DHL Supply Chain, one of the world’s largest logistics companies, has partnered with Vuzix Inc (NASDAQ: VUZI) for its enterprise augmented reality (AR) initiatives. The projects involve using smart glasses to enhance workplace productivity, including a series of ‘vision picking’ tasks to be carried out in DHL’s Australian order fulfillment warehouses. The goal is to determine how AR headsets can improve productivity in warehouse settings, especially collecting and moving items before shipping.
This isn’t the first time DHL has conducted AR tests. The company first expressed interest in AR in 2014, when its trend research division released a paper called “Augmented Reality in Logistics.” The paper identified three potential AR use cases in the logistics industry: warehouse operations, transportation, and last-mile delivery.
In 2015, DHL used Google and Vuzix headsets in its AR testing project. This three-week pilot project had staff use headsets for common tasks in a Ricoh Warehouse. The tasks including picking up, moving, and dropping off items in a fulfillment process. By the end of the project, staff had picked more than 20,000 items and fulfilled 9,000 orders.
The tests were heralded as a major success, providing a productivity boost of more than 25% compared to traditional picking.
The 2017 trials will follow much the same format as previous ones. Warehouse workers will complete a number of item-picking exercises in a warehouse setting, and results will be compared against other order-picking methods.
DHL Taps Vuzix for Australian Trials
DHL has been running its AR tests, including the vision picking tests, with a number of smart glasses suppliers. Past trials were run using Google Glass and Vuzix headset models.
What makes this year’s tests different is that DHL will be working with Vuzix alone. The difficulty with obtaining Google Glass headsets in the Asia-Pacific region has resulted in DHL using Vuzix’s M100 and M300 smart glasses exclusively.
This is a major development for Vuzix, a company that develops smart glasses for both consumer and enterprise markets. By deepening its relationship with DHL, the company has positioned itself as an exclusive tech supplier to one of the world’s most influential logistics companies.
A Diverse Product Line
Vuzix’s main product line, the ‘M’ series, consists of smart glasses designed for use in enterprise settings. On the company’s website, the M100 Smart Glasses are described as “the world’s first commercially available smart glasses.” The company has won a number of awards, including Best of Innovations at the 2013 Consumer Electronics Show.
Vuzix has also received funding from Intel and is rumored to be pursuing a partnership with Microsoft. Through these and other relationships, the company has established itself as a major player in the enterprise segment of the smart glasses market.
The partnership with DHL is yet another vote of confidence in Vuzix from a larger company, indicating the potential for wide adoption of its headsets in enterprise settings. This is the second major partnership the company announced this year. Vuzix announced another partnership with Ubimax in July. The two companies teamed up to supply smart glasses for warehouses at companies like John Deere and WS Kunststoff-Service. The WS Kunststoff-Service project will use a modified version of the Vuzix M300 for error reduction, process optimization, and training purposes.
Vuzix Ramps Up Manufacturing Volume
Vuzix’s partnerships with DHL and Ubimax have led to increased demand for its products. As a result, the company has transitioned to higher-volume manufacturing facilities. The company has retained the contract manufacturer it had been working with before, but shifted operations to a higher-capacity facility in China. In a recent press release, Vuzix claimed that it had “successfully scaled operations, improved yields and lowered our cost profile of the M300.”
The transition process was initiated during the mid-second quarter of this year and was completed during the third quarter. The company’s management has said that M300 manufacturing rates are growing in-line with its planned production outcome of 1500 units per month. As an additional benefit, the company has reportedly reduced the product’s cost by 33%, which may help sales, particularly in the more price-sensitive consumer segment.
Vuzix has also been working on improving its products on the software side. In July, the company released an OS upgrade along with a new SDK for M300 developers. These releases add functionality to the M300 that had previously been lacking.
An Ever-Expanding List Of Partnerships
One of Vuzix’s biggest assets is its roster of partners, investors, and customers. These include big names like Intel, Dell, Amazon.com, Toshiba, Sony, and BMW, among others. The company expects its pipeline to grow over time, as established companies become more familiar with new technologies and the benefits of smart glasses become more widely known.
There is evidence that this is already happening. DHL’s first case study from its vision picking trials reported a 25% increase in productivity when smart glasses were used instead of traditional methods. Accenture reported even better results from a partnership with Airbus, one of the world’s biggest airplane manufacturers. The companies had teamed up to develop an AR solution for airplane cabin manufacturing. In its report, Accenture said that Airbus had realized a 500% increase in productivity in this key manufacturing process.
Investment Bank Rates Vuzix a ‘Buy’
On July 19th, an analyst at the investment bank Chardan Capital Markets released a report on Vuzix. In the report, James McIlree covered the M300 manufacturing transition, production growth, OS upgrades and other topics relevant to the company’s financial performance.
Despite Vuzix’s negative per-share earnings, Chardan remains positive on the company’s shares. To support the positive rating, Chardan cited the possibility a buyout by a larger company at a premium price. This happened with Oculus Rift, which was purchased by Facebook (NYSE: FB) for $4.5 billion in March 2014.
Vuzix’s extensive relationships with larger technology companies lend credibility to this claim. With a current market capitalization of $118 million, Vuzix’s price makes it an attainable buyout target for larger tech companies and institutional investors.
Chardan’s price target for Vuzix shares is $10, which would represent a significant gain from its last closing price of $5.80.