Fabric Unveils 1st U.S. Microfulfillment Center

CEO: Robotic warehouse can solve economic and operational delivery dilemmas
Photograph by WGB Staff

Behind the weathered brick facade and spray-painted steel doors of an ugly old warehouse in an industrial pocket hard along the Gowanus River in Brooklyn, a compact revolution in e-commerce is coming to life.

Beyond the doors of the loading dock fronting Ninth Street is a towering steel frame containing a collection of bright blue plastic totes. These totes autonomously scoot along the floor, and are lifted, shifted and pushed vertically and horizontally between the columns and rows of the grid by a small army of whirring robots. The facility, soon to be a temporary home of items from an unnamed consumer products company that will use it to speed e-commerce deliveries around New York, is the first operating U.S. microfulfillment center (MFC) for Fabric, the Israel-based technology and logistics firm with big ambitions to bring such units to grocery retail in the U.S.

WGB attended a tour of the new facility, led by Fabric CEO and co-founder Elram Goren and Jonathan Morav, the company’s director of U.S. operations.

Fabric employees
Photograph by WGB Staff

As configured in Brooklyn, the Fabric MFC covers 9,000 square feet. The frame is a little more than 24 feet high and constructed of three “aisles” between which the lift robots operate. This layout can hold 9,000 of those bright blue totes, which are either 250 or 350 millimeters high—although the number of items picked from them can be exponentially more than that as inserted dividers can allow totes to hold two, four or still more SKUs as their size allows, Morav explained.

“This where we have fun with inventory analysis. In a grocery application we can ask, what pairs with olive oil in the basket? We run these analyses, and then we position these items next to each other in the same bin.

“In this cube, we can get about 25,000 items,” Morav continues. “It’s pretty amazing given the space that we’re talking about.”

Fabric uses two kinds of robots in the facility: About 100 of what the company calls “grounds," or flat wheeled shuttles upon which the totes piggyback. These travel by reading a grid of QR codes printed every few feet on the floor like a virtual conveyor belt, momentarily pausing above some before they shoot off to the next. About 24 lift robots, which move vertically and horizontally about the grid, are larger and appear somewhat more sophisticated (officials asked WGB not to a photograph a spare model displayed on the warehouse floor). Depending on the volume of the warehouse, more lifts can be added to the grid, Manav said, and their versatile movements help avoid “bottlenecks” and single points of failure that can slow retrieval from systems not as dexterous. The robots also know when to charge themselves, retreating to a station inside the grid to power up as needed.

The first U.S. microfulfillment warehouse for the Israel-based robotics company Fabric, in Brooklyn, N.Y., provides efficient automated picking of items to enable faster delivery. Fabric will use this center as a service to non-food retailers.

In addition to productivity per square foot, robotic fulfillment centers such as Fabric’s are also about superior labor efficiency. The facility needs only a small handful of employees at a time. An operator at an angled counter—one of just four “touchpoints” as Fabric calls them, although it can expand that number of those as well—assembles incoming orders from arriving bins to his left (these lift to counter height as they arrive), picking items from them, scanning them and bagging them in a waiting tote just to his right. When the order is complete, the filled tote is lowered and robotically ferried to another touchpoint: an outbound terminal by the loading dock. The picked bins are escorted back beneath the grid, where a lift will again find them a home, or head to an inbound touchpoint to be restocked as needed. And a new empty tote in the meantime rises to the counter and waits to be filled.

'What’s Going On Here?'

This design, Goren insisted, provides superior speed to competing microfulfillment systems deployed in grocery settings that descended from traditional warehousing applications not designed with grocery e-commerce in mind—such as Takeoff Technologies or Dematic—and is more cost-effective than larger systems operating from a distant warehouse developed with a next-day delivery focus, like Ocado.

“I think what Ocado did is brilliant engineering, but I just don’t believe that they solved for the right problem—at least, not the one that we’re trying to solve,” Goren said. “I think at the end of the day, it comes down to what the consumer wants. And for groceries, they want same-day delivery, and they’re sensitive about price. The other thing is what the retailer wants, which is not to lose money. If you add all these up, for speed, you need to be local; and in order to solve for the economics problem, you really need automation.

“Now you might ask, what about Takeoff? That’s automation as well, right? But when you get into the details of the topology of that system or other systems, the efficiency, the cost ... the capital cost together with the operational efficiency, and if you couple that with the throughput or the speed in which we can fulfill an order, the numbers don’t work,” he said.

Goren believes that Fabric’s focus on the customer—combined with some fortunate timing—makes its point of difference.

“We actually started this journey trying to solve a problem for the consumer,” said Goren, who like many entrepreneurs in Israel’s burgeoning consumer tech industry, first applied his engineering degree in the military. “We didn’t come from retail. We didn’t come from logistics or supply chain. I didn’t know what the word ‘fulfillment’ meant before we started this company. But we actually approached this from two different angles. One was a consumer standpoint where we were basically frustrated by the fact that we can't get our groceries faster and cheaper than going to the supermarket. We were trying to understand why that was not possible. And the second one was from a business perspective.”

This is where good timing played a role.

“This was 2015, we were looking at some data pings of the U.S. e-commerce markets. We were looking at different segments [of market penetration], and I remember electronics was in the high 40%, clothing was in the 20s or 30s, and groceries was at 1%. We were like, ‘What's going on here?’ This is an industry almost $1 trillion in size, but there’s something going on: either people don’t like to shop online for grocery, which might be the case, or there’s a huge supply-side problem.”

Fabric’s leaders—the young company was then known as Commonsense Robotics—got a clue as to the demand picture when they saw the grocery delivery concierge Instacart raise some $200 million. On the supply side, meetings with officials of retailers like Walmart and Costco revealed a simple answer: They were losing money on every order.

“This is before Amazon bought Whole Foods, and before Walmart bought Jet, so there was also no incentive to grow that business,” Goren continued, referring to the seminal deals of 2017 that kickstarted the industry’s collective omnichannel journey. “We basically said, ‘We believe that the consumer will at some point drive the retailer to offer this, but the retailer doesn’t have any capability to do that, so if we can build something that will allow that to happen, and if our timing is not completely off, then there’s an interesting business opportunity.’ And that has turned out to be the case.”

Fabric got another strong demand signal a year ago, raising more than $100 million to grow in the U.S., including support through Kraft Heinz’ Evolv Ventures fund.

Next Up: FreshDirect

Fabric built its solutions first in Israel, demonstrating an ability to adapt its warehouses in a variety of physical spaces including the basement of high-rise rise office tower—spots that are close to consumers, but not easily leased out, aiding the economics of the project and slashing its relative delivery costs—before setting sights on the U.S., where it intends to operate units like the Brooklyn site doing “fulfillment as a service” to nonfood retailers but also with intentions to reel in grocery partners for dedicated facilities either as part of a store or perhaps, more likely, dark-store conversions.

Its first announced grocery unit will be a reconfigured cross-docking facility for internet grocer FreshDirect near Washington. That warehouse will look similar to the Brooklyn site, Manav said, although it will include refrigerated aisles for cold goods, a separate area to pick frozen, and will combine with FreshDirect’s existing processing and kitchen facilities there. Construction is largely complete, said Manav, and is expected to go live in early February. Earlier this year, Fabric officials said 14 sites were under contract.

The COVID pandemic, which among other legacies will likely be remembered for a second jolt it delivered to America’s online grocery appetite, is further making the landscape favorable for such facilities, but Goren anticipates that retailers will spend the coming year closely studying the results before committing to a full-blown rollout.

“We’re probably going to announce a few other customers quite soon, but I think 2021 is still going to be a year where people test them before they start scaling,” he said. “I think the industry is almost waiting for a solution that will work, because once you have a solution that works, then, if I can save money and offer my customers better service, I would probably do that.”

The Brooklyn facility, in the meantime, is expected to begin service to a general merchandise retailer, which will move a portion of its business providing delivery to New York area customers from the current three- to five-day offering fulfilled from a facility in Pennsylvania to same-day.

See inside Fabric's Brooklyn micro warehouse


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