E-commerce continues to change the grocery market, as companies seek to meet click-and-collect demands with innovative fulfillment solutions and strategies.
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.
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.
CLICK AND COLLECT TAKES HOLD
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."
URBAN FULFILLMENT AND THE "LAST MILE"
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."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.