Addressing the challenges of grocery retail
The grocery retail landscape is becoming more complex, with consumers increasingly ordering food online and shopping at smaller local stores. These challenges present retailers with a number of opportunities to re-shape existing grocery supply chains for competitive advantage. Efficient store replenishment, effective order fulfilment and the appropriate application of automated processes will be the key differentiators in a highly competitive market.
Convenient home shopping — at a price
Online grocery shopping in Australia is forecast to increase by an annualised 12.9% to reach $4.9 billion in 2021–22. But these sales will still represent only a small proportion of the overall market, and a good part is represented by online-only specialists and high-end retailers — new businesses that are not directly competing with the supermarkets.
Nonetheless, retailers need to offer online shopping. This may not be in just a single channel but in several — especially in terms of delivery. Retailers may offer options ranging from delivery to domestic properties, to delivery at place of work, or to ‘dropbox’ facilities. Alternatively, an online order may be collected from a supermarket where it has been picked or delivered from a pick-point in a larger store, a distribution centre (DC) or a specialised online-only warehouse.
Meanwhile, there is the problem of picking, assembling and delivering the order. Some early adopters chose to fulfil online orders from the shelves of their larger stores. This allowed them to achieve nationwide coverage quickly and relatively cheaply, and it worked as long as volumes were low. However, with larger volumes there are obvious conflicts between regular customers, order pickers for online purchases and with replenishment activities as well. This may detract from an enjoyable consumer experience in store.
Additionally, there are built-in inefficiencies with an in-store pick. In a warehouse or DC, products are grouped to enable (as much as possible) the shortest pick journeys. The ethos of a supermarket is quite the opposite — they are laid out to expose consumers to everything available in the hope that some of this will find its way into their carts.
Others have adopted a radically different strategy. Some retailers serve vast areas from just three or four online DCs. This eliminates cross-channel conflict but must inevitably limit the ability to promise very swift delivery times. That is also a problem for retailers who fulfil online orders by picking in-store overnight when the shop is closed to normal customers. By definition, the best they can offer is next-day delivery, and a significant part of the online market has come to expect better than this.
Local store trends — the new hot spots
A notable trend is the resurgence of the smaller, more local store model. These may not always be particularly small but are typically serving defined localities without easy access to a big supermarket. A limited range of fast-moving goods is carried, often emphasising fresh ‘food to go’ as well as staple items.
The offer from local stores is constrained, not just by economics but often by physical limitations. Prime locations in urban areas are unlikely to deliver much in terms of either loading bay or back room space. Replenishment — especially for fresh food — must be in small but frequent shipments. There is little space to accommodate full pallets of product, or extensive chilled or freezer capacity back of store. Orders will usually be for less than a pallet load, often for less than a case load.
This requirement for split-case or single-item picking, especially for slower-moving goods, can be a problem. Traditionally one might set up the DC with two pick faces for the product — one for full cases and one for split cases. An alternative is to decant into split case totes and fulfil the smaller requirements by family, using a goods-to-person (GTP) automated system fed by a buffer system.
Optimising the cube — and going ‘dark’
Floor space within grocery DCs (or wherever local store replenishment and online orders are fulfilled) is about to get extremely congested. So, too, will goods-outward facilities. Typically, a home delivery vehicle, limited as it is by the need to access urban streets, is doing well if it carries 20 orders per trip. That is a lot of traffic that a facility may not be designed for. To free up space it is important that the full cube of inbound delivery vehicles be optimised as much as possible.
All this extra, detailed activity also suggests that more staff will be needed — that is if reliable people can be obtained at the wage being offered. The only conceivable way forward is to automate processes.
How to respond depends very much on the retailer. One interesting solution being contemplated by certain retailers is to convert all or part of an existing big outlet into a ‘dark store’ to serve local and online channels.
The dark store looks very much like a large supermarket with the aisles laid out with similar logic, but usually with wider spacing to improve traffic flow. With no ordinary customers in the way, there is opportunity for some considerable use of automation. This could include the automatic routing of both pickers by pick-to-voice or similar technologies, and order totes to the appropriate part of the pick face. GTP automation, fed by multishuttle systems, is also appropriate especially for slow-moving or batch-picked SKUs. And despatch staging using multishuttle and conveyor-based systems involving sortation and consolidation for van/route sequencing could also be usefully deployed.
There are many advantages in adapting an existing store: the building itself, lighting and other services, staff amenities and car parking are already present, and existing consumer parking can be sequestered to accommodate the delivery van fleet. Most or all order picking is removed from the customer environment and can be automated as required, but inbound logistics is essentially unchanged. It is a compelling proposition that could benefit still further through the application of increased productivity by automated techniques.
A pallet-oriented warehouse or DC is usually quite good at using the full cube or volume of the facility. When we start breaking things down, it tends to be area rather than volume that matters. Given the costs of commercial property and the need for cost-efficient operations, it is vital that the full potential of the building is used. Here, automated storage and retrieval system (ASRS) configurations could best optimise store density and performance.
Many warehouses and DCs could benefit from relatively inexpensive software and hardware automation. This automation may range from high-bay racking systems with operators at a height to inserting mezzanine floors or using straightforward conveyor systems for efficiently moving totes or other containers.
Automation of the human element also has possibilities. Voice-directed picking is now quite common; vision-direction (via ‘smart glasses’) is rapidly becoming affordable. Both of these methods have been shown to improve pick accuracy. Combining voice direction with automated guided vehicles (AGVs) is also a possible future direction.
A further consideration is that of worker health and safety. Automation can reduce the impact of worker compensation claims for industrial injury due to lifting and stretching and provide a more pleasant working environment.
Automation is up for the challenge
Grocery retailers face an increasingly challenging environment with downward pressure on pricing meeting higher costs, notably wages. The consumer demands ever more accurate and timely fulfilment through many channels.
If grocery retailers are to accommodate and also capitalise on the changing demands of the market, they will need to think carefully about how supply chain processes can be optimised and attuned more closely to the needs of the grocery market.
What is clear is that the complex requirements of omnichannel fulfilment, flexible store replenishment and advanced sequencing techniques will demand the greater use of automated technology for order picking and order assembly activities. Intelligent automated systems applied and optimised in innovative ways will provide the means to meet these challenges and create new opportunities.
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