The evolution of e-commerce, with the need to meet customer demands for ever-faster delivery, requires a whole new approach to local fulfillment, says Jake Heldenberg, senior sales consultant with Vanderlande.
SCB: What are the big trends and issues in the world of order fulfillment today?
Heldenberg: We see a trend toward same-day shipping and instant delivery. You hear a lot of trendy words like micro-fulfillment and hyperlocal. We think the market is headed toward local fulfillment. We have to tackle the issue of a small or large back room, or a store that has a large cube. We need to have a solution that tackles the use of retail space. Because customers want to be served fast and efficiently. And retailers need to optimize the stores that are already in the market.
SCB: What’s your definition of “local,” in terms of distance from the customer?
Heldenberg: What we're seeing in the market now is a five- to 10-mile radius. The biggest challenge is always last-mile delivery, especially for same-day and instant delivery. You see companies like Instacart partnering with a lot of different grocers. But it’s not just a grocery problem. It's really an e-commerce and retail problem. If I’m Walmart or Target, and a customer buys something from me online, how do I get it to them the same day, or even within two hours? It's got to serve fashion, general merchandise, and food. That's the real challenge.
SCB: When you need to be within five to 10 miles of the customer, you have to be leveraging the stores themselves, right? With all the Walmarts and Targets that are already out there, they might as well be partial distribution and fulfillment centers.
Heldenberg: Exactly right.
SCB: But on the other hand, we're talking about the need for dense urban populations in order for this to work, right?
Heldenberg: Right. The challenge is taking your stores and utilizing the footprint that you already have. But you have to be flexible. One store might be 100,000 square feet, and another one twice that size. The solution can't be predicated on one model.
SCB: Is microfulfillment a working concept now?
Heldenberg: We don't see retailers being very successful at that. The business case hasn’t proven itself yet, at least where we've investigated.
SCB: Why not?
Heldenberg: It comes down to being able to hit your target SKU range. Like I just talked about, we want a solution for general merchandise. Considering the cost to start it up, there's not really a reduction in labor on the receiver’s side. You're talking about having a buffer of just one to two days’ worth of product. And when you receive goods, you have to do it with quite a few people. You're constantly decanting product into totes to go into a system that goes to a picker who now has to pick this product.
SCB: In the solution you’re contemplating, are you fulfilling from store shelves?
Heldenberg: Maybe and maybe not. It depends on the footprint of the store. It can also depend on the market. A rural area doesn't necessarily need same-day or instant delivery. So how do you fulfill that efficiently?
SCB: I would imagine that the level of automation would have to be pretty high, although not necessarily eliminating the use of humans altogether. What types of automation are we talking about? Is it robots for picking, putting away, and moving stuff to a dock?
Heldenberg: Right now it’s combination of all of the above. We're investigating everything from shuttles to AGVs [automated guided vehicles]. Ultimately, the automation has to be agile. So if a market takes off, and the store wants to change its footprint to provide better service with more automation, then we need to be able to grow that automation quickly and efficiently. But let's say a store doesn't service a lot of e-commerce, but has a backroom issue. How do you make that more efficient? The solution we're working on would solve multiple problems for retailers in stores.
SCB: Can “dark stores” play a role?
Heldenberg: They absolutely can. There's some flexibility on the retailer side to look at that. But it’s not necessarily our goal right now, in our investigations with retailers and their partners. We want to solve it holistically.
SCB: What are D.C. managers and warehouses supposed to do in the meantime? They have a job to do now. How should they be preparing for these questions to be answered?
Heldenberg: That’s a challenge in and of itself. Currently, you have to stick with the status quo. You want to implement automation in your stores. How do you do that so that it makes your D.C.s more efficient? You don't want to shut them all down and then automate every single store. That's not going to work, right? Maybe there's some automation that allows for store-friendly delivery. That's the next step in retail. We have it in grocery, but what about general merchandise?
SCB: Of what sort exactly?
Heldenberg: Fashion's a prime example, where it’s push, push, push. Maybe a pallet full of product comes into the store, and when you de-palletize it and take it out to the store floor, it's in order. You get your payback very quickly. Everything is improved if we can automate a little bit better at both the store and D.C. in a more efficient manner.
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