KUECKER LOGISTICS GROUP, PULSE INTEGRATION, AND QC SOFTWARE HAVE COMBINED

KUECKER LOGISTICS GROUP, PULSE INTEGRATION, AND QC SOFTWARE HAVE COMBINED

 

Kansas City, July [16], 2021 – Leading integration firms Kuecker Logistics Group, Inc. (“Kuecker”), Pulse Integration (“PULSE”), and QC Software, LLC (“QC”) announced today that they have combined to form a new company, Kuecker Pulse Integration, L.P. (“KPI” or the “Company”).  In conjunction with this combination, funds managed by the Private Equity Group of Ares Management Corporation (NYSE: ARES) (“Ares”) have acquired a majority interest in the Company with the existing owners of all three businesses retaining significant equity stakes.

Larry Strayhorn, CEO of Pulse, will lead the Company, and he will be joined on the leadership team by executives from each of Pulse, Kuecker, and QC.

“Pulse, Kuecker, and QC all hold the same core values of honesty, integrity, and transparency. We are thrilled about the opportunities ahead to combine our companies and extend our track record of value creation, innovation, and success as a larger operator,” said Strayhorn.

Jim Kuecker, President of Kuecker, noted “This is an exciting time for our companies. This combination will enhance our capabilities and scale, and we look forward to working together to deliver even greater value to our customers and suppliers in the future.”

“We have worked closely with Larry and Jim and their respective companies over the years, and we are excited to be combining with them in this next chapter of our evolution” said Kevin Tedford, CEO of QC.

Kuecker is a leading innovative material handling solutions provider for more than 40 years. Using a customized approach, they work to design, engineer, and implement logistics management solutions to increase distribution efficiency. Kuecker provides cutting edge solutions in logistics management, supply chain management, value chain management, industrial automation, inventory management and more.

PULSE is a systems integrator that has over 50 years of experience serving customers throughout North America.  Pulse is focused on helping companies leverage the right mix of technology in their facilities, and works to understand, collaborate, and analyze business needs in real-time, and provide custom-engineered solutions in a tiered delivery process.  Using a data-driven, technology-agnostic approach, Pulse ensures projects are scoped to fit the needs of the customer while remaining adaptable for a changing market.

QC is recognized as an industry leader in providing innovative software solutions for order fulfillment and distribution centers. Headquartered in Cincinnati, Ohio, they have been providing software solutions to customers in North America and Europe to streamline their warehouse operations using the most innovative supply chain automation software solutions.

“As a pure-play technology and solutions integrator, KPI is well positioned to serve the requirements of the fast-growing warehouse automation space,” said Brian Klos, Partner in Ares’ Private Equity Group. “This combination will provide KPI with significant scale and expanded capabilities to better serve its customers and drive the next phase of the Company’s growth, both organically and through strategic acquisitions. We are excited to have the opportunity to partner with Larry, Jim, Kevin, as well as the other members of the management team.  We believe this combination brings together a group of uniquely talented and motivated leaders.”

Mr. Strayhorn continued, “Our vision is to build a full-service integrator platform with an industry leading software offering”.  “We believe Ares is the right partner to help us expand our Company and deliver on these important objectives.”

About Kuecker Logistics Group, Inc.

Kuecker is a leading innovative material handling solutions provider working to design, engineer, and implement logistics management solutions to increase distribution efficiency. Kuecker provides cutting edge solutions in logistics management, supply chain management, value chain management, industrial automation, inventory management and more. Not only does Kuecker design and build systems to make business supply chain more efficient, Kuecker acts as a partner and consultant to ensure the success of our implemented services. The strong relationships with clients are testaments to value, commitment, and fulfillment of customer expectations in providing operational analysis, system engineering, system installation, project management, training, start-up assistance and ongoing support.

About PULSE Integration

PULSE is a full system integrator working diligently to provide a customized solution for every client. Combining design expertise, seamless integration with intentional transparency Pulse provides clients with scalable engineered solutions. Cultivating over 50 years of material handling experience to specifically help companies leverage the right mix of technology (digital and physical) in their facilities. The Pulse team ingrains Industry 4.0 Thinking into the design philosophy at every level to deliver truly agnostic solutions that adapt to continuous evolving customer requirements.

About QC Software, LLC

QC is recognized as a leading provider of supply chain automation software solutions. Our Warehouse Execution / Warehouse Control Systems streamline warehouse/distribution operations with the lowest total cost of ownership in the industry. QC solutions maximize your system’s productivity and dependability, making us the ideal solution for your warehousing needs.

About Ares Management Corporation

Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, private equity, real estate and infrastructure asset classes. We seek to provide flexible capital to support businesses and create value for our stakeholders and within our communities. By collaborating across our investment groups, we aim to generate consistent and attractive investment returns throughout market cycles. As of March 31, 2021, including the acquisition of Landmark Partners, which closed June 2, 2021, and the acquisition of Black Creek Group, which closed July 1, 2021, Ares Management’s global platform had approximately $239 billion of assets under management with approximately 2,000 employees operating across North America, Europe, Asia Pacific and the Middle East. For more information, please visit www.aresmgmt.com. Follow Ares on Twitter @Ares_Management.

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Contacts:

Ares Management Corporation

Bill Mendel

212-397-1030

bill@mendelcommunications.com

Or

Carl Drake

888-818-5298

cdrake@aresmgmt.com

Or

Brittany Cash

212-301-0347

bcash@aresmgmt.com

KPI

Brittain Ladd

469-714-9754

brittain.ladd@kpisolutions.com

Or

Stephanie Fisher

315-778-0138

stephanie.fisher@kpisolutions.com

 

Micro-Fulfillment as a Service

Micro-Fulfillment as a Service

A challenge faced by vendors that wish to introduce new technology into the grocery industry is that many grocery retailers are risk averse. Instead of jumping at the chance to embrace new technology, most retailers take a ‘wait and see’ approach. Specifically, grocery retailers wait to see what Amazon and Walmart will do. This has been especially true regarding the topic of micro-fulfillment. Although the use of micro-fulfillment centers within a retailers grocery ecosystem makes operational and financial sense, most grocery retailers have sat on the sidelines.

That has changed as a result of the announcement by Walmart that it is going to install micro-fulfillment centers in an undisclosed number of stores. Walmart will install solutions from Alert Innovation, Fabric and Dematic.

Walmart indicated that they are still in the testing and evaluation phase and that they have not identified the optimal solution. (You can read more about the different micro-fulfillment systems on the market here).

I have proposed the use of micro-fulfillment centers inside retail stores, in buildings next to retail stores, or in offsite ‘Dark Stores’. Micro-fulfillment is a must-have for retailers. However, let me be clear, micro-fulfillment isn’t just technology a retailer can purchase and install. Micro-fulfillment is a strategy retailers can leverage to reduce costs and complexity related to fulfilling online and curbside grocery orders, create a competitive advantage, and enable growth.

Most retailers that choose to leverage micro-fulfillment as part of their strategy have entered into direct arrangements with specific micro-fulfillment vendors. For example, H.E.B entered into an agreement with AutoStore. I rank AutoStore at the top of the list for micro-fulfillment. (Dematic will probably introduce the AutoStore system at Walmart; something I strongly recommend).

Is a direct relationship with a vendor the optimal choice? Is there another option retailers can choose? Yes, there is.

Micro-fulfillment as a Service (MaaS)

I prefer retailers to purchase and install micro-fulfillment centers across their ecosystems. I believe owning and operating MFCs is a wise move strategically for retailers.

However, retailers that don’t want to own and operate MFCs have the option to utilize Micro-fulfillment as a Service (MaaS). MaaS is a service that a few MFC companies are offering to retailers. Fabric has done a great job of marketing MaaS to potential customers.

At a high level, MaaS is a service whereby an MFC company will purchase or lease a building to install micro-fulfillment centers. An MFC company can also install one or more micro-fulfillment centers onsite in a company owned facility.

Once installed, the MFC company will provide the required labor (or use a 3rd party) to run the facility. Customers that sign up for MaaS ship their inventory to a MaaS location where the inventory is either stored or immediately placed inside an MFC. Retailers will have little to no upfront costs to leverage MaaS. The MFC company will fulfill orders for their customers. On average, the MFC company running the MaaS location will charge between $.58 to $.60 per line picked.

Sounds like a great deal!! It’s not. MaaS is nearly impossible to justify due to high operational costs. On average, grocery retailers can lose up to $25 on every online order they fulfill. MaaS reduces the cost of fulfilling online orders but not as much if a retailer operates their own micro-fulfillment centers.

Based on analysis completed by several strategy consulting firms, and based on my own analysis, the MFC companies offering MaaS have greatly underpriced their services. In addition, the projected order volumes that can be filled using a MaaS model will be difficult, if not impossible, to fulfill because of limitations within the MFC systems being used by the companies I evaluated.

Regardless of the limitations, I expect MaaS to grow in popularity for these reasons: Executives at some retailers will be very risk averse. To minimize risk, they will choose to essentially outsource micro-fulfillment. I know of several grocery retailers that are in the process of evaluating micro-fulfillment systems. A few of the retailers are leaning towards using MaaS as a way to reduce capital spend and mitigate risk.

Recommendations

Using real world examples, this is what I recommend all grocery retailers that are interested in MaaS to do.

Albertsons is one of the leading grocery retailers in the United States. The company is led by CEO Vivek Sankaran, former President and COO of Frito-Lay North America. I believe Vivek should be considered one of the best CEOs working today. I have written multiple articles about Albertsons and I have publicly stated that Albertsons should merge with Ahold-Delhaize. If the merger occurs, it would create the largest grocery retail conglomerate in the United States, and one of the largest in the world.

Based on announcements from Albertsons, the company is evaluating options for micro-fulfillment. Albertsons has a relationship with the MFC company, Takeoff Technologies. (I am a former advisor to Takeoff and Fabric).

Full disclosure: I have had multiple discussions with executives from Albertsons regarding the topic of micro-fulfillment. I also advised executives from H.E.B, Ahold-Delhaize, Publix, Amazon and Walmart on the topic of micro-fulfillment. However, I do not work for a micro-fulfillment company. I work for a system integrator, PULSE Integration, that has relationships with several MFC companies. I also write articles on the topic of micro-fulfillment.

I applaud Albertsons focus on micro-fulfillment. However, what should Albertsons do?

In my professional opinion, I recommend that Albertsons purchase and install MFC systems from AutoStore. If there is resistance within Albertsons for such a model, Albertsons should evaluate MaaS as an option. However, instead of only testing MaaS as a solution with one MFC company, I encourage Vivek Sankaran to speak with AutoStore, and negotiate an agreement whereby AutoStore will operate one to three MaaS locations for Albertsons.

AutoStore hasn’t embraced MaaS due to analysis they have performed that indicates MaaS is a higher cost and lower value option for grocery retailers than grocery retailers owning and operating their own micro-fulfillment centers. However, I believe AutoStore has no choice but to offer a MaaS solution due to growing interest in the topic. I strongly encourage AutoStore to partner with Albertsons.

Sankaran should also have one to three AutoStore MFCs installed within their grocery ecosystem, including installing an AutoStore inside a grocery store, to test which MFC performs the best. Sankaran can compare the results of MaaS and a company owned and operated MFC model at the end of one year. May the best MFC solution win.

In addition to micro-fulfillment, I strongly encourage Albertsons (and all retailers) to test the use of last mile delivery carts from the company Tortoise, and testing mobile retail using vans from Robomart. Both companies are generating a lot of interest from retailers. (I am an advisor to both companies).

Finally, I recommend that Albertson (and all grocery retailers) to improve the customer experience for online grocery delivery by providing their customers with a DynoSafe or a similar product. This article outlines the importance grocery retailers “winning the porch.”

Publix, Kroger, Ulta Beauty, Sephora, Macy’s, owners of malls, convenience store chains, and large retail development companies should also test MaaS and operating MFCs within their retail ecosystems.

What’s Next for Micro-fulfillment? 

I am convinced that Instacart will invest heavily in micro-fulfillment centers starting in 2021; probably with Fabric. Instacart will go public in 2021. By 2022, 80 to 100 micro-fulfillment centers will be dedicated to Instacart’s needs. By 2025, Instacart will become an online grocery retailer fulfilling orders direct to their customers. Instacart will end their relationship with their current customers. I anticipate that Instacart will open Instacart-branded stores in select locations. If I’m correct, Instacart should acquire Fabric in 2021. (Instacart is in an interesting position. I recommend Shopify, Google or Facebook to acquire Instacart).

Amazon is investing heavily in micro-fulfillment. I anticipate that Amazon will soon unveil a 20,000 square feet MFC built inside one of their AmazonFresh branded stores. I’m convinced that Amazon has no choice but to explore the use of Nano-fulfillment centers inside Whole Foods stores. I designed one of the first micro-fulfillment centers specific to the needs of Amazon. You can read about it here.

Amazon is creating a business model whereby they will sell more groceries through their Amazon branded stores than through Whole Foods. Why? Because Amazon is going to sell branded CPG and organic products inside its supermarkets. When Amazon acquired Whole Foods, I stressed to Amazon that they should introduce branded CPG products at Whole Foods to increase customers. The stores could be re-branded to ‘Whole Foods Plus.’ Amazon didn’t introduce branded CPG products at Whole Foods and sales have stagnated.

An argument can be made that Amazon should divest Whole Foods and focus on its own AmazonFresh brand. Target is the company that should acquire Whole Foods. Target can open Whole Foods Markets inside its stores. I have recommended to Amazon on several occasions to acquire Target and also open Whole Foods Markets inside Target’s stores. Since the acquisition hasn’t occurred, I’m skeptical that it ever will. If Amazon is not going to acquire Target, divesting Whole Foods should be explored.

Amazon and Kohl’s are piloting an AmazonFresh store inside a Kohl’s store; this is something that I recommended to Kohl’s and Amazon over two years ago so I’m glad that pilot has begun. If the pilot is successful, I recommend that Amazon should acquire Kohl’s.

DoorDash, Postmates and other restaurant delivery companies must expand into delivering groceries. I strongly recommend that these companies should invest in opening their own micro-fulfillment centers powered by AutoStore or some other MFC system. Grocery retailers are actively looking for a replacement for Instacart. Postmates, for example, could open MFCs; receive inventory from grocery retailers; store the inventory inside each MFC system; fulfill online and curbside orders; and use their own delivery drivers to deliver orders.

I also believe that restaurant delivery companies that partner with grocery retailers should teach their grocery retail customers how to open dark kitchens and offer their own branded meals.

Micro-fulfillment is going to grow in popularity. Every retailer needs to ask and answer this question: What is our micro-fulfillment strategy?

For more information on micro-fulfillment, you can read articles located here and here.

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

Optimal Retailer Micro-Fulfillment Strategy

Optimal Retailer Micro-Fulfillment Strategy

Micro-fulfillment, as a solution for automating online grocery fulfillment and fulfillment of other retail products closer to customers, is growing in popularity among retailers. Amazon, Walmart, H-E-B, Ahold Delhaize and FreshDirect are just a few of the retailers that have embraced the use of micro-fulfillment technology.

However, for every retailer that has made the decision to enter into an agreement with a micro-fulfillment company to install its technology, there are dozens of retailers still stuck on answering the questions: How do we choose the right solution? How do we know what’s best for us?

Strategy First

A mistake that I continue to see made by certain retailers is that they select a micro-fulfillment solution without first having a micro-fulfillment strategy. Bad idea.

I have personally provided consulting to several retailers that selected and installed micro-fulfillment solutions only to discover that no value of any kind was derived in doing so. I was contracted to assess the current state of their operations and identify the optimal future-state strategy, and in each case, the failure on the part of the retailers to identify the optimal strategy created a situation whereby the micro-fulfillment technology provided no value. The situation could have easily been avoided by following an effective methodology and by working with a consulting company.

Precision Distribution Consulting (PDC) is one of the few consulting firms skilled in analyzing the value of micro-fulfillment solutions to a retailer and then identifying the optimal strategy for introducing micro-fulfillment solutions into the retailer’s ecosystem of stores. Kearney, Capgemini, Accenture and Deloitte also provide consulting services related to micro-fulfillment, as do McKinsey, The Boston Consulting Group and Bain & Company. (I do not have business relationships with these companies, but I am a former consultant for Capgemini and Deloitte).

The methodologies utilized by these consulting companies vary, but some critical elements include:

• Assessing each micro-fulfillment solution and selecting the best solution based on the requirements of the retailer.

• Building a current-state supply chain and logistics network model.

• Conducting scenario analysis to evaluate the impact of introducing micro-fulfillment technology into the retail network.

• Assessing changes required to manage inventory replenishment to each micro-fulfillment solution.

• Performing a “what if?” analysis to identify the total number of micro-fulfillment centers and automated dark stores a retailer should install within its retail ecosystem.

• Identifying the optimal future-state supply chain model to maximize the value of each micro-fulfillment center within the network.

• Building a business case outlining savings across labor and increased productivity to justify the investment in micro-fulfillment.

As a consultant, I’ve found determining the optimal strategy is the first step in every project that I lead. However, Covid-19, the growth of Amazon, changing consumer behavior away from stores to e-commerce and increased retail bankruptcies has resulted in many retail executives wanting to move fast into micro-fulfillment. I disagree with such an approach.

When confronted with an executive pushing to select and install a micro-fulfillment solution without first understanding the optimal strategy, I remind them of the exchange between Alice and the Cheshire Cat from Alice in Wonderland:

“Would you tell me, please, which way I ought to go from here?” asked Alice.

“That depends a good deal on where you want to get to,” said the Cat.

“I don’t much care where,” said Alice.

“Then it doesn’t matter which way you go,” said the Cat.

“… so long as I get somewhere,” Alice added.

“Oh, you’re sure to do that,” said the Cat. “If you only walk long enough.”

Without a strategy, retailers have movement within their supply chains and operations but nothing more. Many people are in motion installing the selected micro-fulfillment solution, but the movement gets them nowhere, and the micro-fulfillment solution adds no value.

Selecting The Optimal Micro-Fulfillment Solution 

Once a retailer has identified the optimal micro-fulfillment strategy to meet its needs, the next step in the process is evaluating the different micro-fulfillment solutions available on the market.

The company I work for, PULSE Integration, has a business relationship with the micro-fulfillment company AutoStore. However, the purpose of this section isn’t to discuss AutoStore; it is to provide an overview of the leading micro-fulfillment solutions on the market and the key questions to consider during the selection process.

Whenever a retailer enters into an agreement with any micro-fulfillment company, the entire micro-fulfillment industry wins. I believe José Vicente Aguerrevere, Max Pedró and Rafael Pieretti V, founders of the company Takeoff, deserve credit for creating the modern-day micro-fulfillment industry. Other leading micro-fulfillment companies include Alert Innovation, Attabotics, Exotec, Dematic, Fabric and Tompkins Robotics.

Innovation is becoming increasingly important in the micro-fulfillment industry. For example, Takeoff is transitioning from a micro-fulfillment company to a software company capable of licensing its technology platform to retailers and micro-fulfillment companies to run all front-end and back-end operations related to online grocery ordering, fulfillment and operations.

At a high level, micro-fulfillment solutions are designed to do one thing: automate the process of fulfilling online grocery and e-commerce orders. Micro-fulfillment solutions are either shuttle-based or cube-based. There are positives and negatives of each.

A micro-fulfillment center can be installed inside every store to fulfill the curbside and online orders for a single store only. Micro-fulfillment centers can also be installed inside select store locations to fulfill curbside and online orders for many stores — a hub-and-spoke model. Again, there are pros and cons of each.

Retailers must first identify which model they prefer because that will determine the number of micro-fulfillment centers required to meet the demand for groceries from their customers. The model determines the strategy. My advice to all retailers is to assign someone from within their company who is experienced in micro-fulfillment to fairly evaluate all micro-fulfillment options or to partner with a third party that can lead the process.

There is no one-size-fits-all approach when selecting a micro-fulfillment solution.

Read the full article in Forbes

The Best Micro-Fulfillment Solution

The Best Micro-Fulfillment Solution

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

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