As grocery e-commerce rapidly evolves, shoppers increasingly demand better service, speedier delivery times and more click-and-collect options. For retailers fulfilling online grocery orders, every second impacts profitability. Time literally is money in the grocery business, and retailers are searching for every possible efficiency that can improve the bottom line.
Before the impact of COVID, maximizing the efficiency of online order fulfillment wasn’t a top priority for many retailers. Today almost every grocery retailer—large or small—is on an e-grocery journey. The question is just how far they have progressed and how much efficiency they have squeezed out of their order fulfillment technology solutions, many of which are built in-house.
The two biggest costs of the fulfillment process are order picking and the last mile. Order picking alone often accounts for 25% to 50% of costs, depending on whether it’s a home delivery or click-and-collect order.
Combined with last-mile delivery, driving efficiency savings from the picking process should be at the top of everyone’s agenda. If a grocery retailer is not achieving maximum efficiency rates in their order picking system, then they are not maximizing their profit potential.
Automated Solutions Work Best in Combination With Manual Picking
Walmart’s rollout of automated grocery-picking robots last year captured headlines as the retailer began deploying its “Alphabot” technology in a 20,000-square-foot warehouse. In addition, a growing number of robotics startups are focused on the retail space. One automated solution that is particularly suited for grocery retailers with a store network is a microfulfillment center (MFC), which can be built in smaller spaces, including inside stores.
Automation combined with manual picking is part of the solution for any grocery retailer looking to the future of grocery e-commerce. The sheer increase in e-grocery demand has meant an exponential increase in customers, and the fastest and easiest way to capture online demand is manual picking. It can be operationalized in days, and grocery retailers can leverage their store network to keep initial startup costs at a minimum. However, for those further along in their digital transformation journey, automation should be an integral part of their strategy, complementing their manual picking in-store or in dark stores.
According to our insights, most grocery retailers have one or two peak days that require order fulfillment to temporarily scale up. To handle these demand spikes, it may make sense to use automation to cover the baseload of demand and then compliment that with manual picking when needed. Manual picking is also appropriate in areas where there is lower demand for e-commerce, because an automated solution makes more sense with a higher order volume.
How and when you use manual or automation or a combination of both depends on your customer demands; their needs should drive your e-commerce strategy.
Helping In-Store Pickers Improve Productivity
In Europe, where store worker wages are relatively high (in Scandinavia this is often $35 or more an hour), retailers had to embrace technology to squeeze the highest possible efficiency rates from manual picking. They make the most of their store network by picking in-store and maximizing the number of orders a store can process, as grocers must leverage all their assets in order to ensure maximum productivity.
Of course, grocery retailers must use every opportunity to make online order fulfillment profitable. American-based retailers can learn from their counterparts in Scandinavia about augmenting the power of in-store and dark store order picking through technology. But this doesn’t mean clogging up the aisles with manual pickers—in fact we are seeing the opposite. When stores can process so many more items an hour, they need fewer people picking.
For technology that augments the workforce to succeed, it must adhere to the following principles, which apply to every retailer, regardless of how they control in-store fulfillment.
- Solutions must have the ability to be tailored to every store, regardless of size and location. In order for stores to embrace technology it must be appropriate for small stores with fewer employees as well as large formats with more SKUs and staff. This will allow grocers to quickly scale up when needed and capture online demand no matter where or when.
- Technology must be easy to learn and use. The turnover rate in retail is around 60%, and COVID exacerbated this trend. Given this constant turnover, new employees must be able to quickly become proficient within minutes.
- Technology should ideally be hands-free. Grocery pickers need to be hands-free to enable multiorder picking. It’s a small detail that can make a big difference overall.
In-store picking is an area that’s ripe for improvement. Technology that enables an augmented workforce can help retailers make the best use of the existing workforce, improve productivity and margins, and deliver a better customer experience for online shoppers.
Jacob Tveraabak is CEO of StrongPoint, which provides retailers with integrated technology solutions to help increase productivity and improve the shopping experience in-stores and online.