New website is a valuable source of information for grocery e-commerce and store automation
BOSTON, MA, June 30, 2021 – Alert Innovation, thought leader in grocery automation, launches www.e-grocery.com, an online educational resource for the global e-commerce and store automation community.
As grocery and retail brands begin to improve their bottom line with new technologies, robotics, and warehouse automation, the entire supply chain industry is changing rapidly. Supply chain operations are evolving into more efficient engines that integrate new computerized tools and employ new micro-fullfimment centers on-site and/or with ancillary fulfillment centers.
With so many changes, employees and business partners are forced to learn an entirely new vocabulary related to the updated value chain. e-Grocery.com is an online resource, updated in real-time, developed to educate the community and accommodate the fast-growing demand for information on new topics related to e-commerce in the grocery business.
“Alert Innovation is very excited to launch this new resource and guide for our business community,” said John Lert, Founder and CEO of Alert Innovation. “Our goal for the e-grocery.com site is to broaden the understanding of grocery e-commerce and store automation for improved conversations that continue to propel the industry forward.”
e-Grocery.com features a comprehensive vocabulary list of terms, phrases and acronyms that cover numerous topics in global grocery, retail and supply chain automation. The site uses a unique balance of multi-media including imagery, animations and videos to educate audiences on various terms and processes. Future plans include more resources such as industry white papers, best practice guides, and trend-spotting links for the industry.
The e-grocery.com site is continuously being updated and welcomes the addition of new terms through an online form. For more information, visit www.e-grocery.com.
About Alert Innovation, Inc
Founded in 2013, Alert Innovation’s mission is to improve people’s lives through innovation, starting with retail, by transforming how people shop and how retailers operate. Alert Innovation has brought to market the Alphabot® Automated Storage and Retrieval System and Automated Each-Picking System and is creating a new kind of automated supermarket called Novastore™. More information is available at http://www.AlertInnovation.com.
If you’re operating a Micro Fulfillment Center (MFC), you probably set it up in reaction to several unexpected changes. Your ecommerce order volume was exploding due to COVID. Your labor costs to manually pick orders were hurting your margins. You had to do something to control your order fulfillment costs.
The good news is that you did something. You replaced manual picking with automation. That change showed you that not only can ecommerce order fulfillment be profitable, you can also provide a much better service to customers when you have full control and visibility of inventory in your MFC.
Another bit of good news is that you are a leader. You are among the few who have firsthand experience operating an MFC. And as things have settled down, you can now use the time and experience you’ve gained to evaluate where you and your MFC stand. Is it doing all it can? Is it configured correctly? Is it being used optimally? Are you missing anything that can add value?
Defining an MFC
MFCs popped up quickly leading to a variety of definitions. For the purposes of this discussion, we will define a micro fulfillment center (MFC) as an automated system for grocery ecommerce order picking that is co-located at a supermarket. The MFC handles item storage, order picking and order dispense for a large percentage of items in an ecommerce order. Certain items are still picked from the floor. Some MFCs, such as the Alphabot® system by Alert Innovation, also handle completed order storage and automated order dispense to shoppers, which deliver additional labor savings.
Equipped with this definition, we’ll help you evaluate how to make sure you are getting the most from your MFC.
Did you Get the Size Right?
Any time you do something new, there’s a bit of guesswork. Add in the ecommerce order growth projections and trend disruption caused by COVID and you were basically flying blind when you sized your MFC. Thus, it’s possible you undersized your MFC.
The first challenge of sizing an MFC is determining the number of SKUs it can hold. Not every MFC is easily expandable, but with some systems you can increase item storage capacity independently of throughput, and vice-versa.
When sizing our Alphabot system, we encourage as much storage as possible in the initial design. This expands the assortment you can offer your shoppers and storage is cheapest to add at the initial build.
The other challenge with MFC system sizing is how many orders per day you can manage. You need to consider how fast you can get product into the system, how many items per hour you can pick both on average and at peak times and how fast you can get completed orders ready for shopper pickup or delivery.
With our Alphabot system you can efficiently increase orders per day from your MFC by adding robots to align with increasing demand. You may also be able to add order picking workstations or an automated picking arm.
Is Your MFC Reliable?
If your MFC requires frequent maintenance downtime or experiences failures that prevent order fulfillment, you’ll upset shoppers and won’t get the return you expected. To increase reliability of any system, the reduction in parts that need maintenance or can fail is paramount. This means eliminating lifts, conveyors, gears and other moving parts. Whatever the engineers can do to remove the risk of a single point of failure or the need for maintenance improves MFC reliability, lowers your cost of ownership and lets you serve your shoppers quickly and reliably.
Our Alphabot system was designed from the ground up with no moving parts in the structure to reduce maintenance and failure points. If there is an Alphabot failure, only that Alphabot and that specific location are affected. The rest of the Alphabot system will continue to operate.
As a reference, your MFC uptime should be over 99.5% with no major failures and a maintenance schedule that shouldn’t exceed 6 hours a month. If your mileage varies a lot from these benchmarks, you should think about MFC project 2.0.
Is Your MFC Achieving Maximum Labor Savings?
An MFC should cut your order-picking labor cost by 80% or more compared to manual picking. We’ve calculated millions of dollars in labor savings across a year at the store level. These savings are based on 80-100 hires that don’t need to be made when an MFC replaces manual order picking.
Our Alphabot system delivers additional savings from storing finished orders and automating order delivery to shoppers. These capabilities combine to improve labor savings by more than 40% beyond a standard automated picking system.
Does Your MFC Eliminate Order Delivery Costs?
Last mile costs are an ecommerce profit killer. Target estimates they save 90% when a shopper picks up an order at the store. Average last mile delivery costs are estimated at around $10 per order.
You can eliminate last mile delivery costs through marketing programs that encourage at store pickup. You can further reduce delivery costs and time through automated order dispensing, which, as offered by our Alphabot system, removes the labor of associates consolidating and delivering orders to shoppers.
Is Your MFC Causing Warehouse Congestion?
Most MFCs hold completed orders outside the system. This approach requires additional storage locations to stage those orders. Since most orders also contain frozen and refrigerated items, secondary refrigeration units are needed.
The added storage and refrigeration equipment, combined with order consolidation, leads to warehouse congestion. And failing to keep products in their proper temperature range while picking, staging and transferring will impact product quality and shelf life.
The Alphabot system uniquely supports three temperature zones including frozen. Items and completed orders are stored in the system in their appropriate temperature zone until ready for customer pickup or delivery to home. This approach maintains maximum freshness, food safety and customer satisfaction. The Alphabot system also automates the delivery of completed orders to shoppers. By adding completed order storage and automated order dispense to the system, warehouse congestion is eliminated.
Is Your MFC delighting Your Shoppers?
Two of the biggest shopper complaints of manual ecommerce order picking (aside from picking carts clogging store aisles) are out of stocks and substitutions. It’s common for as little as 65% of a shopper’s order to be available from in store inventory through manual picking. Since an MFC is a closed system, both out of stocks and substitutions can be eliminated through near-perfect inventory visibility.
If your MFC is still having out of stocks and requiring substitutions, you need to review your methodology for determining the assortment that gets loaded into the system and how you determine and communicate available inventory to your shoppers.
Is Your MFC Generating All the New Sales it Can?
When an MFC is first installed, the focus is on labor savings. But MFCs can fulfill eight to ten times as many ecommerce orders as manual pickers, offering you the opportunity to capture new ecommerce business.
Like the stores they support, the more orders processed by your MFC, the better the ROI. Make sure you are using your efficient MFC to increase ecommerce sales and market share, not to just satisfy existing ecommerce order demand.
Our Alphabot system offers the ability to add Alphabot robots to increase order throughput. This is an economical way to capture more ecommerce sales from an existing MFC.
Improve the Value Your MFC Delivers
An MFC is a first step in an automation journey. As defined, it handles product storage, order picking and order dispensing for pickup or delivery. It can also automate order dispensing, which rewards you with significant additional labor savings, in some cases 20% or more.
What about a better process to break down cases to place items into your MFC? Have you considered how much labor you can save by automating inventory replenishment?
Are you getting full order picking volume from your MFC? For example, could you benefit from picking overnight but have trouble staffing? An automated picking arm might be a valuable upgrade.
Is Your MFC Future-proof?
As we’ve learned with the unexpected explosion of grocery ecommerce, you can’t predict the future. But you can select an MFC that is designed to be future-proof by design.
Your MFC should be able to expand capacity, increase order throughput and add new automation elements easily and economically as technologies evolve. You can’t anticipate what will change. You can however select an MFC that’s designed for change.
Summary
As MFCs and their supporting automation capabilities continue to expand, keep an eye on your labor costs and where you have delays today. There may be ways to get even more value from your MFC.
The combination of a future-proof MFC and your store locations gives you the tools you need to be a winner in this new game.
The COVID-19 pandemic has been a trying time for everyone and we can all agree a lesson learned is that humans crave in-person social interaction. We have also found a desire to get back to basics – games with the family, getting back to nature, walking the dog. Things that are fundamental needs from our 3 billion+ year evolution.
At first glance, you may say that automation, robots, and AI are further distancing humans from each other and our basic needs, but the data tell a different story.
Job growth from ecommerce, specifically online grocery ordering and delivery, has been extraordinary by any measure. Experts can debate the sustainability of post-COVID online grocery demand (see Fig. 1), but the trend line has been set, and it is here to stay. According to a Brick Meets Click study, 69.3 million U.S. households placed one or more online orders in March 2021 alone.
Figure 1, Source: Mercatus
Automating grocery fulfillment increases grocery store revenue and margins, improves order accuracy and increases speed of delivery. The improved profits are a result of maximizing the efficiency and productivity of the existing workforce using automation. This increased employee efficiency creates a slower rate of increase in jobs over time but that rate still continues to increase as the sector expands. Prior to barcode scanners, for instance, warehouse and retail employees spent hours and days counting inventory by hand with a great margin of error. Industry automation and revolutionary technology made the process more efficient and accurate, and enabled employees to spend more time engaging shoppers.
As online grocery continues to expand, the total number of workers needed will continue to rise. It’s true that other sectors may experience job losses, but grocers will generate more same store revenue, and let’s not forget that human to human interaction is still going to be critical to their success. If traditional grocers fail to adopt automation technology, Amazon will make them extinct. A review of the general merchandise sector over the past decades proves that.
Labor Shortages
The COVID economy has created a huge chasm between the haves and the have nots. But as the pandemic winds down, it is clear there are more jobs than workers in many sectors.
Figure 2, Source: WSJ 4/17/2021
Economists surveyed by The Wall Street Journal project U.S. gross domestic product—the value of all goods and services produced—will grow 6.4% this year, measured from the fourth quarter of last year to the same period of this year. That would lift output to nearly 4% above its pre-pandemic level measured in the fourth quarter of 2019 (see fig. 2).
Meanwhile, economists expect employers to add 7.1 million jobs in the 12 months ending in December 2021, a gain of 5%.
The economy grew at a 4.1% rate in the fourth quarter of 2020, and employment demand is on the rise. Many of the positions that automation replaces are the most challenging to fill and have high turnover. The costs of constantly recruiting training and then losing employees is a heavy burden on retailers. While the average employee turnover for all U.S. industries is around 19 percent, the rate in the retail industry is just above 60 percent, according to the National Retail Federation.
Looking past the current economic cycle and pending labor shortages, there is an even more pressing macro trend. There has long been a concern that human population growth would outstrip the capacity of the planet, but we now face population decline.
Wikipedia: 4/16/2021
Up until the beginning of the industrial revolution, global population grew very slowly. After about 1800 the growth rate accelerated to a peak of 2.1% annually in 1968; but since then, due to the world-wide collapse of the total fertility rate, it has declined to 1.1% today (2020).[2] Long-term projections predict that the growth rate of the human population of this planet will continue to decline, and that by the end of the 21st Century, will reach zero.[2]
Examples of this emerging trend are Japan, whose population is currently (2015–2020) declining at the rate of 0.2% per year,[2] and China, whose population could start declining in 2027 or sooner.[3] By 2050, Europe’s population is projected to be declining at the rate of 0.3% per year.[2]
Possible consequences of long-term national population decline can be net positive or negative. If a country can increase its workforce productivity faster than its population is declining, the results, both in terms of its economy, the quality-of-life of its citizens, and the environment, can be net positive. If it cannot increase workforce productivity faster than its population’s decline, the results can be mostly net negative.
Automation presents an opportunity to increase the productivity of each worker and raise the standard of living while offsetting current and impending labor shortages.
Quality of Work and Career Development
Alert’s mission statement starts out, ‘Our mission is to improve lives through innovation….’ Alert automates e-grocery fulfillment and other e-commerce verticals by designing robotic systems to perform tasks normally performed by humans. For grocery customers, it’s simple to see that we are improving lives by reducing the cost of e-grocery fulfillment and getting those orders to you faster and more accurately.
When meetings end early, the meeting organizer often says, ‘I’m giving you time back.’ Automating the grocery shopping experience does just that at scale. The average shopper in the U.S. spends 53 hours a year buying groceries, not including transportation time. And about 30% of the population are active grocery shoppers according to FMI data. So, if everyone shifted to e-grocery shopping in the U.S., we would be giving back 5.25 BILLION HOURS per year. Over the course of a lifetime, each person would get back 3,100 hours which is almost two years of work, play, family time or education!
But would a retail grocery worker agree that automation in the form of Alphabot is improving their lives?
There’s no question that I have achieved a privileged position in the workforce, but I have also landscaped, washed dishes, and maintained heavy equipment. I know both the rewards and the demands of physical work; it can wear you out. I was recently chatting with a worker, a retail grocery veteran who is using the Alphabot platform and asked what she thought of the system, she responded, ‘this is the best job I have had in my 14 years!’
Staffers working with robotic systems are affectionately called bot wranglers. The implication is that the robots are working for you, not the other way around. This is Alert’s goal. Robots increase productivity, eliminate repetitive tasks, and make work better. Retailing often has the perception of a dead-end job. While it is true that retail tends to be an entry level job into the workforce, most retailers provide education, training, and career development. Alert developed the Alert Innovation Academy to train existing retail employees to work with the Alphabot system. Alert Innovation Academy has a career development trajectory that graduates workers from operators to robotics tech 1, tech 2 and even systems operation manager. Associates can start stocking shelves and become a robotics expert!
Beyond the retail grocery worker, third party technical support and service companies are also trained via the Alert Innovation Academy to expertly maintain the Alphabot platform. This is just one part of a whole new ecosystem that automation drives – manufacturing, engineering, quality, service and more. Alert strives to turbocharge this ecosystem and corresponding job growth in the U.S.
And what happens to the grocery experience?
The immediate impact of automation improves the shopper experience on many levels – aisle congestion from gig shoppers goes away, order accuracy goes up and deliveries are faster. Looking further down the road, there is a tremendous opportunity for grocers to redeploy employees in the store so they can focus on experiential shopping. This is a concept at Alert called Novastore. Human interaction with the butcher, the baker, the team in produce, in store cafes and cooking demos. It is back to meeting basic human needs of shoppers and real workers engaging in real interactions in person.
So, are robots good?
If you are familiar with Peter Diamandis’ book ‘Abundance’ or are a student of psychology, you will appreciate that we humans tend to look at things with a half glass empty perspective. The fear of potential loss is much greater than our appreciation of potential gain.
However, historical data tells us that things keep getting better. If you look at the following charts, we are working almost half the hours today as in 1870 and wages have increased over 20 fold and poverty is down 80%.
So are robots good? They are the continued progression of electricity replacing candlelight, and cars replacing horses. They deliver more productivity, higher quality work and an increased standard of living, giving us back time to engage with customers and get back to basics of building a better future together with few downsides.
Alert developed the Alert Innovation Academy to train existing retail employees to work with the Alphabot system. Alert Innovation Academy has a career development trajectory that graduates workers from operators to robotics tech 1, tech 2 and even systems operation manager. Associates can start stocking shelves and become a robotics expert!
