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Powering logistics for effective e-grocery

02 February 2021

As the world moves further into the digital landscape, grocers are racing to find the best way to channel new opportunities. But while the e-grocery industry is poised for growth, it also faces unique challenges, says Swisslog.

Before the Covid-19 pandemic, e-commerce giants drove these challenges. Stepping into grocer’s territory, the attractive delivery times were enough to sway even the most loyal supermarket customers. Today, grocers face new hurdles: changing trends, last mile delivery, and increasing pressure on brick-and-mortar retail.

Ever-changing e-grocery trends

For Shane Faulkner, Head of Sales for Swisslog in the UK, it is clear that logistics operations must be efficient enough to fulfil e-grocery orders now, but flexible enough to accommodate any future changes in strategy. “In the e-grocery sector, the only constant is change,” he says.

“As an example, customers might currently prefer home delivery due to the pandemic and resulting lockdowns, but preferences may shift to curbside collection in years to come. For grocers to remain successful, logistics operations must enable efficient order fulfilment in both scenarios, and the capacity to handle a shift between the two.”

Last mile delivery

While home delivery is the preferred method for some shoppers, it is also time- and cost-intensive for the grocer. “Supermarkets must decide between operating their own fleet for home delivery or partnering with a third-party app like Deliveroo. Both options come with their own challenges, and it won’t be easy to switch the approach without causing order delays,” says Shane.

Other shoppers prefer not to wait at home for two or more hours waiting for their groceries. This is where curbside collection comes in, allowing shoppers to pick up their shopping. Typically, customers are given a pickup window that allows them to manage their time and remain in control of their day. Shane adds: “To compete in last mile delivery services, it is important for grocers to optimise the operation and make both the fulfilment process and the last mile efficient.”

Pressure on brick and mortar retail

Grocery retailers have gone through a variety of small changes over the years, but nothing as large in scale as the e-grocery trend. The biggest challenge is how to fulfil e-grocery and remain profitable. But it’s becoming abundantly clear that the quick fixes that grocers are currently using aren’t viable in the long term.

For example, grocers are meeting current e-grocery demand by employing manual pickers, essentially surrogate shoppers, who travel up and down supermarket aisles, alongside traditional in-store shoppers, pulling orders. 

This is an inefficient use of resources, as well as a burden on the traditional in-store shopper who will be competing for stock and aisle space with the surrogate shoppers. “Most importantly, because the e-shopper is not willing to absorb the full cost of order fulfilment, it’s forcing grocers to sacrifice profitability to remain competitive in the e-grocery space,” Shane continues. “The message here is clear; those that innovate now will be the segment leaders in the future.”

Three paths to powerful logistics

Without a doubt, e-grocers need a cost-effective approach that allows them to promise their customers fast and accurate order fulfilment – with a choice between home delivery and curbside collection. The right automation technology can provide this support, enabling companies to deliver the nation’s essentials quickly and productively. 

At Swisslog, we are working with our grocer clients on several different types of automation and fulfilment solutions. One of these solutions is a hub-and-spoke model. This is where a centralised automated fulfilment centre assembles orders for all non-perishable items and then bulk ships those orders to the stores where they are topped off with perishable items.

There’s also micro-fulfilment, where grocers utilise urban retail space to store inventory without offering an in-store experience. Instead, customers can opt for home delivery or pick up their groceries at a convenient curbside location. Shane adds: “Micro-fulfilment stems from the idea that an instore experience is no longer necessary for shoppers. It turns existing or vacant retail space into a small, nimble fulfilment centre that is close and convenient for the customer.”

Swisslog has already proven itself as an ideal partner for micro-fulfilment hubs at grocery chains around the globe, including H-E-B. The US-based grocer recently partnered with Swisslog to deploy a number of automated micro-fulfilment centres to support the chain’s curb-side pick-up and delivery business.

Grocers are also investing in bolt-on solutions, effectively adding fulfilment centres onto existing brick-and-mortar stores. These centres fulfil the adjacent store’s e-grocery orders but can also send product out to other stores in the local area in a hub-and-spoke model. “As with micro-fulfilment centres, this type of solution provides the flexibility to fulfil both home delivery and curbside pickup,” says Shane.

Modular solutions to the e-grocery challenge

The biggest advantage these solutions provide is flexibility. If one of the challenges is not knowing where this market’s going, then grocers need automation that can handle a potential shift in approach. Fortunately, Swisslog has a portfolio of flexible automation technologies and software that can be quickly deployed.

Grocers can achieve faster order fulfilment times with AutoStore. As a compact, innovative robot-based automated storage and retrieval system, it 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 fulfilment strategy.

The Swisslog CarryPick system is another option offering a flexible and modular approach to picking. Consisting of mobile racks, automated mobile robotic (AMR) vehicles, workstations, and software; the software-controlled system combines storage with replenishment and picking functionality – making it a great option for e-grocery fulfilment.

Automated shuttle system CycloneCarrier delivers high throughput, helping grocers store small loads quickly and efficiently when high availability is essential. The density, throughput and capacity of shuttles are well-suited to e-grocery fulfilment in hub-and-spoke and micro-fulfilment applications. 

Shane explains: “The automation that Swisslog is providing gives very high levels of flexibility regardless of the direction of the market.”

No time like the present

E-commerce in grocery is becoming widely acknowledged, and that is not likely to change. With big players moving into the grocery space, companies looking to take their slice of the pie should move quickly. Shane explains: “It seems companies are in analysis paralysis mode, waiting to see which direction the market is headed to avoid making strategic mistakes. But waiting too long to move is itself a strategic mistake.”

By using vacant retail space in highly concentrated areas, grocers can leverage the perfect application for micro-fulfilment. “There is no shortage of vacant retail space for those who don’t have an existing network of stores,” Shane emphasises. “And with automation solutions on the market that will allow grocers to leverage this space, the solution to modern challenges is obvious. There are even low-cost pilot options available for grocers to determine what works best for them and to fulfil their shoppers’ needs.”

Margins are notoriously low in grocery, and the expense of human beings walking up and down the grocery store aisles to fulfil e-grocery orders translates into an unprofitable model. Shane concludes: “Only through automated modular solutions can this model be turned into a profitable one.”

For more information, visit www.swisslog.com