Time is ripe to bring about change for online retail. As more goods are being sold online, retail businesses around the world are turning to robots to help them service their customers reliably and cost-effectively.
The online retail market has been experiencing steady and steep growth over the past decade. Until recently, online retail shopping was dominated by the sale of electronic products and books. E-grocery, online grocery shopping, previously considered a niche industry, is now gaining in popularity. It is estimated that online grocery’s dollar share in the USA alone will climb to $250.26 billion of the estimated $1.16 trillion overall grocery market by 2025.
The digital retail and e-grocery market is experiencing a surge in growth recently, specifically due to the global changes caused by the COVID-19 pandemic. In the new normal, e-grocery is getting at the front lines of the online retail market. Many indicators signal that now is the best time to be in the e-grocery business to seize the opportunity as its turnover is expected to experience a growth of about 163%, with a consumer spending projection of $100 billion globally, in the next couple of years.
To meet the rising expectations, retail businesses will have to transition from the manual, labor-intensive, and costly order fulfillment procedures, to automated and robot-assisted methods. In many other industries, we already see technologies such as Robotics, Cloud, and Artificial Intelligence (AI) paving the way to unprecedented revenue generation. E-grocery will be no exception.
Read on to understand the technology that is involved in the automated warehouses of the e-grocery business, the advantages of using these technologies, and most importantly the return of investment (ROI) associated with the technology.
Why do we need automated warehouses?
In a typical e-grocery business today the order fulfillment starts with the pick worker receiving the list of groceries to be put together for a customer. The worker grabs a cart and starts to wander around the store, or a warehouse, in pursuit of the items on the list.
After picking up the ordered items, the worker takes them to the packing station, where a colleague takes over the items and prepares to ship them to the customer. Pick workers spend most of their time walking around the store or a warehouse searching and putting together the items ordered. In the process they cover several miles of distance in a day!
Compared to automated warehouses with robots doing all the heavy-lifting, this clearly is not an efficient and productive way to run an eCommerce business. However, most companies in this business today have continued with the manual order fulfillment process strategy to stay in business and to stay competitive. This model carries many disadvantages for retail businesses, some of which are listed below:
- It is a labor-intensive and rigorous process, affecting the health of the workers by increasing their stress levels and risk of injury.
- It is prone to mistakes. Workers often misplace the orders or pick wrong items due to fatigue involved with this kind of work, and a drop in their concentration levels.
- It has a low throughput. Increased demand during the holiday season or emergency times such as natural disaster or pandemic strains the process leading to longer delivery times.
- It is expensive. Labor costs are very high, increasing the price of delivery of the product.
- It requires a large physical space as the workers should be able to move and work in an ergonomic environment.
Costs associated with the manual order fulfillment have been the turning point and the main reason for the digital retail market’s slow emergence. Nevertheless, this is changing as more companies are entering the market, and automation with the use of robots for order fulfillment is being widely adopted.
The advantages of automated warehouses
The persistent need to increase operational efficiency and decrease the delivery costs to the customer has led to the utilization of automation and robotics technologies for e-grocery order fulfillment. Furthermore, the retail robotics market size is forecasted to reach $69.04 billion by 2028, growing at about 32% from 2021 to 2028.
This trend has opened up opportunities to convert traditional warehouses into e-grocery order fulfillment centers for home delivery. Inside the automated warehouse robots do the tiring, stressful, and repetitive pick up tasks while redefining the role of the workers and making them more productive.
The groceries are stored in shelving units, completely operated by robots. When an order is placed, the robotic systems operate in collaboration with the fetching and transporting robots to pick the ordered products and deliver them to packing stations. Pick workers then receive the goods and pack them into clearly indicated packages.
The function of pick workers in an automated environment has changed. They now stay at the fixed stations with no need to wander around to fetch products, making the whole process faster and more reliable.
The most prominent advantages that automated warehouses offer over the manual order fulfillment are:
- Compact store space. Compared to the manual picking process, automated warehouses require a much smaller physical space. When warehouses are built for robots rather than for humans, there is a possibility to store products closer to each other while utilizing vertical space as well. Automated warehouses can be 6 to 7 times smaller in size than regular stores with the same number and volume of products.
- Increased productivity and pick accuracies. Robots are designed to perform repeated tasks with little variation at high speed and precision. They also provide flexibility to be quickly re-assigned to different tasks. In fully automated warehouses, operated by these robots, overall productivity is increased three-fold while achieving 99.9% pick accuracies.
- Increased throughput. Automated warehouses provide flexibility and agility in work and efficiency. In the face of dynamic markets and rapid changes in customer needs, automated warehouses are adaptable and flexible to serve the peak demands.
- Better inventory control. Automation systems heavily rely on advanced software components that are data-driven and provide advanced tools for inventory control, making sure you know what you have inside the warehouse and where.
- Safety. Automated warehouse systems provide safety for workers and products. Normally, warehouse operations have been associated with hazardous activities such as handling heavy boxes and high racks and even dealing with toxic products, including chemicals. Luckily, robots can handle a lion’s share of these jobs, thus considerably reducing risks for employees.
- Sustainability. Just like other industries, retail and logistics contribute to climate change. Therefore, these days sustainability has become one of the primary points for businesses involved in retail and logistics. Warehouse and automation solutions can assist executives in getting closer to their sustainability goals by offering advanced management of warehouse conditions as well as energy efficiency.
Key features of automation technologies for e-grocery
There are several aspects of technology we have to consider when automating the e-grocery warehouses. It should have the following characteristics:
- Scalable. Automated solutions must be capable of quickly adjusting to the changing market dynamics and customer demands.
- Data-driven. They must be able to provide customized optimization tools for inventory management, smart scheduling and demand forecast.
- Cost-effective. Automation technologies must have the capacity to increase the productivity of workers while decreasing fulfillment costs and warehouse space.
Automated systems for e-grocery warehouses require both hardware and software implementation. The ability and quality of these components determine the overall efficiency of the system.
Hardware technologies involved in automated retail
The most popular automation solutions for e-grocery warehouses utilize the goods-to-people concept. In this model, the robots store, retrieve and deliver goods to stations where human workers further prepare them for shipping. This approach reduces pick up time and increases pick up accuracies profoundly.
In general, there are several ways to implement goods-to-people scenarios. Goods can be retrieved from stationary shelves by shuttle robots and either loaded onto an autonomous mobile robot or, which is less preferred, a conveyor belt that delivers the goods to the packaging station. In another scenario, smaller mobile shelving units are moved around the warehouse by autonomous robots and brought to the packaging station once the items on the shelf are ready to be processed.
In yet another scenario, instead of shelves, boxes filled with groceries are stacked in a 3D grid arrangement. The mobile robots move on top of the grid, retrieve the necessary box with the goods, and deliver it to the human worker. The choice between either case highly depends on the size, weight, and the frequency of retrieval of goods.
Choosing the right software for e-grocery systems
Selecting the right hardware is important, although, picking the right software for the automated warehouse is what will make the difference in profitability. Software is a component of the system that allows both the orchestration of the automated components and the integration of warehouse management systems.
Nowadays, cloud-based systems allow for dynamic and data-driven inventory management while optimizing the key performance indicators (KPI) that matter most to the business. Out-of-the-box data pipeline management allows for the deployment of machine learning algorithms that enable the self-optimization of the overall system. With the right software components, the possibilities are limitless.
The software for an automated e-grocery warehouse can be segmented into three parts:
- Software for data collection. Data pertaining to every item inside the warehouse must be collected in an automated manner such that it eliminates any possibility of error. This software component implements a system for the collection of data from the moment the item enters the warehouse to the moment it is shipped to the customer. The data is stored and updated accurately in the central database. It is collected using barcodes, RFID tags, IIoT devices, cameras, etc.
- Inventory management software provides transparency in inventory storage as previously captured data is updated in real-time when items are added and removed from the storage. It also allows trace the stock keeping units’ (SKU) quantity, conditions, location, and etc. at any given time.
- Overall warehouse management software allows for the optimization of robot functionalities and uses dynamic and adaptive algorithms to coordinate the movement of robots and inventory inside the warehouse. This software component is responsible for task management, including picking, storage, and replenishment of inventory. It increases efficiency by plotting the best routes for robots and minimizing task execution time.
Automated warehouse management expenses
Automated e-grocery is a paradigm shift that needs a sensible business model. Most of all, the investment in technology has to be justified. The biggest monetary benefits of automation in order fulfillment comes from:
- Decreased direct labor cost;
- Increased throughput;
- Higher storage density;
- Better reliability of the system.
Offline grocery retailers in general make slim profit margins mostly coming from servicing a large number of people in a given geographic area with a variety of high-quality goods. E-grocery, however, has a completely different set of parameters in the play.
The most important factors that affect the return of investment (ROI) in the business are:
- Level of customer satisfaction;
- Characteristics of the warehouse;
- Cost of the automation system.
Customer satisfaction is the most important factor in the e-grocery business. Delivering what customers want, when and where they want it while keeping competitive pricing is the key to success. In order to succeed in this line, companies will have to rely on automation to retain customer satisfaction while slashing costs normally associated with the offline stores.
Characteristics of the warehouse such as its size and the required environmental conditions dictate the size of the automation system and the cost of the machine control equipment. More moving parts, larger systems, and utilization of specialized equipment adds to the overall cost of the system. Additionally, the desired throughput plays an important role, as the time between pickup and delivery to human operators shortens, the cost of the system increases.
Automation system costs are attributed to the software, hardware, installation, maintenance, and training factors. Software is usually sold in packages, which means that adding more software functionality to the system will cost more. Hardware costs are related to the costs of the robotic systems. Installation of the equipment is a fixed, one-time cost that covers putting all of the hardware in place.
Maintenance is a running cost that must be factored into the ROI calculations. You have to make sure that the system is always running optimally and properly as any downtime can cause late deliveries. Training costs are associated with the initial user training and other extended training as necessary so that warehouse workers can properly handle the installed equipment.
We now see an emerging trend to shopping online compared to using the near-by convenience stores as a result of the changing customer behavior. The recent surge in demand for home-delivered groceries due to the coronavirus pandemic has speeded up digital transformation of the retail segment. Automation and the introduction of robots for picking and packing groceries play a key role in this process.
Servicing the customer needs using a manual picking process, is costly, slow, and prone to mistakes. Many eCommerce companies are turning to automation technology for order fulfillment. With mobile robots operating inside automated warehouses, the overall efficiency and accuracy of the work and operation are increased manifold and customer expectations are met with close to zero complaints.
To reap the full benefits of the automated e-grocery, business owners have to incorporate diverse digital capabilities into their workflows, which are often outside their field of expertise. The best approach is partnering with an experienced service provider with proven experience in deploying projects powered by IoT, AI, and Cloud technologies.