Online grocery service shows what it takes to build a fully automated robotic fulfillment system from the ground up—and become a technology-driven company in the process.
Victoria Kickham, an editor at large for Supply Chain Quarterly, started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for Supply Chain Quarterly's sister publication, DC Velocity.
Leaders at online grocery company Home Delivery Service (HDS) say they are ready to reveal an e-fulfillment system that will change the way food delivery is done, rivaling the likes of Amazon and Wal-Mart, and taking advantage of the growing popularity of online grocery shopping, especially in the last year. The concept has been in the works for nearly 10 years, driven by the need to get the technology behind it just right before attempting to deliver a single item. Later this spring, HDS plans to launch a full-scale pilot of its fully automated, robotic, touchless warehouse fulfillment system, bringing the company one step closer to its goal.
“In order for us to not just be another [dotcom] copycat, we have to have something of a moat for our business. Something that [makes us] highly efficient and very profitable,” explains Aravind Durai, HDS’s vice president of automation and a founding member of the company. “The moat we have decided on is our own design and build of the e-fulfillment technology. We believe the efficiency gains and cost savings we will achieve and the service level we can deliver to customers [are] built upon the framework of [our technology].”
The technology is called RoboFS. Driven by robotics and packed into a smaller footprint than most online fulfillment systems occupy, RoboFS will allow HDS to operate “lights out” fulfillment centers (FCs) across the country, where orders are untouched by human hands until they arrive at the customer’s doorstep, company leaders claim. The system has inspired the confidence of a handful of investors, one of which is IT products distributor Ingram Micro, which will pilot and host full-scale demos of the system at its 500,000-square-foot omnichannel fulfillment center in Plainfield, Indiana. The journey to get to that point offers a glimpse at the work involved in building a fulfillment system from the ground up—and proof that automation is reshaping the way work gets done in warehouses and distribution centers everywhere.
SHIFTING GEARS
HDS is the brainchild of Louis Borders, co-founder of Borders Bookstores and founder of the now-defunct dotcom-era online grocery business Webvan. As Durai explains, Borders was an early leader in supply chain automation, and he founded HDS to provide a fast, personalized online shopping experience for a wide range of goods. The company will be rooted in grocery but will also include access to other products that can be purchased within the same order—like shopping at an online mall.
Pallets and cases are broken up in the receiving area, and products are put into as many as eight separate bins within each tray. Using an automated storage and retrieval system (AS/RS), the trays are stored in high-bay racks and removed as needed for picking.
Although the concept may sound familiar, Durai insists it’s different from the Amazon or Walmart approach to online shopping—primarily because HDS is leading with fresh grocery delivery and offering access to other branded merchandise as an add-on. Its primary competition is not Amazon, but your local grocery store, Durai explains.
The company’s business model calls for the establishment of small, highly automated fulfillment centers in urban and suburban markets. At 150,000 square feet, the FCs will be larger than the microfulfillment centers many supermarket chains are developing but considerably smaller than a typical Amazon DC. And there will be no retail outlets. HDS will store roughly 100,000 fast-moving stock-keeping units (SKUs), including chilled, frozen, and ambient-temperature items, for same-day or “express” one-hour delivery. Add-on items will be filled as part of the customer’s next order, via one- or two-day delivery. So your groceries arrive first; your new sneakers a couple of days later.
Creating a fulfillment system to accommodate that plan turned out to be a bigger challenge than Durai and his colleagues expected—and the exercise ended up turning the tide in the company’s mission.
“This is a tough nut to crack,” Durai says of coordinating fast fulfillment and last-mile delivery of perishable items. “When you combine it all, it’s a challenging problem to solve.”
After researching the systems and equipment required for the job, he says, the company “came away with the realization that the product we wanted does not exist. We had to make instead of buy.”
Durai and his colleagues ended up engineering a system from the ground up—and becoming a technology company in the process.
PUTTING THE BUILDING BLOCKS IN PLACE
The fulfillment system Durai and his colleagues have built uses robotics and advanced proprietary software to create a just-in-time fulfillment system that keeps throughput running smoothly. An artificial intelligence (AI)-based warehouse management system (WMS) coordinates the movement of mobile and articulated robots (the latter used for picking) and smart conveyors to create the lights-out fulfillment process, which encompasses everything except receiving and shipping dock activities.
The system uses standardized transport trays to move items throughout the facility. Pallets and cases are broken up in the receiving area, and products are put into as many as eight separate bins within each tray. Using an automated storage and retrieval system (AS/RS), the trays are stored in high-bay racks and removed as needed for picking. Autonomous articulated robotic arms pick products from the trays to fill orders. The breakdown of pallets and cases is the only manual part of the fulfillment process, according to leaders at Indiana-based material handling equipment manufacturer Shuttleworth, which designed the AS/RS and tray-movement system. Once products are placed into the AS/RS, they aren’t touched by human hands until the consumer opens the HDS reusable delivery tote to remove them.
“When a pallet of goods comes in, we break it down into storable or pickable levels and then feed the storage area or the robotic pick area,” explains Ken Tinnell, vice president and general manager of Shuttleworth, adding that the development of the entire project has been purposefully slow. “They [Louis Borders and his colleagues] pulled together a vision of the company and have very patiently been moving this forward. In that timeframe, we’ve engineered a little, shown a little, and grown and gathered momentum over time.”
ROLLING IT OUT
The RoboFS uses standardized trays to move items throughout the facility. Pallet and case breakdown is the only manual part of the fulfillment process, according the manufacturer, Shuttleworth.
The RoboFS demo will go live later this spring at the Ingram Micro facility, with plans to showcase the technology for a wider audience. Ingram Micro is one of a few initial investors in the system, and the company will have exclusive rights to use RoboFS—specifically for its IT, mobile device, and connected-device distribution business and logistics services, according to Eric Schelm, Ingram Micro’s director of business initiatives.
Durai explains that HDS plans to sell the RoboFS fulfillment service to companies in noncompeting industries—anyone in the grocery industry is excluded—and that it won’t sell it to any of those companies’ competitors for 10 years. Early investors like Ingram Micro have ponied up millions to get in on the technology. HDS had raised about $38 million to develop the system as of this spring, Durai says.
“[Our] technology is being built to service the grocery e-commerce [business], but in the process of developing it, we have talked to many other people about it [because] supply chain fulfillment is a problem that vexes everyone,” Durai explains.
Although it’s been a long time coming, the Ingram Micro pilot project is finally ready to go. As for HDS’s own e-commerce grocery business, the company says it plans a full-production launch sometime in 2022. Right now, it adds, the focus remains on testing and demonstrating the fulfillment technology.
“It’s ready, it’s working, it’s real,” Tinnell says, again emphasizing the long steady road the partners have traveled to get to this point. “Some companies that I work with rush through the design—because they have to, to get to market. They have to react to market pressures. Because this [project] has taken a longer time, this design has been seasoned over the course of several years … As a result, it’s going to market a whole lot better than any other, similar type of project I’ve seen in my career.”
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."