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 gro-
cers and food-
service compa-
nies,” explains
O’Farrell. “They
are using auto-
mation that they can put
into their existing operations—
Solutions run the gamut from voice-directed pick-
ing systems to more complex automated storage and
retrieval systems (AS/RS) as well as automated palletiz-
ing 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, regula-
tions often require that employees take frequent warm-
ing 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 automat-
ing 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
