By John Gargasz

One of the highlights of GroceryShop 2021 in Las Vegas was Jon Fortt from CNBC interviewing Tony Xu CEO of DoorDash. Jon also hosts the weekly CNBC segment ‘On the other hand,’ where he argues both sides of the same issue, so this blog will take the same approach in reviewing the rapidly changing Convenience or ‘Q’ market and how automation may apply.

Let’s begin by looking at the last-mile delivery market for food and grocery – it earned revenue of approximately $25 billion and is expected to cross $72 billion in 2025, driven by the COVID-19 pandemic and new customer shopping behaviors. Online food retailers and convenience delivery companies that offer speed and variety are experiencing tremendous growth.

The likes of GoPuff, Getir, DoorDash, and others are among the current favorites of the venture capital market with tremendous funding and lofty goals for scale. Many of these players are transitioning from pure delivery companies to actual retailers with physical locations offering convenience SKU assortments ranging from roughly 1,000 to 5,000 items. For example, GoPuff recently acquired BevMo for $350 million in exchange for coast-to-coast business expansion and 161 store locations useful for acquiring new customers and supporting their local, manual micro fulfillment efforts.

The reality is that these convenience players are scrambling for user adoption, often underwriting orders and deliveries with promotions. There will be many failed ventures along the roadside as the economics of buying customers eventually drains the VC accounts. But there will also likely be a couple of big winners at the end of the day as well.  DoorDash in particular is on a tear. They recently introduced DoubleDash — a new innovation that lets their existing 20 million restaurant customers add items from nearby stores to the original order for that last mile delivery.

Regardless of who emerges, the economics of replenishment and order fulfillment for these convenience operators must improve. They are opening small footprint (about 4,000 square feet) dark stores that are largely replenished and fulfilled manually by 4-5 people per location. There are even stories of employees going to other retailers and buying goods to stock their stores. Ouch!

So how can automation help this sector?

Alert Innovation, a leader in e-grocery fulfillment automation, regularly gets requests to provide its automation capabilities to convenience locations, but robotic automation costs money and if only five employees are fulfilling small basket sizes, with limited assortment at primarily peak hours of the day in small, manual micro fulfillment centers (MFC), it’s hard to make the numbers work.

That said, there is absolutely a place for automation in convenience. The replenishment of multiple convenience outlets from a mid-sized micro fulfillment center within a 30–45-minute radius of the convenience locations is certainly viable and eliminates the replenishment chaos of these small sites.

A mid-sized automated MFC using the Alphabot system by Alert Innovation makes manual fulfillment at the local convenience location much more efficient with intelligent, less than case replenishment eliminating the need for full automation at each small convenience site.

And the Alphabot system offers new technologies that reduce the transport cost and carbon footprint from the automated MFC to the convenience location all the way through to the last mile delivery. So, yes, automation makes sense for the convenience market but not exactly in the manner those companies may be envisioning.

But now let’s look at convenience from the grocer’s perspective.

Convenience and grocery shopping typically serve two different shopping trips. One trip is to get groceries for stock up and fill in. The other trip is driven by impulse and cravings such as candy, beer, or a sandwich at 11pm. Convenience, by definition, demands a premium.  Major cities have been the epicenter of this convenience trip market, proving that shoppers will spend billions for door-to-door deliveries.

As grocery retailers adopt automation technology at the store-level to better-serve their loyal shoppers, they are also installing a capability that makes them a quick-ship convenience outlet at minimal incremental cost, opening a tremendous opportunity for scaling their business with new “convenience” trip shoppers while improving their operational profits on their traditional trip shoppers.

E-grocery automated fulfillment systems like the Alphabot system operate 24×7 with minimal labor. That is their core value proposition. And these systems have peak demand and off-peak demand. For example, shoppers typically are collecting their large orders in the morning, afternoon/early evening during the week, and on weekend mornings. This creates an interesting opportunity for repurposing the automation system to fill convenience orders late at night and early in the morning, which are ‘off peak’ hours for the automation system when the grocers have excess automation capacity to fulfill the convenience demand with very little incremental cost.

And replenishment from distribution centers is already an area where grocery excels, especially when direct store delivery items are incorporated. These set-ups are often called Hub + Spoke models and allow retailers to use their existing inventory to satisfy a great radius of customers.

So there you have it – one huge opportunity for growth from two different perspectives.

(source: “Global Last-mile Food and Grocery Delivery Growth Opportunities” Report by Research & Markets: Wikipedia – DoorDash)

By John Hennessy

Over 20 years ago, John Lert, co-founder of Alert Innovation, had a vision of using automation to make supermarkets more profitable and the supermarket shopping experience more enjoyable for customers. Turning that vision into reality has been his life’s work.

If you understand supermarkets, you understand that realizing John’s vision involves solving a suite of complex problems.

One of the primary challenges that Alert Innovation needed to address was that grocery orders contain a mix of products from ambient, refrigerated, and frozen temperature zones. And, unlike a shirt or a book, even some ambient supermarket products are temperature sensitive and can suffer damage from extended exposure to heat or cold.

The problem to solve: how can a micro-fulfillment center (MFC) automation system fulfill orders while maintaining product quality, shelf life, and safety.

Temperature Control Matters

As mentioned, even shelf-stable items require temperature and humidity control to prevent product damage. Heat-activated detergent pods can release if temps get too high. Nutritional gummies can quickly become a singular blob above 90 degrees. And anything with chocolate can lose its shape and appearance at similar temperatures. So any automated order fulfillment system needs to keep both stored items and completed orders in a fully climate-controlled environment.

Refrigerated items without proper temperature control can lose days of shelf life, suffer from quality deterioration, and eventually spoil and become unsafe. The amount of time spent outside the proper temperature range is the culprit. The process of manually picking refrigerated items from a store floor, taking them somewhere for consolidation and staging, and then transporting to a shopper’s car or delivery van requires a lot of time and is full of opportunities for refrigerated product spoilage.

Isn’t it easier to pick frozen manually from the floor?

Frozen items are fairly sturdy, but they are still subject to deterioration in quality resulting from time spent at the wrong temperature such as a picker’s cart or while being stored or staged for pickup as part of a finished order.

A common misperception is that frozen items are easy to pick manually. But according to Dave Crellin, former Head of Online Operations at Sainsbury, “Picking frozen product from a shelf has a raft of additional complexity which makes frozen amongst the slowest of picking areas – the Alert Innovation solution circumvents many of these low-level inconveniences and standardizes the process to stimulate efficiency within this area and overall.”

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And frozen items are a growing segment of the online basket as evidenced by IRI’s research: In 2020, frozen food sales rose 21% in dollars and 13.3% in units, with nearly all categories seeing double-digit sales gains as consumers stocked up amid the COVID-19 pandemic, according to AFFI’s and IRI’s latest report with FMI-The Food Industry Association, “The Power of Frozen 2021,” released in February. The top three frozen categories in terms of dollar sales growth were seafood (+35.3%), poultry (+34.7%), and appetizers (+28.9%).

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Grocery retailers need a temperature-controlled location not only for order picking but also for all the order fulfillment steps. Each phase of the order fulfillment process – picking, storage, consolidation, and dispense – leads to more touches, more labor costs, and more possibilities for product damage or errors.

Solution

The Alphabot System by Alert Innovation is the only automated fulfillment system that offers three temperature zones for tote storage in a single, integrated system. Ambient, refrigerated, and frozen inventory items along with finished orders are kept in their own temperature zones within the system at all times.

The process is straightforward. Products are first loaded into totes and then placed into storage in the appropriate temperature zone. The totes are then picked from the frozen, refrigerated, or ambient storage zones respectively, transported through picking workstations where ordered items are transferred into order totes, and then returned to their original temperature zone for storage. Completed order totes are also stored in the appropriate temperature zone pending dispense. When a customer or delivery driver shows up, multiple robots retrieve all the required order totes from the various temperature zones and dispensed to associates, drivers, or directly to customers.
28 items ordered. 28 items delivered.

There’s one other benefit gained by managing items from all temperature zones in one automated order picking and dispense system — order accuracy and complete order fulfillment. When orders are picked from the store floor, there is a risk of errors or out of stocks. Retailers never know exactly what will be available and what will be out of stock at the time the order is picked.

An automated order fulfillment system works like an SKU banking account. There is a precise count of the items (SKUs) put into the system, as well as which items have been ordered and in what quantity. Orders placed are tracked against inventory and there is total visibility to what’s been reserved but not yet picked and what’s been picked up, so the balance of each SKU left to sell is always available and accurate.

Is a shopper going to stay loyal if they place a 28-item order but only receive 25 items and two of the 25 items are substitutions? Keeping items from all temperature zones in the automated system delivers accurate e-Grocery orders.

Summary

For the highest product quality, freshness and safety, all e-commerce items should be stored in the proper temperature within an e-grocery automated fulfillment system. The benefits are many:

• Reduced time outside recommended temperature for product quality, freshness, and safety,
• Improved e-grocery order accuracy,
• Fewer touches and labor from order consolidation, resulting in a ~40% improvement in ROI, and
• Happy, repeat, e-Grocery shoppers.

For more information on the benefits of MFCs with complete temperature control, contact John Hennessy at john.hennessy@alertinnovation.com.

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.

Jobs and e-Grocery

In 2021, Amazon added 500,000 jobs, Walmart added 170,000 personal shoppers to their workforce and Instacart added 350,000 shoppers.

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.

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.

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.

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.

Walmart was the first food retailer to recognize the need to automate fulfillment of online orders at store-level. As a result, four years ago, Alert Innovation began working with Walmart to create the Alphabot^® technology designed specifically to automate order-fulfillment at the store level. Alphabot helps serve customers faster by automating the picking, storage and dispensing of orders.

Walmart’s announcement is exciting as it’s the largest deployment of automated micro-fulfillment technology announced to date by any retailer and represents a major step in the evolution of local fulfillment. The team at Alert Innovation is proud to join Walmart on this journey and look forward to helping them better serve their customers in this new way at scale.

From Ground-Breaking to Breaking Ground: Walmart Begins to Scale Local Fulfillment Centers

By Tom Ward, SVP of Customer Product, Walmart U.S.

It’s clear that one of Walmart’s competitive advantages is our stores. And today, stores are transforming to serve more and more purposes – we’re using them to fill pickup and delivery orders, make Walmart.com deliveries and more. We have a great operation that will serve us well for years to come, but we aren’t stopping there.

Our customers love the speed and convenience of pickup and delivery, and we’re committed to finding faster ways to serve them, which is why we’re scaling the number of stores that will also serve as local fulfillment centers. We’re already planning dozens of locations, with many more to come.

A local fulfillment center (LFC) is a compact, modular warehouse built within, or added to, a store. In addition to fresh and frozen items, LFCs can store thousands of the items we know customers want most, from consumables to electronics.

Instead of an associate walking the store to fulfill an order from our shelves, automated bots retrieve the items from within the fulfillment center. The items are then brought to a picking workstation, where the order can be assembled with speed.

We’ve always said personal shoppers are the secret to our pickup and delivery success and that remains true. So, while the system retrieves the order for assembly, a personal shopper handpicks fresh items, like produce, meat and seafood, and large general merchandise items from the salesfloor.

Once the order is collected, the system stores it until it’s ready for pick up. This whole process can take just a few minutes from the time the order is placed to the time it’s ready for a customer or delivery driver to collect.

We began piloting our first local fulfillment center in Salem, New Hampshire in late 2019. The technology is impressive. Equally impressive are the results:

• More availability: We are able to pick more orders and do it quicker, creating more availability for customers.
• Faster fulfillment: The system speed can allow orders to be picked up or delivered within the hour.
• Greater efficiency: One local fulfillment center can fulfill orders for many stores, which means its benefits can be felt by customers in stores nearby.

We’ll be building local fulfillment centers with various technology providers, including Alert Innovation, Dematic and Fabric. With these providers, we’ll be testing different orientations and add-on innovations to understand what works best in different environments. For example, in some locations, we’ll be adding on to our stores. In others, the fulfillment centers will sit inside the existing store footprint.

Finally, in some stores, we’ll be adding automated pickup points. Think of it as the ultimate convenience that allows customers and delivery drivers to drive up, scan a code, grab their order and go!

It’s no secret our customers love the speed and convenience of pickup and delivery. These local fulfillment centers help unlock our ability to expand even faster to meet their needs today, while also setting a new foundation to serve them in the future. We’re excited about this new chapter for our business and what it means for our customers.

The blog post sited above was originally published in January 2021
on the Walmart corporate website.

Alert Innovation offers groundbreaking micro fulfillment center technology to meet the demanding requirements of e-Grocery and other industry applications. We have over 50 patents issued or pending in support of these innovations.

What makes the Alphabot System unique in the world is its ability to transform itself from a mobile robot, operating in two horizontal dimensions, into a vertical lift, move itself and its payload to any storage or workstation elevation, and then resume horizontal operation at that new elevation.

Our Flexible Mobile Robotics solution offers some significant advantages over Traditional Fixed Automation such as “shuttle” technology. When comparing micro fulfillment solutions, especially to automate inside a grocery store, please consider these Alphabot System advantages:

Handle all three temperature zones?

The Alphabot System can pick from ambient, chilled and frozen. Most other solutions require you to manually pick frozen items from your store floor.

Can the automation store completed orders in the system (in the correct temperature zone) until the customer is ready to pick up or the delivery driver arrives?

The Alphabot System stores the picked orders until the customer or delivery driver arrives at the store and then quickly dispenses all order totes. Most other solutions require you to dispense the order as soon as it is picked and requires you to have lots of freezers and refrigerators and racks outside of the automation system to store the completed orders which then need to be manually consolidated when the customer arrives.

Built-in order consolidation

The Alphabot System removes the consolidation step required by shuttle systems. Order totes can be dispensed to meet any business need without needed to consolidate multiple totes in an order.

Does your automation rely on chemical batteries to power the robots?

Alphabot Robots do not use chemical batteries (for example lithium-ion). Alert Innovation’s Alphabots use supercapacitors to power their movement. This removes the fire risk associated with charging batteries. Also, our supercapacitors fully charge in seconds as they travel vertically (rather than being sidelined for parts of the day to recharged.) As an added plus, supercapacitor powered robots are not impacted by cold temperatures, but rather perform even better in the chilled and frozen sections of our storage and retrieval systems.

Can the automation store products in sub-totes to enable significantly more SKUs in the system than totes and enable less than full case replenishment to further expand space available for additional SKUs?

The Alphabot System enables retailer to decant product at case quantity into full, one-half and one-third totes. We will soon be offering one-sixth and one-eighth subtotes to dramatically increase SKU count for smaller items.

Can the automation dispense orders directly to customers via a pick-up portal or to their car using the same robots used to store and retrieves totes?

Alphabot Robots can now dispense to a self-service pick up portal on the outside wall of the store for use by consumers or delivery drivers. Shortly, transit rails will enable our robots to leave the storage structure and move at elevation in delivering and picking up payloads at other locations within the operating facility or further into the parking lot.

Lower Total System Cost

In comparison to any shuttle system, the Alphabot solution costs less because the Alphabot robot performs all the functions of the shuttle robot, the lift, the conveyors and related transfers, and the workstation mechanisms that flow the totes through the workstation. Further, Alphabot features higher utilization during peak periods due to lack of captivity and random accessibility.

Higher Reliability

The Alphabot System is much more reliable than a shuttle system because the robots are the only moving part in the micro-fulfillment center. No Alphabot system has a single point of failure that can shut down the operation (such as lifts and conveyors). If a robot fails, other robots can route around it and the robot can be easily removed for repair at a convenient time. Alphabot offers a massively parallel, redundant architecture and this fault tolerance is critical in automating a grocery store.

Faster Speed

The Alphabot architecture enables high rates of product flow between storage and workstations, resulting in exceptionally fast order-completion times. Additionally, Alphabot currently enables human capable picking of 900 each per hour per workstation with higher pick speeds in development. Alphabot can pick grocery orders at peak demand from three temperature zones in 4 minutes average and 8 minutes 95th percentile.

Greater Space Utilization Efficiency

The Alphabot System currently uses single-deep tote storage, which utilizes roughly 65% of available storage volume. The ability of robots to climb enables unprecedented “transactional” density by stacking picking stations vertically. Overall, Alphabot space utilization cannot be matched when defined as throughput capacity (picking transactions per hour) per cubic feet of space used. Additionally, horizontal robot traffic is distributed vertically, requires less floor space and removes the congestion that shuttle systems face when having to move all bots on one level (or in the case of hive systems like Ocado or Autostore, on the top level).

Easier Scalability

Without any captivity of throughput assets with storage assets, The Alphabot System throughput and storage capacities can be scaled independently. The number of robots and workstations scale linearly with throughput, so it is a purely variable capex component. Modularity enables easy expandability. Put another way, Alphabot enables the retailer to meet growing eCommerce volume by simply adding more bots. Conversely, shuttle systems force the retailer to add storage capacity in order to get more bots and hence throughput.

Summary

In summary, micro-fulfillment is a hot topic for retailers and especially grocery retailers. The pressure is on for grocers to satisfy consumers’ ecommerce demands in a cost-effective manner. However, this article has pointed out how Alert Innovation’s patented Flexible Mobile Robotics approach provides distinct advantages over legacy traditional fixed automation like shuttles (for example from Knapp or Dematic) and HIVE systems (for example from AutoStore.)