home, you know, within the existing that are players
that largely do control the market. On one end you'
ll see some of these
companies who have successfully raised and are now quite revenue generating
perhaps be, you know, not acquired, but their own, be beyond their own large. We do think that we're gonna see a lot
of consolidation of this longer tail of, of companies that have, you know,
in many cases fantastic technology, but perhaps because of, say distribution
advantages within a larger company or maybe with a technology they have once
married with a larger platform would be, you know, a fant
astic fit, but on
its own, may not be like a company. We think, you know, we'll see a, a
lot of activity in the space, just generally of both those things. Tom Raftery: Okay. You mentioned electrification
already, but how else do you think an increasing focus on sustainability and
environmentally friendly practices might impact the development and adoption of
supply chain automation technologies? Steven Dana: We're seeing it a lot maybe
outside of the, the warehouse when you know, you're startin
g to think about
the emissions produced by all the trucks and planes, trains, and automobiles
moving things around the world. And there are we've seen a few different
business models that have some, it's their central focus, but other just as a result
being, you know, far greater efficiency. So I, I think just the machine learning,
the optimization that look has been frankly something that's been part
of the technology for, for many years will continue to get, to get better. We will have seen co
mpanies that are
switching their fleets, for example, to electric fleets and that we'll be, I
think we will, will continue to see that as another way where carbon emissions,
you know, will, will be addressed. We're seeing it too in, let's say
for example, construction sites where large fleets are are switching actually
to, to electric, which I had not realized, but I guess the torque on, on
electric is, is helpful for you know, doing work on a construction site. So that's a little bit outside of
the, you
know, warehouse and supply chain, but just another area where the OEMs are switching Tom Raftery: Sure. In construction, it's also handy
for permitting because electric vehicles are significantly quieter
and because they don't have tailpipe emissions, you can run them indoors
as well without requiring ventilation. So, hugely, hugely advantageous
in the construction industry to be using electric vehicles. Now, whether it's diggers,
whether it's whatever. So, yeah, I, I can see lots
of,
of, of reasons why it would be taking off in construction. So what's up and coming with investors,
what's kind of coming down the line? What are you guys looking at and
saying, Ooh, this looks nice, and kind of rubbing your hands, gleefully? Steven Dana: Well, anything I bring
too investors is they, they immediately love so I think that it, you know,
being aware of the market we're in now I think that does play into it. Even though, like I said, the
industrial slash specifically supply chain aut
omation, there's more energy
than I'm seeing in other markets. It's, it's still a different
kind of financial world that we're in for the foreseeable. And that means that it's investors,
you know, first and foremost have a little bit of maybe it's before they're
all about market size and growth. That's all still important,
but now it's also, you know, a bit of that safety margin. So if you have, you know, if you're
getting close to profitability or you can see it, that's, that's important. If yo
u have a little bit more scale, a
bit of more diversity with your customer base these are all things that are
really top of mind for, for investors. Beyond that, some areas that are, you
know, more interesting that we're seeing is around vision based solutions that
combine, you know, machine learning and vision is an area we, we keep
hearing from investors that they're doing a deep dive in semantically. Tom Raftery: Hmm. Fascinating, fascinating. Cool. Just to name Steven Dana: one there, there'
s a bunch. Tom Raftery: Okay. We're coming towards the end
of the podcast now, Steve. Is there any question that I haven't
asked that you wish I had or any aspect of this we haven't touched on that you think
it's important for people to think about? Steven Dana: I think you've done a
fantastic job, Tom, covering a little bit of, of giving I guess people an insight
into what I've been up to and seeing these entrepreneurs change the supply chain,
you know, world with robotics and sensors. And it's
been fun chatting with
you a little bit about that. If anyone wants to learn, you know,
more about what we're doing at at Drake Star, you can find me on
on LinkedIn Steven Dana, and I'd be happy to talk more about it. Tom Raftery: Super. That was my, my final question was gonna
be that if people wanna know more is it just LinkedIn or do you have other
things, I mean, your website as well. Will that give people more information
or is there somewhere else people got, should be looking as well? St
even Dana: Yes at Drake Star's
website we have our supply chain automation report, which goes into
all the nitty gritty details of deals occurring in supply chain automation. And has my contact information
as well as on LinkedIn. Tom Raftery: Perfect. Great. I'll put those links in the show
notes so everyone has access to them. Steve, that's been fascinating. Thanks a million for coming
in the podcast today. Steven Dana: Thank you, Tom. It's been pleasure.
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