MISSION CRITICAL MISSION CRITICAL In
In conversation with the Senior Leadership trio at Empirix Partners and their guest, Michael Kokal, the CEO of Kodis Holdings
Ethan Summers chief of staff for Empirix Partners
Gentlemen, welcome to this EDITION OF “IN CONVERSATION WITH” POWERED BY The Purchaser magazine. Today we are joined by Zach Peña, CEO of Empirix Partners. Sam Robinson, VP, strategic sourcing and solutions for the Decennial Group. Ethan Summers, chief of staff for Empirix Partners and special guest Michael Kokal, president of Kodis Holdings.
welcome...
My name is Ethan Summers. I’m the chief of staff for Empirix Partners. My main role here is supporting Zach with strategy and leading all of the internal operations and team performance.
I have a deep background in the supply chain, finance and operations space for some major manufacturers and health care systems. Before spending several, I call them dog years in the startup space with consumer electronics and software development. Before coming over to Empirix Partners.
Hey, everyone. Sam Robinson, vice president here at Empirix Partners, responsible for leading client delivery.
Most recently, I was at NTT Global Data Centers helping build out and establish their own CI program before getting into mission critical, I did a host of different things in the consumer products world. From setting category sourcing strategies, selecting supply chain partners to be able to bring new products to the market, led supply planning across several different manufacturing plants, and, helped build an allocation strategy and tool for our sales team to survive the toilet paper apocalypse of 2020.
Yeah, thanks. This is Zach Peña, CEO of Empirix Partners. So we, you know, we’re shooting, sourcing procurement advisory specifically for mission critical. And we’ve come to come to be from a lot of our past experiences where we were at, either working for the co-location of hyperscalers directly, or within the consulting side, of the OEMs, and or the overall supply chain department itself. So come with a wide breadth of knowledge of and then before I got into consulting advisory and data centers, I spent a little time in the
Marine Corps as well. So, apologies in advance for any, any fun you guys hear during this.
I’m Michael Kokal. I’m the president and CEO of Kodis Holdings. We provide freight warehousings and supply chain technology, for mission critical type end markets. Including digital infrastructure, aerospace, can keep going and going and going, but you guys get it.
Ethan: Cool. So I’m the outsider to the space. I come in from a very different background, mainly focused on startups, product development, that kind of space. And it’s been really interesting learning about the mission critical space, especially over the first, I’ll say, 10 to 15 years focused on data centers. And then the massive shift that’s happened in the last five years.
I think that’s a good, launching point for this discussion - Zach, can you lay out the history of the market, kind of the age of easy, like we talked about pre-COVID, where we are now and what are some of the big changes we’ve seen in the space?
Zach: You know, the last five years have been pretty interesting. And, Mike, I think even you said the golden age of data centers, right? I mean, land was affordable. I’m not going to say cheap, but land was affordable. Power was available. Money was borderline free. you lead times were low, on on equipment and and everybody, you know, everybody was coming into this new, you know, I’ll call it more hyperscale vision of what the future looks like. You know, people were emerging out of their, out of their shells and moving from, you know, we’ll call it, you know, 1 to 10 megawatt data centers moving into that 20 to 30. And, and hyperscalers are moving into that 30 and 40MW.
I keenly remember in late 2020 visiting the same grocery store every day, and I eventually found a six-pack of toilet paper, and I put it in a bow and brought it home for my wife the same way I was bringing home flowers. And we all joke about it now, but that’s just how fragile the supply chain is.
Ethan Summers
“You’re starting to even see chief supply chain officers become CEO’s of companies”
And that was massive. Right? Five years ago, you mentioned the 40 megabyte data center. And people are like, wow, that’s you know, where is that going? Right. We can’t wait to see it. Now, you mentioned a 40 megawatt data center and passing there, like, cool. What are you going to do next? And people aren’t really intrigued by that, which just blows my mind, right? In half a decade. So, yeah, I mean, that’s been the environment. And then Covid hit and things obviously got much more complicated when it came from a supply chain perspective. But the environment didn’t shift too much other than just the hockey stick - just acceleration of need, right? Or demand and which obviously put the constraint on, on the supply chain and put the constraint on a lot of the things that were known to be real. and I think that’s, you know, that kind of set the stage where we are now, which is substantially different.
Mike: So what’s really interesting about where we sit in this whole ordeal is that, you know, supply chain was never a sexy topic prior to Covid, right? It was low person on the totem pole, maybe a stepping stone to get to something different. Whether it was finance was kind of didn’t matter where it is. The reality is, is that when Covid hit, people couldn’t get their products, both businesses and consumers. It brought the supply chain into focus for everyone. I think what we’re even seeing today is that the supply chain side of things is starting to become, more or less a higher portion of the executive management team. You’re starting to even see chief supply chain officers become CEOs of companies. All that being said, as you bring visibility into a certain industry like supply chain that was generally invisible before, well, that’s going to come with a whole lot of issues and, and infrastructure issues, right?
So now we’re sitting there saying, I’ve got all this stuff on the water. It used to come over in two weeks. Now it’s two months. Four months. Right. How do I see it? How do I
know? Communication increases ability for anybody to actually come to the table and say, I’ve got viable solutions to be able to give you accurate information that was all gone, right? So what happened is right. Take a big step forward. Now we’ve got all this into the limelight. Covid goes away. Well now we started coming into the age of data centers. Now we have the AI hit. Now we have these businesses that went from 3 or 4 people right, in a Denver office or something like that, to raising 3 billion, 6 billion, $10 billion in order to move. And the reality is, is that they know how to to build maybe a data center, maybe not. They know how product moves. So we’re seeing on our side of things is that just like the Empirix Team of coming in and working with purchasing agents and working with teams to be able to start their operations, we’re doing a lot of the same things. We’re building their delivery chain right from the ground up. We’re providing visibility, we’re providing greenhouse gas emissions, right. All that being said that in this particular industry and mission critical, right, whether you’re purchasing, whether you’re shipping, whether you’re warehousing, status quo is not going to be okay. Further, we have to be able to move at the speed of technology to be able to deliver the same customer experience to Empirix and their clients as you are used to getting in the consumer side, right? The last thing I’ll say about this is I said this a bunch of times, Zach you’ve heard me say, this is we can all order chapstick from Amazon. See you when it gets picked. See when it gets put in the truck, see when they close the door, see when they’re 20ft from your house. You can’t buy a genset that you spent a couple million bucks on without having to call six degrees of Kevin Bacon, right?
So the industry had to make a step up. And I think the biggest thing, and this is where the Empirix team is, has done a really good job of bringing us along as well. Is that mission critical operations require specialized, mission critical vendors.
Visibility is not about necessarily just seeing where something is at a point in time but –within your visibility platform – being able to tell a story.
Michael Kokal CEO of Kodis Holdings
Quantity has a quality
Ethan: here’s a phrase I really like. It comes from the military. It says that quantity has a quality. Another way of saying that is that more is not just more and more is different. When I joined the team less than a year ago, Zach, you said that a 50 megawatt data center was a huge data center. And then this spring we started talking to clients who were building 200 megawatt data centers. We toured one, and it was like walking around a Death Star, just enormous. That scale brings lots of challenges, and I think it brings out one of the most interesting trends is that data is a utility power, water, food, data. We don’t want any less of that.
Michael, maybe starting with you. What is that scale change brought to your business? And maybe in terms of challenges and how you’re solving those challenges?
Mike: I think it’s an interesting question. Why it’s a little bit challenging is because when you talk about scale rate, you talk about the scale of the size of the building, you talk about the project itself. At the end of the day, what we’ve learned here is that a shipment is a shipment, right? Doesn’t matter where it goes A to B, it’s table stakes for anybody to operate. But it’s the way in which you actually construct the project prior to cutting a PO, prior to pouring a foundation. Right. Because why? What has changed? Yeah, it got a little bit bigger, but it’s not like that time is condensed, right. If you’re going to build a, 200 Meg data center, right. It’s going to take you longer, then it’s going to take you to build a smaller data center. So from our side of things and from your side of things that that time has, has obviously grown right or is as spread out. But what I’ve seen more than anything else is that the age of ad hoc is over, right? The age of no information is over. The ability for data center developers or construction managers or procurement professionals to not know exactly where everything is at every point in time is over, right? So it requires the Empirix team or
whomever is in there, your own procurement team, to be able to have access to information to make data driven decisions on our side of things. Right. We’re sitting there saying every single day that a truck is late, every single day that someone, mismanages a piece of paperwork, right? These are dollars that are going out the door that are not 100, 200 and $500. Right? These are millions of dollars that we’re delaying every single day. So to your point, Ethan, is that has it got more challenging? Yes. Is it requiring more prep on the front end? Yes. But the reality is, is that the stakes have become so much higher.
Sam: I love what Michael was just saying about the age of information. Right. That we’re in this stage of visibility, you have to have that to be successful. But, I mean, reality is there’s a stat it’s like 15% of your CPOs out there. Only 15% of them have visibility into their, I guess, beyond their tier one suppliers call it. So I mean, that’s a major problem when we’re trying to move at the scale and pace in this industry, to deliver. So that, I mean, that’s one, one kind of facet that stands out to me. And then the other is just building on that topic is when I came into the mission critical industry, I got in kind of right when that pandemic was starting to hit. So on the supply chain side of things you had over several months, you start seeing these increase in demand signals that are hitting the manufacturing plants, and those signals are getting passed down the chain, and nobody’s really stepping back and realizing that, hey, this supply chain can actually break until it broke. And, I mean, suddenly you have this thing that’s trickling on for months, overnight. It’s broken in the lead times through the roof for every product you’re trying to get. And that’s where we were a few years ago. We’re getting better, in today’s world. But it goes to what Michael was saying about you have to have visibility throughout the supply chain, throughout your partners to be successful.
Ethan: That’s so funny, Sam, you joked about the great toilet paper crisis. I keenly remember in late 2020, visiting the same grocery store every day, and I eventually found a six pack of toilet paper, and I put it in a bow and brought it home for my wife the same way I was bringing home flowers. And we all joke about it now, but that’s just how fragile the supply chain is. And I think, you know, both companies agree that visibility is crucial to that. So, Zach, I want to ask you, visibility is it’s a huge part of what Empirix does. Can you talk through some of the tools and processes that we’re investing in that space, and really more why they matter so much as we make these long term decisions?
Zach: The core tool that we use is called Watchtower. And it really looks at the supply chain, cradle to grave and all the way from demand planning, all the way through execution and even into, if the client wants, right, or a partner wants it can go into, supplier relationship management, right, all the way and then really make it to where you’re managing the full supply web, not just parts and pieces of the supply chain and so that’s, that’s the key product that we use. And we see it very valuable. Right. And Michael, you said it’s visibility, right? I mean, people need to not only understand post PO visibility, they need to understand why they’re cutting that PO why they’re fighting for that, you know, their availability of supply base. you know, we bring it in from a multifaceted perspective, and we’re not only just driving it from, hey, we know what’s going on and what should go on. But from a strategic perspective as well. Right? We’re making data driven decisions on the front end so that we to actually limit the risk or the potential risks down the chain or through the web. Right. Cuz it’s really a web. It’s not a chain. I wish they would just completely change that, that, that definition. But you know, there there are ripple effects regardless of what you do. you
“You can’t just show up and say, ‘I’m going to go run a supply chain tomorrow’ - I mean, you’ve actually got to be good at this now.”
know, people look at, different strategies for different regions. you know, a lot of people are starting to move from a regionally led, regionally executed supply web or supply chain now to a centrally led strategy that then deploys regionally. And to do that you have to have visibility, you have to have data, you have to have decisions that are made, to de-risk, not just to accomplish. And I think that’s the interesting place we’re in now is, you know, we went through the crazy bullwhip, right. That that was talked about by Sam and people were just like, I just need butts in seats I need, I need a generator. I don’t care where it’s coming from. I don’t care where it’s going. I just needed to hit here because I have an SLA I have to hit, and it was the Hunger Games for a while. And running a supply chain through that was, was quite interesting. But without having the proper visibility and the right data, it’s the blind leading the blind. and Sam, you mentioned. Yeah, we’re getting better. But just because we’re getting a little better doesn’t mean we shouldn’t implement and do all the things that would have stopped the craziness from happening in the first place, so that when it does happen again and it’s not a it’s not an if, it’s a when, that we’re prepared for that and that we can actually make it through, regardless of the industry that you’re in now.
Ethan: That’s a fantastic perspective. And one of the things that we focus on with Empirix Partners is creating control. We want to build a platform that is disciplined, predictable and scalable so that our partners have control over their supply chain. And we think about control is two factors. One is visibility, which I think we just addressed. Well, the other is leverage. You need to see what’s going on. But you also need to be able to do something about it. So Michael, I want to ask you, I know Kodis is doing some really impressive stuff on the visibility front, but all
have also developed a network that I think creates exceptional control on the freight and transportation side. Can you talk about that some?
Mike: There’s a few different points around visibility, right? Because when we consider visibility for any sort of environment, right, I think the definition of visibility is what’s really hard. And sometimes where it’s lost in translation. Right. Visibility is not saying on the transportation side, I can put my tracking number in and know where that freight is. Right? Visibility is understanding that the moment that that piece of equipment goes on the production line, you know that that’s going to take six days. You know, the paperwork’s in to take a day. You know, the truck’s going to take four hours. You know, the transit time is right. It’s about not necessarily just seeing where something is a point in time, but within your visibility platform, being able to tell a story. And that’s what’s really interesting about the Empirix model. Right. And using vendors like us to be able to have, really good information is that without talking to a vendor, without talking to a trucking company, you can go into the Empirix system, right? And be able to answer questions in real time. That in the past would have maybe taken your procurement team hours. Right. Because what we’re really looking to do here is provide accurate information for boots on the ground to be able to decrease any sort of Maverick spend. Right? This is one of the things that we talked about with a couple other vendors was, well, that’s great. You’re going to pinch pennies on freight or warehouse or whatever it is, but you’re willing to pay your GC, you know, $4 million to coordinate inbound deliveries. Come on. Like I’m not saying that that’s not a bad thing. That’s the easy button. That’s great. But it’s not in line with the overall, technological push forward of the industry.
Zach Peña CEO OF Empirix Partners
Right? Why are we so archaic in the way that we manage the supply chains, manage the visibility on the trucks, ultimately communicate with one another via phone, fax? Who the hell knows what these folks are doing, right? We can give you the information as you need it and how you want to digest it. And you mean so it’s really unique about the partnership that we have here. Is that one, you know, Zach’s talking about is Watchtower. Watchtower. Am I saying that? Right? Watchtower. Right. That’s great. But you know what that is? That’s a template, right? That’s not even a template. It’s just a blob. Right. They’re going to molded into what they want for each individual client because you’re going to ingest data in a way that makes sense for you as an ultimate decision maker. Right. So I look at anybody that’s out there pending on what their ERP system or lack of ERP system, are you their ERP system. Right. So now we take that to say, each individual customer requires a bespoke level of service. And I think that’s really what we’re talking about here is giving a higher level of service, to anybody that’s out there. But what does that mean for us as a company? Right. Anybody can pick up and deliver. Anybody can warehouse, anybody can work and develop, a bot that goes into someone’s, you know, ecosystem to scrape data. It comes down to, at the very end of the day, shit in, shit out. If your data that is not going into your single source of truth is not quality data, then the output is not able to be trusted. So our two organizations, when we work together, we ensure that the data is going in for consumer. Stakeholder consumption is accurate data that can be trusted.
And I think as people start to get over this hump of not hitting the easy button button of using all the ways you used to do it before, I think you’re going to see a little bit of a
technological revolution in mission critical logistics, and in particular us on the visibility side, right where we don’t own trucks. I don’t have a fleet of boats, planes or anything like that. Right. We deal with 9000 different trucking companies every single year. But how can I deliver to Empirix and Empirix clients? Right. That same level of visibility. And for ours, its commitments of visibility, different layers of how we actually track that freight as it goes in and then ultimately having a back end team that’s here that allows us to be able to provide data that is useful, relevant and ready for decision making.
Zach: T hat useful data is interesting to Michael, right? Because I mean, I mean, I’d love to dig into this and Ethan into a little bit of a tangent. I think it’d be really interesting to talk through is I, I mean, Michael, what we’ve known each other for, for multiple years, but I mean, we didn’t recently really get into deep diving into opportunities and data centers until recently, right? I mean, in the last year or two, because we worked together and we found, wow, we you see this data and now that we have the data, we have the visibility. We should be looking at freight. It’s not just that thing that happens. We should be looking at the money being spent post P0, that maverick spin or whatever it might be, that unmanned spin or that, hey, we’ll get to it eventually once we optimize, you know, the important parts of the supply chain, right?
Which people really view, especially on the owner operator, own the owner operator side, they view that as pre-PO. Right. or getting to the PO. So, I mean, I’d love for you to give us a little background on on how you got, you know, like that story because it was extremely interesting to go from we’re not really looking at data centers, but we are moving some of their equipment to now it’s a pretty big concentration of the work you guys do.
Mike: Yeah. So when we, I kind of started the business raid one, started the business and went after clients that were really challenging because I thought cold calls were stupid. I don’t want to call somebody and somebody says, I’m going to go piss off. This is not this is not good for my ego. And that’s important to me. So what happened is right. We go to these more challenging places. Anybody that went you know, the normal transportation provider wouldn’t go to. Right. We would lean into those sort of things. So right. For us it’s digital infrastructure. Like I say, it’s power generation, both nuclear and fossil. I can keep going unless underground construction, nutraceutical, pharmaceutical. Right. All of these niche industries that you’re really talking about for us, that at the end of the day, if something goes wrong, there are going to be financial ramifications for it. So going back to Zach’s point, right, we have we still do to this day, have a very large presence in the semi-custom and custom commercial Hvac space across North America. And ultimately we will we kept seeing for all these new clients where we used to ship to a hospital or used to ship to school, right. It’s now going to data center A, data center B, data center C so it wasn’t really hard to understand, right, for us to be able to actually see the market and where it was shifting to right there. So now what we look at is we say we’re the low person on the totem pole. How many times is this being marked up on the way that it gets to the actual end client, right. B what is that experience actually look like? Because we’re not necessarily saying no, we’re going to save money, right? We might not even we might be even a little bit more on the front end of things. But when you look at the overall total cost of the delivered, product to the site, I think that’s really what you’re talking about is how we got into this space together to be able to understand what are the needs of a developer, what does the logistics provider need to bring to the table? How do
Sam Robinson VP, strategic sourcing and solutions for the Decennial Group
It’s about transparency and getting comfortable with being uncomfortable, right? Sitting down with your partners, facing the problems that either they have or you have and working together to solve them.
we make it scalable, and how do we make it repeatable? Right. And I think that’s really where we came into this. And had I it’s not an ‘ah-ha’moment. Right. It’s not really that hard. It’s we follow the money. We’re not that we’re not that intelligent. It’s just wherever it is. and I think that’s really how from our perspective, you know, we get to that next phase. I don’t know what’s next, right? I don’t know what the next industry is going to be. If any of you guys know it, that’d be great if you could give me a heads up so we could buy futures. But that’s not where we’re at. Yeah, you got it. Get you. Your finger got caught in your beard. And then I think the other thing too is like. What everybody’s talking about, but is all kind of a little bit of a fast rise of the scope three emissions conversation. This is really where Zach, we were able to work with Zach and say, what do we want to provide, right. Scope three emissions. How do you know how to reduce your emissions before you even know what the hell they are? Right? How can you say that? You’re putting together a plan and you’ve got to net 0 in 2030? Hyperscaler right when you don’t even remotely know how to walk and chew gum, right? We’ve got to start somewhere. So to the point here is just if you start with the basics of understanding what the industry is going to require, right. And then we can a we’re able to be pliable enough as a partnership here to be able to deliver a custom experience to these clients. I think ultimately, not only are you going to have, any sort of decreased spend or delivered spend on anything like that, but you’re going to have a solution that fits your organization and is also able to scale with your organization. And I think that’s where we as a business is, right, is two different businesses, our philosophies very much the same and aligned in that perspective.
Ethan: That’s a fantastic point. It’s one of
the talking points that we have a lot with Empirix partners. Is this shift, not just from cost reduction to opportunity cost. You know, when you’re talking about building a data center, they can charge $100,000 a megawatt a month, sometimes 50%, 100% higher than that. Right now, the cost of them missing a month online, a quarter online can be tens, if not hundreds of millions of dollars compared to them pinching pennies on a little bit of freight or taking too long to make a decision on replacing a PO. And I think about that a lot. Is this idea of fighting the last war that they’re so used to, this pre-COVID concept of bottom line, bottom line, bottom line, that they’re not thinking about how much they’re giving up on a much more competitive market.
Sam,from your unique perspective and experience, what is what is one of the areas where we’re routinely seeing customers in this space fight the last war?
Sam: I think everyone’s very much focused on the total cost of ownership. And when I say that right, it is a it’s certainly a buzzword. It sounds great. Everyone wants to focus on it, but it’s simply it’s hard to do. It’s not an easy thing to grasp and understand. And I think that’s the challenges that probably our team and, and Michael over at Kodis probably run into as well is hey, we understand we do understand the levers and the different things. They get pulled and shifted. When you make a selection for a partner A versus partner B product A, product B, and we we can see that and we can help bring data behind it and show that, hey, there is long term value that is created and goes with this solution or recommendation that we see that fits your business and your strategy. And I personally think that that’s an issue or a challenge that a lot of our, our customers and clients face
today is really grasping and putting the data behind that TCO type model and decision that needs to be made.
Zach: I think one, you know, pinching pennies on what they actually need, right? Or having this grand facade of that I’m going to go out and build a supply chain team or go out and do this, and it’s going to do these great things and it’s going to cost a little amount of money. And and we’re going to go take on the world and be fine. That sounds cool, but then you’re but then you realize you’re actually building the plane while it’s not just going on the runway, but taking off. So the ability to go do that, if you don’t really have that a established, it’s not a light switch moment unless you bring in somebody like an Empirix, That’s just help to be able to do it. because the difference between five years ago and now is that you can’t just show up and say, hey, I’m in. Where’s the line for all the free, you know, the cheap land and the free money and and all this? And where’s the where’s the line for the data center that I want to build? Oh, it’s nowhere. Okay. Crap. Where do I go? I mean, you actually be good at this now. You can’t just show up. you have to be very good at finances. You have to be very good a supply chain. You have to have amazing relationships to be able to leverage across the board. I mean, you have to actually, and this is not a knock on any specific individual or group or company, but like, you actually have to know what the hell you’re talking about. you can’t just show up and say, I’m going to go run a supply chain tomorrow, or I’m just going to go build a team, or I’m just going to go, you know, quadruple my capacity globally now. I mean, you look at some of these forecast, of some of our current clients and potential future clients and not saying they can’t get there. And I’m not saying that we can’t help them get there,
but that they’re looking their two, three, four gigawatt global capacity that they want to put on line between now and we’ll call it 2028. And they’re looking at it as a, as a hill or a speed bump or a slight elevation. And they don’t realize that they’re staring at Mount Everest. And I think that’s the big miss here, that people are having a misconception on is that today’s environment is not yesterday’s environment. So going in, doubling and tripling your capacity that you very easily did over the last five years is not going to happen in the next in the next five years. If you are not set up to win. and we can talk about what winning truly is. I think that definition is different for everybody. But I think that’s the big blind spot that I think we’re walking into.
Mike: So I agree wholeheartedly with all of those concepts. Zach you put it very eloquently. But I try to be nice. But, you know, I could have been an asshole. Well, you were just like the definition of winning. I’m like, Al Davis, just win, baby. Like, this is not how you that you either are. You are like, come on, let’s just be realistic. There is no middle ground here. I think there’s a very interesting and I didn’t last word for it. I think it’s the way that you said it is and right, I almost look at this and I say that the buyer. Right. Whomever the buyer is. Right. Let’s just call it the developer. Right. If they’re trying to do these things on their own, I think a lot of times the choice isn’t always theirs to make that new, that next step. What do I mean by that? Right. There’s so much concentration and critical path items that are, you know, for the OFCI side of this thing that it’s concentrated at a very small group of of manufacturers, at least domestically right now, every year that we go, we keep adding and adding and adding. This is something I talked about last year on a panel in New
York. Was that the market needs to set itself right on the capacity side, right? The ability to produce product. Because if you are going to buy a certain fan array with this, this, this and this will, you’re going to one person, right? So now we say we’re going to one person, whomever they are, right. One company whomever they are. And we want to decrease our delivery costs. We want to increase our speed to market. Right. Well what happens if I don’t have a Google balance sheet, right. Or whomever? Maybe. What happens if I am that well funded startup, but I don’t have I don’t have the ability to carry all of that product for three years by ordering ahead of time.
So I think there’s this also this market type setting situation of until the developers or whomever is making the sourcing decisions allow themselves to use more nimble, more, you know, newer technology companies that aren’t the old guard. Not to say that those aren’t phenomenal, phenomenal companies that are out there. You’ve got to allow the small to medium sized players to get a chance at to your data center, to get a chance to be able to scale right, pay them properly, don’t string them out for 180 days because they’re not going be able to scale their operations. Zach, you talked about the cost of money, right? We’re going to hit inflation. Like, what do you think we’re all doing here. Like the cost of something to move from A to B five years ago was half of what it is even today. Right. That’s the biggest driver of what’s going on. The nobody’s talking about right now. So if you don’t have options on where to source or you don’t have relationships with people, what are you going to do? You’re going to stand in line. You’re going to overpay. And that’s what I loved about the concept. When Zach and I started talking
about this whole thing, was that he does have those you guys do have those relationships, right? We ship partner with people that maybe don’t even have the slightest, you know, and anybody knows that they exist. But there are custom shot, right? I think this concept of I’m going to go to that person because I always went to that person ultimately is stunting the growth and capacity for the market. Right. But then I also look at that and I say money still undefeated in 2024. So reining in capacity right is ultimately going to be good for everybody’s bottom line.
That’s interesting because that’s what happens when any market matures. And that’s what we’re seeing right now, is none of that. None of these are surprising challenges. It’s just the data center. The mission critical space has hit maturity, but when any market matures, you see the same trend happen. it’s Michael, what you said - you win or you don’t. There’s no middle ground. And that’s what we see here in a mature market is you either have to be very, very big or you have to be very, very good. And the best companies are big and good, of course. So that’s kind of my perspective on it is, I think that the middle market players are maybe not making the right investments, the right decisions to either get really, really good, which they can do. Partnering with people like Kodis partnering with people like Empirix or to get as big as they can. They all seem to be aiming at big, and that’s a very boom or bust bet. So we’ll see how that goes. But one of the one of the big themes that’s been coming out of this is partnership is something that we value at Empirix is something that you value or Kodis.
“So that’s the hot take for me: I think we’ll start seeing a little bit of an industry shift. The bottom of the totem pole is going to start pushing some of the technology needs.”
Zach Pena
Introduction
A developer and operator of clean energy technologies engaged KODIS, a leading 3PL providing specialized logistics for demanding end markets, to devise and implement a comprehensive logistics plan for the transportation of oil sands filtration equipment from Utah, United States, to Kuwait in the Middle East.
Client profile
Our client is a publicly traded clean energy technology company focused on the oil remediation and natural resources sector. Its patented filtration centers enable the environmentally friendly recovery of heavy crude and other hydrocarbons from shallow, oil-laden sands.
Objective
The goal was to dismantle the oil sands filtration equipment in Utah, ship it to an export facility in Houston, Texas, and transport it via steamship to the Port of Shuaiba, Kuwait. The client required consultation on best practices for loading, minimizing crane downtime, transporting to a specialized crating facility, handling customs in the U.S., managing ocean transport, and clearing customs in Kuwait. Additionally, the client needed consistent communication and global visibility of the goods in transit.
Solution
KODIS coordinated with the export crating facility, freight forwarders, and the steamship line to advise the client on efficient breakdown of the equipment for ocean-bound transport. A decommissioning crew was deployed to split the machine into transportable pieces that required several types of trucks. Due to a lack of space onsite in Utah, each piece of equipment was lifted directly onto a trailer. This process required a precisely choreographed sequence of thirty trucks and trailers to minimize costs. Given the complex nature of this multinational product movement, KODIS served as the nexus for consolidation and communication with over forty vendors, ensuring the client had a single point of contact. KODIS also provided GPS-enabled IoT devices, leveraging its technology platforms to offer a single source of truth for cost, item-level tracking, and visibility.
Outcome
Simply put, the project ran on schedule. without any excess trucks, crane downtime, or general hiccups. The freight arrived at Kuwait’s Port of Shuaiba on time, intact, ready for transport and reassembly.
Conclusion
KODIS successfully developed and executed a comprehensive operational plan, efficiently managing the logistics of transporting the client’s oversize equipment from Utah to Kuwait. This project highlighted KODIS’ expertise in providing organized, costeffective logistics solutions for complex, multinational movements.
Ethan: So I’ll just open this to the floor, maybe share some thoughts on key partnerships, what makes them work, and also what makes partnerships hard to develop.
Zach: Jury’s still out on this one. I mean, I’m pretty sure it works, right? Pretty sure it works. Now, we it comes down to trusts, right? If you have the ability to say to your partner, do this, you can’t micromanage, right? You as Empirix are looking at it at the highest level possible, even though you’re offering it to the clients right at the at the most granular level. At the end of the day, you’re running the strategy. That’s really what you’re doing. You’re ensuring that what you said you were going to do, how you said you were going to deliverit, it was going to be it was going to happen. So when Empirix comes to us and says we have this new clients, here’s the build, here’s here’s the scope, put together what this looks like, your SOW you just have to trust that what we’re doing there is not only market based pricing. Pricing is ultimately going to, aid the clients and increasing their speed to market for whatever they’re building at that time and ultimately doing it efficiently, effectively, and with the least amount of, disruption to it in any way, shape or form. So to me, it’s just it’s still trusts. I don’t know if that’s going to ever go away. Yeah. I mean, a great example of that. Right. When, when Sam ran our NTT together. You know, we you know, I know me and the by no means did not have the buying power of Microsoft. but we were told we sat in a room with the executives of Commons and they said, hey guys, because of your transparency, the trust you’ve built with us, just the availability of data, and your willingness to partner and be a true partner, not just, you know, something on a piece of paper, with your very large volumes that you have, you have the same clout in our boardroom that Microsoft does.
And we were like, oh, that’s cool, right? That sounds awesome. just because I used to work there, right. Which was great. but it, I think it really hit us until we were, you know, really in the trenches. And we’re sitting there putting in orders and we’re getting whatever we want, and we’re getting it when we want it, and we’re getting it for a fair price, and we’re getting a very senior dedicated resource that they specifically put on our account. That’s probably one of the smartest people in the industry. And, he was able to help us not just be good, but guided us to be there. Right. And I think we do the same thing at Empirix is we’re not trying to be that hero. Right? We’re trying to be that guide. and I think that back and forth trust, is needed because we need to help guide the industry as professionals, but also we need the industry to help guide us. Right? Because they’re seeing this they’re feeling that, they’re understanding that. And if we’re not trading our, our partners and suppliers and OEMs whatever we want to call them, like we do our own, our own internal families within our companies, then we’re not taking advantage of a very good leverage point to make sure that we are good at what we do so we can win.
Mike: Yeah, it’s really that transparency and, one of, I mean, getting comfortable with being uncomfortable. Right? And sitting down with your partners facing the problems that either they have or you have and working together to solve it. And I mean, we’ve seen that pay dividends in our past. And, do it here at Empirix. And, Michael, I know you guys over at Kodis. I mean, it’s on your website with with how you feel, like right there within your core beliefs of of how you approach challenges.
I think a lot of partnership, trust, collaboration, it’s really important to, to understand what your partner goal is, what
they’re after. Zach, one of the interesting insights you’ve taught me is especially for these OEMs, of course, they want the highest total upside, but they don’t want a gigantic order. And then three months later, 20% of it drops off and six months later, 20% drops off. They want, predictable production curve. Michael, I have to imagine it’s the same with you. They want to get out of flat production gear. Yeah, you would have to have known volume of business every day, week, month, quarter that you can grow on then having these, these boom or bust trends. So I think it’s really important for trust partnership, collaboration to understand what your, partner’s goals are and to freely share what your goals are, which I think we all know from this space. The classic way of doing things was to not even admit that you had goals, and to make your partner try and guess what the goals are, which is just maddening to me.
Zach: Yeah, I mean, Ethan, one is the part of that. No, I’ll make this short because I know we need to probably move on to the next subject. But I mean, that’s the looks on the on the suppliers and partners faces when you actually sit and be honest with them. And you can you open the kimono, whatever you want to call it. Right. They’re dumbfounded. Right. Oh, what do you mean you’re sharing this with me? What do you mean that you’re going to tell me you’re going to allow 360 feedback to go back and forth, right? Like you’re going to you’re going to let me tell you that I hate your ops guy because he screws me every time I try to come and replace an air filter on your generator, like that. That real, tangible stuff is what we need with trust. Not just giving them data and taking it back and having a communication. It’s truly getting deep and showing them what’s behind the curtain and not just saying that we have a curtain.
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Zachary Peña – CEO
Mike: What I think to be the hottest part of this right now, would probably have to be, kind of. What I touched on earlier was people’s willingness to go outside of, of what is the norm right now. Right? Everybody can. When you look at an industry. Right. You know, now we’re throwing the, the generative AI in there right at the end of the day, if you get something up and running, more than likely you’re going to make money right now. And do we think that this whole demand side for data centers is going to continue at this massive hockey stick pace? I don’t know, I think basic macroeconomics would tell us there’s going to be something out there that’s going to stop that, maybe even something unknown. Right? So I think ultimately what works today, what gets us through today is still going to work today. However, in this binary, you know, yes or no sort of situation, if we’re not building for what could be, if we’re not minimizing our downside, if we’re not looking to the fact that, you know, maybe demand might not be there next year due to whatever forces that we can be. Right. We
have geopolitical issues that are out there or there’s been threats of nuclear invasion. Right. How does how does that how does that work here? I’m not 100% sure. Right. You know, you got somebody that fires a nuclear weapon over to Israel. It’s not going to be great for our markets. It’s not going to be great for people’s ability and trust in the banking system. Right. How does that work then into the future? How do we how do we minimize the downside for that? And how do we ultimately have pliable supply chains? to be able to react to things that we may not even see in the future?
Zach: I think the tide’s turning on the way that people approach the market. I think that historically, you know, it was very hyperscaler driven, right, by the technologies that were, brought to market. And then just organically, the colo providers would, would come in and then, you know, either repeat that, copy that, or have some type of version of that, because they were then obviously seeking those hyperscalers to lease their, their
space. And that was kind of the transition, right? It was like, okay, coming out of this technology, a new way of doing things where they’re going to, you know, concentrate on lowering PUE or we’re going to concentrate on moving from water to do air side. where we move from this technology, that technology. And I think that’s shifting. I think some of these new market entries is some of these medium guys that are trying to make a name for themselves or go big, are starting to starting to get some testicular fortitude on them. And they’re and they’re saying, hey, I have this. Let’s run with it. Right. And screw what we used to do, we know that there’s going to be an AI problem with a capacity. We know that there’s a current capacity issue. let’s just get on line and let’s go do something cool. Let’s go. But we always say we, you know, sales pitch to our size. We want to work with you to go build cool shit. Well, there’s people that are finally starting to build cool shit. And we’re seeing that like grid last, or stuff like that is real and coming and being produced today
“SALUT!”
like dirt is moving on these sites. And so I think that’s the hot take for me is that I think we’re going to start seeing a little bit of an industry shift. Is that the bottom of the totem pole was going to start pushing some of the technology needs. And I think you might see some of the hyperscalers either following suit or having a less direct impact to the actual movement of the industry.
Michael, Zach, You both lead companies that are crucial, mission critical, crucial to this giant nebulous thing we call supply chain. Any core message you want to leave us with related to what you do? Maybe what makes us uniquely suited to help meet these challenges.
Zach: I’ll go first if that’s okay. so no, I think choosing the right partner, is the way to success in the future, right? I think a lot of people have, gone out and try to build their own teams, and I think they’ve been successful on that, but they’ve they’ve built those teams to answer a problem that that’s in the past and not the problem in the future.
and I think supplementing that and figuring out what your gaps are and who can help you, I’m not even saying it’s Empirix or Kodis, but just realizing that you probably have a pretty large gap to get to where you need to be. And very quickly figuring it out and choosing the right partner to get there, is going to be vitally important to to be able to achieve these two, three, four gaps, and these forecasts that people are putting out there. So I think just the message to the listeners is, you know, do a little bit of a gut check, sit there and say, am I tooled for what our North Star truly is? Or do I even know what my North Star is? And they’re getting to that very quickly because without that, developing the team you need and or maturing the team you need, or supplementing the team you need is not going to be a quick process for you. And obviously both Kodis and Empirix are here to help and would love to. so, if you need help, give us a call.
Mike: It’s actually kind of the way that I was going to go through it. Right? You know, we live our lives as individuals and we buy houses and we drive cars and we have a computer. But as individual consumers of anything. Right? I don’t build my own car. Right? I don’t build my own house. I do what’s core to me. Right. And I think my message for anybody is and kind of going back to that gut check of what Zach just had to say is as a business that is buying services from anybody. Right? The best partner you can be to a service provider is somebody that knows who the hell you are. And once you define and know who you are, know what your strengths are, know what your weaknesses are. Don’t be afraid to say, I don’t have coverage in that space. And what I’m really going to do is go out there and hire smart people. I think those are the people that ultimately win.
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