With such thin profit margins existing for groceries, it makes sense that this is an industry squeezing every ounce of efficiency out of its supply chain. This has led the grocery industry to be a proving ground for new technologies and processes. It has also led to the birth and rapid growth of the online grocery market, which has been cutting into brick-and-mortar market share. This is a trend occurring around the world. In fact, according to a report produced by IGD, UK, the 10 leading online grocery markets are predicted to grow at an annual rate of 20%, reaching $227 billion by 2023.
Changing grocery habits
The online grocery market is being fueled by Millennials who now make 54% of all their retail purchases online, with 40% of U.S. male Millennials claiming they would “ideally buy everything online” if they could, as outlined in a study released by Smart Insights, UK.
Throughout the past year, we’ve seen grocers, such as Kroger, Cincinnati, accelerating delivery options as a means to compete with Amazon and Whole Foods.
Walmart, Bentonville, Ark., announced plans to test a robotics system to speed up its growing online grocery pickup services and is also investing in autonomous vehicle partnerships, such as its recent venture with Ford, to further accelerate delivery business.
Albertsons implemented an automated e-commerce fulfillment solution that will use robotics and artificial intelligence (AI) to assist in compiling baskets based on online orders at select locations.
On top of this, there is the race among food delivery companies that don’t have physical locations open to the public, such as FreshDirect, LocalHarvest, ShopFood Ex, as well as meal kit services, such as Hello Fresh, Blue Apron, Sun Basket and more. Whether a virtual food supplier or a physical retailer expanding its channels to customers, new infrastructure and efficient supply chains will be key to staying competitive.
Growing demands for grocery warehousing
Although there has been a flurry of e-commerce-related grocery activity, it remains a relatively unpenetrated sector for the industry. Even so, change is coming.
Case in point: 70% of consumers will be grocery shopping online by 2024, according to a report released by the Food Marketing Institute, Arlington, Va., and Nielsen, Chicago. This online growth combined with a rise in small urban grocery chains will ultimately lead to smaller and less traditional supermarket retail spaces. However, while grocery stores might not be anchoring to retail real estate in the future, the need for warehousing and industrial space for grocers will continue to grow.
In fact, CBRE, Los Angeles, projects that demand for as much as 35 million square feet of cold storage space will transition from retail properties to industrial. This could pose potential problems given the rapidly declining availability of U.S. industrial real estate, which dipped 7.2% in the second quarter of 2018, marking its lowest point since 2000. The limited availability of land suitable for fulfillment centers has significantly increased prices, with some plots of land now costing twice as much as they did a year ago.
Another factor that could present difficulties is the age of infrastructure. According to CBRE, the average age of a U.S. warehouse is 34 years. While these facilities may be located on high-value land near major cities, they often lack the basic modernizations necessary to accommodate growing e-commerce demands, such as tall ceilings – not to mention the cold storage requirements. Technology will be key for making the most out of the space that is available.
There is a clear appetite for robotics within the frozen foods industry.
Traditionally, robotics has been reserved for larger facilities, such as Amazon’s fulfillment centers. In 2017 alone, the company added 55,000 robots to its fleet, more than doubling its total number of robotic workers from 2016. However, the industry is experiencing a growing number of companies turning to smaller spaces and seeking new ways to enhance productivity through automation.
Micro-fulfillment is a growing trend stemming from the pressure to keep up with major players. Grocery brands are actively trying to perfect their strategies for improving and expanding grocery pickup and delivery options. As a result, companies are racing to provide advanced robotic systems capable of automating operations in much smaller spaces – many of which are 10,000 square feet or smaller. This allows for more flexibility in where fulfillment centers are located, making them closer to traditional storefronts and customers.
Leading the charge with better batteries
Batteries and chargers are creating an intersection of diverse technologies, disrupting the long-established market underpinning supply chain operations.
Increased scrutiny on efficiency, rising energy costs and the far-reaching adoption of robots and intelligent devices, such as automated guided vehicles (AGVs), are creating a need for new power solutions that can support this robotic workforce. This has led to a shift to lithium-ion batteries.
Lithium-ion batteries can dramatically improve the efficiency of supply chain operations for the growing e-commerce market, especially where it concerns refrigerated and frozen goods. Traditional lead-acid batteries struggle to hold a charge within cold storage settings since they are not sealed, requiring them to be frequently charged. However, lithium-ion batteries are entirely sealed. This allows them to be more conducive to cold environments and operate for longer periods of time between charges. The modules within the enclosure are individually heated for maximum efficiency, which allows the battery to capitalize on the heat retained within the system for longer operation. One of the most important benefits of lithium-ion batteries is that the technology can be fast-charged within cold storage housing, even when temperatures are freezing.
Similarly, increased scrutiny on energy usage and concerns around operation costs has led to a shift in the industrial charging market from large monolithic linear chargers with very low efficiency and limited capabilities to high-frequency, high-efficiency designs. As a result, more companies are embracing modular charging stations. This technology allows for greater standardization to cover a wider range of battery options, enabling companies to forego purchasing multiple single-purchase chargers in favor of versatile options that can power a wider range of batteries.
Another technology upgrade that has increased efficiency in warehouse settings is the emergence of wireless or contactless charging. With these solutions, many of the menial and repetitive tasks associated with ensuring that the burgeoning robotic workforces and AGVs are fully powered can be eliminated. An added benefit is that many high-cost components associated with traditional plug-in charging, such as DC contactors, connectors and cables, will become obsolete. Wireless charging also offers an alternative to conventional methods of docking with copper contacts, which are prone to wear and tear and require constant cleaning to be effective.
The grocery industry will continue to pour resources into streamlining operations to compete with the big players and new entrants alike. Robotics and intelligent vehicle systems will be vital ingredients to increasing fulfillment time and reducing costs along the way. As such, it’s become a top focus for many power suppliers to ensure warehousing facilities are optimized. Sometimes, it’s the small components, such as reliable batteries and modernized power solutions that are doing the heavy lifting, helping grocers capitalize on the full potential of existing infrastructure and truly shine in the eyes of consumers.