In European DCs, bags of coffee and sugar are whipping out of highly automated storage and retrieval systems at a rate of 3,000 cases per hour. Is America next?
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
For most of the last 50 years, the grocery industry's war on labor costs has been waged at the checkout counter. The opening salvos came in the '70s, when grocers seized on the newly introduced bar codes and scanners to replace the labor-intensive process of ringing up purchases on a cash register. Next came self-checkout lanes, installed to encourage consumers accustomed to doing their own banking at ATMs and pumping their own gas to scan and bag their own groceries. Today grocers are racing to find ways to use radio-frequency identification technology to end the traditional checkout process once and for all.
But the money saved by eliminating all those checker positions over the years is just pennies compared to the savings grocers can realize by automating what goes on in their back rooms and DCs. Right now, order picking accounts for a whopping 70 percent of the average grocery distribution center's payroll. Automate that function, and a company could save serious money.
In fact, grocers are already doing just that—particularly in Europe. Dutch grocery retailer Albert Heijn, for instance, recently celebrated the first anniversary of its revolutionary DLS order release module (made by Nedcon). The system, which is currently installed in one-quarter of the grocer's 900,000-square-foot distribution center near Rotterdam, can ship up to 3,000 cases per hour. Late last year, the grocer announced that it would install a second module at the DC, which stores and ships about 2,000 fast-moving products like sugar and coffee. Once the DC is fully automated, it's expected to ship up to 6,300 cases per hour, or about one million cases of perishable and dry grocery products each week. "We are certain that this is a system for the future," Mels Koster, the company's vice president of supply chain development, told DC VELOCITY in the first interview the retailer has granted about the highly automated system.
It's automatic
So what does the future look like? Big, shiny and complex, if Heijn's system is any indication. Its automated picking module is seven levels high,with 72 conveyor lanes on each level, for a total of 504 lanes. Each level has an inbound conveyor and an outbound conveyor running along the front and back.
The system performs its complicated ballet hundreds of times each day with virtually no human intervention. For example, on each inbound conveyor a pusher device rides up and down the lane. Upon receiving an order command from the warehouse management system (WMS), the pusher device moves to the correct lane and pushes a batch of the required product into the lane. After guiding a batch into a lane, the pusher sends a message to the WMS that it's moved a certain number of cases. (Bar codes are not used on full cases; the system relies on the WMS's information in combination with a counting photo sensor to ensure the number of cases entered into a lane is correct.)
Products ready to be picked are automatically fed from bulk storage to depalletizing machines. Once they're depalletized, the packaged items are transported via conveyor to one of the DLS module's seven-level input roller tracks.
As products are carried along on the input lane, an input trolley at each level sees to it that the items are routed into the correct storage lane. The storage lanes are typically 40 feet long, which not only allows for a large area of entry for each product, but assures timely replenishment. The system is designed to handle items of all sizes, weights, and packaging types, including fragile products. (Fast-moving items are assigned to more than one storage lane.)
Each storage lane is fitted with a universal computer-controlled dispenser, creating enormous release capacity, especially for fast-moving items. All items destined for a particular store are released in a predetermined sequence so that, say, bags of coffee beans come out before potato chips, ensuring the bags of chips don't arrive at the store as bags of crumbs.
Numbers game
Although officials at Royal Ahold, Albert Heijn's Dutch parent company, won't discuss specific productivity gains until later this year, their comments hint at the magnitude of the savings they're realizing. "What we have created is a system where you can turn out several thousand cases per hour," says Han Willemse, chief supply chain officer for Ahold, "not the 100 to 150 cases per hour that you see with normal order picking processes in conventional warehouses."
As the number of cases shipped per hour soars, labor needs will plummet. Once the DC is fully automated (the plan is to install a total of four order picking modules), the grocer will need roughly 100 associates spread over two shifts—a huge drop over the approximately 350 order pickers currently needed.
A 70-percent cut in workforce is staggering by any measure, but it's particularly significant in Holland, where (as in many parts of Europe) DC workers command $50 an hour or more. And that's assuming grocers are lucky enough to find workers willing to work in their DCs. During peak picking seasons like the Christmas and Easter holidays, Albert Heijn has been forced to bus in workers from Poland and East Germany.
What's not yet clear is whether a system that's all the rage in Europe will catch on in America. Unlike Europe, where land and labor are in short supply, America still boasts an abundance of both. And outside of the Northeast and the West Coast, land is still relatively cheap—particularly in Oklahoma and Texas.
Labor, too, remains readily available in the vast majority of markets across North America, says Marc Wulfraat, a senior partner at consulting firm KOM International Inc. who specializes in the grocery supply chain. In contrast to Europe's $50 an hour, the going rate for DC workers in most parts of the United States is somewhere around $15 to $20 an hour, says Wulfraat, who points out that it would take an extraordinarily expensive labor market to justify a full-blown automated storage/retrieval system (AS/RS).
Certainly, automation doesn't come cheap. Though prices have dropped—an AS/RS that once cost as much as $750,000 per crane can now be had for as little as $200,000 per crane—one of these systems still represents a hefty investment. And enormous labor savings are by no means guaranteed. True, grocers may be able to get by with fewer manual laborers and forklift drivers. But cranes, like forklifts, require upkeep. Most facilities eventually find themselves hiring highly specialized—and highly compensated —technicians to maintain the cranes.
Still, a couple of grocers have taken the plunge. Stop & Shop has installed an AS/RS system (made by HK Systems) that uses 77 rotating fork cranes to perform put-away and replenishment functions in place of forklifts at its 1.3-million- square-foot facility in Freetown, Mass. And Kroger has installed a dynamic picking system (DPS) that integrates storage and picking into one module at a new distribution center in the Southeast. The first phase of the "goods to person" picking system engineered by Witron Integrated Logistics includes installation of an integrated conveyor network, 16 stacker cranes, 70 picking workstations, two order consolidation buffers and 175,000 tote locations.
Yet grocers lag well behind their counterparts in electronics and apparel. "When you take a good hard look at who has invested in automation in North America, the list is pretty short when it comes to food retailers and wholesalers," says Wulfraat."This stuff is so expensive that it's very difficult to make a business case for it."
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.”th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use AI-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next 1-3 years. That was followed by self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) that are planned for use within the next three years, specifically for loss prevention.
Those strategies could help improve the brick and mortar shopping experience, since 78% of shoppers say it’s annoying when products are locked up or secured within cases. Adding to that frustration is that it’s hard to find an associate while shopping in stores these days, according to 70% of consumers. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
The survey also identified additional frustrations faced by retailers and associates:
challenges with offering easy options for click-and-collect or returns, despite high shopper demand for them
the struggle to confirm current inventory and pricing
lingering labor shortages and increasing loss incidents, even as shoppers return to stores
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
An eight-year veteran of the Georgia company, Hakala will begin his new role on January 1, when the current CEO, Tero Peltomäki, will retire after a long and noteworthy career, continuing as a member of the board of directors, Cimcorp said.
According to Hakala, automation is an inevitable course in Cimcorp’s core sectors, and the company’s end-to-end capabilities will be crucial for clients’ success. In the past, both the tire and grocery retail industries have automated individual machines and parts of their operations. In recent years, automation has spread throughout the facilities, as companies want to be able to see their entire operation with one look, utilize analytics, optimize processes, and lead with data.
“Cimcorp has always grown by starting small in the new business segments. We’ve created one solution first, and as we’ve gained more knowledge of our clients’ challenges, we have been able to expand,” Hakala said in a release. “In every phase, we aim to bring our experience to the table and even challenge the client’s initial perspective. We are interested in what our client does and how it could be done better and more efficiently.”
Although many shoppers will
return to physical stores this holiday season, online shopping remains a driving force behind peak-season shipping challenges, especially when it comes to the last mile. Consumers still want fast, free shipping if they can get it—without any delays or disruptions to their holiday deliveries.
One disruptor that gets a lot of headlines this time of year is package theft—committed by so-called “porch pirates.” These are thieves who snatch parcels from front stairs, side porches, and driveways in neighborhoods across the country. The problem adds up to billions of dollars in stolen merchandise each year—not to mention headaches for shippers, parcel delivery companies, and, of course, consumers.
Given the scope of the problem, it’s no wonder online shoppers are worried about it—especially during holiday season. In its annual report on package theft trends, released in October, the
security-focused research and product review firm Security.org found that:
17% of Americans had a package stolen in the past three months, with the typical stolen parcel worth about $50. Some 44% said they’d had a package taken at some point in their life.
Package thieves poached more than $8 billion in merchandise over the past year.
18% of adults said they’d had a package stolen that contained a gift for someone else.
Ahead of the holiday season, 88% of adults said they were worried about theft of online purchases, with more than a quarter saying they were “extremely” or “very” concerned.
But it doesn’t have to be that way. There are some low-tech steps consumers can take to help guard against porch piracy along with some high-tech logistics-focused innovations in the pipeline that can protect deliveries in the last mile. First, some common-sense advice on avoiding package theft from the Security.org research:
Install a doorbell camera, which is a relatively low-cost deterrent.
Bring packages inside promptly or arrange to have them delivered to a secure location if no one will be at home.
Consider using click-and-collect options when possible.
If the retailer allows you to specify delivery-time windows, consider doing so to avoid having packages sit outside for extended periods.
These steps may sound basic, but they are by no means a given: Fewer than half of Americans consider the timing of deliveries, less than a third have a doorbell camera, and nearly one-fifth take no precautions to prevent package theft, according to the research.
Tech vendors are stepping up to help. One example is
Arrive AI, which develops smart mailboxes for last-mile delivery and pickup. The company says its Mailbox-as-a-Service (MaaS) platform will revolutionize the last mile by building a network of parcel-storage boxes that can be accessed by people, drones, or robots. In a nutshell: Packages are placed into a weatherproof box via drone, robot, driverless carrier, or traditional delivery method—and no one other than the rightful owner can access it.
Although the platform is still in development, the company already offers solutions for business clients looking to secure high-value deliveries and sensitive shipments. The health-care industry is one example: Arrive AI offers secure drone delivery of medical supplies, prescriptions, lab samples, and the like to hospitals and other health-care facilities. The platform provides real-time tracking, chain-of-custody controls, and theft-prevention features. Arrive is conducting short-term deployments between logistics companies and health-care partners now, according to a company spokesperson.
The MaaS solution has a pretty high cool factor. And the common-sense best practices just seem like solid advice. Maybe combining both is the key to a more secure last mile—during peak shipping season and throughout the year as well.