Woolworths opens its first automated micro-fulfilment centre in Australia
Woolworths chief executive Brad Banducci has pledged that supermarket jobs won't suffer at the hands of automation, even as the grocery giant looks to inject more technology into its online delivery operations.
The $48 billion retailer has pressed go on the first of its automated 'micro-fulfilment' centres located in the Victorian suburb of Carrum Downs, which it hopes will play a major role in turbocharging its online services in the face of a COVID-induced boom.
The new site, designed by Boston-based Takeoff Technologies, is far smaller than standard distribution centres at just 2400 square metres, and are placed either alongside or in the back docks of supermarkets.
Up to 10,000 products can be packed into the small-format sites, which use robots to pick products off shelves and ferry them to human workers, who sort them into orders intended for online deliveries.
Woolworths CEO Brad Banducci has said supermarkets will have more employees, rather than less, in a decade.
Despite the industry-wide push into automation, Mr Banducci said he expected his supermarkets and their supply chains would employ more people in ten years than they do now.
"I think our business will have more people in it than it does now," he said. "Where they work and what they do will change, and that's just the way the world is."
"We'd love to provide a bit more service in our stores, a bit more meal inspiration...we're not lacking things we want to do, but we have to find very smart ways to do them given the nature of the world we live in."
"It will change the shape of the business, no question."
Earlier this year, Woolworths announced as many as 1350 workers at three of its New South Wales distribution centres could be made redundant due to the company replacing the warehouses with two automated ones.
The new Carrum Downs site will create 150 jobs in the region, and Mr Banducci said the company was also gearing up for a big hiring spree ahead of a bigger-than-expected Christmas rush.
Woolworths chief executive Brad Banducci said the technology was a "game changer" and would enable Australia's largest retailer to better meet the needs of customers amid a boom in online shopping.
Woolworths' new micro fulfilment centre in Carrum Downs.
Mr Banducci said the MFCs would cut delivery times and enable Woolworths to satisfy demand for "ultra convenience" or same-day deliveries as well as reduce the time it takes to dispatch orders for pick-up, concierge service and next day deliveries.
"The first 10 orders we managed on average to pick and dispatch in four minutes per order. That's very quick," Mr Banducci told The Australian Financial Review as Woolworths prepared to formally launch the MFC on Friday.
Manual online orders normally take about 30 minutes to pick and dispatch.
Woolworths built the first MFC using the Takeoff technology in a new 2400-square-metre site at the back of its 4300sq m store at Carrum Downs in Melbourne.
Future MFCs, which are likely to be closer to 1300sq m, could be built inside existing stores, either by shrinking the retail trading space or by using back-of-store space, or in areas close to stores.
Woolworths has not divulged the costs of the trial sites and Mr Banducci labelled them a "strategic initiative" rather than a capital one. However, he indicated more sites could be on the way given the supermarket's dire need for better online systems.
"We'll wait and see how many we have, but picking e-commerce orders will always take place in our existing fleet and we need to make it as efficient as possible [with] additional capacity given customer demand for home delivery," he said.
The Carrum Downs site was constructed alongside the existing supermarket, however, Woolworths' preference is to shrink the floor space of larger stores in order to fit the centres within existing store footprints.
While Woolworths has opted for the micro-fulfilment model, Coles has partnered with UK tech company Ocado to build two centralised automated fulfilment centres at the cost of $150 million.
Woolworths is also focusing on automating its larger-format centres, with Mr Banducci saying automation was "critically important" for large warehouses to ensure the supermarket could continue growing its business.
The Takeoff MFCs uses automation, robotic pickers and vertical shelves to sort and move products from automated storage units to team members.
Mr Banducci said Woolworths would build four MFCs – two in Australia by the second half of 2021 and two in New Zealand that go live later this year – and measure improvements in metrics such as pick rates per hour, orders per week and out-of-stocks before deciding whether to open more MFCs.
The first four MFCS will cost "in the tens of millions of dollars", Mr Banducci said, a fraction of the cost of building fully automated centralised distribution centres.
"It's not a material capital investment for Woolies but material strategic investment for Woolies," he said.
"We're obviously on a steep learning curve on how to better meet our customer needs in this time of ultra convenience. The key value proposition for our customers is we can increase our home delivery capacity and increase the speed of home deliveries.
"What we've seen, particularly in Melbourne, is that our customers do want, especially in times of COVID-19, groceries delivered to the home. They like to order today and delivery today."
Woolworths’ online orders have more than doubled in Victoria this year, boosted by demand for home delivery during the national lockdown in April and stage four lockdown in August, September and October.
Woolworths will also open two more dark stores, one in Sydney in December and another in Melbourne early next year, taking the number to five.
“We see the future of online delivery as a mix of our large-scale fulfilment centres in major metropolitan areas and a localised approach that leverages the strength of our national store network," Mr Banducci said.
Coles is taking a different approach, building two highly automated centralised fulfilment centres in Melbourne and Sydney in partnership with British online food retailer Ocado Group at a cost of up to $150 million. They are due to open in 2023.
Ocado's pick and pack technology features Dalek-like robots that hover over stacks of grocery tubs, grabbing tubs from the top of the stack and dropping them off on to other stacks or taking them to a pick station. Ocado claims they have a lower cost to serve than MFCs.
Earlier this month Autostore, a Norway-based automated warehouse company, launched legal action against Ocado, alleging patent infringements.
Autostore is seeking orders barring Ocado from manufacturing, importing, using and selling technology that infringes AutoStore’s patents. Ocado returned fire, saying it was investigating whether Autostore had, or intended to, infringe Ocado's patents. The legal action is not expected to delay the Coles CFCs.
