January 8, 2019
technology | Order Fulfillment

Grocery fulfillment goes high-tech

Grocery fulfillment goes high-tech

E-commerce continues to change the grocery market, as companies seek to meet click-and-collect demands with innovative fulfillment solutions and strategies.

By Victoria Kickham

Grocery retailers are taking a closer look at their order fulfillment strategies in the face of a growing consumer appetite for online grocery shopping, a situation that is piquing their interest in automated fulfillment solutions, robotics, and small-scale distribution centers designed to get products closer to customers. But rather than jump full-force into highly advanced systems, industry watchers say, more and more grocery retailers are taking a measured approach to meeting changing consumer needs in this new environment, carefully considering their goals as they seek to improve—and in some cases, develop—their e-commerce strategies.

"[Grocery and foodservice companies] are looking for growth paths," explains Sean O'Farrell, market development director at systems integrator Dematic. "For instance, they may be using a person to operate a pick cell, but seven years from now they want to be able to put a robot in that existing cell. They may not be ready for it now, but they want to make sure the system is designed so that they can add to it in the future."

This forward-thinking approach is in part the result of an increasingly tight labor market and the falling cost of technology, both of which are making it easier for companies to justify the purchase of automated equipment that can speed up fulfillment and improve productivity across the business. But it's also about competition. There's no getting around the Amazon effect in the grocery market, especially in light of the online retail giant's purchase of Whole Foods Market in 2017. Amazon's expansion into the sector has lit a fire under many companies to either develop or step up their direct-to-consumer fulfillment processes.

"Amazon is driving the response time and has really raised the bar [on customer expectations]," says Dean Starovasnik, director of consulting sales for systems integrator Bastian Solutions. "It's really created an energy and buzz around all this."

The pressure is causing grocery retailers to investigate technologies and fulfillment strategies they might not have considered just a few years ago. And although a handful of early adopters are leading the way, there's no denying the industry as a whole is moving toward a more e-centric business model, experts say.


U.S. online grocery sales continue to rise, with some estimates predicting growth of as much as 70 percent over the next three years. The growth is being driven in large part by millennials who prefer convenient shopping options, but also by consumers' growing comfort level with online grocery shopping in general. The result is a shift in the way grocery fulfillment is done that mirrors what's been happening in other retail sectors over the last several years.

"E-commerce has really taken the attention of a lot of grocers and foodservice companies," explains O'Farrell. "They are using automation that they can put into their existing operations—the warehouse or the retail store—to fulfill smaller, more frequent orders."

Solutions run the gamut from voice-directed picking systems to more complex automated storage and retrieval systems (AS/RS) as well as automated palletizing solutions, he adds. Much innovation is taking place in the freezer, he says, where automated solutions can yield a faster return on investment by reducing labor costs and improving safety. In such conditions, regulations often require that employees take frequent warming breaks, for instance, which can limit productivity as compared to other parts of the operation.

A few large companies in the grocery industry have begun to pave the way for the use of such advanced solutions. Late last year, Cincinnati-based supermarket chain The Kroger Co. announced plans to build 20 highly automated warehouses for handling e-commerce grocery orders. In a partnership with British retailer and technology provider Ocado Group plc, Kroger will create its first such "customer fulfillment center" (CFC) in suburban Cincinnati this year, the company said. The CFCs incorporate innovative robotics technology for "next-generation automated storage and retrieval," the partners said in November.

But not everyone is moving so swiftly toward advanced automation. Although the cost of technology is coming down, many argue that it's difficult to reduce the human element required in grocery fulfillment to a level that makes the investment worthwhile for many companies. The fragile nature of the items being picked requires a human touch, for example, and is one reason labor costs remain high. And although there is considerable investment in robotic picking systems that can address those challenges, industry watchers say the technology is not quite there yet.

"Robotic picking is still not entirely ready for prime time [in this market]," Starovasnik says. "It's hard to replicate the human hand. For health and beauty items, it's not so much of a problem for robotic arms—at least it's a regular-shaped item with smooth surfaces. But a head of lettuce or an orange is more of a challenge. Those kinds of problems on the fresh [foods] side are a big challenge, [and they] won't be solved tomorrow. But there is work being done."

Some argue that's a large part of why much of the industry is taking a longer-term approach to automating its e-commerce fulfillment systems.

"The grocers are pretty cautious because they don't have a history of doing e-commerce," O'Farrell explains. "We're seeing [customers] want to crawl, then walk, and then run. They are asking what we can do immediately to put them on the journey."


Hand in hand with the move toward automation is the development of smaller warehouses and fulfillment centers located closer to customers that make it easier for companies to deliver e-commerce orders—whether via click-and-collect or home delivery. Starovasnik and others say companies are exploring ways to utilize such facilities in urban and city center-type environments, incorporating a range of automated, goods-to-person, and vertical storage solutions. Supermarket chains and foodservice companies can place these "micro-fulfillment centers" in a variety of settings, he adds, including inside or near a larger facility where orders can be picked up in a "drive-through" type of setting.

Kevin Reader, director of business development and marketing for logistics solutions provider Knapp, agrees there is a rise in micro-fulfillment centers and points to Waltham, Mass.-based startup Takeoff Technologies as one company that is leading the charge. Takeoff is an e-grocery solutions provider that develops hyperlocal micro-fulfillment centers that incorporate Knapp's robotic shuttle technology to assemble customer orders quickly and at a lower cost than would be possible with traditional manual picking operations, according to Takeoff. Located in high-traffic urban locations, the centers take up less than one-tenth the footprint of a typical supermarket by utilizing robotics and compact vertical spaces. Takeoff announced the launch of its first such center in partnership with one of the largest Hispanic grocers in the U.S., Sedano's Supermarkets, last fall. Its first hyperlocal micro-fulfillment center will serve 14 Sedano's Supermarkets locations throughout Miami, the company said in a statement released in early October.

"We'll certainly see growth in urban fulfillment centers and much smaller centers that are located close to the customer—there's not any doubt about that," Reader says. "We're already seeing it—and [we're seeing] centers that can be deployed relatively quickly."

But Reader adds that the "last mile" in grocery fulfillment—meaning delivery to the customer's residence—remains the biggest question mark on the industry horizon, as companies struggle to find the most cost-effective delivery methods, even if they are located in close proximity to customers.

"Still to be seen is how the home delivery piece is going to fall out because it's the most expensive part of the equation," Reader explains, pointing to companies' ongoing efforts to evaluate delivery options and optimize scheduling and delivery time windows to maximize profitability and cost-efficiency. "That, I think, is the piece that is still very much in play."

About the Author

Victoria Kickham
Senior Editor
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.

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