Our investment in arculus and the future of manufacturing

“You can have any color as long as it’s black”

A lot has changed since Henry Ford reputedly said the above of the cars he was producing. Ford’s genius, and the basis for his success, had been to cut down on variability and, in doing so, mass produce vehicles so that their cost allowed broad market affordability. The price one paid for this bargain was customizability — hence the Hobson’s Choice represented in Ford’s comment.

Over a hundred years later, cars come in a variety of colours, with myriad options available, from the number of doors to even the size of cup holders. Yet one thing that has (shockingly) stayed the same over this period is how cars are manufactured: with a linear conveyor belt. You can imagine why this might be inefficient: even for actions that aren’t relevant (e.g. adding the back two doors to a 2-door car) a vehicle still has to go through the motions, sitting by idly until it is moved to the next (and hopefully now relevant) station. As customization has increased, so too has the number of wasted steps. And the whole process is only as fast as its slowest step, so that if one step takes longer than expected then the whole line gets held up.

This is why we are so excited to partner with arculus — a German company that is transforming the one-dimensional assembly line of the 20th century into a completely modular production approach.

The object being assembled (sitting atop a robot transporter called an AGV) is cleverly routed by software from one relevant station to the next, dynamically adjusting for changing conditions, whether large bottlenecks or just slightly different speeds of one station versus another. The decoupling of stations from each other means they can now also work at different rates, providing the flexibility of approach and a greater ability to experiment without risking the whole production process. The 21st century need for customizability demands nothing less than this 21st century approach.

At Atomico, we estimate that applying this approach to auto manufacturing alone can save the industry nearly $100bn.

Why now? Manufacturing, a $12T industry, has been slow to enter this new digital era. Yet inexpensive sensors, cheap wireless communications infrastructure, highly scalable cloud-based data processing and novel machine learning methods have converged to a point where the building blocks are in place to change that. We’ve already partnered with companies like Oden Technologies, Scandit, and CloudNC who are working on different parts of this epochal shift. (You can read more about our thoughts on Industry 4.0 here)

Part of our Industry 4.0 thesis is the belief we need solutions for increased customization and quicker turnaround times. A conveyor belt works very well for mass production with low variability and high volume, but times have changed.

We first met the arculus team in early 2018 and were amazed by their ambition, tenacity and deep understanding of the automotive industry. This team has an impressive founder-market fit — they have lived and breathed manufacturing, and even had an office above a conveyor belt to observe its inefficiencies every day.

Many manufacturers have been using bits of the modular manufacturing concept championed by arculus for a while, by employing so-called “pre-assemblies,” i.e. separate stations where parts are pre-assembled and then supplied to the main line. But without the tech that could enable real-time situation analysis, transportation, and scheduling, pre-assemblies are more like a patch than a long-term solution. This is why we are so excited about arculus’s four-part tech solution that unlocks the full potential of modular production.

1. Proprietary robot (AGV)– meets the highest demands of industrial environments by being extra reliable, versatile and can be controlled with the highest precision and agility.
2. Warehouse Management (WM) — system for goods-to-person warehouse management with all service processes executed by AGVs.
3. Fleet management (FM) — a platform for intelligent traffic management of multiple fleets of robots, integrating 3rd party robots via open API standard (VDA5050) developed by arculus and adopted by VDMA, the largest industry association in Europe. It allows arculus to orchestrate AGVs and to deliver on the programs from MP and WP.
4. Modular Production (MP) — core software system for real-time controlled fulfilment of product orders based on availability and utilization of resources (by WM solution), enabled by autonomous mobile robots (by FM solution). This software piece allows to describe the logic of the product flow and to simulate different scenarios and resulting KPIs.

Ultimately, arculus’s solution affects factory efficiency or product output by increasing worker and machine utilization, decreasing physical space requirements, and optimizing planning time and logistics costs.

Audi, one of arculus’ clients, wrote back in 2016:

… Audi expects modular assembly to result in a productivity advantage of about 20 percent plus x. The size of that “x” will increase along with the growth in version diversity…

The automotive industry has been eking out low single-digit efficiency gains and calling that success. An improvement of 20%+ is just unheard of, and hugely significant. Industries other than automotive are also direct candidates for modular production, and although studies on the RoI there have not yet been performed, the higher current sophistication of automotive gives one reason to believe that efficiencies elsewhere will be greater still.

Notably, beyond productivity gains there are at least two further consequences:

1. It allows a more flexible tradeoff between volume and product mix, which is important as customer demand becomes harder to predict.
2. It creates employment opportunities for people with disabilities or injuries, who otherwise would have not been able to work in a conveyor-paced production facility.

With some of the largest manufacturers already using arculus and the amazing team in place, we believe that arculus is on a path to forever change how things are manufactured. We’re excited to support them on this journey and lead their €16m Series A with participation from Visionaries Club, previous investors La Famiglia, and some of the great angel investors including some of Germany’s leading entrepreneurs including Hakan Koc (founder of Auto 1), Johannes Reck (founder of GetYourGuide), Valentin Stalf (founder of N26) as well as the founders of Flixbus.

This post was co-written by my colleague and Atomico Partner Siraj Khaliq, who is also a member of arculus’s board.