Grocery Chains Lead Automation Charge in Micro-Fulfillment

Recently, Texas-based supermarket giant H-E-B announced its partnership with warehouse automation specialists, Swisslog to deploy several automated micro-fulfillment centers (MFCs) towards supporting the supermarket chain’s curbside pick-up and delivery operations. This partnership, along with enhancing H-E-B’s order processing capability, enables shorter delivery time by being closer to customers, reducing human contact, and allowing associates to fulfill orders without getting in the way of shoppers in stores. H-E-B’s planed MFCs will feature Swisslog’s SynQ software, which, as per Swisslog, would allow a “goods-to-person” solution that can be used in dark stores, MFCs, or even fully automated grocery stores in the future.

The rise of automated MFCs over the past 3-4 years has stirred from being promising experimentation to being a full-fledged portion of omnichannel strategy for major grocery players across America, who hope to compete with Amazon’s desirable two-hour grocery delivery offering.

• Swisslog’s E-Grocery Click & Pick Micro solutions configuration, which is specialized for in-store or bolt-on MFCs, includes a 5,000-square-foot ambient storage module, which supports 9,000 Stock Keeping Units (SKUs) and a 2,500-square-foot chilled module, which accommodates 3,000 SKUs.
• Swisslog can also host E-Grocery Click & Pick Micro Plus solutions, catered for in-store, bolt-on, hub-and-spoke, and centralized fulfillment centers, that includes a 7,000-square-foot ambient storage module, supporting 14,500 SKUs, and a 4,000-square-foot chilled module, supporting 4,000 SKUs.
• For larger applications, H-E-B is also expected to make full use of Swisslog’s E-Grocery Click & Pick Micro XL solutions, with a 12,500-square-foot ambient storage module, backing 21,500 SKUs, and a 4,000-square-foot chilled storage unit, supporting 4,000 SKUs. Swisslog said its large-scale offering is suitable for bolt-on, hub-and-spoke, and centralized fulfillment models, which would most likely be the case for H-E-B in several instances.
• Nationwide grocery giant, Target, acquired tech-based delivery services Shipt, Deliv, and Grand Junction. Using the technologies from its newly acquired subsidiaries, Target is testing a new way to deliver orders online with a special facility that sorts packages and contract workers from Shipt that then help drop them off at customers' homes.
• FreshDirect linked up with Fabric to position a 10,000-square-foot MFC in the Washington, D.C. area.
• Albertsons is currently testing two MFCs and plans to place more facilities soon.
• Midwest-based grocery retail chains Meijer, Sedano's, Associated Wholesale Grocers, and Ahold Delhaize are other notable names that have also incorporated micro-fulfillment technologies into their online operations.
• Another noteworthy development has been the recent opening of Kroger’s first automated online grocery warehouse in Monroe, Ohio. Partnering with software and robotics platform business Ocado, their Customer Fulfillment Center (CFC) will equal the sales of about 20 stores. Kroger had a particularly successful year in terms of digital operations with over US$10 billion e-commerce revenue in 2020, experiencing 116% year-on-year growth. Kroger unveiled its partnership with Ocado in 2018. Since then, it has announced 10 CFCs throughout the country.

With e-commerce growing and spreading its wings over the online grocery industry, tech giants like Amazon are emerging as the major players. It is apparent that a cost and time effective path to online grocery fulfillment and last-mile delivery is imperative. There are several important factors to consider with site selection, with a major one being space.

Along with the high costs of deploying advanced robotics and accompanying software, a major hurdle in terms of setting up fulfillment centers seems to be the rising costs of real estate in urban neighborhoods with high population density. Ocado has been the leading firm in addressing this problem on a global scale. They recently invested US$23 million in ‘vertical farms’ to grow produce near distributors in urban areas. Ocado is not the only player venturing into vertical farming and warehousing for urban grocery needs. Boston-based robotics start-up Urbx plans to build an automated grocery store that stretches 150 feet tall while occupying only 1,800 square feet of space by end of this year.

Another crucial friction that needs to be addressed is the inefficiencies surrounding loading and unloading. Ocado states that the two human-operated procedures, decanting and picking, costs about US$9 million per warehouse per year. To work around this issue, they have acquired two US-based robotics firms, Kindred Systems and Haddington Dynamics. With the end goal to have “dark” fulfillment centers, which would be fully automated and employ virtually no people, Ocado hopes to add US$38 million to its annual revenues because of these acquisitions. Leveraged surface areas resulting from a streamlined dock-to-stock process and shorter load/unload time due to minimal human contact will be the driving forces behind lowered operating costs resulting from automation.

Fully automated loading and unloading systems potentially allow extreme efficiency when working with stock flows requiring speed, which is the case for consumer-packaged goods. Additionally, the precision it offers brings a degree of consistency in warehousing activities, which ensures a higher level of operator and product safety, resulting in lesser chances of product wear and tear. Automation undoubtedly holds the key to shaping up logistics and fulfillment for consumer-packaged goods in the future.