Grocers Turn to Fulfillment Centers

ALEXANDRIA, Va.—Today’s consumer is all about speed and convenience, which in the still relatively uncharted world of grocery delivery has lead grocers to innovate to meet customers’ changing needs.

Albertsons wants to position itself at the cutting edge of the order-picking technology, so the company is partnering with Takeoff Technologies to develop micro-fulfillment technology, according to Grocerydive.com. The two organizations have already opened one micro-fulfillment center (MFC) at a Safeway in South San Francisco and plan to open another at a Safeway in San Jose, California, by year’s end.

Takeoff reports that micro-fulfillment centers typically hold 15,000 to 18,000 items and can increase productivity tenfold, filling 4,000 orders a week. Earlier this year, Takeoff built its first standalone facility and announced plans for a "version 2.0" fulfillment center that will process orders faster and store more products.

“The micro-fulfillment center model is a key element in the store of the future,” said Vivek Sankaran, Albertsons' president and CEO. “It combines the efficiency of automation with the ease of meeting customers when and how they want to shop. In working with Takeoff, we can evolve how the MFC ties into our store and e-commerce ecosystems and accelerate our path to best serve our customers.”

Financial firm Jefferies Group LLC says the sites, which require three months to build, can be profitable in a year and are "superior" to other fulfillment models. Jefferies has been critical of the centralized fulfillment model, notably Kroger’s partnership with Ocado, noting that the automated centers the companies are building take too long to construct and are expensive. But micro-fulfillment does have limitations. Robots can’t pick the entire store assortment, such as fresh produce, leaving some items to be hand-picked.

Other food retailers, including Walmart and other chains, are betting on small warehouses to bulk up their growing delivery businesses, as supermarkets try different approaches to get groceries to customers more efficiently, reports the Wall Street Journal.

Originally, grocers were slow to embrace e-commerce because many customers still want to inspect fruit and meats before buying—but that’s changing. Nearly half of U.S. households digitally ordered groceries in the past year, and online grocery sales have jumped 15% in 2019, according to advisory firm Brick Meets Click.

Walmart and Meijer Inc. are testing small fulfillment centers. Ahold Delhaize’s Stop & Shop LLC said it would open several more of these warehouses this year, while its Peapod delivery division continues to build bigger distribution centers. In contrast, Kroger, the nation’s biggest supermarket operator, is building bigger distribution centers for delivery, wagering that economies of scale will make the larger investment worthwhile.

Automated Receiving Facilities management