June 7, 2017
strategic insight | Systems Integration

Startup Takeoff Technologies is ready to revolutionize e-grocery segment

Startup Takeoff Technologies is ready to revolutionize e-grocery segment

A new model for grocery distribution has the potential to alter the way we shop for the things we eat.

By David Maloney

Most of us don't like to shop for groceries. We do it because we need to eat, but we'd much rather spend our time doing other things.

The consistent ordering patterns of grocery shopping—people tend to buy similar products each time they go—would appear to make the segment ripe for e-commerce. Yet e-grocery has never really caught on. A few operators in large markets have been marginally successful. But for the most part, profit margins have been too thin to make online grocery fulfillment viable.

That's largely because grocery stores are one of the few businesses in which consumers provide most of the labor. Not only do shoppers assemble their orders themselves, but in many cases, they also process their own payments in self-checkout lines.

This model is hard for e-grocers to compete with because they have to pay people to pick and pack orders. Although some consumers have been willing to pay extra for the convenience of having their orders assembled for pickup, no one has been able to provide an e-grocery service at a cost that's competitive with the traditional grocery store model. At least until now.

POISED FOR TAKEOFF

Enter Takeoff Technologies. Takeoff is a Boston-area startup that believes it has hit upon the elusive e-grocery solution, with a model that works for both the consumer and the retailer. It will put its concept to the test later this year when it opens a first-of-its-kind operation in conjunction with an unidentified grocery retailer near Boston.

Takeoff's model calls for the development of micro-fulfillment centers that use robotic shuttle technology to assemble customer orders, making fulfillment quick and relatively cheap. The micro-fulfillment centers would be located in high-traffic urban locations, making customer pickups convenient and reducing last-mile delivery costs for those wanting door-to-door service. (The cost of delivery from a warehouse to the customer's doorstep is something that has plagued e-grocers in the past.) Online orders would be available for pickup within 30 minutes of order placement, which means a customer could order groceries online before leaving the office and pick them up on the way home. As added enticements, customers would have the option of curbside pickup and would pay no extra fees.

At the heart of the Takeoff model is the Knapp OSR Shuttle, an automated storage system used to house and deliver products quickly to workers at the micro-fulfillment sites. Automating most of the picking duties creates the economies needed to make the e-grocery model viable, according to the companies. The system is able to fill orders with five times less labor per item sold than traditional grocery operations can. And it does it with over 99.9 percent accuracy, according to figures from Knapp and Takeoff.

Among other benefits, the micro-fulfillment centers are designed to make ultra-efficient use of space. Alfredo Millan, who heads engineering for Takeoff, reports that the shuttle system can hold 4,500 totes of products located on 15 levels and two aisles. With a footprint of 3,500 square feet, the system can easily house 40,000 to 50,000 stock-keeping units (SKUs)—although Takeoff considers the sweet spot to be around 20,000 SKUs. In essence, the system can accommodate a product assortment that rivals that of the largest grocery stores but does it in a footprint that's one-tenth the size of a traditional supermarket.

QUICK PICKS

As for the machine itself, 30 shuttles operate within the OSR system, one per level per aisle. As incoming goods arrive, totes holding products are inducted into the system and raised using two elevators, one per aisle, to the assigned level. The shuttle for that level then collects the tote from the elevator and transports it horizontally along the aisle to a storage location in one of three temperature zones: frozen, refrigerated, or ambient. The shuttles can handle 1,200 lines per hour.

Customer orders are assembled in bulk and managed using the Symphony EYC warehouse management system (WMS) from Boon Software along with a proprietary middleware system that integrates all technologies involved in the operation. The software works in conjunction with Knapp's KiSoft warehouse control system (WCS), which operates the OSR Shuttle system and its associated conveyors.

Based on the software's instructions, the shuttles gather up the totes needed for the current batch of orders and transport them to the elevator located at the end of each aisle. From here, they're sent to picking stations, where workers assemble orders into customer cartons according to directions from a pick-to-light system. About 70 orders can be completed hourly from the OSR Shuttle system.

Approximately three-quarters of all items can be housed within the shuttle system. The exceptions are fast-moving items such as bread, milk, sodas, toilet paper, and bananas, where demand rotates too quickly for the shuttle. Non-conveyable items, such as mops, would also be stored outside the shuttle. These items can be picked using radio-frequency or voice technology.

The shuttle system used by Takeoff is a standard design, meaning it will be easy to replicate at new sites as the rollout progresses.

Takeoff executives say they looked at a number of automated solutions before settling on the Knapp technology. "Our concept is about simplicity," says Jose Vicente Aguerrevere, who founded the company with Max Pedró, whom Aguerrevere met at Harvard Business School 17 years ago. "But most of the automation out there was just too expensive to compete with the efficiencies of the [traditional supermarket model]. What we liked about Knapp is that they were the inventors of the shuttle concept and it is a proven technology. They had the performance metrics we needed and the ability to replicate the concept."

Takeoff says it can install one of its micro-fulfillment centers in an existing building for about a fifth the cost of constructing the typical new full-line grocery store. The company adds that the design is so simple and straightforward that it can be implemented in an existing facility within 90 days. After the Boston launch, Takeoff is planning to expand to other facilities in the first quarter of 2018.

WORKING WITH GROCERS

As for where it will fit into the competitive landscape, the Takeoff model is designed to work with existing grocers and not compete against them, as other e-grocers have done. Takeoff executives believe partnering with existing retailers will work to their advantage by allowing them to leverage the grocery chains' existing infrastructure and established customer base.

When it comes to potential locations for the micro-fulfillment centers, the field is wide open. With their small footprint, they could be placed within a larger grocery store or at other retail locations, such as convenience stores, drug stores, and gas stations. In some cases, it might even make sense to create a dedicated standalone fulfillment facility, Takeoff executives say. "We will locate where the demand is. That means we have to locate near the customer," says Pedró. "We will help existing retailers be successful in e-groceries. We are not trying to put them out of business."

In addition to offering pickup at the micro-fulfillment centers, Takeoff plans to utilize pickup points at other high-traffic locations and to contract with Uber-type services for home or office delivery of groceries. Deliveries would be made within two hours of order placement.

Will this model take off as the name suggests? Company executives appear confident on that count. In fact, the Takeoff executives say they believe it has the potential to revolutionize the way we all get our daily bread—and more.

A version of this article appears in our June 2017 print edition under the title "Thought for food."

About the Author

David Maloney
Chief Editor
David Maloney has been a journalist for more than 30 years and has been with DC VELOCITY since April of 2004. Prior to joining DCV, David was senior editor for Modern Materials Handling, where he reported extensively on distribution and supply chain operations. David also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. David combines a background of reporting on logistics with his video production experience to bring new opportunities to DC VELOCITY readers, including Web-based videos highlighting top distribution and logistics facilities, Webcasts and other cross-media projects. He also is the host and producer/director of Move It!, DC VELOCITY's online program that explains "how the stuff we use everyday gets to us." David continues to live and work in the Pittsburgh area.

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