A SHOPPER'S GUIDE TO E-GROCERY FULFILLMENT
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
A SHOPPER’S GUIDE TO E-GROCERY FULFILLMENT
CONTENTS
Disruption Comes to Reaching the Limits E-grocery Fulfillment
the Grocery Store of Manual Picking Strategies
E-Grocery Automation
Beyond the Hardware Taking the Next Step
Technologies
2
DISRUPTION COMES TO THE GROCERY STORE
E-commerce has been a highly disruptive force in the retail sector over the last
ten years, rapidly growing to account for up to 20% of total sales. The grocery
sector has largely been immune to this disruption with only about 3% of grocery
spending in the U.S. occurring online in 2019.
That is now changing — and quickly. Demand for e-grocery services is
accelerating and multiple sources predict the industry is on the cusp of the
same type of disruption other retail sectors have already experienced:
• Online grocery sales in the U.S. is growing by 15% this year according to
an analysis from Bricks Meet Clicks.
• Nielsen and the Food Marketing Institute project that consumer spending
on e-grocery could reach $100 billion by 2022 — triple what it is today.
• A research study from Edge by Ascential projects the e-grocery sector will
experience a compound annual growth rate (CAGR) of 13% through 2024,
increasing total online sales to $162 billion.
Nielsen and the Food Marketing Institute
project that consumer spending on
e-grocery could reach $100 billion by
2022 – triple what it is today.
3
REACHING THE LIMITS OF MANUAL PICKING
Grocers have been meeting current e-grocery demand—and stoking the market —
by employing manual pickers, essentially surrogate shoppers, who travel up and
down supermarket aisles along with other shoppers pulling orders. But this approach
is labor- and time-intensive and because the market is not willing to absorb the
full cost of order fulfillment, is forcing grocers to sacrifice profitability to remain
competitive in the e-grocery space.
With their oversized carts, surrogate shoppers also create congestion in store aisles
that negatively impacts the shopping experience for other consumers. According
to industry sources, a grocery store will start to feel congested when just 6-8%
of purchases are e-commerce orders fulfilled by manual pickers. That’s a level
some stores are already at and most will reach within the next two years. Grocers
who continue on the path of using surrogate shoppers to pull e-commerce orders
from store shelves risk growing their e-commerce business at the expense of more
profitable in-store sales.
According to industry sources, a grocery
store will start to feel congested when just
6-8% of purchases are e-commerce orders
fulfilled by manual pickers.
4
REACHING THE LIMITS OF MANUAL PICKING
The Need for Automation
These factors are causing virtually every major grocery chain to explore opportunities
to automate e-grocery fulfillment. This can prove challenging on several levels.
First, it may involve bringing automation into retail stores that were never designed
to accommodate it. Space constraints within the existing retail footprint will create
challenges for many traditional material handling systems. The alternative is major
new investments in dedicated fulfillment facilities.
In addition, e-grocery order fulfillment can’t be fully automated. A majority of orders
will include some combination of non-perishable items — which can be efficiently
managed through an automation system — along with frozen items and perishables,
such as produce, deli products and prepared foods, which don’t lend themselves to
automation. These non-perishable items are also often sold by weight rather than
piece, which introduces additional challenges.
With the market still in its infancy, grocers are having to evaluate automation
solutions while still defining fulfillment processes that optimize the use of technology
while retaining the flexibility of manual processes in ways that don’t significantly
compromise speed.
5
REACHING THE LIMITS OF MANUAL PICKING
The One-Hour Mandate
Another variable that must be considered is consumer expectations and preferences,
which are still evolving and may vary in different neighborhoods within the same
market. Today, consumers in densely populated urban areas are showing a preference
for in-home delivery while those in surrounding suburbs seem content with in-store
pickup. Will in-home delivery ultimately surpass store pickup, or will a substantial
segment of the market continue to be willing to drive to the store to pick up their
orders? That’s a question that will only be answered with time.
Expectations around speed of fulfillment are easier to predict. Groceries aren’t a
“want,” like many other e-commerce purchases. They are a need that is consumed
continually in most households, creating the demand for short delivery times.
Waiting even a day or two for grocery orders will prove unacceptable for many.
Just as some e-commerce companies created competitive advantage by shortening
delivery times, large grocers are using one-hour fulfillment as a target for e-grocery
customers. This is a very aggressive goal and will not be possible in all cases, but there
is little doubt consumer expectations will quickly be shaped by the situations where
one-hour fulfillment is possible.
6
REACHING THE LIMITS OF MANUAL PICKING
Urgency and Uncertainty
Grocers are rightly feeling a sense of urgency around e-grocery fulfillment. With
the total market for e-grocery services projected to reach $100 billion by 2022,
the stakes are high. Get it right and tap into the biggest growth opportunity the
industry has seen in years. Get it wrong and risk losing ground to competitors.
Despite the challenges and uncertainty, grocers have several advantages when
it comes to e-commerce. They benefit from a highly concentrated and localized
market that removes some of the barriers to last mile delivery. Every home
needs groceries and local competition is typically limited to four or five retailers
so grocers may be able to consolidate multiple deliveries within the same
neighborhood, much like a parcel carrier.
Grocers also have the advantage of having a highly local network of stores that
can be used to support both home delivery and curbside pickup. Key to their
success in leveraging that asset will be choosing a right distribution strategy
and matching that strategy with automation that enhances productivity, reduces
fulfillment costs and can adapt to future changes in the market.
7
E-GROCERY FULFILLMENT STRATEGIES
There are a number of strategies being employed by grocers today to introduce
automation to improve the speed and efficiency of e-commerce fulfillment.
Hub-and-Spoke
Some grocers are developing centralized fulfillment centers that support multiple
stores in a hub-and-spoke arrangement. The automated fulfillment center assembles
orders for all non-perishable items and then bulk ships those orders to the stores
where they are topped off with perishable items. Completed orders are then available
for curbside pickup at the store or delivery to the home.
This approach allows the fulfillment facility and automation system to be designed
hand-in-hand and eliminates the space limitations imposed by integrating
automation into existing retail locations.
These facilities can also be designed to scale easily to accommodate continued
growth by using modular automation solutions that enable a pay-as-you-grow
approach. However, they are inherently capital intensive and can create an extra layer
of transportation between the hub where orders are fulfilled and the store where
orders are distributed, potentially limiting the ability to support expedited orders.
The automated fulfillment center assembles
orders for all non-perishable items and then
bulk ships those orders to the stores where
they are topped off with perishable items.
8
E-GROCERY FULFILLMENT STRATEGIES
Bolt-on Store Automation
In many cases, it will make sense for grocers to bring automation directly to the
store. Using compact, robotic automation technologies, they can create small
fulfillment centers at the back of the store that automate current manual processes
for non-perishable item picking while utilizing store inventory to top off orders
with perishable goods. This allows them to fill complete orders from one location,
reducing transportation time and costs.
This scenario could support faster fulfillment times than the hub-and-spoke
approach, but unless the store is physically expanded to support automation most
locations will not be able to bring perishables and bulk items in close proximity to
the automation system, limiting the productivity of manual pickers who may still
need to go out into the store to complete orders.
Creating a full fulfillment center may be possible in some locations, particularly
high-volume locations with available space, by physically expanding the store.
This requires some additional investment but could allow these locations to
achieve order cycle times similar to a larger hub-and-spoke warehouse without
the need to transport orders to the store.
In many cases, it will make sense
for grocers to bring automation
directly to the store.
9
E-GROCERY FULFILLMENT STRATEGIES
Micro-fulfillment Centers
The shifts in the retail landscape created by e-commerce have created
opportunities to convert abandoned or underperforming retail outlets into
micro-fulfillment centers that serve the same area as a traditional grocery
store with automated fulfillment for curbside pickup or home delivery.
This strategy sacrifices in-store shopping so is particularly attractive
to pure-play e-grocers but creates the opportunity to optimize the
environment by efficiently integrating automated and manual picking.
It allows grocers who don’t have an existing brick-and-mortar footprint
within a particular area to move fulfillment closer to customers to reduce
transportation costs and enable shorter delivery times.
10E-GROCERY FULFILLMENT STRATEGIES
The Automated Grocery Store
Rather than bolting on automation to the back of the store, some grocers are
experimenting with moving it to the middle of the store, creating a new type of
grocery store that combines automated e-fulfillment with traditional shopping.
This is still an emerging concept, but early executions place an automated storage
and retrieval system in the center of the store which holds the majority of the
non-perishable items with perishable and specialty items located around the
outside of the store.
Shoppers have the flexibility to place their orders in advance or while in the store
and can choose to pick their own perishable and specialty items or have the store
complete their order for pickup or delivery. It remains to be seen how integrating
automation into the shopping environment in this way will impact the consumer
experience and how consumers will respond to that new experience.
A less intrusive approach is also being piloted in which large kiosks within
superstores streamline the pickup of smaller orders. When shoppers place their
order, they receive a bar code which is then scanned at the kiosk and their order
is presented to them within seconds. While this approach allows shoppers to get
in and out of the store quickly, avoiding navigating large stores and going through
checkout lines, it is not well suited for the typical grocery order.
11E-GROCERY AUTOMATION TECHNOLOGIES
As in other distribution operations, groceries have a range of automation solutions to
choose from. The best solution will depend to a degree on the selected e-fulfillment
strategy, but as with e-commerce automation in general, grocers should seek out
solutions that are flexible, data-driven and rob otic to ensure they won’t become
obsolete as the market changes and can leverage new technologies as they emerge.
Flexible solutions are those that can scale easily and adapt to change as it occurs.
Data-driven solutions deliver the intelligence to better manage product flow and have
the capability to incorporate machine learning that enables them to self-optimize.
Dat
Robotic solutions are required to increase the productivity of scarce human resources
le
a-D
xib
and drive down fulfillment costs.
Fle
rive
While there are multiple niche solutions being developed today to capitalize on the
n
growth in e-grocery fulfillment, such as the kiosk discussed previously, the primary
FUTURE-READY
automation solutions being used or considered are either robot-assisted picking or AUTOMATION
goods-to-person automation systems.
Goods-to-person picking is a concept that has been widely adopted in e-commerce
and multi-channel warehouses to enable higher productivity and faster order
fulfillment times. Instead of pickers walking up and down warehouse aisles to pull Robotic
orders, the goods-to-person system allows the picker to remain stationary, with an
automated storage and retrieval system delivering the products they need to fulfill
the next order as it is needed. Pick time is thus reduced significantly, and accuracy
is improved, while pickers experience less fatigue
12E-GROCERY AUTOMATED TECHNOLOGIES
Robot-Assisted Picking
Robots are being introduced into grocery stores to automate a variety of functions,
from cleaning floors to unloading trucks. They are also being used to support and
supplement e-fulfillment, particularly in regard to store pickup.
One approach is robotic-assisted picking in which a robot guides the picker through
the store to optimize travel based on the location of the items to be picked and
allowing multiple orders to be picked at the same time. The robot leads the shopper
through the aisles in the most efficient manner and even guides the picker on how
to package the order, determining which SKUs should be put into which grocery bag
based on criteria such as the maximum weight for a bag, crushability and whether
items need to be segregated by temperature.
This approach allows robots to be added with minimal disruption and investment,
but ultimately doesn’t address the congestion issue as e-commerce orders continue
to grow.
Alternately, some retailers are experimenting with creating a goods-to-person picking
environment in the store. Automated mobile carts collect items from a warehouse-
style storage space within the store and bring them to pickers at pick stations for
order assembly within a section of the store. Orders are then topped off with fresh
items by shoppers. For stores that aren’t fully utilizing their existing space, this may
prove to be an attractive alternative.
13E-GROCERY AUTOMATED TECHNOLOGIES
Shuttle Systems
Shuttle systems rely on a combination of robotic shuttles and lifts to enable
products to be stored both horizontally and vertically in bins, cartons or trays.
Each horizontal row of the system is served by one or more shuttles, depending
on throughput requirements, which travel down aisles between each vertical row
to access products deep within the row. The lifts then lower the selected bins or
cartons to conveyors, which feed stationary order assemblers.
The density, throughput and capacity of shuttles are well-suited to e-grocery
fulfillment in hub-and-spoke and micro-fulfillment applications. However, the
large number of moving parts in these systems does contribute to high maintenance
requirements, which are amplified in distributed applications such as e-grocery
fulfillment. They may require dedicated and trained maintenance specialists
on-site to deliver a high degree of availability, which adds significantly to their
cost of ownership.
In addition, because the shuttles must travel down aisles to retrieve products,
each vertical row of products requires its own aisle. This limits density relative
to other solutions that don’t require aisles. This also means each new vertical row
of storage added requires its own aisle. While the solution is scalable modularly,
the size of each module is larger than with other solutions, which could prove to
be a problem in bolt-on or micro-fulfillment applications.
14E-GROCERY AUTOMATED TECHNOLOGIES
AutoStore
AutoStore is a compact, innovative robot-based automated storage and retrieval
system that supports goods-to-person or goods-to-robot picking. Its combination of
density, reliability and scalability makes it an ideal solution for virtually any e-grocery
fulfillment strategy.
The AutoStore system consists of four main components: a three-dimensional storage
grid, storage bins that contain product inventory, a team of robots that retrieve bins,
and ports that serve as the interface between the operator and the AutoStore system.
The system has low maintenance requirements and each robot can reach any bin in
the system, allowing individual robots to be taken off-line for maintenance without
shutting down the system. Fast-moving products naturally migrate to the top of the
grid to enhance retrieval times.
AutoStore’s unique cube design, in which storage bins are stacked vertically up to six
meters high, represents the most space efficient automation system available today.
The architecture of the system also allows a high degree of design flexibility. It can
be constructed around pillars and in irregular shapes to take maximum advantage
of available space within a grocery store. Unlike shuttle systems, port locations are
flexible and can be placed anywhere within the grid. AutoStore also provides a high Swisslog is the world’s leading AutoStore integrator with over 160 deployments across 19 countries.
degree of scalability in storage and throughput. Additional storage bins, robots or
pick stations can be added at any time with minimal disruption to operations.
15BEYOND THE HARDWARE
In some respects, getting the hardware right is the easy part of e-grocery fulfillment.
The software that both manages the automation system and orchestrates activities
between automated and manual picking can make or break the success of an
installation.
Here, e-grocers can benefit from the experience of other e-commerce companies
who have learned first-hand the benefits of an integrated automation control and
warehouse management system. While e-grocery represents fulfillment challenges
in regard to the range of different types of products that must be assembled to
complete an order, it’s common within many warehouses to support automation
systems with some degree of manual picking.
That has proven to be a challenge when the AutoStore control system is not
integrated into the warehouse management system (WMS). In those cases, the
AutoStore control system must be manually integrated with a third-party system
and this can create issues with order management and synchronization that will
be particularly pronounced in e-grocery applications.
Look for automation control software that is included as a module within the WMS
platform as that will allow a single system to orchestrate all of the processes and
systems within the fulfillment center. Operating within the WMS, the automation
control software should be capable of managing all of the functions needed to run
the automation as a “black box.” Local inventory management components and
Look for automation control software
sophisticated material flow strategies can leverage the overall system performance that is included as a module within the
in the best possible way. WMS platform as that will allow a single
system to orchestrate all of the processes
and systems within the fulfillment center.
16BEYOND THE HARDWARE
Another advantage of using a WMS with fully integrated automation control is
consistency in the operator interface across various processes and systems. User
interface design is an often-overlooked aspect of automation software, but it has
a significant impact on accuracy and productivity.
Interfaces should be designed to present necessary information simply, visually and
intuitively to minimize training and maximize productivity. When interfaces are
consistent across different processes, workers can move fluidly between automated
and manual picking. While the interface is standardized, the information presented to
operators should be customizable based upon the specific application and optimized
for ergonomics and simplicity.
Other features that could be valuable include 3D visualization and business
intelligence tools. Three-D visualization present a simple, holistic overview of the
system at any point in time while business intelligence tools provide a dashboard
view of KPIs and simplify system health monitoring.
Finally, consider the experience of the solution provider and maturity of the software.
Solutions providers that have established implementation and startup processes
proven across multiple applications may be better equipped to help grocers navigate
the complexity of e-grocery fulfillment. Shortcuts within the implantation process
can create long-term problems when they fail to consider all possible use cases and Solutions providers that have established
exceptions. implementation and startup processes
proven across multiple applications may
be better equipped to help grocers navigate
the complexity of e-grocery fulfillment.
17TAKING THE NEXT STEP
With e-grocery sales ramping up, grocers must finalize strategies for supporting
same-day home delivery and curbside pickup. While there are multiple options to use
the existing store network to support e-grocery fulfillment, automation is required to
provide the necessary productivity and speed. Goods-to-person automation systems
have been proven in many warehousing applications and provide the density and
flexibility required to support e-grocery fulfillment.
Both shuttle systems and AutoStore support goods-to-person fulfillment. Shuttle
systems offer much higher throughput while AutoStore provides greater density in
most applications, has lower maintenance requirements and is easier to scale.
While several integrators support AutoStore, the e-grocery fulfillment experience
and software maturity of the integrator can have a major impact on the success of
an implementation. Working with an experienced integrator with automation control
integrated into the WMS platform, helps ensure e-grocery fulfillment automation is
implemented in the most efficient manner possible and delivers the desired performance.
The e-grocery fulfillment experience
and software maturity of the integrator
can have a major impact on the success
of an implementation.
18TAKING THE NEXT STEP
About Swisslog Logistics Automation
We shape the future of intralogistics with robotic, data-driven and flexible
automated solutions that achieve exceptional value for our customers. Swisslog
helps forward-thinking companies optimize the performance of their warehouses and
distribution centers with future-ready automation systems and software. We are the
world’s leading integrator of AutoStore with more than 160 deployments worldwide.
Our integrated offering includes consulting, system design and implementation, and
lifetime customer support in more than 50 countries.
Swisslog is a member of the KUKA Group, a leading global supplier of intelligent
automation solutions with more than 14,000 employees worldwide.
For more information, contact logistics@swisslog.com.
19You can also read
