6 minute read
Swisslog OpEd
Five trends shaping E-grocery fulfillment in 2022
This will be the year will mark the year when virtually every major grocer finalizes their e-grocery strategy, and many will move into the execution phase using MFC automation
The year 2021 answered some important questions about e-grocery fulfillment and how grocers can most effectively fulfill online orders through micro fulfillment centres (MFCs) and e-grocery fulfillment centres (EFCs). David Dronfield, General Manager, Swisslog Middle East, highlights some of the major trends emerging across material handling in 2022 in this special OpEd for Global Supply Chain.
The majority of the grocery market used 2021 to gain a better understanding of the complexities of e-grocery fulfillment and began to implement the organizational changes required to support an MFC strategy in the future. As a result, 2022 will mark the year when virtually every major grocer finalizes their e-grocery strategy, and many will move into the execution phase using MFC automation.”
The five trends that grocers should prepare for as they begin to execute on their strategies, based on our work with industry leaders who have successful MFCs and EFCs operating today.
1E-grocery orders
get smaller and more frequent
The big question coming into 2021 was how much the ‘return-to-normal’ would affect demand for e-grocery services. Would demand drop steeply from the highs experienced during the early days of the pandemic or would the convenience and time savings offered by on-line grocery shopping convert firsttime users into regular customers?
That question was answered definitively in 2021. Despite online grocery’s share of total sales being up and down on a month-to-month basis, the overall trend was one of growth.
According to a report from strategic advisory firm ‘Brick Meets Clicks’, the share of the U.S. grocery market represented by e-grocery pickup and delivery grew to 10% of total sales in 2021, up 2 points from 2020. While the firm saw relative consistency in order frequency through 2021, we expect this to change in 2022.
David Dronfield General Manager, Swisslog Middle East
David Dronfield is the General Manager of Swisslog Middle East, an intralogistics provider that delivers robot-based and data-driven automation solutions for customers.
David brings more than 35 years of professional experience in the warehouse automation sector with expertise across sales, marketing, business development, project management and in managing senior leadership roles. Having worked in the industry for more than three decades, David brings with him a wealth of experience and industry expertise.
Prior to joining Swisslog Middle East, David has served as Founder & Managing Director of Intralogistic Solution, a company providing intralogistic design, supply chain consulting & turnkey equipment solutions.
David also managed business operations in various locations, including the United Kingdom, Australia, Indonesia and Thailand prior to relocating to UAE. David holds a B.Sc degree in Electrical and Electronics Engineering from the University of Surrey.
As consumers get more comfortable with online grocery shopping and the convenience it provides, they will place smaller, more frequent e-grocery orders. This could put further pressure on the productivity and efficiency of in-store order picking as a means of fulfilling online orders.
MFCs and EFCs enable greater agility in responding to changing order profiles because the automation systems deployed in these facilities provide the flexibility to scale throughput and inventory independently.
2Competition around
delivery times heats up
Another byproduct of the maturing of e-grocery is the growing pressure to reduce order fulfillment times that will occur in 2022. As was seen in the broader e-commerce market, as consumers get more comfortable with, and more dependent on, online shopping they expect faster order fulfillment times. The largest, bestfunded players fuel these expectations by continually shrinking delivery times to improve customer experiences and create differentiation.
E-grocery will experience a similar evolution and likely much faster than occurred in other e-commerce segments. Of course, in e-grocery fulfillment, times are measured in hours and minutes rather than days. Grocers relying on manual fulfillment will be hard-pressed to keep pace with customer expectations, particularly in light of changing labor profiles in many markets.
Those moving to automation must ensure their systems are optimized for speed through advanced slotting strategies, maximum automation utilization, and orchestration across upstream and downstream processes. Automated systems must also be easy to use to better accommodate employee turnover and reduce fatigue.
3Grocers cut through
the hype and focus on the business case
In the early months of the pandemic, grocers were developing fulfillment plans as a reaction to an extreme situation. The rapid spike in demand for e-grocery services created a sense of urgency that overshadowed
the need for a solid business case. Speed of deployment was paramount and the situation too dynamic for a fully developed business case. That led some to adopt quick-to-deploy solutions that did not achieve cost-per-order expectations.
That is no longer the case entering 2022. Grocers moving forward with MFCs and EFCs in 2022 will take a more analytical and long-term approach to their e-grocery decisions. The focus is no longer on responding quickly to an unprecedented change in the market, but in establishing and scaling a cost-neutral e-grocery offering.
This shift is increasingly being informed by the experience of early adopters whose facilities met and exceeded expectations. Automation providers that worked with these early adopters are now positioned to help grocers determine the best distribution strategy based on order volumes in each market and accurately project the performance of automated fulfillment centres, both vital components of the business case.
4Innovative automation
configurations emerge to address key application challenges
The flexibility of the automation deployed in MFCs and EFCs allows these systems to adapt to small and irregularly shaped locations and scale with changes in demand. In 2022, it will also be leveraged in innovative configurations that more tightly integrate manual picking with automation.
One example that is expected to gain traction is placing cube-based automation that would normally be floor-mounted onto a mezzanine. Fast-moving and perishable inventory is then located directly beneath the automation system to improve material flow through the fulfillment centre and optimize building and space utilization.
5Omni-mode last
When e-grocery fulfillment is limited to curbside pickup, order consolidation and staging can be relatively easy to manage. But when fulfillment hubs are supporting pickup as well as delivery to customers and retail spokes, consolidation and staging gets complex.
Managing the timing of orders across the various modes can create confusion and requires more space than many sites have available.
This is increasing the focus on consolidation in e-grocery fulfillment centre planning. In 2022 more grocers using a hub-and-spoke distribution strategy will choose to automate consolidation as well as fulfillment. Shuttle systems have proven to be an ideal consolidation engine and will be increasingly paired with cubebased automation systems, such as AutoStore, to efficiently consolidate the ambient, chilled and frozen components of an order based on delivery and pickup schedules.
Rapid advancement
It may be a little premature to say e-grocery fulfillment has come of age, but it is advancing rapidly as volumes increase and more grocers gain experience operating MFCs and EFCs. In 2022, that progress will be seen in a wave of grocers launching their initial e-grocery distribution centres.
By collaborating with experienced partners and leveraging lessons from early adopters, these organizations can achieve cost efficiencies and performance levels that no one was sure were possible just two years ago.
Meanwhile, grocers that already have MFCs and EFCs in the market will focus on scaling their use of the strategy and using the speed and agility these facilities enable to create competitive advantage.
