Why Meijer Is Trying Micro-Fulfillment

winsightgrocerybusiness.com - By Jon Springer on Oct. 15, 2019

More evidence of the spread of the micro-fulfillment center as a strategy to help grocery retailers tackle challenges of e-commerce is underway around Grand Rapids, Mich., where Meijer is carving a small slice from one its big supercenters to pilot the technology.

A spokesman for the retailer declined to provide details but acknowledged a pilot was forthcoming following a news release from Dematic, the warehouse logistics firm for whom Meijer will test that company’s first U.S. micro facility in grocery.

The center, to be located inside an unidentified Meijer store, is “closer to being operational than being built,” said Matt Walker, a project manager working on the Meijer installation for Dematic. Walker said Dematic utilizes a proprietary hardware and software solution that will allow retail stores to efficiently pick and assemble e-commerce orders at their stores—a concern as consumer demand for e-commerce increases and existing store-pick solutions can trigger operational and profitability woes.

Meijer offers home delivery and pickup for grocery orders assembled in stores through Shipt, which uses independent shoppers and delivers. Shipt is owned by Target Corp., one of Meijer’s top superstore competitors.

While declining to share specific details of Dematic’s partnership with the 245-store retailer, “our conversations with Meijer were the same as what we’re hearing from any grocer today,” Walker said in an interview. “With the growth of online grocery, there’s a desire to maintain loyalty, and retailers are searching for ways to optimize that experience. They also have to be cost-conscious. Fundamentally, what Meijer is looking forward to is what many retailers are coming to Dematic for—an automated solution that can allow them to meet their customers’ experience expectations and at the same time make online grocery profitable.”

Dematic’s shuttle-based robotics and goods-to-picker system is supported by software that according to Walker, enables retailers to retain control of their data while providing integration with other inventory management, warehouse and enterprise resource planning systems so that all stores, distribution centers and corporate offices can be networked on the same platform. The units can store between 8,000 and 15,000 chilled and ambient SKUs.

While only a handful of micro-fulfillment centers are up and running in grocery stores in the U.S. at this time, sources anticipate a rapid rollout in the next two years behind a growing belief that delivery hubs close to customers—such as stores—and less-labor intensive solutions such as automation are going to be necessary to meet demand for e-commerce quickly and profitably. Dematic said one system could provide customers of several surrounding stores with one-hour delivery.

“The biggest advantage to our customer is on the software side—that’s really the secret sauce,” Walker said in an interview. “We can apply our software to drive a hub-and-spoke solution for customers, and we can drive that further up the supply chain and help create that next-generation solution. It’s really the software that makes the difference

While micro-fulfillment’s growth has come behind several well-funded startups such as Takeoff Technologies, Alert Innovations and Fabric, Dematic is hardly a pup. The company, with U.S. headquarters in Atlanta, is celebrating its 200th birthday this year, tracing its roots from Harkort & Co. in Germany in 1819. Dematic’s innovations in grocery logistics include conveyor technology pioneered at its Rapistan business in Grand Rapids in the 1930s. It has longed partnered with Meijer on automated distribution centers. Takeoff Technologies, using units of a similar size and appearance to Dematic, licenses equipment from Austria-based Knapp, one of Dematic’s competitors in the logistics field.

“Where we believe we’re a differentiator in the micro-fulfillment market is that we fully understand the distribution ecosystem from start to finish,” Walker said. “We’ve been doing distribution centers and dark store conversions for retailers worldwide for years. We have some relationships that go back more than 50 years. So we’re leveraging that, really helping [retailers] evaluate how the distribution and fulfillment model is changing, how the hub-and-spoke model is changing, and how Dematic can leverage the technology that we’ve proven out with you already in your distribution centers.”

Dematic has big plans for its small units. Walker said the company can build and install the units, which require about 10,000 to 12,000 square feet of store space, in about 12 weeks. Walker said the company expects to announce a second food retail partner soon and is in talks with many others.

“It’s been a really interesting six months in terms of active conversions,” Walker said. “Micro-fulfillment is an emerging market but one that we see in 2020 and 2021 is really going to take off and have a huge presence in grocery.”