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Should Grocery Retailers Offer On-Demand Delivery?

Should Grocery Retailers Offer On-Demand Delivery?

Jun 22, 2021

Prior to the pandemic, online grocery shopping accounted for just 5% of all grocery sales in 2019, according to data from Mercator Advisory Group. As of February 2021, online grocery shopping had increased 230% from pre-pandemic levels, according to Adobe research.

In 2021, consumers continue to shop online, but I’ve found that retailers are under pressure to deliver orders faster. This is no easy task for most retailers, as they don’t have a business model suited to making deliveries in several hours — let alone in minutes.

The desire for speed on the part of consumers has resulted in the creation of a new business model known as “instant on-demand delivery” whereby customers can place an order and receive their delivery in as little as 10 minutes.

New entrants like Gorillas, Fridge No More, Gopuff, Getir, Dija and Jokr have exploded on the scene and are attracting significant investor capital. An advantage of on-demand delivery companies is that they can often launch operations very easily due to lower-cost and lower-tech operating models.

Many retail analysts are claiming that on-demand delivery is the next big thing in retail. Is it? Should retailers embrace on-demand delivery? If so, how? I’ll answer these questions in the next section.

Grocery Retailers Versus On-Demand Delivery Retailers

Although all retailers can technically utilize on-demand delivery, I am using the grocery industry as an example of how retailers operate and the changes they will need to make for the purpose of this article.

With the growth of e-commerce, grocery retailers have invested capital into creating the ability to fulfill online orders themselves or by using third parties that perform most functions for them: Think Instacart or Shipt.

The biggest drivers of costs related to e-commerce for grocery retailers are generally the processes required to pick products from a store shelf or from a location in a fulfillment center, pack the items into grocery bags and totes, and deliver the orders to customers. A detailed example of the costs associated with fulfilling an online grocery order can be found on the MWPVL International website here.

Most grocery retailers operate stores that have their own costs related to store labor, utilities and additional costs associated with running and operating stores. Some grocery retailers fulfill all online orders from their stores, but many grocery retailers fulfill orders from large distribution centers. Distribution centers may employ associates or leverage automation to fulfill orders.

Based on my experience consulting for leading grocery retailers in the U.S. and globally, most grocery retailers are able to offer same-day delivery. Many grocery retailers aim to offer two-hour grocery delivery, but they may not be able to do this consistently without using third-party delivery companies like Instacart or Shipt.

Companies that offer on-demand grocery delivery operate with a completely different business model. For example, the average number of items carried in a supermarket is 28,112, according to 2019 FMI data. This means there can be tremendous variance in the number of products that customers order. The higher the number of products ordered is, the longer it takes to pick the items and fulfill the order. In my experience, on-demand grocery retailers tend to offer far fewer products.

Offering a smaller number of products makes it easier to fulfill orders, especially if customers are ordering fewer items from the on-demand retailer.

Unlike grocery retailers with lots of stores and large fulfillment centers and warehouses, on-demand retailers typically operate manual micro-fulfillment centers in the neighborhoods and regions they serve.

The biggest difference in the model is the way the companies utilize labor. On-demand retailers typically hire workers who can pick and fulfill orders quickly, place the items picked into a backpack, and walk to the customer or ride a bicycle to them. Some companies claim they can deliver groceries in as little as 10 to 15 minutes.

One of the leading grocery delivery companies, Instacart, recently announced that it would be offering an option called “Priority Delivery,” which offers delivery in as little as 30 minutes.

Should Grocery Retailers Embrace On-Demand Delivery?

Many grocery retailers are likely grappling with the question of whether or not they should offer their customers a separate grocery service for essential items. Yes, I think they should. Here’s why.

I believe consumers will continue to push retailers for faster deliveries with a goal of near-instant gratification. I often state in the articles I write that the future of delivery is delivering to people, not places. Gone are the days when retailers only need to deliver to a customer’s home. Instead, I believe retailers will have to deliver to wherever the customer is — and do so quickly.

Retailers should understand that the need for speed will likely only increase, and they should work to become experts at offering this service. As I’ve written about before, I strongly encourage grocery retailers to open micro-fulfillment centers to fulfill online grocery orders and supplement their network with nano-fulfillment centers to reduce the cost of fulfilling online essentials orders. (Full disclosure: My company helps retailers do this, as do others.)

I strongly encourage grocery retailers to leverage data to better understand the daily consumption habits of their customers, too. This requires collecting data to identify what products customers purchase to use and what products customers purchase and eat or drink by the time of day, day of the week, and week of the month. The more granular the data is, the better you can plan your offerings.

In turn, retailers need to build a dynamic pool of easily replenished inventory to meet the needs of their customers 24/7.

I also encourage grocery retailers to explore the use of mobile retail vans for essential items. The business model has been adopted in Japan, as Warehouse Automation explains, and some mobile markets have been developed in the U.S.

What I recommend won’t be easy for retailers to accomplish. However, without the ability to meet the demand for speedy deliveries, retailers may lose customers.

 

Top Material Handling System Solution Provider

Top Material Handling System Solution Provider

Mar 30, 2021

Leading Material Handling System Solution Provider

PULSE Integration has been featured as a top material handling system solution provider for 2021 by Logistics Tech Outlook Magazine.

Logistic Tech Outlook provides an annual listing of 10 companies that are at the forefront of providing material handling system solutions and transforming businesses.  The magazine is read by over 68,000 subscribers who are key decision-makers in the logistics sector.

The magazine also features contributory articles from senior management executives from distribution, warehousing, manufacturing, supply chain experts, logistics professionals, and other technology decision makers on how material handling solutions improved operational performance in their organizations.

Read The Article Here

Proving the Case for Autonomous Mobile Robots

Proving the Case for Autonomous Mobile Robots

Jan 22, 2021

PULSE Integration partnered OTTO Motors, to undertake what is the world’s first in-depth analysis of automated mobile robots (AMRs) deployed at scale in industrial facilities.

Working with an F500 company, OTTO deployed the OTTO Materials Handling Platform at a brownfield and greenfield site. PULSE then compared performance with:

  • Forklifts
  • Conveyors
  • AGVs
  • Manual material handling

The fact that these deployments were carried out at scale was important. What we have found amongst all but the digital leaders is that businesses look to adopt the technology bit by bit, trying to hedge their bets on their investment risk and keep all stakeholders happy. The result is that you tend to get islands of automation across a business or a production facility, missing out on the network effect you get with a large scale implementation where all pieces complement each other to achieve a greater whole.

Analysis and Conclusion

The findings of PULSE’s study were unanimous – on a per-unit basis, they found that:

  •  AMRs were significantly cheaper compared to other materials handling solutions
  • 90% cost saving compared to manual handling
  • 33% saving compared to AGVs.

Depending on the investment model used (system lease, vehicle-only lease or capital funding), PULSE calculated that this would translate to ROI being achieved in one to two years.

These are significant figures for an industry that has long tended to view robotics as an expensive solution with a high bar for ROI. As McKinsey puts it, the robotics market, in the past, leaned towards customers with the biggest spending power, focusing on proprietary, non-standardized whole factory solutions that kept costs high – and meant only those firms with the deepest pockets could forge ahead.
PULSE’s study is proof that times have changed. AMRs offer a specialized automated solution for one critical area of manufacturing operations, materials handling and intralogistics. PULSE and OTTO have demonstrated how AMRs can boost agility, efficiency, productivity and space utilization in the factory, while also driving down costs.
Critically, AMRs do this in a way that is more cost-effective than other available solutions, with an ROI that fits well within standard financial reporting cycles. If, as the likes of Interact Analysis forecasts, this leads to significant growth in the mobile robotics sector, this will also help to close manufacturing’s digital divide.
Social Commerce & Online Auctions Revolutionizing Retail

Social Commerce & Online Auctions Revolutionizing Retail

Nov 23, 2020

Retail is one of the oldest industries still operating. Throughout history, individuals have had a desire to buy for fun and a need to buy out of necessity. Retail is also an industry that is constantly changing. The arrival of Amazon has ushered in the growth of e-commerce, and consumers are increasingly shifting their preferences to ordering products online vs. shopping inside retail stores.

Based on what I’m seeing, I believe retail is about to undergo further changes as a result of the growth of social commerce, where buyers form a group in order to receive discounts from suppliers. Complementing social commerce is the growing trend of using online auctions to find the lowest bidders to fulfill orders for apparel, shoes and other merchandise.

Much of my academic research during three master’s degree programs was focused on retail, auctions and supply chain management. Since 2015, I have conducted research on one of the largest social commerce platforms, China-based Pinduoduo. In addition, I have provided consulting to retailers interested in social commerce and online auctions. (I do not mention these retailers in this article.)

Auction-Driven Social Commerce

Pinduoduo has taken China’s retail industry by storm. The platform reportedly had 585.2 million active buyers in 2019, surpassing JD.com’s 362 million and catching up to Alibaba, which reported 712 million users (in the 12 months leading up to September 30, 2019). I believe this can be credited to Pinduoduo’s executive team’s focus on efficiently receiving, fulfilling and shipping orders to customers.

To accelerate growth, products on Pinduoduo list two prices: one for individual purchases and a price for team purchases. Team purchases encourage consumers to convince as many friends and family members as possible to buy the same products together. The more products that are purchased, the lower the price for each product sold.

The model from Pinduoduo differs significantly from a warehouse club like Costco or Sam’s Club, which already sells a product in bulk. Convincing friends and family members to buy the same product in bulk doesn’t decrease the price.

I believe this is what’s missing in the current commerce model — duplicating the social experience online where friends and family buy together and have fun together. Further, I anticipate a move toward an online bidding model, whereby more than one seller can bid on selling their products to a group of consumers. This model has the potential to explode in popularity for several reasons.

First, the Nobel Prize for economics was recently awarded to two Stanford University professors for their work related to online auctions. The award has generated interest from retailers (several of them my clients) who wish to learn how to leverage auctions within their retail ecosystems.

Second, at nearly $800 billion, the grocery industry remains one of the most important industries operating today. Consumers purchase groceries more than any other commodity on an annual basis.

However, according to many economists and analysts, grocery retailers are examples of monopolies due to the fact they control all pricing power over the products sold in their stores. Walmart, for example, reportedly controls over 50% of the grocery market in many areas within the U.S.

In addition, the growth of online grocery ordering and delivery has uncovered a weakness in the current model: Every online grocery order is treated as a separate order. No attempt is made to combine orders to sell in bulk to reduce prices.

I believe the current grocery model can easily be disrupted. For example, a third party with an online platform for ordering groceries could enter the market with the promise of reducing grocery prices to their lowest possible level through the use of an online auction.

Instead of treating every online order as a separate transaction, a third party would be able to bundle hundreds of thousands of online orders and, on a daily basis, conduct a bid whereby brands, grocery retailers and wholesalers bid to fulfill the online orders at the lowest cost. (I wrote more about this topic earlier this year.)

Removing pricing power from grocery retailers has the potential to drive significant growth to a third party that perfects the use of social commerce and an online auction for selling groceries.

When To Use An Auction Model

Virtually all retailers can use an online auction and social commerce in their business, assuming they have a platform with the required technology. However, there are risks that must be taken into account. For example, retailers must understand what their costs are, and they must have a cutoff price that they won’t exceed, lest they rob themselves of margin and eliminate any chance of making a profit.

Also, retailers must have a supply chain capable of managing inventory and shipping bulk orders to many locations. Partnering with the right inventory optimization software can provide the needed algorithms to manage and optimize inventory.

It should be noted: I don’t recommend the use of social commerce or online auctions for high-value products that require a long time to make. I evaluated an online auction model for a company that manufactures extremely complex and expensive (over $1 million in some cases) CT scans and other intricate medical equipment. Using an auction would prevent the company from personalizing its process for making the machines and showing how its “hands-on” approach provided value above and beyond price.

Retailers must evolve or they will surely die. The status quo is no longer acceptable, and I strongly recommend all retailers in the U.S. to crush it.

Read the full article in Forbes

The Best Micro-Fulfillment Solution

The Best Micro-Fulfillment Solution

Oct 26, 2020

I recently hosted two webinars on the topic of micro-fulfillment centers (MFC). You can download and watch the webinars here and here.

Based on the size of the audience for each webinar and the number of questions asked by audience members, the topic of micro-fulfillment is growing in popularity. The question I am asked the most whenever I host a webinar or when I write an article on the topic of micro-fulfillment is this: What is the best micro-fulfillment solution on the market?

I will attempt to answer the question in this article.

I am also frequently asked: What are the biggest mistakes companies make when assessing and selecting a micro-fulfillment solution?

Based on my experience and discussions with companies that have gone through the search process for a micro-fulfillment solution, I believe the following are the biggest mistakes that are made:

  1. Companies fail to understand that micro-fulfillment isn’t just robotics they can purchase and install, micro-fulfillment is a strategy that can provide a competitive advantage. I always recommend that companies should identify their optimal micro-fulfillment strategy before they begin the process of selecting for micro-fulfillment automation. PULSE provides consulting on selecting the optimal MFC along with installation and life-time service. (Precision Distribution Consulting is a company that can help you identify your micro-fulfillment needs along with MWPVL International, founded by Marc Wulfraat. I owe a special thanks to Marc as I leverage some of his data in this article).
  2. Companies don’t invite all the recognized leaders in micro-fulfillment to take part in their RFP process. I can find no legitimate reason for not inviting all MFC companies to demo their hardware and software and submit a proposal. The established leaders in micro-fulfillment who should always be invited to participate in an RFP are: AutoStore, Takeoff, Fabric, Alert Innovation, Dematic, Attabotics, Geek +, OPEX, Vanderlande, Intelligrated and Exotec.
  3. Companies continue to allow inexperienced team members to lead the search for a micro-fulfillment solution. Having prior work experience at Amazon, Walmart, eBay, Google, Microsoft, Tesla or any number of other companies, doesn’t make anyone an expert in micro-fulfillment. Having prior experience in fulfillment or supply chain management doesn’t make anyone an expert in micro-fulfillment. Micro-fulfillment requires a specific set of skills and knowledge.

For the record, any company that doesn’t evaluate all the leading micro-fulfillment solutions on the market is making a mistake. Any company that allows inexperienced individuals to lead the search for a micro-fulfillment solution is making a mistake. What’s one of the signs indicating that a team leading the search for a micro-fulfillment solution are inexperienced and unqualified? Not inviting all MFC companies on the market to take part in a micro-fulfillment RFP.

The only exception to the rule of evaluating all the leading MFC companies is if Marc Wulfraat, PULSE, Precision Distribution Consulting, or other consultants are leading the search and selection for an MFC and they determine not to invite certain MFC providers to participate in an RFI or RFP.

Before I continue, I must point out that the future of retail and the future of business is robotics and technology.

Although the topic of this article is micro-fulfillment, I encourage all companies interested in micro-fulfillment to stop asking, “What’s the best micro-fulfillment solution on the market?” and instead ask, “What is the optimal robotics and technology strategy that we can leverage across our ecosystem to reduce costs and complexity, increase customer experience, enable growth and create a competitive advantage?”

See the difference?

The Missing Piece of the Puzzle

I embraced the value of micro-fulfillment in 2009 after completing a Master’s in Supply Chain Management at Penn State University. In 2013, I completed my third masters, a Master’s of Science in Merchandising. The degrees triggered a desire inside me to research the global retail industry. After months of research, I became convinced of the value of micro-fulfillment, and I designed one of the first micro-fulfillment centers. You can read about it in this article.

I also discovered the missing piece of the puzzle when it comes to micro-fulfillment: hardware automation is just part of the equation. In fact, I believe the easiest aspect of micro-fulfillment is getting the hardware to work assuming a retailer hires a qualified system integrator like PULSE Integration to install the MFC.

The biggest challenge in micro-fulfillment is getting the business case to work, meaning reducing the cost to serve (the cost to fulfill and deliver orders). Reducing cost to serve depends on optimizing the supply chain, product assortment mix, and labor planning. Automation isn’t enough.

Retailers that install MFCs without understanding the need for applying science across their supply chains and store operations to maximize the value of MFCs will achieve little to no ROI. Precision Distribution Consulting, PULSE Integration, and other consulting firms and system integrators can provide the required expertise to ensure maximum ROI is achieved.

A Crack in the Dam 

I am often asked why more retailers haven’t embraced micro-fulfillment? The reason is this: traditional retailers won’t lead and the industry responds to fear. For example, when Amazon acquired Whole Foods, grocery executives were convinced that Amazon was going to steal their market share in a matter of months. To prevent this from happening, executives contracted Instacart to provide online grocery fulfillment and delivery. Amazon hasn’t taken anyone’s market share. Yet. Many retail executives are now looking for ways to end their relationship with Instacart with micro-fulfillment being a possible solution.

Amazon and Walmart haven’t embraced micro-fulfillment as the right solution to meet their needs given the failures of their current micro-fulfillment pilots. Why did the pilots fail? Because neither Walmart or Amazon selected the best solutions on the market. Walmart and Amazon also don’t have experienced experts in micro-fulfillment, store operations and supply chain management leading the teams testing micro-fulfillment. In addition, Amazon and Walmart don’t have a strategy for micro-fulfillment, they’re only piloting micro-fulfillment. I believe this is a critical mistake.

I’m encouraged that Amazon and Walmart will quickly change their opinion about micro-fulfillment based on new pilots that will soon be underway. For example, I expect to see Amazon open a 20,000 square feet MFC fairly soon either inside one of their supermarkets and/or at an offsite dark store. Based on discussions with Amazon resources, the consensus is that the mistakes of the past are behind them and recent personnel changes has closed the gap in much needed skills and experience.

Amazon will drive other retailers and the retail industry to embrace micro-fulfillment and the increased use of robotics.

Walmart has also made changes to their MFC program, and I’m confident it will help push Walmart in the right direction. As the largest retailer in the U.S., Walmart should also be the leader in using micro-fulfillment centers throughout its retail ecosystem. I have recommended to Walmart to pilot a MFC from AutoStore, and to compare the results against the operational performance of the MFC Walmart has installed from Alert Innovation. Piloting a MFC from Attabotics and Exotec should also be explored.

I believe the real ‘game changer’ related to micro-fulfillment is the fact that H-E-B, arguably the best grocery retailer in the U.S., recently selected AutoStore to provide the company with multiple MFCs. I believe this is the crack in the dam of resistance that will eventually become a raging torrent of interest in micro-fulfillment by grocery and other retailers not wanting to be left behind.

H-E-B’s decision to select AutoStore makes them the leader in micro-fulfillment among grocery retailers. I anticipate Albertsons, Ahold-Delhaize, Kroger, Publix, Giant Eagle, Whole Foods, Target and other grocery retailers will accelerate their interest in micro-fulfillment.

This Forbes article that I wrote dives deeper into the need for grocery retailers to embrace micro-fulfillment.

My Methodology 

Ranking the micro-fulfillment players is difficult but I believe my methodology is fair.

On one end of the spectrum exists traditional shuttle and AS/RS companies like Dematic, Fabric, KNAPP, Vanderlande and Honeywell Intelligrated. The systems utilized by these companies offer good, not great, reliability but their architecture is far from ideal for a small MFC. Specifically, there are too many single points of failure, and the technology is incredibly expensive to maintain given so many moving pieces. The technology used in these systems was meant for large warehouses and fulfillment centers, and scaling the technology down for use in micro-fulfillment centers didn’t produce the best results.

On the other end of the spectrum exists the emerging 3D technology players like Attabotics, Alert Innovation, and Exotec. The systems offered by these companies have great architecture, low maintenance costs, and high density with no single point of failure. These systems also have low reliability due to so few of these solutions being sold, installed and operating. There is no easy way to build up reliability in technology other than installing many systems, identifying issues, and making improvements.

AutoStore was founded in 1996 and is a proven company with hundreds of satisfied customers. AutoStore currently has the best combination of reliability, architecture and density. AutoStore will have to continuously invest in its technology and software to maintain its position.

During my assessment of these solutions over the years, I’ve identified that all of them lack a very important feature: orchestration software to manage the end-to-end processes related to online ordering, fulfillment and delivery. The solutions also lack capabilities for integrating with or powering WEC, WMS, TMS and other software solutions required to fulfill and deliver orders, as well as perform other functions.

Software is the Achilles Heel of many MFC solutions.

I rank the MFC solutions below.

I’m confident that the list below will more than likely look much different in one year. There are many things taking place in the industry that will move some of the companies up or down on the list.

What follows is only my opinion. I do not work for any of the MFC companies I evaluate in this article. I encourage all companies interested in micro-fulfillment to perform their own due diligence before making any decisions.

First Place Goes to AutoStore 

AutoStore has been in business since 1996 and they have perfected the use of robotics, software and specialized materials and construction to build the most dependable and capable micro-fulfillment solution on the market. AutoStore has over 500 customers globally and the company enjoys a nearly 100% repeat business relationship with their customers.

AutoStore was recently selected by the grocery retailer H-E-B, to provide them with a large number of MFCs to be installed across their retail ecosystem. There continues to be a myth, driven by AutoStore’s competitors, that the AutoStore system can’t fulfill groceries. This is 100% untrue. AutoStore is the best solution for grocery retailers.

I recommend all grocery retailers interested in micro-fulfillment to contact Andrew Benzinger (andrew.benzinger@autostore.com) of AutoStore, and have a discussion with him about the AutoStore system in order to get the facts.

What makes AutoStore unique is that they perfected the use of the cube-based system that allows inventory to be stacked vertically in bins; this greatly reduces the amount of space required to install and operate an AutoStore. The AutoStore system can also be configured to fit in nearly any space. This webinar provides detailed information on the AutoStore system.

I also rank AutoStore in first place as a result of its commitment to continually look for ways to improve the efficiency of the AutoStore system. AutoStore recently announced the creation of Router, which utilizes sophisticated computer algorithms to continuously calculate and recalculate the most efficient path for robot movement in real-time – making each robot up to 40% more efficient.

Although I rank AutoStore in first place, I believe the company will face stiff competition in the coming years. I encourage AutoStore to ‘Think BIG’ at all times and explore making changes to their system that will increase the speed of fulfillment even more.

For example, I think it would be very interesting if AutoStore can create a system whereby robots pick from the top of the grid they ride on but also from the bottom of the grid. Such a system would allow for dual picking at all times from the top and bottom of each vertical stack of inventory. Robots would never have to access any bin that is deeper than half-way inside the cube at any time.

I’m also curious about the possibility of creating a combined shuttle-based and cube-based system that leverages the best of both systems for micro and traditional fulfillment needs.

Finally, I’m curious about the efficacy of a circular micro-fulfillment solution based on the motion of carousels. As the MFC carousels rotate, they would move totes into position for robots to retrieve the inventory.

Second Place Goes to Attabotics

Choosing Attabotics for second place was no easy task. I think Attabotics is technically the most advanced system on the market. That’s the good news. The bad news is that Attabotics is the most technically advanced system on the market. In other words, Attabotics works well once it is installed but installing the system can be difficult.

I will defend Attabotics by stating that when compared to other MFC solutions, I don’t believe Attabotics deserves the criticism it has received by some analysts and customers that I’ve spoken to.

Attabotics is most notable for its “3D” storage system, with wheeled carts capable of moving on an X, Y, or Z axis. I can attest to the fact that Attabotics is a technical marvel.

Attabotics raised an additional $50M in Series C funding in August, and the company is positioned well for future growth and continued development of its system. Attabotics has deployed their system in six locations across North America at companies in the food, B2B and retail sectors. Nordstrom is a client of Attabotics.

Companies that don’t invite Attabotics to participate in their micro-fulfillment RFP process are making a big mistake.

I also want to recognize the CEO/CTO of Attabotics, Scott Gravelle. Scott Thinks BIG and he is willing to question everything. This is a TED talk by Scott.

I refer to Attabotics as the Tesla of micro-fulfillment technology platforms. Like Tesla, Attabotics is encountering several operational challenges. My sincere hope is that Attabotics does whatever is necessary to eliminate the issues and maximize growth. I’m confident by early 2021, Attabotics will be firing on all cylinders.

Third Place Goes to Alert Innovation

I’m a fan of Alert Innovation for many reasons. Among them, founder John Lert has created one of the most unique micro-fulfillment powered store concepts in existence, the Novastore. I created a similar design in 2013, and people have contacted me over the years to complain that John stole my design. This is false. John and I independently came up with a similar concept at nearly the same time. I can assure everyone that John’s design is his own. I also believe John’s design is better than the concept I created.

Alert Innovation has secured Walmart as a customer, and an MFC has been installed inside a Walmart Supercenter located in Salem, New Hampshire. This is a link to the case study.

Developed specially for Walmart by startup Alert Innovation, Alphabot helps to enable quicker, more efficient order picking. The system operates inside a 20,000-square-foot warehouse-style space, using autonomous carts to retrieve ambient, refrigerated and frozen items ordered for online grocery. After it retrieves them, Alphabot delivers the products to a workstation, where a Walmart associate checks, bags and delivers the final order.

The e-Grocery Micro-Fulfillment Center design by Alert Innovation is another example of an MFC company creating a system that is highly advanced technologically. I think highly of the Alert Innovation system.

The jury is still out on Alert Innovation due to the small number of customers the company has. Another issue faced by the company is that Walmart invested in Alert Innovation, and Walmart has restricted the company from doing business with the leading grocery retailers. Alert Innovation’s growth is dependent upon Walmart. Note to Alert Innovation: End the relationship with Walmart unless they’re willing to acquire you.

My advice to Alert Innovation is to approach Instacart about building Instacart branded Novastores in strategic locations, and opening Alphabot-powered micro-fulfillment centers across the USA to give Instacart the ability to fulfill online grocery orders. Instacart would also have the option to become an online grocery retailer with the most advanced physical grocery stores (Novastores) in the world.

Acquiring TakeOff or merging with Takeoff is worth evaluating.

Fourth Place Goes to Exotec

Without a doubt, my fourth place pick, Exotec, offers one of the most interesting and unique solutions on the market. This video does a great job of explaining the Exotec system.

Exotec is growing in popularity; the company just raised $90M. The capital has positioned Exotec for explosive growth.

Although the Exotec robots are first-class in terms of quality and capabilities, what I really like about the Exotec system is their logistics software that coordinates the movements of all the robots.

Exotec is a France-based company (all robots are manufactured in Lille, France) but there are now Exotec teams in Atlanta and Tokyo, selling the Exotec solution to customers. The company currently has 14 running systems around the world. Clients include Leclerc, Cdiscount, Uniqlo and Carrefour.

Although I’m not a fan of shuttle-based systems, I like the system from Exotec and I think its a quality system.

And like Attabotics and Alert Innovation, companies should invite Exotec to participate in their micro-fulfillment RFP process.

Fifth Place Goes to Fabric

CommonSense Robotics was founded in Israel by Elram Goren, Ori Avraham and Shay Cohen in 2015. I was contacted by individuals who worked for CommonSense Robotics when the company was founded asking for my advice on different topics. I was happy to share my opinion.

CommonSense Robotics changed its name to Fabric in 2019.

I like Fabric because they offer multiple options for customers to leverage their technology. Companies can purchase or lease the Fabric platform and have it installed inside their stores or in warehouses, or companies can place their products inside micro-fulfillment centers owned and operated by Fabric. The latter model is similar to a concept I created that I call Micro-fulfillment as a Service (MaaS).

Fabric has raised $136M and is seeking $50M in additional funding according to sources. Fabric’s executive team made the right decision to secure additional funding lest they run out of cash. A startup can easily burn through $136M in as little as 12 months.

I’m not concerned about Fabric wanting to raise additional capital, I’m concerned that in my opinion, Fabric’s shuttle-based system is one of the most basic on the market. For example, this is a link to the a video that explains the Fabric system, and this is a link to the Exotec system.

Notice anything? Both solutions are very similar but what solution appears to have the better design, robots and software? Based on my unscientific poll that I’ve conducted multiple times, individuals who watch the Fabric and Exotec systems in action overwhelmingly select Exotec.

I believe Fabric should make several design changes to their solution. Specifically, I recommend that the Fabric solution become more like the Exotec platform. Fabric has a solid team of engineers and I’m confident that if given direction to improve the design and functionality of the Fabric solution, they can do so. This isn’t the option I prefer.

I’m also concerned about penchant for several individuals who work for Fabric, to use hyperbole when speaking about the company and its future. For example, Steve Hornyak, Fabric’s Chief Commercial Officer, made the following quote in a July 28, 2020, Grocery Dive article titled, FreshDirect, Fabric to launch micro-fulfillment powered grocery delivery in DC-area:

Hornyak said Fabric expects to have 10 MFCs running by the end of this year and between 50 and 100 by the end of next year. Within five years, he anticipates the company will be running as many as 1,000 MFCs.

I appreciate Hornyak being a cheerleader for Fabric, but I believe it’s nearly impossible for anything Hornyak claimed in the quote to become a reality. I see no reason, none, for Hornyak, or anyone else at Fabric, to wildy exaggerate the future of the company. It is very dangerous to create a false perception when it comes to predicting the growth of any company. (If there was an ‘Entertainer of the Year’ award, I would give it to Steve; he is truly one of the funniest people working in the industry).

Due to the number of people who speak to me about Fabric, I feel I have no choice but to offer my unbiased advice free of charge to the company.

The first thing Fabric should do is hire a CEO with the understanding that he/she has complete authority over the strategy and direction of the company. The founders of the company should have no input, zero. I’ve stated many times at conferences and during webinars that I believe most founders make terrible executives. I have nothing personal against the founders of Fabric. However, in my opinion, I believe mistakes have been made that should have been avoided.

Let me be clear, if I ran Fabric, I would make many, many changes starting with the corporate strategy.

Second, my preferred option is for Fabric to evaluate the available MFC solutions that are on the market and seek out a partnership. I strongly recommend Fabric to partner with Geek + or Addverb, and eventually end production of Fabric’s shuttle system. Fabric is at a disadvantage when it comes to the cost of their solution because they sell so few. Without volume, Fabric is unable to negotiate favorable terms to reduce their manufacturing costs. A partnership with Geek + or Addverb would provide many benefits to Fabric’s current and future customers.

Third, if Fabric doesn’t enter into a partnership with Geek +, they should evaluate selling the company. Fabric is a good company with a good MFC solution. I believe Fabric is an ideal acquisition target for several retailers and other companies.

I want Fabric to succeed. Please do not interpret any of my comments as being malicious towards Fabric, I can assure you no malice is intended.

I’m frustrated that Fabric isn’t the company I know it can become. I’m frustrated that Fabric isn’t living up to its potential even with so many talented individuals in the company. Hubris can kill careers, and hubris can kill companies. Regardless of the amount of capital raised, survival is not assured for Fabric.

My final piece of advice is this: Fabric should contact the consulting firm Capgemini, and hire them to lead an Accelerated Solutions Environment (ASE) engagement. I believe it is exactly what Fabric needs the most in my opinion.

If I didn’t want the best for Fabric, I wouldn’t offer my advice.

I recommend all companies interested in micro-fulfillment to invite Fabric to participate in their micro-fulfillment RFP process.

Sixth Place Goes to Dematic

Dematic is a 201-year-old company yet its micro-fulfillment solution didn’t become commercially available until 2019.

Based on the information I received, it appears that Dematic only has one customer for its MFC solution, the grocery retailer, Meijer. The fact that Dematic only has one customer isn’t a concern to me.

What does concern me is that in my opinion, Dematic’s MFC hardware and software solution are simply too basic for any retailer to consider. This video of the solution speaks volumes.

Dematic is a company that designs, builds and implements solutions for warehouses, distribution centers and production facilities. When interest in micro-fulfillment began to grow, Dematic made the decision to apply technology they leverage on full-scale, large fulfillment and warehouse projects to create a Dematic micro-fulfillment solution. On the surface, this appears to be a wise decision. However, the facts prove otherwise.

I believe Dematic used brute force to create their version of a micro-fulfillment system including software to run the MFC. However, the Dematic MFC isn’t competitive when compared to the other MFCs on the market.

I recommend that Dematic should disband their MFC team and exit the MFC market altogether. In turn, Dematic should focus on serving large customers that require hardware but not software. For example, Dematic has a relationship with Amazon and Walmart. Both of these companies have their own software solutions and don’t require software from Dematic. However, I believe Dematic can be successful in customizing MFC solutions to meet the needs of Amazon, Walmart and other large accounts.

Dematic may not appreciate my opinion, but it is better for the company to exit the MFC space early vs. losing millions of dollars trying to sell a solution that can’t compete with the other MFC solutions I’ve evaluated. I also want to make it clear that Dematic exiting the micro-fulfillment space in no way negatively impacts revenue or the potential for future growth. Dematic is a fabulous company with an incredible reputation.

If Dematic wants to be successful in micro-fulfillment, an option they may want to consider is acquiring Fabric and rebranding the company to Dematic Micro-Fulfillment Solutions. This is not something I would pursue if I ran Dematic.

And Seventh Place Goes to…

I’m sure individuals knowledgeable about the micro-fulfillment industry were expecting to see the name of ‘Takeoff’ listed in seventh place. However, there is no seventh place for this reason – I no longer consider Takeoff to be a MFC company. Instead, I believe Takeoff is the next Ocado. Here’s why.

I’ve watched Takeoff develop as a company since it was founded in 2016 by Jose Vicente Aguerrevere, Rafael Pieretti V, and Max Pedro. Jose and Max lead the company today but Rafael chose a career in medicine. I provided free consulting to the founder early in the history of the company which is how I met Max and Jose.

For the record, I credit Max and Jose with being the individuals who created the micro-fulfillment industry. I also believe Jose and Max are among the most skilled executives in the industry and I believe they are the ideal team to lead Takeoff for years to come.

Takeoff has operated as a traditional MFC company since it was founded and it uses a solution form the company KNAPP. Takeoff has many MFC customers and the company is the most well-known brand out of all the MFC companies on the market. The challenge for Takeoff is that AutoStore, Attabotics, Alert Innovation, and Exotec offer better micro-fulfillment solutions. Fabric and Takeoff are very similar in terms of the capabilities of their systems.

For several years, I’ve spoken about Takeoff on webinars and I’ve written articles where I’ve mentioned the company. Most recently, I’ve begun to offer my opinion on what I believe Takeoff will do in terms of its corporate strategy. Among the ideas I’ve shared is that Takeoff could choose to enter into a partnership with Exotec or Attabotics, and use their solution for micro-fulfillment and focus on using KNAPP for larger warehouse and fulfillment projects.

I’ve stated that Takeoff and Fabric could merge.

The problem I kept encountering is that no matter how many times I heard myself share my opinion about Takeoff, I didn’t believe what I was saying was correct. It’s certainly plausible that Takeoff could partner with Exotec or Attabotics. It’s possible that Takeoff and Fabric could merge. However, none of those options are big ideas. It’s just a change in hardware while maintaining the same strategy. Why would two of the brightest leaders in micro-fulfillment maintain the status quo?

And then it hit me. They wouldn’t maintain the status quo, and they wouldn’t think small, they would THINK BIG.

During this period of evaluating potential options for Takeoff to follow, I read an article about the fact that the British retailer Ocado is worth an estimated $20B even though the company only sells 1.7% of the groceries in the U.K. By comparison, Tesco, the largest grocery retailer in the U.K. with a market share of 27%, is only worth $21.5B. How could that be? How could Ocado be nearly as valuable as Tesco while only controlling 1.7% market share? What makes Ocado so valuable?

Answer: Software and technology. Ocado isn’t a robotics company, they’re a software and technology platform company. Big difference.

In my opinion, I believe 2021 is going to be a BIG year for Takeoff.

I anticipate that Takeoff is going to transition from being an MFC company to becoming a technology company that licenses their platform to MFC companies and their customers. Takeoff has created a best in class platform capable of performing nearly every task associated with online grocery ordering and fulfillment.

As I stated earlier in this article, software is the Achilles Heel of many MFC companies. Software is also the Achilles Heel of many retailers when it comes to online grocery ordering, fulfillment and delivery. Takeoff is an ideal postion to leverage their platform to fill this gap.

Although I’m confident Takeoff can license their software, I’m convinced they will struggle to entice MFC companies and their customers to sign an agreement. Why? Because Takeoff is an MFC company that has a relationship with KNAPP. Takeoff is viewed as being a competitor.

To shift the paradigm, I’m confident that Takeoff will become hardware agnostic. Any MFC company, regardless of their hardware, can sign an agreement with Takeoff to provide and manage all technology requirements related to online grocery ordering, fulfillment and delivery. Becoming a technology company changes Takeoff from being a competitor to an ally.

Until Takeoff publicly announces they’re moving away from a focus on hardware and instead are focused exclusively on marketing their technology platform, I recommend all companies interested in micro-fulfillment to invite Takeoff to participate in their micro-fulfillment RFP process.

Honorable Mention

Geek +

I have to mention Geek + in this article even though the company isn’t considered a competitor in micro-fulfillment by most retail analysts reports that I’ve read. I disagree. I believe Geek + is destined to become one of the largest fulfillment, micro-fulfillment and robotics companies in the U.S. and the world.

Geek + is a Beijing, China-based startup that makes warehouse fulfillment robots similar to those of Amazon’s Kiva. To date, Geek + has raised nearly $400M in funding. The startup has 10,000 robots deployed worldwide, and the company has 300 active customers in 20 countries.

I have worked with Geek + and I think their robots, software and other technologies are second to none. I strongly recommend the company and its products.

In regards to micro-fulfillment, the company has created The Geek+ RoboShuttle, a bin-to-person picking solution that can achieve high-density storage by using the innovative Geek+ C200 and narrow aisle design, while maintaining high efficiency. The standard 9-meters warehouse can store 18-layer 3.50m high-cargo boxes and 24-layer 2.5m high-cargo boxes, fully utilizing the warehouse space.

The Geek+ RoboShuttle™ system was certified as “Best of Intralogistics 2020” by the world-renowned IFOY award, one of the industry’s most prestigious recognitions. Compared with the traditional shuttle system, RoboShuttle has higher flexibility, efficiency and return-on-investment.

It is conceivable that within the next two to three years, Geek + may be in the top three in terms of companies that have sold the most micro-fulfillment solutions.

The advantage Geek + has is that they’re a technology company that specializes in smart logistics. They’re not a company that specializes only in micro-fulfillment. Their use of innovative robotics and artificial technologies is arguably the most advanced of nearly every company I’ve listed in this article.

An interesting option for Geek + to consider is acquiring Fabric.

My advice to all companies seeking fulfillment and micro-fulfillment solutions is to invite Geek + to participate in all related RFPs.

Addverb Technologies 

India-based Addverb is by far one of the most interesting robotics companies on the market. Addverb is focused on intra-logistics automation utilizing what they call a 4D approach: Discover, Design, Deliver and Dedicated Support. Based on my analysis, I believe Addverb’s hardware and software are among the best on the market. The challenge is that Addverb hasn’t completed full-scale implementations of their technology and software at a lot of companies so its hard to verify the effectiveness of their solutions.

I think very highly of Addverb’s micro-fulfillment technology; especially the software being utilized to manage MFCs. Addverb has created one of the best videos describing micro-fulfillment and how they view the industry. I have no doubt that Addverb will become one of the leading MFC companies.

I believe partnering with Fabric or acquiring Fabric is something Addverb should explore.

OPEX Corporation

Micro-fulfillment solutions come in many different shapes and sizes. Two of the more interesting solutions on the market come from the OPEX Corporation.

Perfect Pick is a self-contained, standalone robotic goods-to-person order fulfillment system, that can easily be expanded by adding modules or more aisles. Additional iBots can also be added to increase productivity and speed of fulfillment.

Sure Sort has changed the way companies handle small items, particularly as it relates to parcel sorting, multi-line orders, and reverse logistics. The Sure Sort solution reduces the number of excessive touches associated with existing sorters. Regardless of shape, packaging, or orientation, Sure Sort sorter provides a better way to sort small items more accurately and efficiently. Single items of a variety of shapes and sizes and parcels up to 5 lbs. can be delivered to their designated sort location at rates up to 2,400 items per hour.

This video demonstrates how both systems can be leveraged together to provide a micro-fulfillment solution.

OPEX offers additional solutions for large-scale fulfillment needs as well.

Vanderlande

Although not as recognizable as the other MFC companies on the list, Vanderlande offers a unique solution for micro-fulfillment referred to as HOMEPICK. This is a link to a video that explains the HOMEPICK online grocery fulfillment model.

The solution is powered by ADAPTO which is a 3D, shuttle-based automated storage and retrieval system (AS/RS) with built-in sorting and sequencing capabilities. It offers unrivalled flexibility and helps companies to adapt to changing market dynamics.

Based on what I have researched about HOMEPICK, I believe the system can hold its own against the majority of companies I’ve listed. However, the solution is fairly new so more time is required to accurately judge the system.

Honeywell Intelligrated

Intelligrated has entered the e-commerce game through its micro-fulfillment solution that combines AS/RS shuttle technology, goods-to-person (GTP) order consolidation, autonomous mobile robots (AMRs), and high-density cube storage for flexible high-velocity small-footprint automation. Designed for mass retail and food retail applications, Intelligrated’s MFCs can store from 5,000 to 15,000 SKUs within a 6,000 to 20,000 sq. ft. footprint — and can include any combination of ambient and refrigerated storage of both dry and chilled goods.

Intelligrated offers additional systems such as Mobile Picking Carts, Goods to Person Put Walls, Sortation Conveyors to Put Walls, Zone Routing Pick-and-pass and Sortation, and Tilt-tray and Cross-belt Sortation Conveyors for High Volumes.

More time is required to accurately measure the reliability and value of Intelligrated’s solutions.

Unknown Unknowns 

I anticipate that there will be consolidation among several MFC companies and it’s certainly plausible that one or more of the companies I mention in this article will go out of business.

We must also recognize that any number of companies can make a big move that will disrupt the entire micro-fulfillment industry. For example, Ocado has signed an agreement with the company Myrmex which may lead to Ocado investing heavily in a new form of micro-fulfillment. There is also the possibility that Ocado could acquire AutoStore and run AutoStore as a separate company while imbedding AutoStore’s technology throughout the Ocado platform. Ocado could potentially acquire Takeoff.

Autostore may choose to become another Ocado. Ocado is a valuable company because of their platform, not because of their robots. AutoStore has the hardware but it lacks the platform to become another Ocado. AutoStore can solve this dilemma by acquiring Takeoff or some other company with the required platform.

Why become another Ocado? Let’s take a look at their public numbers: Ocado charges 4-5% of sales (GMV) for a site that does around $250M GMV. That equates to $10M to $12.5M per year with 40% net margin after capex lease, site maintenance, software hosting and maintenance and training/supervision. Total automation hardware investment per site is around $50M with roughly 20% margin.

If we do the math, is it better to earn $5M per year per site, or earn $10M one time selling technology? The former is an Ocado example and the latter is an example of the estimated revenue generated by Autostore.

This is why there is 10x value gap between both companies (software as a service companies trade at around 35x EBITDA, and capex hardware companies trade at 12x EBITDA). Ocado, even though they’re one of the smallest automation players in the industry, is worth twice all other automation companies combined.

Finally, there is the case of Louis Borders and his company, Home Delivery Service. Based on my research of HDS and an interview I conducted with Louis, I believe Home Delivery Service has incredible potential to disrupt the entire MFC industry, as well as disrupt the $800B grocery industry. This is a link to a video about the company. What I like about HDS is their use of technology and software to reimagine the online grocery experience.

Conclusion

I anticipate that more changes will take place at grocery and other retailers between 2020 and 2030, than took place between 1900 and 2020. All retailers need to ask and answer this question: What’s our micro-fulfillment strategy?

Additional questions that must be asked are what will Google do when it comes to retail? Will Amazon acquire Costco, Kohl’s or Target? Will Walmart acquire Shopify? Will Alibaba make a big move and enter the U.S. market by acquiring a retailer? Will Ahold-Delhaize and Albertsons merge? Will Target and Kroger merge? Retailers must embrace robotics and technology to give them an edge in terms of performance and meeting customer demand.

Grocery retailers will continue to lose up to $25 on every online order they fulfill. Increased volume does nothing to reduce online fulfillment costs.

Grocery retailers must be prepared for the possibility that online penetration will increase to between 20% to 25% by 2025. This means grocery retailers will see a significant drop in customers inside their stores. Grocery retailers will also experience increased costs and a significant drop in earnings. Grocery retailers need to take steps to prepare for this eventuality. Micro-fulfillment is a must-have to automate online grocery fulfillment, along with a real estate strategy to reduce the size and number of stores based on consumer behavior and operational needs.

I want to leave executives, board members, and individuals tasked with selecting a micro-fulfillment solution with this reminder: Your careers and reputations are on the line when you select a micro-fulfillment solution. Do not, under any circumstances, fail to perform your due diligence when evaluating micro-fulfillment companies. Invite all the MFC companies I listed in this article to participate in your micro-fulfillment RFP process, and conduct a thorough evaluation of each.

Read more articles like this from PULSE’s Chief Marketing Officer, Brittain Ladd