With Amazon.com Inc.’s next-day and 2-day delivery precedent set, more retailers have spent the last year upping their fulfillment game.
44% of the 1,188 U.S. online shoppers polled in the June 2019 fulfillment survey conducted by Digital Commerce 360/Bizrate Insights said they haven’t placed an order with a retailer because it wouldn’t arrive on time, and 20% said that they didn’t place an order because the delivery date was unclear.
To accommodate some of these consumer expectations, retailers are opening new fulfillment centers to streamline operations, while others are adding robotics to make fulfillment more efficient. Plus, vendors and fulfillment companies are experimenting with new technologies to better meet consumer demands.
Here’s a recap of some fulfillment moves in ecommerce in 2019.
Several retailers open new fulfillment centers
Women’s apparel retailer Lulus, No. 130 in the 2019 Digital Commerce 360 Top 1000, opened a new fulfillment center in Palmer Township, Pennsylvania, earlier this year. The facility’s opening is part of the retailer’s push to speed up its delivery times. The retailer aims to have a two- to four-day shipping window in place by year-end as the first step toward its goal of offering two-day free shipping all the time, says CEO Colleen Winter.
The new 250,000-square-foot fulfillment center—which is 177% larger than its 90,000-square-foot fulfillment center in Chico, California—became operational in early March and currently employs about 200 people, Winter says. However, the fulfillment center is still ramping up; it currently handles about half the volume of its other fulfillment center, as well as processing returns. That volume will increase as the retailer hires “hundreds” more employees, Winter says. The new facility also can hold a significantly higher inventory volumes than the Chico facility.
The new facility was a boon to the retailer during the Cyber 5 crunch—the period from Thanksgiving to Cyber Monday. It kicked off its promotions on the Monday preceding Thanksgiving.
This longer stretch of sales days gave its customers a longer period to shop, “and it helps our fulfillment centers keep up,” Winter notes. “We’ve kept up much better than last year, and our shoppers can’t believe orders are shipping already.”
Digitally native intimate apparel retailer Adore Me Inc. (No. 387) also opened its own 126,286-square-foot distribution center—after moving out of its third-party logistics center—that uses two different robotic technologies. The first is AutoStore, a cube storage technology that stacks bins vertically in a grid with robots traveling across the top retrieving products. It also leverages Opex SureSort, which is an automated sorting system that scans and sorts products and places them in the correct bins.
With the technology, the distribution center fulfills more than 20,000 online orders per day, which is four times the volume of a conventional distribution center, Adore Me says. The new system enables the retailer to employ 30% fewer people and fulfill 1.5 times the orders than its former third-party logistics supplier, the retailer says. Also, its partial ship rate—meaning when it cancels or only ships part of an order—has gone down by 50% compared with its partial ship rate with the previous vendor, which Krutin Shah, director of distribution at Adore Me, attributes to inventory and shipping accuracy.
The Kroger Co., No. 17, and British online grocery retailer and technology vendor Ocado Group in July said they plan to build a $55 million, 375,000-square-foot ecommerce fulfillment center in Forest Park, Georgia, that will use Ocado’s warehouse automation technology.
The new fulfillment center—which will serve the Atlanta metropolitan area—is part of Kroger’s plan to build 20 “Ocado-powered” warehouses in the United States. Last month, Kroger broke ground on the first of those facilities in Monroe, Ohio, near the retailer’s Cincinnati headquarters. In March, Kroger announced plans for a center in Lake County, Florida.
The new fulfillment centers have been in the works since last year. In May 2018, Kroger agreed to buy a stake in Ocado and license the British grocer’s automated warehouse technology, which is designed to fulfill online orders for delivery to consumers’ doors. The deal was Ocado’s first in the United States. Under the terms of the agreement, Kroger became Ocado’s exclusive U.S. partner.
How robotics are changing ecommerce fulfillment
Driven by the need for more flexible and efficient ecommerce fulfillment, Gap Inc. (No. 28) recently added a robotic, artificial-intelligence-powered picking system from robotics vendor Kindred.
The technology Gap deployed, Kindred’s SORT system, transformed the retailer’s processes. Gap previously dropped thousands of products into a pile from a giant oval belt—known as a Bombay sorter—into manual sorting stations, and an employee would pick up each piece and scan it with a bar code scanner. A corresponding light on the putwall—a vertical grid of cubbies—would then light up to signal an employee which cubby corresponds to that order. After all items were scanned, the employee took the contents of the cubby and passed it off to another station to be packed and shipped.
The SORT system allows Gap to reconfigure the chutes from the Bombay sorter to send products directly to the robotic arm sorter. The system uses a camera to look at the items in the bin, comparing each to all the images of Gap items in its system. It then uses the system’s various data points to calculate and execute an optimal pick strategy for each task in real time, says Kindred CEO Jim Leifer.
Within a few months, the SORT system was picking 98% of Gap’s items autonomously and rarely required pilot assistance. Because of SORT’s success at the Tennessee facility, Gap implemented the system into its Fresno, California, distribution center last fall and plans to add it to its Fishkill, New York, distribution center by the end of this year, the retailer says.
Although the system is automated, a warehouse employee has to complete the supply chain flow after the robotic arm picks the order. However, the system greatly increases that worker’s efficiency, he says. “A single employee can pack many more orders at a SORT station because the robotic arm is doing most of the work,” he says. “If the employee oversees multiple picking stations, they can be responsible for two to three times as much throughout.”
Adding technologies to boost efficiency extends beyond retailers. For example, delivery service DHL in July says it spent two years learning about different warehouse technologies and investigating ways it could utilize robotics.
DHL now works with three robotics vendors—Rethink Robotics, Universal Robotics and ABB Robotics—to employ robotics throughout its warehouse. It uses robotic arms that can carry out simple, repetitive tasks within the warehouse; transport robots, which take a product from point A to point B; and pick-assistant robots, which help pick products.
Since implementing these systems into its existing infrastructure, DHL has had a 30% boost in productivity compared with using only employees to accomplish such tasks. “Compared to traditional automation, they’re flexible and fit into our existing infrastructure,” says Justin Ha, director of solutions design for DHL Supply Chain. “When there’s a big surge of volume, such as during the holidays, it’s been helpful to work with flexible solutions.”
DHL has added the robots to 85 of its 430 North American distribution centers. And it plans to add robotics to about 350 additional facilities and invest $400 million in this technology in the coming months.
Shopify creates a fulfillment network
Vendors like Shopify are getting in on the fulfillment action too. It announced plans in June to spend $1 billion over the next five years to set up a network of fulfillment centers in the U.S. to help merchants using its ecommerce platform deliver products to shoppers more quickly and cheaply and better compete with Amazon. A Shopify spokeswoman says the company has negotiated low rates with warehouses and shipping companies for its merchant customers.
The Shopify Fulfillment Network is a geographically dispersed network of fulfillment centers that uses machine learning to predict the closest fulfillment centers and optimal inventory quantities per location to ensure fast, low-cost delivery, Shopify wrote in a blog post announcing the network. The network is built to support multiple channels (retailers’ ecommerce sites and apps, physical stores, as well as sales that take place on Instagram, eBay and Amazon). It will also support returns and exchanges, Shopify says.
Shopify is working with logistics firms to offer the service to merchants of all sizes shipping from warehouses in seven states: Nevada, California, Texas, Georgia, New Jersey, Ohio and Pennsylvania.
Shopify also announced in September it was acquiring 6 River Systems Inc., a robotics warehouse fulfillment vendor, for $450 million. The vendor’s cloud-based software and mobile robots named “Chuck” will be added to Shopify’s Fulfillment Network and will help Shopify’s warehouse associates with daily tasks, including inventory replenishment, picking, sorting and packing. Shopify expects this to increase the speed and reliability of its warehouse operations and is a “critical step to accelerate its growth,” Shopify says.
James Melton and Bloomberg contributed to this report.
Favorite