The word is out in the open: when it comes to warehouse automation, grocery is lagging behind almost all other industries. This finding is counterintuitive, because essential characteristics of the grocery distribution are crying out for automation.
Properties suggest otherwise
Nowhere else is the turnover and thus the dynamics as high. Also when considering the total physical volume or weight of the goods moved, grocery is at the forefront of distribution. Not to mention the high demands placed on different temperature zones, batches, and their comprehensive documentation.
And despite these demanding requirements for warehousing and distribution logistics, the level of material handling automation in grocery is, on average, only half that of other industries. In this context, it might be worthwhile to compare it with an industry that has been at the forefront of warehouse automation for decades and, above all, shares many similarities in distribution.
Comparing apples with oranges?
I’m talking about the pharmaceutical wholesale. “Really, he’s comparing these pill boxes to that?” you might immediately think. And yes, you would be right. But before I get to further differences, let’s look at the many similarities. Just like in grocery, there are different temperature zones and cold chains that must be meticulously maintained and documented. Batch tracking and the monitoring of expiration dates are also standard in pharmaceutical distribution. Likewise, the number of SKUs in the warehouse, at approximately 50,000 to 150,000, is similar to food and FMCG. And there is another similarity with the fresh produce sector in grocery distribution: the use of a delivery container in a closed loop.
Despite these similarities, one industry is at the forefront, while the other is something of an ugly duckling of warehouse automation. Before we delve deeper into the reasons, this statement should be viewed with some skepticism. With its fully automated mixed-case palletizing systems, grocery, of all industries, represents the technological beacon of warehouse automation! However, these beacons are very expensive, very complex, take a long time to achieve ROI, and are therefore relatively rare. Overall, despite these beacons, grocery remains a laggard in warehouse automation.
Back to the direct comparison with the pharmaceutical model students. The popular phrase “pharmacy prices” also applies to distribution and wholesale. Compared to grocery, the margin per item moved, per volume/weight moved, is significantly higher, and thus there is literally more budget available for automation.
Delivery within hours (and less!)
In fairness, in addition to the higher margins, one must also mention a specific requirement of pharmaceutical distribution that contributes significantly to automation: typically, the delivery box is ready for shipment within 30 minutes to 1.5 hours of order receipt. While others still work on next-day delivery, pharmaceutical wholesale has been delivering same-day, often even “same-half-day,” for decades.
Even though the typical grocery retailer has earned its reputation as a stingy merchant, it doesn’t seem to be a matter of money alone. The mixed-case palletizing systems mentioned above typically cost between €50 million and €200 million—just the storage and automation technology, mind you. So even the stingy retailer will invest if it pays off. I maintain, however, that there are two reasons why the grocery industry is lagging so far behind in terms of automation.
First, automation providers simply don’t have the right solutions and technologies yet. Two years ago, I wrote in a newspaper called “Lebensmittelzeitung” about the reasons for the failure of so-called micro-fulfillment systems. In the end, it was an unsuitable technology, an unsuitable solution.
Solution gap
Food retail is a combination of high turnover, low margins, and a limited technological infrastructure/base. This requires solutions that are both efficient, cost-effective, and robust. Clearly, there is still a solution and technology gap between supply and demand that needs to be closed.
But it’s not just the suppliers who still have some homework to do. Grocers are generally not particularly tech- and automation-savvy. Other industries are doing a better job of attracting the right talent and investing in material handling automation expertise. A simple rule of thumb says: “I’m less likely to spend time on a topic I don’t know much about.” So, it seems to be partly also a home-grown problem.
This article is also available in German, published at „Lebensmittelzeitung, Ausgabe 21/25“, Deutscher Fachverlag GmbH