WEBVTT - GXO's CIO on the Past, Present, and Future of Warehouses 0:00:10.640 --> 0:00:14.840 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:15.000 --> 0:00:19.680 I'm Joe Wisenthal. Unfortunately my co host Tracy Elloway is 0:00:19.760 --> 0:00:23.560 off today, but um I will continue on without her. 0:00:23.640 --> 0:00:26.439 So obviously, Tracy and I have been talking a lot 0:00:26.560 --> 0:00:30.640 about logistics, supply chains and so forth. We know there's 0:00:30.640 --> 0:00:34.559 an extraordinary amount of disruption in the space lately, but 0:00:34.640 --> 0:00:36.800 there's still uh, I guess I would say links in 0:00:36.840 --> 0:00:39.200 the supply chain that we haven't covered. So we've talked 0:00:39.200 --> 0:00:43.560 about shipping a lot, we've talked about trucking and so forth, 0:00:43.920 --> 0:00:45.960 but they're all still all kinds of all kinds of 0:00:46.000 --> 0:00:48.599 links in the chain we haven't talked about. And of 0:00:48.640 --> 0:00:53.320 course one of those links is warehouses, and so we've 0:00:53.600 --> 0:00:56.440 talked about. You know, there's this been this incredible boom 0:00:56.480 --> 0:01:00.200 and sort of like e commerce demand for goods from 0:01:00.320 --> 0:01:04.080 China that's created issues with the shipping and the containers 0:01:04.280 --> 0:01:08.080 and the trucking. But of course along the way everything 0:01:08.160 --> 0:01:12.319 at some point stops in a warehouse. And warehouses setting 0:01:12.360 --> 0:01:16.320 aside even the pandemic and all of the tensions. Now 0:01:16.760 --> 0:01:19.000 this has just been a booming area and people think 0:01:19.040 --> 0:01:22.800 about Amazon warehouses and the rise of e commerce and 0:01:23.000 --> 0:01:26.520 warehouses in general because of all this are expected to 0:01:26.720 --> 0:01:30.559 grow massively in the future. So we wanted to explore 0:01:30.640 --> 0:01:32.920 further this sort of current moment where there's all this 0:01:33.000 --> 0:01:37.760 bullishness on warehouses themselves, with this current tension that we 0:01:37.840 --> 0:01:41.360 see in supply chain disruptions, I'm very excited. I think 0:01:41.600 --> 0:01:44.560 we have the best guest for it. Today we're going 0:01:44.640 --> 0:01:47.400 to be speaking with Mark Manduca. He is the chief 0:01:47.480 --> 0:01:51.800 investment officer of g XO, which is spitting off from 0:01:51.840 --> 0:01:56.600 the big logistics and transportation company XPO very soon, and 0:01:56.680 --> 0:01:59.320 he's going to be talking to us about this moment. 0:01:59.440 --> 0:02:02.400 So with out further ado, Mark, thank you so much 0:02:02.400 --> 0:02:06.120 for joining us. Jerry, thank you for that kind introest. Absolutely, 0:02:06.240 --> 0:02:11.320 why don't you start off actually by explaining g x 0:02:11.360 --> 0:02:13.639 O just a little bit, because it's sort of confusing. 0:02:13.680 --> 0:02:16.600 I know it's part of XBO, it's on the verge 0:02:16.680 --> 0:02:20.760 of spinning off into its own publicly traded company, But 0:02:20.800 --> 0:02:23.320 what do you just tell us what what g XO 0:02:23.480 --> 0:02:25.840 is for listeners and how that how that spin will 0:02:25.880 --> 0:02:29.040 work and the timing and all that. Absolutely, so, g 0:02:29.240 --> 0:02:33.320 x is a warehousing company, as you as you eloquently 0:02:33.360 --> 0:02:36.160 explained at the start of the pool. G XO hands 0:02:36.240 --> 0:02:39.680 around nine hundred warehouses across twenty seven countries and we 0:02:39.760 --> 0:02:42.119 solve people's problems for them. And you mentioned a number 0:02:42.120 --> 0:02:44.120 of supply chain problems that exist in the market, and 0:02:44.160 --> 0:02:47.080 I'm happy to to talk about those on this call. 0:02:48.000 --> 0:02:50.440 The reality is is that we we fix what's in 0:02:50.480 --> 0:02:54.200 the warehouse. We we take parents, we distribute parts, We 0:02:54.320 --> 0:02:57.320 manage your supply chain for you within the warehouse. And 0:02:57.320 --> 0:03:00.440 it's such an important part of someone's business. We've got 0:03:00.440 --> 0:03:02.720 some of the bluest blue ship customers in the world 0:03:03.200 --> 0:03:06.000 and we are we managed, We managed their back office, 0:03:06.000 --> 0:03:07.720 so to speak, to make sure that you can get 0:03:07.720 --> 0:03:10.320 the goods back into the front office. And that is 0:03:10.720 --> 0:03:13.400 that's our bread and butter. Do you own the warehouses? 0:03:14.200 --> 0:03:16.800 So we least the warehouses by and March got it. 0:03:16.880 --> 0:03:19.080 So what don't you exploit a little further? Like what 0:03:19.280 --> 0:03:23.400 is the relationship with the customer? So I mean, I 0:03:23.440 --> 0:03:26.200 get I gather the sort of relationship is different from 0:03:26.240 --> 0:03:29.839 one to another. But what is sort of a typical uh, 0:03:29.880 --> 0:03:32.640 you know, a client comes to g x O for 0:03:32.760 --> 0:03:36.560 what service, What is the sort of nature of that arrangement? Yes, 0:03:36.720 --> 0:03:39.800 So when a customer moves to g X, so it's 0:03:40.120 --> 0:03:42.560 it's not a cost decision, it's actually a revenue decision. 0:03:43.360 --> 0:03:45.680 And what I mean by that is that logistics represents 0:03:45.680 --> 0:03:49.040 about three percent of the typical customers cost space. But 0:03:49.120 --> 0:03:51.320 if you pick the wrong provider to provide you with 0:03:51.360 --> 0:03:55.119 third party logistics, and for whatever reason it doesn't work out. 0:03:55.240 --> 0:03:58.320 Maybe there the third party logistics providers too small, maybe 0:03:58.360 --> 0:04:00.760 that they don't have to write balance sheet, maybe they're 0:04:00.760 --> 0:04:03.800 not global enough, maybe they don't have the right technology stacks. 0:04:04.680 --> 0:04:06.920 Then what happens is is that ultimately about a hundred 0:04:06.960 --> 0:04:09.720 percent of your revenues end up suffering. So this is 0:04:09.720 --> 0:04:12.040 not a cost decision anymore for for customers, it's an 0:04:12.040 --> 0:04:16.160 absolute necessity. And this is exactly why customers are increasingly 0:04:16.240 --> 0:04:19.640 demanding a best in class, scalable third party logistics. Provided 0:04:19.720 --> 0:04:22.559 you asked what we do well in so many ways, 0:04:22.800 --> 0:04:26.159 the biggest portion of our businesses is e commerce, and 0:04:26.360 --> 0:04:29.640 as you know, e commerce has has made the lives 0:04:29.640 --> 0:04:34.200 of our customers incredibly exciting but also incredibly complicated. So 0:04:34.240 --> 0:04:36.560 in the old world, what you would find is that 0:04:36.600 --> 0:04:38.520 a thousand T shirts would arrive on a pallet in 0:04:38.560 --> 0:04:40.880 a warehouse, and they would need to be organized in turn, 0:04:41.480 --> 0:04:44.479 and then you'd have two palettes. Ultimately that afternoon, leaving 0:04:44.480 --> 0:04:47.320 the warehouse, they'd go to a brick and mortar type institution. 0:04:47.760 --> 0:04:51.440 So a thousand T shirts arrive and basically two boxes 0:04:51.480 --> 0:04:54.640 or two palletts will leave that afternoon. That's the old world. 0:04:54.839 --> 0:04:56.640 In the new world, what will happen is that a 0:04:56.640 --> 0:05:00.360 thousand T shirts arrive and then a thousand separate boxes 0:05:00.440 --> 0:05:03.240 have to leave that afternoon. And that complication has just 0:05:03.360 --> 0:05:08.280 called caused a volcano effect in most people's back offices, 0:05:08.360 --> 0:05:12.080 most people's supply chains Joe, and that's effectively resulted and 0:05:12.120 --> 0:05:14.960 not only a three x two ten x need for warehousing, 0:05:15.720 --> 0:05:20.359 it's also resulted in a demand for scalable players, multinational players, 0:05:21.080 --> 0:05:24.360 players that provide a good balance sheet, long term relationships, 0:05:24.360 --> 0:05:27.280 and technological advancements, and just that happens to be us. 0:05:27.360 --> 0:05:30.359 So I want to focus obviously aren't the warehouses, but 0:05:30.440 --> 0:05:34.160 just real quickly, can you just explain for listeners g 0:05:34.480 --> 0:05:37.280 XO is part of XPIOT, like what has happened, like 0:05:37.360 --> 0:05:40.000 how it is formed within XBO and then what is 0:05:40.520 --> 0:05:43.920 the plane going forward? Here? Yeah, easy. So g XO 0:05:44.160 --> 0:05:48.960 is in effect around of the revenues of XPO, which 0:05:49.000 --> 0:05:51.920 is the conglomerate, which is largely based around lt L 0:05:52.360 --> 0:05:54.240 as you mentioned at the start of the call, as 0:05:54.320 --> 0:05:57.560 well as brokerage and of course our warehousing business, and 0:05:57.560 --> 0:06:00.320 we're planning on spinning that out as the second of August, 0:06:01.000 --> 0:06:04.800 and therefore g XO will become its own entity. As 0:06:04.839 --> 0:06:08.240 spinoffs goes, some spinoffs are always good company, bad company, 0:06:08.240 --> 0:06:11.039 and that's not the case here at all. Once, once 0:06:11.080 --> 0:06:13.280 your listeners look at the look at the numbers, look 0:06:13.320 --> 0:06:15.080 at the look at the company, and hear what I 0:06:15.120 --> 0:06:17.719 have to say, you'll see that this is great company 0:06:17.960 --> 0:06:22.200 spinning out great company, XBO spinning out g x So 0:06:22.279 --> 0:06:25.000 it'll be it'll it'll be a very exciting spin I think. 0:06:25.040 --> 0:06:27.960 And the goal ultimately will be able to allow g 0:06:28.240 --> 0:06:31.800 XO to to focus on its own strategic priorities and 0:06:31.920 --> 0:06:34.479 ring fence the business with its own capital structure going 0:06:34.520 --> 0:06:37.520 forward and ultimately play in its own field with its 0:06:37.520 --> 0:06:41.200 own decision making. Now, what we we talked about trucking 0:06:41.880 --> 0:06:44.080 a few weeks ago, and one of the things that 0:06:44.160 --> 0:06:48.039 really stood out to me was just how incredibly fragmented 0:06:48.200 --> 0:06:50.560 the space with it, and I actually until that episode, 0:06:50.600 --> 0:06:54.640 I had no idea that there is essentially no like 0:06:55.200 --> 0:06:57.919 really dominant market leader and trucking and something. There's some 0:06:58.040 --> 0:07:01.360 insane stat about tens of thousands of new truck and 0:07:01.400 --> 0:07:03.920 companies having entered the market just the last few months. 0:07:04.040 --> 0:07:06.359 Of course, many of them quite small. What does the 0:07:06.480 --> 0:07:11.560 warehouse market look like in terms of size and fragmentation 0:07:11.840 --> 0:07:16.160 and how big is g XL within that market. There's 0:07:16.160 --> 0:07:18.360 a few things to know. So we've got some phenomenal 0:07:18.400 --> 0:07:20.760 secular tail ones in this market, unlike I think any 0:07:20.760 --> 0:07:22.480 other market that I've ever looked at. I've covered the 0:07:22.520 --> 0:07:26.320 transportation and the just acceptor for the last fifteen years. 0:07:27.120 --> 0:07:29.000 So from my perspective, we're in the right place at 0:07:29.040 --> 0:07:32.080 the right time, whether that's e commerce, automation, and outsourcing. 0:07:32.120 --> 0:07:34.520 In terms of your question about the total addressable market, 0:07:35.000 --> 0:07:37.680 the total addressable market is roughly around four hundred and 0:07:37.760 --> 0:07:40.960 thirty billion dollars. Remember we're about an eight billion dollar revenue. 0:07:41.880 --> 0:07:45.040 To contextualize that, as the biggest market player out there 0:07:45.080 --> 0:07:48.120 that is a pure play asset, that's being US g 0:07:48.360 --> 0:07:50.920 x O. We've go got five per cent of the market. 0:07:51.000 --> 0:07:54.320 So everything you've just said about fragmentation is very much 0:07:54.360 --> 0:07:56.360 the case here, and we're waiting for a white night 0:07:56.400 --> 0:08:00.160 to emerge within this four dred and thirty billion dollar market. Now, 0:08:00.160 --> 0:08:03.160 within that four billion dollars, there's a hundred and thirty 0:08:03.160 --> 0:08:06.920 billion dollars that's already outsourced and three hundred to get 0:08:06.960 --> 0:08:09.560 you to four hundred and thirty three hundred billion that 0:08:09.640 --> 0:08:11.720 is still sitting in hops. And what I mean by 0:08:11.720 --> 0:08:16.240 that is companies running their own logistics networks. I'd like 0:08:16.320 --> 0:08:18.000 to start with all these things like what the pre 0:08:18.120 --> 0:08:23.360 pandemic normal looked like, and I don't you know, and 0:08:24.120 --> 0:08:26.200 as much as you describe what is you know, the 0:08:26.280 --> 0:08:31.080 sort of February twenty or March nineteen world look like 0:08:31.480 --> 0:08:33.960 for a company like g X, so just we could 0:08:34.040 --> 0:08:37.080 sort of get a sense of the changes in the 0:08:37.080 --> 0:08:42.520 new trajectory. Let's let's let's characterize that as old world 0:08:42.320 --> 0:08:44.640 the world. So in the in the old world, in 0:08:44.679 --> 0:08:46.600 the brick and mortar world, and that's not obviously just 0:08:46.640 --> 0:08:48.880 pretty pandemic, it's it's it's it's a long way for 0:08:48.960 --> 0:08:51.559 the pandemic. But in the old world, what you'd have 0:08:51.679 --> 0:08:56.040 is is the dickensiean warehouse where cardboard boxes would would 0:08:56.120 --> 0:08:58.199 rule the roost and there will be very little alternation. 0:08:58.240 --> 0:09:01.439 In fact, the industry is still outside of outside of 0:09:01.480 --> 0:09:04.520 our good selves, there's there's very little automation. If you 0:09:04.559 --> 0:09:07.320 look at some of our smaller peers within the space. 0:09:08.000 --> 0:09:09.800 The punch line here is very simple, and that is 0:09:09.800 --> 0:09:14.320 the Dickensian warehouse evolved didn't have automation. It was largely 0:09:14.360 --> 0:09:17.280 focused on brick and water operations. And therefore what would 0:09:17.280 --> 0:09:19.040 happen is is that there wouldn't be the same level 0:09:19.080 --> 0:09:21.400 of complexity that there is today. And what I mean 0:09:21.440 --> 0:09:24.439 by that is not so much our own complexity with technology, 0:09:24.800 --> 0:09:28.920 but actually customer complexity. Very simply, today one in three 0:09:28.920 --> 0:09:32.040 items are returned in an e commerce world, whereas in 0:09:32.080 --> 0:09:33.840 the old days it would be more like one in ten. 0:09:34.320 --> 0:09:36.360 To give you a sense of that volcano that I 0:09:36.400 --> 0:09:40.400 talked about that is erupting on the the balance sheets 0:09:40.559 --> 0:09:44.920 of so many of our customers. And therefore the customers 0:09:44.920 --> 0:09:48.360 are seeing more complexity in regards to working capital, they're 0:09:48.400 --> 0:09:51.160 seeing more complexity in regards to their day to day operations. 0:09:51.160 --> 0:09:52.800 I mean, you can imagine if you all of a sudden. 0:09:52.840 --> 0:09:55.040 Have you know, you send out a hundred boxes and 0:09:55.080 --> 0:09:56.840 ten boxes used to come back, and now all of 0:09:56.840 --> 0:10:00.440 a sudden, thirty boxes are coming back. You up pulling 0:10:00.440 --> 0:10:02.040 your hair out and end up crying for help. And 0:10:02.080 --> 0:10:04.840 that's that's ultimately where we step in. Is that White 0:10:04.880 --> 0:10:07.760 Knight that I talked about. In so doing, you've you've 0:10:07.760 --> 0:10:11.200 referenced a bunch of interesting points post pandemic. What's happened 0:10:11.240 --> 0:10:14.000 ultimately is that the the industry has become a bit 0:10:14.000 --> 0:10:16.400 log jammed elbow to elbow. Clearly people have been buying 0:10:16.760 --> 0:10:22.320 online rather than going to the cinema having experiences, And 0:10:22.360 --> 0:10:24.440 in so doing, what's happened is is that you've had 0:10:24.520 --> 0:10:26.680 a lot of the supply chain outside of the warehouse 0:10:26.720 --> 0:10:29.680 getting a bit log jammed. Now there's a bunch of 0:10:29.720 --> 0:10:33.280 reasons for that. Most prominently, buying patterns have changed. I 0:10:33.360 --> 0:10:35.600 referenced that, and the question you should ask, I guess 0:10:35.640 --> 0:10:38.400 is when we're consumers go back to pre pandemic buying pattern. 0:10:38.440 --> 0:10:40.680 I hope you have the answer to that, because that's 0:10:40.679 --> 0:10:43.480 the that's the trillion dollar question everybody wants to know, 0:10:43.600 --> 0:10:45.920 so we better come up with an answer. On this episode, 0:10:46.640 --> 0:10:49.040 we will we will, we will, we will endeavor together. 0:10:49.160 --> 0:10:51.560 Let's and then the other thing that's changed, obviously, is 0:10:51.559 --> 0:10:53.800 the flying patterns have changed. You'll know, of course that 0:10:53.960 --> 0:10:57.200 the world's available cargo capacity. If you think about the 0:10:57.360 --> 0:10:59.560 amount of cargo capacity that we have in the world, 0:11:00.000 --> 0:11:02.400 half of it, half of it lies in the in 0:11:02.440 --> 0:11:05.400 the belly of passenger planes, and clearly without people flying 0:11:05.480 --> 0:11:07.360 as much as they used to at the moment, that 0:11:07.400 --> 0:11:09.719 means there's less supply, which means air freight rates have 0:11:09.800 --> 0:11:12.439 gone gone through the roof, and in so doing, people 0:11:12.440 --> 0:11:16.480 have shifted their mode of transport towards shipping, so that 0:11:16.600 --> 0:11:19.560 in turn has led to a log jam in the system, 0:11:19.559 --> 0:11:21.720 which is why you're seeing in part things going on 0:11:21.760 --> 0:11:25.160 in the port of Los Angeles. So that log jam 0:11:25.240 --> 0:11:28.200 ultimately needs to unwind itself at some point in the 0:11:28.200 --> 0:11:30.960 next in the next six or twelve months. But all 0:11:31.000 --> 0:11:33.480 of these things, whether it's the truck driving point that 0:11:33.520 --> 0:11:36.400 you mentioned, whether it's the inflation that we're seeing at 0:11:36.400 --> 0:11:38.320 the worker level, whether it's the log jam that I 0:11:38.360 --> 0:11:40.800 talked about from the ports and the shortage of containers, 0:11:41.280 --> 0:11:43.520 all of this leads to one thing, which is that 0:11:43.600 --> 0:11:47.920 White Knight, someone needs to help me run my business 0:11:48.000 --> 0:11:50.480 because I need to focus on whatever it is selling 0:11:50.520 --> 0:11:54.080 t shirts, selling shoes, making cookies, while my back office 0:11:54.120 --> 0:11:56.680 needs to be managed by someone else who has expertise 0:11:57.080 --> 0:12:02.360 precision scale, good balance sheet, technological advancement. That's where we 0:12:02.600 --> 0:12:06.760 have stepped in effectively. As sad as it sounds, we have. 0:12:07.360 --> 0:12:11.600 We have benefited from the last twelve months because people 0:12:11.600 --> 0:12:13.400 have realized that they can't do it on their own. 0:12:13.800 --> 0:12:15.880 Let me ask you before we forget. You know, you 0:12:15.960 --> 0:12:18.160 mentioned something about your model, which is that you lease 0:12:18.440 --> 0:12:22.040 the warehouses, and I'm curious, like, I guess what prevents 0:12:22.520 --> 0:12:26.880 the rent so to speak, from accruing largely to the 0:12:26.920 --> 0:12:31.400 warehouse owners because I imagine that actual like physical warehouse 0:12:31.440 --> 0:12:34.360 space is not infinite. That is a big advantage if 0:12:34.400 --> 0:12:38.920 you own it. What what what gives you or your 0:12:39.000 --> 0:12:42.080 client sort of leverage to not give up all of 0:12:42.120 --> 0:12:44.679 the margin to the warehouse to the people renting it to. 0:12:46.320 --> 0:12:49.040 So the question is is very much a case of 0:12:49.080 --> 0:12:51.440 availability of real estate and that's cually a challenge at 0:12:51.440 --> 0:12:53.680 the moment, as you've seen from vacancy rates yourself and 0:12:53.679 --> 0:12:55.880 the stuff that you've been reporting on. You know, the 0:12:55.880 --> 0:12:59.400 industry has seen vacancy rates falling to single digits, particularly 0:12:59.400 --> 0:13:03.280 in Europe, and um I really believe that this highlights 0:13:03.280 --> 0:13:07.600 of strength of our services. Not only does it point 0:13:07.640 --> 0:13:11.640 to increased uses of usage of warehousing and logistics capabilities, 0:13:12.080 --> 0:13:16.760 but given the given our scale as the largest pure player, 0:13:16.840 --> 0:13:21.480 the second largest warehousing company globally, it it leaves it 0:13:21.559 --> 0:13:25.559 leaves us relatively well placed to secure leases for our customers. 0:13:25.720 --> 0:13:28.160 So we have obviously dedicated relationships with some of the 0:13:28.200 --> 0:13:31.720 exact same warehousing companies that you've mentioned that therefore provides 0:13:31.800 --> 0:13:34.600 us with bargaining power logically, So if your decision is 0:13:34.640 --> 0:13:36.240 I need a warehouse, either I'm going to do it 0:13:36.280 --> 0:13:38.040 on an in house basis or I'm going to outsource 0:13:38.040 --> 0:13:40.720 it to the third party logistics provider. You've already decided 0:13:40.720 --> 0:13:42.720 that you need a warehouse, and you can have that 0:13:42.760 --> 0:13:44.360 close to the last mile or you can have it 0:13:44.440 --> 0:13:47.960 further away. It doesn't change the demand for warehousing. But 0:13:48.040 --> 0:13:50.720 if you can have someone who has bargaining on labor 0:13:51.120 --> 0:13:55.240 has the scalability to negotiate rents for you on a 0:13:55.280 --> 0:13:59.720 global basis, that does provide a value add the dynamic 0:13:59.800 --> 0:14:02.640 of you either paying it directly to the to the 0:14:02.679 --> 0:14:05.320 segrea of the plodgers, yourself or getting a third party 0:14:05.360 --> 0:14:08.280 logistics provider to do it doesn't really change the price dynamics. 0:14:08.840 --> 0:14:11.240 But what it does do is we can provide potentially 0:14:11.559 --> 0:14:15.520 better bargaining power, which in turn provides arguably a lower 0:14:15.600 --> 0:14:18.360 price for the end customer. So using a third party 0:14:18.360 --> 0:14:37.120 logistic provider is useful. I don't know, Like, I'm curious 0:14:37.120 --> 0:14:40.040 if you have a stat in the industry that answers 0:14:40.160 --> 0:14:43.600 this question. But you know, obviously I want to get 0:14:43.640 --> 0:14:46.800 into this world deeply. But automation is a huge theme 0:14:46.920 --> 0:14:49.280 you mentioned as one of the key tail winds for 0:14:49.360 --> 0:14:52.200 your business. How would you compare I don't know, is 0:14:52.240 --> 0:14:56.600 it humans per dollar moved per day or something like that, Like, 0:14:56.960 --> 0:15:00.240 is there some or human wages per dollar per moved 0:15:00.280 --> 0:15:02.320 per day by the warehouse? Like can you sort of 0:15:02.360 --> 0:15:05.600 contextualize the degree to which the sort of like the 0:15:05.640 --> 0:15:09.560 old brick and border warehouse versus today's warehouse, And how 0:15:09.640 --> 0:15:13.560 much more efficient a warehouse of today is versus what 0:15:13.600 --> 0:15:17.040 we think of the old fashioned ones. So there's there's 0:15:17.040 --> 0:15:21.160 plenty of examples in the technology sphere of how technology 0:15:21.200 --> 0:15:25.040 has helped make warehouses more efficient. We put a number 0:15:25.040 --> 0:15:28.280 of stats within our Investor Day presentation last week specifically 0:15:28.280 --> 0:15:32.920 talking about how the Dickensian warehouse of old has accelerated 0:15:32.920 --> 0:15:36.120 in so many ways um and become the warehouse of 0:15:36.200 --> 0:15:38.720 the future. And we've got plenty of examples across our network, 0:15:38.760 --> 0:15:43.640 whether it's advanced automation, whether it's improved efficiency, reducing the footprint, 0:15:44.280 --> 0:15:46.480 whether it's some of the class based, cloud based systems 0:15:46.480 --> 0:15:49.040 that we use, or some of the intelligent robotics of 0:15:49.080 --> 0:15:54.760 how this saves money for for our customers, and naturally 0:15:54.960 --> 0:15:58.000 it results in customers coming to us because very few 0:15:58.000 --> 0:16:02.080 people have the amount of dedicated automation implementation that we 0:16:02.160 --> 0:16:06.560 have across robotics and automated guided vehicles and vision technology 0:16:06.720 --> 0:16:11.040 and advanced sortation systems. But if you look specifically at 0:16:11.080 --> 0:16:15.160 say a robotic arm, I'll answer your question right down 0:16:15.160 --> 0:16:19.000 the line. In the old days, a typical pick let's 0:16:19.040 --> 0:16:21.760 call it would be around two hundred and ten cases 0:16:22.080 --> 0:16:24.840 per our picking rate. With a robotic arm, you can 0:16:24.880 --> 0:16:28.800 do four x that, so effectively eight hundred cases per 0:16:28.880 --> 0:16:32.400 hour picking rate. So you can see explicitly how manual 0:16:32.520 --> 0:16:35.480 goes to automation and how the customer benefits and it 0:16:35.520 --> 0:16:39.000 generates dramatic productivity gains as you can see both for 0:16:39.040 --> 0:16:41.480 our customers and for us. And we'd obviously share any 0:16:41.560 --> 0:16:45.040 economics of that when it comes to thinking about other 0:16:45.720 --> 0:16:47.960 other other factual numbers out there that we can we 0:16:48.000 --> 0:16:50.560 can help you get a sense of of how technology 0:16:50.600 --> 0:16:54.240 improves on the automation side for our customers. Obviously, robotic 0:16:54.320 --> 0:16:57.120 d stackers early good example you get in the old 0:16:57.120 --> 0:16:59.960 manual world versus the automation world as six x saving 0:17:00.880 --> 0:17:03.040 taken automate a gantry, for example, you can get a 0:17:03.120 --> 0:17:05.880 sixty next saving if you think about the cases per 0:17:05.920 --> 0:17:10.560 hour that can be picked um by gantry. So there's 0:17:13.040 --> 0:17:15.320 so when you when you think about an automated warehouse, 0:17:15.359 --> 0:17:18.639 what you find is is you find different different operations 0:17:18.640 --> 0:17:23.080 across the entire supply chain that that offer. So you 0:17:23.080 --> 0:17:26.399 can take the adjustable heights of various gantry cranes across 0:17:26.440 --> 0:17:29.919 the across the warehouse and that allows you to in 0:17:29.960 --> 0:17:34.840 affect lighting more efficiently through the warehouse school. So obviously 0:17:34.920 --> 0:17:37.840 though I mean you know most of the attention to 0:17:37.920 --> 0:17:40.680 the warehouses. You know, there's been numerous stories about Amazon 0:17:40.760 --> 0:17:44.000 for example, So despite and the stories are always that 0:17:44.520 --> 0:17:47.800 the hiring is just absolutely voracious and that there's just 0:17:47.800 --> 0:17:51.679 an incredible demand still for actual people. So what is 0:17:51.720 --> 0:17:54.479 the you know, you you describe all these efficiency gains, 0:17:54.520 --> 0:17:57.680 and yet it doesn't seem like hiring needs have really 0:17:57.920 --> 0:17:59.800 slowed down for the industry. What does it look like 0:17:59.840 --> 0:18:03.320 for year? If you think about inflation that you're seeing 0:18:03.359 --> 0:18:06.720 in the system right now, there's there is undoubtedly inflation. 0:18:06.760 --> 0:18:09.879 We're certainly seeing that across the markets that we operate in, 0:18:10.600 --> 0:18:14.120 and clearly it increases the global problem for customers. And 0:18:14.240 --> 0:18:17.000 this isn't just a phenomenon that's taking place in any 0:18:17.000 --> 0:18:19.399 particular market. As I mentioned, were seeing it coast to 0:18:19.440 --> 0:18:21.080 coast in the US, and we're seeing it in the 0:18:21.200 --> 0:18:24.840 UK and specific terms, and labor inflation is clearly an improblem, 0:18:24.840 --> 0:18:26.840 that a problem that's here to stay for our customers. 0:18:27.560 --> 0:18:30.159 If you think about the silver lining in terms of 0:18:30.240 --> 0:18:33.480 inflation volatility, I think it goes back to my key point, 0:18:33.520 --> 0:18:36.399 which is that it drives demand for those third party 0:18:36.480 --> 0:18:40.359 logistics providers, and labor inflation obviously causes our customers to 0:18:40.400 --> 0:18:44.600 want more automation and more robotics as well. And clearly, 0:18:44.640 --> 0:18:46.960 as I mentioned we're a global global tech leader when 0:18:46.960 --> 0:18:49.840 it comes to automated warehouses. But it is a problem. 0:18:49.880 --> 0:18:51.840 I think it is here to stay. There is demand 0:18:51.960 --> 0:18:53.880 for labor, and so there should be in so many 0:18:53.880 --> 0:18:56.640 ways we we we aspire to make sure our teammates 0:18:56.640 --> 0:19:00.760 are all a hundred thousand teammates are all exceptionally well 0:19:00.760 --> 0:19:04.480 rewarded for for their efforts. But it is it is 0:19:04.520 --> 0:19:06.800 something that we're very good at managing from a bargaining 0:19:06.840 --> 0:19:08.760 power perspective in a similar way to the way I 0:19:08.800 --> 0:19:11.080 described Joe on the on the warehousing side of things. 0:19:11.280 --> 0:19:13.679 But just in terms of pure numbers, I guess is 0:19:13.720 --> 0:19:16.400 what are we're trying to get at? Like how much 0:19:16.560 --> 0:19:18.840 hiring do you have to do? So, even with all 0:19:18.880 --> 0:19:22.720 of the automation you described, what is the trajectory of 0:19:22.760 --> 0:19:25.480 the actual numbers of people that you've had to hire? 0:19:25.520 --> 0:19:28.200 Because again, just going by the news reports from say Amazon, 0:19:28.520 --> 0:19:32.480 I'm sure they have incredible technology investments, but they still 0:19:32.520 --> 0:19:34.639 just have to keep you know, they seem to be 0:19:34.720 --> 0:19:39.160 hiring people nonstaff. Yeah, we ultimately will see the same 0:19:39.320 --> 0:19:41.440 the same trend in regards to the way we plan 0:19:41.520 --> 0:19:43.719 on expanding. I mean, our revenues are planning to expand 0:19:43.720 --> 0:19:47.520 next year at about eight after some phenomenal growth already 0:19:47.560 --> 0:19:50.960 this year that we've already seen with a number of 0:19:50.960 --> 0:19:54.040 new customer winds, and with that will obviously come its 0:19:54.040 --> 0:19:57.000 o unfair share of being able to grow a warehousing 0:19:57.040 --> 0:20:00.960 footprint and thus our employee footprints. So you know, teammates 0:20:01.000 --> 0:20:02.639 will continue to grow at g X. So we're a 0:20:02.640 --> 0:20:06.040 fast growth company over the next few years and we 0:20:06.080 --> 0:20:08.919 intend to partake within that growth as as as an 0:20:08.920 --> 0:20:13.520 industry leader. Do you see a difference in labor market 0:20:13.560 --> 0:20:16.480 titaness globally because obviously there are a lot of economist 0:20:16.560 --> 0:20:19.320 debates about well, why is it hard to hire? And 0:20:19.359 --> 0:20:22.359 some people point to unemployment insurance, and some people plointed 0:20:22.400 --> 0:20:24.720 to the persistence of the virus and the lack of 0:20:24.800 --> 0:20:28.879 childcare and so forth. But you have a global footprint 0:20:28.960 --> 0:20:30.760 and so you, I guess you can see sort of 0:20:30.760 --> 0:20:35.040 a natural experiment, so to speak, with different labor markets 0:20:35.040 --> 0:20:38.200 across the different set of policy and virus outcomes. How 0:20:38.280 --> 0:20:41.920 global is the tightness right now in or the challenge 0:20:41.920 --> 0:20:44.920 of hiring? I would say the similarities in our two 0:20:44.920 --> 0:20:47.399 core markets two thirds of our revenue is is obviously 0:20:47.480 --> 0:20:50.480 Europe one third is board in North America. When you 0:20:50.480 --> 0:20:53.199 think about those two markets, I would say that the 0:20:53.240 --> 0:20:56.000 similarities are there. I would say that the US is 0:20:56.000 --> 0:20:57.960 probably three months ahead of what we're seeing in the 0:20:58.000 --> 0:21:00.159 in the European market. What do you sorry do you 0:21:00.200 --> 0:21:03.880 mean by that labor wedging question? Europe's lag what you're 0:21:03.920 --> 0:21:05.679 seeing in the US, what you have seen with all 0:21:05.680 --> 0:21:08.359 the articles that you refer to, Yeah, it's probably three 0:21:08.400 --> 0:21:11.560 months three months lagging in the European But ultimately, what 0:21:11.600 --> 0:21:13.879 you're saying is this, this is not just a U 0:21:13.960 --> 0:21:15.639 S a U S. This is definitely not just a 0:21:15.720 --> 0:21:19.240 US phenomenon. This challenge of hiring under no circumstances, this 0:21:19.320 --> 0:21:22.480 is just a US phenomenon. In fact, the same applies 0:21:22.560 --> 0:21:26.200 for for for warehouse vacancy rates. Were seeing similar phenomenons 0:21:26.640 --> 0:21:30.200 within the European European market as we are in the 0:21:30.320 --> 0:21:35.199 US market. That's really interesting. Go back to the automation question. Obviously, 0:21:36.200 --> 0:21:39.240 you know that I assume you know you're constant spending. 0:21:39.320 --> 0:21:41.399 How do you how do you keep up? You know, 0:21:41.480 --> 0:21:45.560 again going up against big tech giants. What is your 0:21:45.880 --> 0:21:48.439 um what is your edge so to speak? And how 0:21:48.520 --> 0:21:51.960 much investment does it require? On your part in terms 0:21:52.040 --> 0:21:57.080