David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
Most of us don't like to shop for groceries. We do it because we need to eat, but we'd much rather spend our time doing other things.
The consistent ordering patterns of grocery shopping—people tend to buy similar products each time they go—would appear to make the segment ripe for e-commerce. Yet e-grocery has never really caught on. A few operators in large markets have been marginally successful. But for the most part, profit margins have been too thin to make online grocery fulfillment viable.
That's largely because grocery stores are one of the few businesses in which consumers provide most of the labor. Not only do shoppers assemble their orders themselves, but in many cases, they also process their own payments in self-checkout lines.
This model is hard for e-grocers to compete with because they have to pay people to pick and pack orders. Although some consumers have been willing to pay extra for the convenience of having their orders assembled for pickup, no one has been able to provide an e-grocery service at a cost that's competitive with the traditional grocery store model. At least until now.
POISED FOR TAKEOFF
Enter Takeoff Technologies. Takeoff is a Boston-area startup that believes it has hit upon the elusive e-grocery solution, with a model that works for both the consumer and the retailer. It will put its concept to the test later this year when it opens a first-of-its-kind operation in conjunction with an unidentified grocery retailer near Boston.
Takeoff's model calls for the development of micro-fulfillment centers that use robotic shuttle technology to assemble customer orders, making fulfillment quick and relatively cheap. The micro-fulfillment centers would be located in high-traffic urban locations, making customer pickups convenient and reducing last-mile delivery costs for those wanting door-to-door service. (The cost of delivery from a warehouse to the customer's doorstep is something that has plagued e-grocers in the past.) Online orders would be available for pickup within 30 minutes of order placement, which means a customer could order groceries online before leaving the office and pick them up on the way home. As added enticements, customers would have the option of curbside pickup and would pay no extra fees.
At the heart of the Takeoff model is the Knapp OSR Shuttle, an automated storage system used to house and deliver products quickly to workers at the micro-fulfillment sites. Automating most of the picking duties creates the economies needed to make the e-grocery model viable, according to the companies. The system is able to fill orders with five times less labor per item sold than traditional grocery operations can. And it does it with over 99.9 percent accuracy, according to figures from Knapp and Takeoff.
Among other benefits, the micro-fulfillment centers are designed to make ultra-efficient use of space. Alfredo Millan, who heads engineering for Takeoff, reports that the shuttle system can hold 4,500 totes of products located on 15 levels and two aisles. With a footprint of 3,500 square feet, the system can easily house 40,000 to 50,000 stock-keeping units (SKUs)—although Takeoff considers the sweet spot to be around 20,000 SKUs. In essence, the system can accommodate a product assortment that rivals that of the largest grocery stores but does it in a footprint that's one-tenth the size of a traditional supermarket.
QUICK PICKS
As for the machine itself, 30 shuttles operate within the OSR system, one per level per aisle. As incoming goods arrive, totes holding products are inducted into the system and raised using two elevators, one per aisle, to the assigned level. The shuttle for that level then collects the tote from the elevator and transports it horizontally along the aisle to a storage location in one of three temperature zones: frozen, refrigerated, or ambient. The shuttles can handle 1,200 lines per hour.
Customer orders are assembled in bulk and managed using the Symphony EYC warehouse management system (WMS) from Boon Software along with a proprietary middleware system that integrates all technologies involved in the operation. The software works in conjunction with Knapp's KiSoft warehouse control system (WCS), which operates the OSR Shuttle system and its associated conveyors.
Based on the software's instructions, the shuttles gather up the totes needed for the current batch of orders and transport them to the elevator located at the end of each aisle. From here, they're sent to picking stations, where workers assemble orders into customer cartons according to directions from a pick-to-light system. About 70 orders can be completed hourly from the OSR Shuttle system.
Approximately three-quarters of all items can be housed within the shuttle system. The exceptions are fast-moving items such as bread, milk, sodas, toilet paper, and bananas, where demand rotates too quickly for the shuttle. Non-conveyable items, such as mops, would also be stored outside the shuttle. These items can be picked using radio-frequency or voice technology.
The shuttle system used by Takeoff is a standard design, meaning it will be easy to replicate at new sites as the rollout progresses.
Takeoff executives say they looked at a number of automated solutions before settling on the Knapp technology. "Our concept is about simplicity," says Jose Vicente Aguerrevere, who founded the company with Max Pedró, whom Aguerrevere met at Harvard Business School 17 years ago. "But most of the automation out there was just too expensive to compete with the efficiencies of the [traditional supermarket model]. What we liked about Knapp is that they were the inventors of the shuttle concept and it is a proven technology. They had the performance metrics we needed and the ability to replicate the concept."
Takeoff says it can install one of its micro-fulfillment centers in an existing building for about a fifth the cost of constructing the typical new full-line grocery store. The company adds that the design is so simple and straightforward that it can be implemented in an existing facility within 90 days. After the Boston launch, Takeoff is planning to expand to other facilities in the first quarter of 2018.
WORKING WITH GROCERS
As for where it will fit into the competitive landscape, the Takeoff model is designed to work with existing grocers and not compete against them, as other e-grocers have done. Takeoff executives believe partnering with existing retailers will work to their advantage by allowing them to leverage the grocery chains' existing infrastructure and established customer base.
When it comes to potential locations for the micro-fulfillment centers, the field is wide open. With their small footprint, they could be placed within a larger grocery store or at other retail locations, such as convenience stores, drug stores, and gas stations. In some cases, it might even make sense to create a dedicated standalone fulfillment facility, Takeoff executives say. "We will locate where the demand is. That means we have to locate near the customer," says Pedró. "We will help existing retailers be successful in e-groceries. We are not trying to put them out of business."
In addition to offering pickup at the micro-fulfillment centers, Takeoff plans to utilize pickup points at other high-traffic locations and to contract with Uber-type services for home or office delivery of groceries. Deliveries would be made within two hours of order placement.
Will this model take off as the name suggests? Company executives appear confident on that count. In fact, the Takeoff executives say they believe it has the potential to revolutionize the way we all get our daily bread—and more.
A version of this article appears in our June 2017 print edition under the title "Thought for food."
Container imports at U.S. ports are seeing another busy month as retailers and manufacturers hustle to get their orders into the country ahead of a potential labor strike that could stop operations at East Coast and Gulf Coast ports as soon as October 1.
Less than two weeks from now, the existing contract between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance covering East and Gulf Coast ports is set to expire. With negotiations hung up on issues like wages and automation, the ILA has threatened to put its 85,000 members on strike if a new contract is not reached by then, prompting business groups like the National Retail Federation (NRF) to call for both sides to reach an agreement.
But until such an agreement is reached, importers are playing it safe and accelerating their plans. “Import levels are being impacted by concerns about the potential East and Gulf Coast port strike,” Hackett Associates Founder Ben Hackett said in a release. “This has caused some cargo owners to bring forward shipments, bumping up June-through-September imports. In addition, some importers are weighing the decision to bring forward some goods, particularly from China, that could be impacted by rising tariffs following the election.”
The stakes are high, since a potential strike would come at a sensitive time when businesses are already facing other global supply chain disruptions, according to FourKites’ Mike DeAngelis, senior director of international solutions. “We're facing a perfect storm — with the Red Sea disruptions preventing normal access to the Suez Canal and the Panama Canal’s still-reduced capacity, an ILA strike would effectively choke off major arteries of global trade,” DeAngelis said in a statement.
Although West Coast and Canadian ports would see a surge in traffic if the strike occurs, they cannot absorb all the volume from the East and Gulf Coast ports. And the influx of freight there could cause weeks, if not months-long backlogs, even after the strikes end, reshaping shipping patterns well into 2025, DeAngelis said.
With an eye on those consequences, importers are also looking at more creative contingency plans, such as turning to air freight, west coast ports, or intermodal combinations of rail and truck modes, according to less than truckload (LTL) carrier Averitt Express.
“While some importers and exporters have already rerouted shipments to West Coast ports or delayed shipping altogether, there are still significant volumes of cargo en route to the East and Gulf Coast ports that cannot be rerouted. Unfortunately, once cargo is on a vessel, it becomes virtually impossible to change its destination, leaving shippers with limited options for those shipments,” Averitt said in a release.
However, one silver lining for coping with a potential strike is that prevailing global supply chain turbulence has already prompted many U.S. companies to stock up for bad weather, said Christian Roeloffs, co-founder and CEO of Container xChange.
"While the threat of strikes looms large, it’s important to note that U.S. inventories are currently strong due to the pulling forward of orders earlier this year to avoid existing disruptions. This stockpile will act as an essential buffer, mitigating the risk of container rates spiking dramatically due to the strikes,” Roeloffs said.
In addition, forecasts for a fairly modest winter peak shopping season could take the edge off the impact of a strike. “With no significant signs of peak season demand strengthening, these strikes might not have as intense an impact as historically seen. However, the overall impact will largely depend on the duration of the strikes, with prolonged disruptions having the potential to intensify the implications for supply chains, leading to more pronounced bottlenecks and greater challenges in container availability, " he said.
The Owner-Operator Independent Drivers Association (OOIDA) says the bipartisan legislation—called the Household Goods Shipping Consumer Protection Act—is needed because motor carriers are victimized through unpaid claims, unpaid loads, double brokered loads, or load phishing schemes on a daily basis.
The proposed act, which was introduced by Congresswoman Eleanor Holmes Norton (D-DC) and Congressman Mike Ezell (R-MS), offers a solution, OOIDA says. If passed, the bill would restore and codify FMCSA’s authority to issue civil penalties against bad actors. The legislation also requires that brokers, freight forwarders, and carriers provide a valid business address to FMCSA in order to register for authority.
According to Rep. Norton, the bill “would clarify that FMCSA has the authority to assess civil penalties for violations of commercial regulations, and crucially, to withhold registration from applicants failing to provide verification details demonstrating they intend to operate legitimate businesses. Americans moving across state lines need to be able to have confidence in FMCSA-licensed companies transporting their physical belongings. I'm thankful for Rep. Ezell’s partnership in co-leading this bill with me and look forward to the bill’s progress in the Senate.”
The bill has been endorsed by the Transportation Intermediaries Association (TIA), American Trucking Associations’ Moving & Storage Conference (ATA-MSC), Owner-Operator Independent Driver Association (OOIDA), the National Association of Small Trucking Companies (NASTC), Commercial Vehicle Safety Alliance (CVSA), Institute for Safer Trucking (IST) and Road Safe America.
OOIDA is now calling for the bill to get a swift vote before the full U.S. House of Representatives.
"Freight fraud committed by criminals and scam artists has been devastating to many small business truckers simply trying to make a living in a tough freight market,” OOIDA President Todd Spencer said in a release. “OOIDA and the 150,000 small-business truckers we represent applaud the House Transportation & Infrastructure Committee for its bipartisan approach in providing FMCSA better tools to root out fraudulent actors, which are also harmful to consumers and highway safety. Because of the broad industry support for these commonsense reforms, we hope this legislation will move to the full House of Representatives for a vote without delay.”
A coalition of freight transport and cargo handling organizations is calling on countries to honor their existing resolutions to report the results of national container inspection programs, and for the International Maritime Organization (IMO) to publish those results.
Those two steps would help improve safety in the carriage of goods by sea, according to the Cargo Integrity Group (CIG), which is a is a partnership of industry associations seeking to raise awareness and greater uptake of the IMO/ILO/UNECE Code of Practice for Packing of Cargo Transport Units (2014) – often referred to as CTU Code.
According to the Cargo Integrity Group, member governments of the IMO adopted resolutions more than 20 years ago agreeing to conduct routine inspections of freight containers and the cargoes packed in them. But less than 5% of 167 national administrations covered by the agreement are regularly submitting the results of their inspections to IMO in publicly available form.
The low numbers of reports means that insufficient data is available for IMO or industry to draw reliable conclusions, fundamentally undermining their efforts to improve the safety and sustainability of shipments by sea, CIG said.
Meanwhile, the dangers posed by poorly packed, mis-handled, or mis-declared containerized shipments has been demonstrated again recently in a series of fires and explosions aboard container ships. Whilst the precise circumstances of those incidents remain under investigation, the Cargo Integrity Group says it is concerned that measures already in place to help identify possible weaknesses are not being fully implemented and that opportunities for improving compliance standards are being missed.
Dexory’s robotic platform cruises warehouse aisles while scanning and counting the items stored inside, using a combination of autonomous mobile robots (AMRs), a tall mast equipped with sensors, and artificial intelligence (AI).
Along with the opening of the office, Dexory also announced that tech executive Kristen Shannon has joined the Company’s executive team to become Chief Operating Officer (COO), and will work out of Dexory’s main HQ in the United Kingdom.
“Businesses across the globe are looking at extracting more insights from their warehousing operations and this is where Dexory can rapidly help businesses unlock actionable data insights from the warehouse that help boost efficiencies across the board,” Andrei Danescu, CEO and Co-Founder of Dexory, said in a release. “After entering the US market, we’re excited to open new offices in Nashville and appoint Kristen to accelerate our scale, drive new levels of efficiency and reimagine supply chain operations.”
The deal will create a combination of two labor management system providers, delivering visibility into network performance, labor productivity, and profitability management at every level of a company’s operations, from the warehouse floor to the executive suite, Bellevue, Washington-based Easy Metrics said.
Terms of the deal were not disclosed, but Easy Metrics is backed by Nexa Equity, a San Francisco-based private equity firm. The combined company will serve over 550 facilities and provide its users with advanced strategic insights, such as facility benchmarking, forecasting, and cost-to-serve analysis by customer and process.
And more features are on the way. According to the firms, customers of both Easy Metrics and TZA will soon benefit from accelerated investments in product innovation. New functionalities set to roll out in 2025 and beyond will include advanced tools for managing customer profitability and AI-driven features to enhance operational decision-making, they said.