Three trends driving the future of intralogistics.
While eCommerce was growing steadily up till two years ago, the pandemic lockdowns in 2020 and 2021 accelerated the shift to online and irrevocably changed the world’s shopping habits. This unprecedented growth in online sales triggered a corresponding surge of activity in intralogistics and warehouse operations.
In addition, warehouse labor woes across various sectors have prompted many companies to look at new technologies as the way forward to optimize their warehouses or distribution centers.
They know that to stay competitive in this changing market, it’s vital to be flexible, cost-efficient, and informed on the trends shaping intralogistics. Failing to do this will put them at risk of falling behind and losing customers to competitors.
We at Element Logic believe that three current intralogistics trends will play a decisive role in how the industry evolves this year and beyond.
Micro fulfillment centers
Rising demands will lead to a need for increased fulfillment capacities. The rise of micro fulfillment centers (MFCs) will be a defining trend for intralogistics to improve space utilization, last mile delivery and, ultimately, the customer experience.
Today’s consumers expect same-day or next-day deliveries and click-and-collect options, most notably those in the grocery market. Speed of delivery is directly related to distance. So, to shorten delivery time, some retailers are establishing smaller warehouses or micro fulfillment centers closer to their customers to expedite last-mile deliveries or collections. Micro fulfillment centers support better inventory control and tracking, often lower transportation costs, and make product exchanges or returns faster and easier.
Micro fulfillment centers can be located inside a physical store, in an adjacent building, or inside a “dark store” where inventory and products are staged but is only accessible to employees. We believe the dark store concept combined with the regular storefront – where a dedicated space at the back functions as a micro fulfillment center – will mold the future of intralogistics.
Micro fulfillment is undoubtedly innovative, yet many companies still rely on manual labor despite the associated decline in productivity. This is because a warehouse has capacity restrictions and there is a limit on the number of products human labor can pick per hour – limitations that are even more evident in a MFC. Automating the micro fulfillment process, especially in a center with 12 or more employees, can significantly improve throughput and reduce operating costs.
Storage density is the most significant difference between a manually operated and an automated micro fulfillment center. Holding hundreds or even thousands of products as inventory can easily overwhelm employees and make stock challenging to control. However, an automated, modular order picking solution increases storage capacity significantly.
For example, Swiss-based construction merchant Peterhans invested in an AutoStore solution (a type of robotics-based automated storage and retrieval system, or AS/RS) to improve storage capacity and increase warehouse efficiency. The company used a combination of a regular storefront and an extended micro fulfillment center in the back. The system uses a total of 11,650 220mm bins at eight levels. The grid surface of 400m2 occupies only 10 percent of the floor space, making future expansion possible.
Orders take less than two minutes to arrive at the sales counter, making for a short customer journey. With ports next to these counters, customers visiting the store can watch the AutoStore robots processing their orders on-site, making it a unique and rewarding experience.
While this had also been an emerging trend for a while, eGrocery businesses saw a massive uptick during the pandemic. Today, eGrocery is a firmly entrenched custom, with a substantial number of consumers doing their food shopping online rather than at the grocery store. As this phenomenon gains popularity, so does the need for efficient and user-friendly operations.
The challenge for retailers is to build a sustainable infrastructure that aligns with changing consumer demands, a need that emerges once companies start shipping groceries directly to the consumer. This means an intuitive online platform combined with excellent quality, competitive pricing, and fast and reliable deliveries. However, if the infrastructure from order to delivery isn’t done smartly, it can be a costly and unprofitable exercise for the grocer. Automating the warehouse can unquestionably cater to companies’ needs on this front to ensure sustainable and profitable operations.
Grocery retailers can benefit immediately, since automated intralogistics solutions that provide the required speed and inventory control to win the hearts of consumers already exist. Not relying on manual order picking can eliminate errors while massively speeding up the shipping process.
One example of an eGrocer that has seen tremendous growth lately is Swedish eGrocer Matsmart, which sells surplus food at a discounted rate online. As one of the fastest-growing companies in the Nordics, Matsmart had maxed out its manual labor and space capacity by 2021. To resolve this dilemma, the company invested in a warehouse automation solution that offered three times more capacity while giving it even more space to grow. The 149 robots can pick an estimated 6,000 items per hour from the 88,000 storage bins.
Today, most grocers only offer home delivery to customers in major cities. Still, many are trying to figure out how to distribute profitably to the smaller towns and rural areas. The answer is most likely micro fulfillment centers combined with more extensive regional warehouses.
Automation as a service
Although warehouse automation is a worthwhile investment for most companies, not all can afford or want to invest in a solution before they’re convinced it will be profitable. Automation as a Service (AaaS) is an emerging trend that accommodates companies with this concern. This means the automation concept is sold as a service, not a product. In other words, the system integrator would build the solution according to the customer’s needs, but still owns the solution and the equipment.
This short-term option could benefit young companies in particular, who can access automation at a much earlier stage of their development in order to facilitate rapid, sustainable growth. Such
subscription-based models – where the costs are spread evenly throughout a financial year as opposed to a large, single first-time investment – are common across many industries.
An AS/RS like AutoStore is an ideal fit for AaaS. It’s modular and flexible, which means it can fit into any space and can easily be scaled up and down when necessary. This means the solution provider can take it down quickly down and rebuild it in another warehouse if a customer ends the subscription.