How can automation help omnichannel fulfillment?

Discussion
Photo: Whole Foods
Sep 04, 2020
Tom Ryan

According to 32 percent of U.S. retailers, the top priority around store fulfillment over the next twelve months will be implementing automation, as per the “2020 Supply Chain Survey” by enVista. The calls for more automation come as stores have been straining to quickly add or amplify BOPIS, curbside pickup and ship-from-store capabilities in wake of the pandemic.

“For some stores, picking, packing, and shipping from stores is an entirely new concept; in others, the infrastructure is in place, but the labor processes and training are not,” according to the study. “In most cases, additional processes and technology are required to standardize the desired customer experience.”

Thirty-one percent of retailers plan to increase in-store inventory storage, while 29 percent are prioritizing the optimization of back-of-house processes to support store fulfillment, according to the survey.

One focus, according to the report, is investing in technologies to ensure associates can access inventory and other information needed to fulfill customer orders in a timely manner. For BOPIS and curbside pickup, shoppers are increasingly expecting flexibility in how they can get their orders fulfilled, as well as ways to complete their purchases or make returns quickly and efficiently.

Having stores efficiently fulfill online orders includes addressing staffing levels and personnel responsibilities, the physical store layout, back-of-house inventory space, plus the ability for real-time inventory visibility across the stores and warehouses. Adding automation and a dedicated MFC (micro-fulfillment center) face challenges due the height and size of the space required.

Evaluating the progress being made in key delivery/fulfillment areas, the survey found:

  • Two-day delivery: 92 percent had implemented, 28 percent indicated it needed improvement;
  • One-day delivery: 84 percent had implemented, 46 percent indicated it needed improvement;
  • Same-day delivery: 64 percent had implemented, 42 percent indicated it needed improvement;
  • BOPIS: 84 percent had implemented, 24 percent indicated it needed improvement;
  • Ship-from-store: 87 percent had implemented, 47 percent indicated it needed improvement;
  • Vendor dropship: 78 percent had implemented, 40 percent indicated it needed improvement.

DISCUSSION QUESTIONS: Can automation solve the execution challenges facing newer store fulfillment models (i.e., ship-from-store, BOPIS, curbside pickup)? Where do you see limitations in implementing automation for fulfillment purposes?

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Braintrust
"One thing is clear, smart application of technology is critical to the success of all these new approaches."
"Automation is only part of the challenge; having processes in place is absolutely necessary for smooth e-commerce fulfillment operations."
"Both Micro-Fulfillment Centers (MFCs) and Order Orchestration Platforms (OOPs) are key tools that retailers need to consider..."

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26 Comments on "How can automation help omnichannel fulfillment?"


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Neil Saunders
BrainTrust

The big problem with online orders is that they are, in most cases, less profitable than selling through stores. This is largely because there are more steps involved in getting the product to the customer than if the shopper comes into the store and picks the product from the shelf themselves. The solution is to streamline and automate as many of those stages as possible. Certainly there is an upfront capital cost in investing in the necessary technology, but the resultant savings are helpful. All that said, the degree to which processes should be automated vary by retail sector. In grocery, where volumes and items per order are large, a full-scale automated solution is needed. In electronics, where orders are smaller in terms of the number of items, partial automation will suffice when used in stores. There isn’t a one-size-fits-all solution, but automation will be key to coping with the rising volume of online sales over the next five years.

Gene Detroyer
BrainTrust

Fulfilling online orders from stores that are designed for personal shopping has to be considerably more expensive than having the shopper do it themselves. However filling online orders from a place that is designed, automated and built for online fulfillment has to be much more profitable than even the grocery store that we know today.

Neil Saunders
BrainTrust

Judged by Ocado – which pioneered the fully automated grocery fulfilment model – that’s not the case. Their retail profitability is weak – and far weaker than the physical stores of their U.K. counterparts like Tesco and Sainsbury’s. That’s why a lot of their business model is focused on selling their technology and expertise – there’s not much money to be made in online grocery retail.

Gene Detroyer
BrainTrust

I will accept that, but it is hard to imagine that an in-service supermarket with real estate, labor and inventory costs would be more profitable than a fully automated model that minimizes real estate, almost completely eliminates labor and deals efficiently with inventory.

Neil Saunders
BrainTrust

I think it depends on how grocery products are delivered. If they are delivered to home then there is a huge additional cost involved. At present, there’s no way that model can be as profitable as having customers drive to your stores, pick products off the shelves themselves and then drive them home again. That said, maybe in the future when everything is fully automated — including self-driving vehicles and so forth — the online model will become more profitable.

Gene Detroyer
BrainTrust

At present, of course. But don’t forget that for every item a shopper picks off the shelf, there is a labor component in putting it on the shelf. For BOPIS, there is a labor component for putting it on the shelf and taking it off the shelf. In an automated environment, all labor can be eliminated, as it has been in the modern warehouses of today.

Bob Amster
BrainTrust

Some automation can address some challenges. Merchandise category differences require different handling. Shipping from store (pick/pack/ship) is not the same as BOPIS (pick/pack, will-call desk) and BOPIS is not the same as BOPAC (Using recyclable/reusable totes?). So they each require at least one, maybe two different pieces of automation from each other. Some may be capital intensive, some may require realignment of store space.

Perry Kramer
BrainTrust

Automation is absolutely key to meeting the forever increasing set of customer expectations around product availability, visibility and flexibility in delivery and point of purchase. There is a long list of the physical changes needed in store and distribution channels which will vary by retail model and available space. However in all cases success will begin with improving automation in the systems, (or in many cases the lack of systems), for merchandise planning, allocation, and supply chain visibility. Having the right goods at the right place with visibility to these goods is the foundation to meeting these challenges efficiently.

Ralph Jacobson
BrainTrust

Automation IS helping address fulfillment challenges as we speak, yet many organizations are not looking deeply enough at their business processes. Execution is all about the most effective and efficient processes seamlessly integrated throughout the business functions. Break down your processes and see which elements of each task could be eliminated as wasteful or which ones could be improved.

Gene Detroyer
BrainTrust

I will go a bit off subject here and invite my colleagues to enlighten me.

From a shopper’s point of view (NOT the retailer’s), why is BOPIS a good option versus straight delivery?

Joe Skorupa
Guest

Good question. I have always thought BOPIS was a good option for the retailer because it drives (literally) shoppers to the store, which creates foot traffic and additional/impulse sales (potentially) and is less costly than home delivery. For shoppers, I guess they want to eliminate fees and tips associated with home delivery. I know I have done BOPIS in the past for purchases from Best Buy (when there was no home delivery from the store available several years ago) to ensure the product was there when I drove to the store. Maybe there are other reasons. I would love to hear them.

Perry Kramer
BrainTrust

For many customers/situations BOPIS offers a more secure transaction where they do not worry about things being stolen or lost. It also has a “guaranteed” timing and in some cases allows them to review the item and return/not accept it immediately. Depending on the purchase many consumers are using both options.

Ananda Chakravarty
BrainTrust

Top concerns for the shopper:

  • Delivery/shipping costs;
  • Delivery timing, fixed vs. variable
  • Immediacy/availability;
  • Third-party product handling and potential damage (two hands are better than one);
  • Substitution/rejection option;
  • Accessories or add-ons;
  • Convenience (e.g. proximity to home, on the way from work);
  • Expertise/personalized advice;
  • Guaranteed delivery (e.g. porch thieves);
  • Multitasking (e.g. return and pickup products simultaneously);
  • Supporting store loyalty.

It depends a lot on the shopper, the products they’re buying, and retailer convenience.

Ricardo Belmar
BrainTrust

There is an element of control for the shopper that BOPIS provides where delivery does not. While I have the ability to pick a delivery window, most often a 2-hr window, sometimes orders arrive early and sometimes late depending on the workload at the retailer and factors like how many shoppers are available to pick the order, etc. With BOPIS, as a consumer, I expect to be notified when the order is ready and then I am in control of the pickup time and can more easily work it into my schedule. I can say that in my household we go back and forth with grocery delivery and pickup every week. Sometimes we choose delivery, sometimes we go to curbside pickup. It ends up being a time management issue each weekend. Most often we find the pickup option allows us more control over our schedule that day. I suspect many consumers find this is true.

Oliver Guy
BrainTrust

Automation could well make a lot of difference to overall capacity.
One thing is clear, smart application of technology is critical to the success of all these new approaches.
Technology and automation offers the opportunity of eliminating errors and executing faster.

Brandon Rael
BrainTrust

Automation is only part of the larger equation to address the relentless digital commerce demands. The COVID-19 pandemic has lit a spark in the fulfillment trends around BOPIS, curbside and same-day delivery. There are far more macro operating model implications for keeping up with the rise of digital commerce.

While automation can help mitigate some of the human touchpoints, there is an art and science to optimizing supply fulfillment. It may sound fundamental, yet there isn’t an “easy button” to becoming an automated organization. Retailers, especially those in the essential categories have to reexamine their organizations from a people, process, and technology perspective.

The most significant challenge for retailers is to mitigate the last mile. Automation can certainly help, however, it will require far more organizational change to operationalize the technologies the right way.

Ken Lonyai
BrainTrust

What is automation? It’s about as specific as saying “I ate food for dinner.”

Whatever it is, automation is a repeatable process. The breakdown in “automation” implementations is quite often the lack of logic in the series of processes that form a journey, especially at the intersections of “automation” and manual operations.

Spend, spend, spend–if there isn’t sound logic applied to a customer-centric journey, then at least the vendors will be happy.

Ananda Chakravarty
BrainTrust

Speaking strictly to execution – yes, with the right configuration. There is an abundance of vendors and tools that range from enabling the e-commerce transaction to processing payments and even using AI to optimize returns. BOPIS, curbside pickup and even ship-from-store are already common models that most of the larger chains have already built solutions around. For execution of these capabilities, automation will be available in multiple forms and over time will mature just like e-commerce. As more delivery solutions become available we’ll see more of the last mile being automated as well. This automation doesn’t mean layoffs for retailers – but it does mean repurposing and retraining.

Profitability on the other hand is a separate issue and not all retailers will be able to map to new automation process or change. Regardless, this process is ongoing and will take years to transform the entire industry, slowly permeating into examples for automating various parts of the customer journey.

Scott Norris
Guest

As a manufacturer seeing our primary sales channel shift from specialty brick-and-mortar to e-commerce, we are making investments to outright change product dimensions and content configurations. It didn’t matter what shipping costs were when stores were the main point of contact, but now we realize our signature SKUs fall into Amazon’s “small oversize” FBA category — the S&H charges there basically make them unprofitable to sell online. But by tweaking the size, we can get them into the “large standard” category and shave a solid $5 of S&H out of the merchant’s cost to fulfill an item, making them wildly profitable. And we’re investing in a cold-seal packaging machine, so they’ll be shipment-ready, again saving the merchant packaging costs to get to the end customer.

So it’s not exactly automation, but it is process/product refinement that will streamline our merchants’ and distributors’ fulfillment. (Wish us luck!)

Ken Morris
BrainTrust

I see technology playing a key roll in solving the in-store fulfillment challenge. Both Micro-Fulfillment Centers (MFCs) and Order Orchestration Platforms (OOPs) are key tools that retailers need to consider to match the new COVID and post-COVID customer journey we now find ourselves in. Retail has been disrupted by the pandemic and by online competitors and must fight back. Shoppers now expect faster delivery, competitive pricing and to shop wherever and however they want and MFCs coupled with OOPs provide a competitive edge over Amazon and their brick and mortar competitors.

Rachelle King
BrainTrust

I received an email recently from my regular online grocer apologizing for not delivering something I ordered. It went on to explain steps they were taking to minimize chances of this happening again. One of those step was ensuring employees could actually find the product in their stores and stock rooms. Until that moment, I just assumed my occasional missing items were just out-of-stocks. The fact that someone just could not find it never really occurred to me, until now.

It seems so incredibly basic, but retail inventory management is hard work, especially the closer you get to pack and ship. This is a huge opportunity for automation and real-time inventory management and optimization. One obstacle may be required employee training but that’s a short-term challenge. It’s likely that customers will continue to seek alternative ways to shop outside of the box even when this pandemic is over. Retailers need to be ready for that.

Craig Sundstrom
Guest

Will automation help? Probably a little. But all of these methods are inherently inefficient, either on the procurement side or the delivery side, so I don’t expect much. The limitations are the same: you’re trying to use a building designed for one purpose (in-person retail sales) for something else (a shipping/delivery function).

Gene Detroyer
BrainTrust

Precisely. That is why the automation/technology focus should not be on today’s store, but a grocery facility specifically designed for online fulfillment. That is where the future is and the grocer that comes up with it first will have a major financial advantage over competitors.

Sterling Hawkins
BrainTrust

Automation is a big part of the answer, but not the only answer. Properly implemented in higher volume areas, these tools can reduce steps and meaningfully increase profitability. The other piece is making sure the humans in and around the automation have the right training, support and customer service ability to make it a win.

Casey Craig
BrainTrust

Before the pandemic, automation was already transforming many industries, including retail. The coronavirus has only accelerated that trend. Retailers in particular can rely on automation technology to provide a new level of convenience, safety, and ease to customers. But retailers should be wary of over-relying on automation; in many areas — and especially in customer service — retail customers will always prefer the personal touch that only an employee provides. At the end of the day, automation should be a net positive for retailers looking for easier and more efficient delivery and fulfillment services, but only as long as they continue to offer strong customer service centers to help customers troubleshoot any issues they face.

Xavier Lederer
BrainTrust

Automation is only part of the challenge; having processes in place is absolutely necessary for smooth e-commerce fulfillment operations. Unfortunately, especially in mid-market companies, team organization needs to be adjusted during peak periods to deal with the higher volume — e.g. roles get split or become more specialized so that more people can work on the fulfillment line.

Here is the issue: only experience can teach how to make these adjustments. My advice would be to take advantage of whatever mini-peak comes before the holidays (e.g. Halloween) and organize the team “as if” this was a big peak (which can include hiring more temps than needed) and learn as much as possible from this “mini-peak” to improve the team organization and be ready for the holidays. The cost of not practicing your peak organization is to wake up on a Monday morning in December and be overwhelmed by many more orders than you can handle — a customer service and financial nightmare.

wpDiscuz
Braintrust
"One thing is clear, smart application of technology is critical to the success of all these new approaches."
"Automation is only part of the challenge; having processes in place is absolutely necessary for smooth e-commerce fulfillment operations."
"Both Micro-Fulfillment Centers (MFCs) and Order Orchestration Platforms (OOPs) are key tools that retailers need to consider..."

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