LET’S GET SMALL: WHY MICRO FULFILLMENT IS SO BIG RIGHT NOW

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LET’S GET SMALL: WHY MICRO FULFILLMENT IS SO BIG RIGHT NOW

December 16th, 2021 Haylle Sok Leave a comment

It’s almost hard to believe that two years have passed since the onset of the COVID-19 pandemic and its merciless impacts on the supply chain, consumer behavior and how the world conducts business as usual. There is really nothing “usual” about conducting business nowadays, particularly for fulfillment operations in a myriad of sectors now saturating the e-commerce market.

The fact of the matter is that e-commerce is no longer just thought of for a holiday list or bargain deal that cannot be found in traditional brick-and-mortar shops. E-commerce is becoming more of a first option for some and a permanent solution for others. Grocers, retailers, department stores and beyond are feeling the full effect of the e-commerce trend and despite the pandemic, it could very well be here to stay.

So, how does this change the way fulfillment providers conduct operations? According to KPI Solutions’ Brittain Ladd, micro fulfillment is the key to capturing lost dollars and keeping up with demand.

“About 20% of all sales today are direct-to-consumer,” Ladd shares. “Prior to the pandemic, only about 3% of grocery sales were online. And only about 6% of all retail sales were online prior to the pandemic, so we’ve seen a massive shift. Grocery retailers and retailers of general merchandise had to change their business models to keep up with direct-to-consumer demand.”

Ladd serves as the chief supply chain and marketing officer with Kuecker Pulse Integration (KPI) in addition to his position as a Forbes Councils member. KPI Solutions is the result of an integrated partnership between Kuecker Logistics Group Inc., PULSE Integration and QC Software. Known best for bringing system integration and robotics automation to a variety of sectors, KPI Solutions approaches fulfillment operations uniquely by implementing and innovating their own software to meet demand.

“KPI Solutions has partnerships with leading robotics companies, and we can install basically any system that exists,” Ladd says. “We work with some of the largest global companies to help them automate their fulfillment and sharpen their strategy to identify more cost effective and innovative ways to meet customer demand. Consumers want more speed, especially now, and a lot of analysts are confused because they fail to realize that the goal isn’t to just deliver groceries in 10 to 15 minutes, it’s to deliver apparel, shoes, electronics and other products as well.”

So, where does micro fulfillment fit? And more importantly, how can it support fulfillment operations now and in the future? Let’s start by understanding how companies–such as grocers—a re struggling beyond the surge in e-commerce. Ladd shares that contrary to the widely held belief, grocers are suffering significantly with e-commerce, as they not only spend more to fulfill these orders, but they must keep up with the labor involved in third-party services, which further complicates the process.

Keep in mind, grocery retailers are now faced with a new wave of demand and speed. Ladd shares that companies in Europe that have entered the U.S. market, such as Buyk and Jokr, are now offering “rapid grocery delivery” in as little as 10 minutes.

“On average, grocery retailers lose anywhere from $7 to $15 on every online order they fulfill,” Ladd says. “And in some cases, they can lose as much as $25 on every online order they fulfill. Most retailers barely break even on any of their curbside pickup orders, except for the product since it’s a little higher value.

“Imagine being a retailer who is now forced into a model where they’re having to change everything they do to meet the changing demands of consumers, but everything the consumer wants them to do the retailer loses money on. That’s the challenge.”

That’s also where micro fulfillment centers and technology can not only capture these costs but turnaround the way e-commerce fulfillment is streamlined.

Geek+, Berkshire Grey, AutoStore, and Addverb Technologies are a few of the companies that are innovating fulfillment operations through automated robotic systems. These fully automated systems reduce the chances for human errors with mobility and capability of reaching inside inventory bins quite literally to fulfill orders. Ladd shares that most of these automated solutions cost around $1.2 million to $1.5 million with a return on investment realized within 18 to 24 months, paying for themselves while re-inventing fulfillment.

“The best way I can describe it is like holding a Rubik’s cube in front of you,” Ladd says. “Each of the cubes has some type of inventory inside and sitting on top of the Rubik’s cube are robots that go back and forth and side to side reaching down and picking up these cubes and moving them from one side to another, pulling out inventory. That’s exactly what they do as a robotic picking and fulfillment system.”

Embracing technology is what comes full circle for retailers attempting to overcome the e-commerce surge. And options such as these not only fully automate fulfillment processes but keep human involvement to a minimum. Retailers are catching on and the U.S. market is now starting to see what the European market has already adopted. In fact, Ladd shared that three European companies have recently entered New York City, and they are bringing exploding growth with them.

What makes these systems even more enticing (beyond the fact that they are fully automated) is the ability to operate after-hours–or in the dark when stores are closed. Micro fulfillment centers are intelligent enough to automate the fulfillment process, but small enough that grocery retailers can install them inside their stores–completing all of the fulfillment tasks and mileage usually completed by employees.

“These systems are quite easy for retailers to embrace and adopt,” Ladd says. “Companies including Kroger, H-E-B, Albertson’s, Instacart and DoorDash are among the more recognized brands that are exploring these innovative options and either installing these systems or exploring how to use these systems. Make no mistake, the future of retail is robotics. Retailers that don’t embrace robotics will never be able to survive long term.”

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Brittain Ladd, chief supply chain and marketing officer with KPI Solutions, is recognized as a leading expert in business strategy, supply chain management, logistics and last-mile delivery. He was one of the first individuals to research, design and recommend that retailers install micro-fulfillment centers in their stores and chains.

Archives, Global Trade Daily, Imports/Exports

States Producing the Most Fruits & Vegetables

November 29th, 2021 Commodity.com Leave a comment

Many sectors of the economy have struggled during the COVID-19 pandemic, but one of the sectors that has faced the greatest challenges in the U.S. is also one of the most critical: agriculture.

The early days and weeks of the pandemic were difficult for many agricultural businesses as shutdowns created major disruptions for some of their primary customers. Much of the food service industry shut down overnight in March 2020, drastically scaling back one of the primary sales markets for farmers. In response, more agricultural producers shifted their focus to retail grocery and wholesalers. However, they paid a steep price in the form of lost products and new costs in labor and logistics to adapt to different distribution channels.

Since then, agriculture has faced many of the same supply chain and labor challenges currently plaguing the rest of the economy. Supply chain breakdowns have meant that farms have been struggling to obtain supplies and equipment that they need and that it has become more difficult to transport their products to customers. Labor force participation remains below pre-pandemic levels, especially in low-wage occupations, which has contributed to a shortage of pickers and other agricultural workers. Because produce is perishable, these issues have caused millions of pounds of produce to go unharvested or spoil before reaching consumers.

These disruptions pose a problem for consumers, who may have less ability to access high-quality fresh food at a low price, but also for the economy at large. Fresh produce in the form of fruits, nuts, and vegetables represents nearly a quarter of the total production value of U.S. crops. These products are also part of a larger value chain in the food industry that includes food processing plants, distributors, restaurants and other food service businesses, and grocery. This means that challenges in growing, harvesting, and supplying fresh produce creates additional struggles downstream for other closely related businesses.

These issues are also likely to affect what crops farms choose to grow and in what amounts. Because crops take time to raise, farmers essentially must make decisions in the present based on predictions about what the market might look like months in advance. With continued uncertainty, agricultural producers may prefer to shift more of their focus to crops that have higher value to improve their margins. In general, tree nuts and fruits tend to have higher production value than vegetables.

The current state of the agricultural market also underscores the importance of domestic agricultural production. In recent years, the U.S. has been importing a large share of its fresh and frozen fruits and vegetables, with imports totaling more than $24 billion in 2019. But with ongoing supply chain challenges worldwide, production closer to home will be important in maintaining the supply of food.

These fruits and vegetables come from a relatively small number of states where agricultural production is highly concentrated. The leader among these states is California, which is responsible for nearly 70% of U.S. fruit and vegetable production by itself. California is joined by other Western states like Washington, Oregon, and Arizona among the leaders, along with highly agriculture-dependent states in the South and Midwest.

The data used in this analysis is from the USDA. All data shown is for the year 2019, the most recent available covering both fruits and vegetables. To identify the states producing the most fruits and vegetables, researchers at Commodity.com calculated the total production value of both fruit and nut crops as well as vegetable crops, measured in dollars. Researchers also calculated what percentage of total U.S. fruit, nut, and vegetable production is accounted for by each state. Only states with available agricultural data from the USDA were included in the study.

Here are the states producing the most fruits and vegetables.

State	Rank	Total fruit & vegetable production	Share of U.S. total fruit & vegetable production	Total fruit production	Total vegetable production
California	1	$29,181,329,000	68.94%	$21,437,185,000	$7,744,144,000
Washington	2	$3,396,600,000	8.02%	$3,033,860,000	$362,740,000
Florida	3	$2,759,462,000	6.52%	$1,536,612,000	$1,222,850,000
Arizona	4	$1,825,539,000	4.31%	$197,188,000	$1,628,351,000
Georgia	5	$823,604,000	1.95%	$308,074,000	$515,530,000
Oregon	6	$650,912,000	1.54%	$456,326,000	$194,586,000
Michigan	7	$578,847,000	1.37%	$361,709,000	$217,138,000
North Carolina	8	$560,492,000	1.32%	$60,811,000	$499,681,000
New York	9	$503,842,000	1.19%	$276,937,000	$226,905,000
Texas	10	$348,246,000	0.82%	$163,350,000	$184,896,000
United States	–	$42,326,702,000	100.0%	$28,770,303,000	$13,556,399,000

For more information, a detailed methodology, and complete results, you can find the original report on Commodity.com’s website: https://commodity.com/blog/most-fruits-vegetables/

Archives, Global Trade Daily, News

Top 4 Trends Enhancing Self-Checkout System Market Size through 2027

October 16th, 2021 Global Market Insights Leave a comment

The higher acceptance of compact kiosks designed with user-friendly interfaces will significantly augment the self-checkout system market. The escalating labor costs, specifically in Europe have stirred the need for automated systems to limit the involvement of staff and let end-users complete the checkout processes. The growing incursion of AI and machine learning techniques into the self-checkout software for enhanced functionalities and effective transaction handling will additionally influence the industry prospects.

In this regard, as per the recent study by Global Market Insights, Inc., the global self-checkout system market will reach a valuation of over USD 6.5 billion by 2027.

Here is a peek into some factors driving the overall market growth in the coming years:

Space benefits of wall-mounted/countertop systems

Industry share of wall-mounted/countertop systems is expected to grow in the forecasted timeline. This is ascribing to their increasing preference by small restaurant owners and medium-sized retailers as they are ideal for places having space constraints. Considering the surging number of retailers and restaurants looking for automated processes, self-checkout machine manufacturers are coming up with various solutions to offer powerful computational features in compact designs.

For instance, Advanced Kiosks introduced a self-checkout system comprising amplified speakers and a 17-inch touch screen LCD monitor to offer enhanced customer comfort.

Higher presence in the travel sector

Demand for self-service checkout systems in travel applications will grow with the increasing international passenger traffic. This has led transportation authorities to deploy advanced solutions for mitigating the checkout time to offer traveler convenience. The International Air Transport Association has estimated that around 80% of the global passengers will employ a complete self-service system produced under the association standards by 2020.

For instance, leading American travel experience provider, Hudson, in January 2021, deployed Amazon’s Just Walk Out technology, Self-service Bag Drop (SSBD) across a few travel convenience stores to limit traveler check-in times.

The retail industry as a big booster

The retail sector will see higher adoption of self-checkout machines through 2027 driven by rising advancements and the assistance to retailers in keeping the stores open in the absence of a workforce. According to a survey that analyzed the shopping habits of U.S. consumers, over 73% of respondents preferred self-service technologies for improved retail shopping experiences and reduced staff interactions.

The growing preference of consumers for fast checkouts with standalone kiosks has encouraged retailers to operate their stores with minimum employees. In addition, the systems help customers to scan as well as pay for their products by themselves, allowing retailers to provide enhanced customer comfort with busted long queues at the payment counters.

Expanding tourism sector in MEA

The Middle East & African self-checkout system industry will gain traction owing to the higher deployment of advanced digital technologies. The mounting economic development through retail, mainly in Saudi Arabia and the UAE has made way for a higher count of large malls in the region for attracting international tourists. The increasing preference for UAE as a shopping hub has led to higher product penetration to offer improved and hassle-free experiences. The growing number of international tourists and the booming hospitality sector are other factors impacting the regional market growth.

Furthermore, the higher incorporation of digital payment techniques, including mobile wallets and smart cards to limit the requirement for handle cash-based financial transactions, will favor the demand for self-checkout kiosks. There are also improving economic conditions across Latin America and the Asia Pacific. The growing usage of smartphones for timesaving and helping customers scan the items and pay through apps will also anchor the market forecast.

Archives, Global Logistics, Global Trade Daily

Rise of the Machines: Two Factors Driving Automation

June 18th, 2021 Louis Lehot Leave a comment

Today I want to talk a little about automation. I’ve talked earlier about the future of work, and there are some obvious trends like remote work and digital transformation. But automation is a significantly growing field, especially in retail markets. Trends in the industry respond to market pressures that affect the supply of and demand for labor. When human labor is cheap, automation will be used less. When human labor is scarce or expensive, automation will be used more. Today, I want to focus on two key market pressures that are driving demand for more automation.

First, declining birth rates are signaling potential labor shortages in the future. According to the CDC, in 2020, the total fertility rate (TFR) for the U.S. dropped to 1637.5 births per 1000 women, a decline of 4% compared to 2019. While some might blame the pandemic for the decrease, the 2020 number follows a downward trend that started in the 1970s. With fertility below the replacement rate of 2100 births per 1000 women, the U.S. labor force may be starting to decline. With an aging population and fewer workers, companies will likely be forced to increase automation or increase pay to attract and retain employees.

Second, rising labor costs are already encouraging companies to experiment with more automation. Depending on which pundit you ask, you will get very different answers as to why labor costs are rising now, but whatever the reason, businesses are grappling with higher personnel costs. As an article in Forbes recently noted, “The law of supply and demand says this scarcity makes existing workers more valuable, letting them insist on higher pay and better conditions.” As a result, some companies are turning to automation. Fast-food chains are experimenting with automated fry cooks. The drive-thru is also poised to see more automation. Other experiments include cashier-less grocery stores and last-mile delivery.

Retail automation, therefore, seems poised for growth, but automation likely will not be a good fit for every job. Peanut the robot, for example, demonstrates that automation cannot effectively replace wait staff yet, but you may have noticed an increase in self-checkout lines in many stores. Kiosk ordering at restaurants has also been rising in popularity over the last few years, and as noted above, fast-food restaurants are experimenting with highly automated systems. In many cases, automation has the advantage of driving down operating costs. Robotic systems, for example, may have high capital costs, but they do not tire or want health benefits like human workers. Therefore, robotic systems can reduce long-term costs and save companies money.

All of these automation systems build on technology trends that have been growing for years: voice recognition, touchscreen interfaces, online shopping, and robotics, to name a few. Companies investing in these spaces will likely do well once retail automation really takes off. Some may worry that automation will eliminate jobs, but that likely will not become a serious problem. Throughout history, automation has eliminated some jobs while creating others. I recommend worrying less about the jobs that automation will eliminate and instead focusing on what new kinds of jobs will be enabled by the new technologies.

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Louis Lehot is an emerging growth company, venture capital, and M&A lawyer at Foley & Lardner in Silicon Valley. Louis spends his time providing entrepreneurs, innovative companies, and investors with practical and commercial legal strategies and solutions at all stages of growth, from the garage to global.

LET’S GET SMALL: WHY MICRO FULFILLMENT IS SO BIG RIGHT NOW

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