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Retail Industry Updates Supply Chain Industry Updates

Why More Retailers Aim to Fully Automate Fulfillment Centers in the Next Year

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Fifty percent more retailers said they plan to fully automate their fulfillment locations in the next year to be best positioned to address consumer needs, according to recent research conducted by Blue Yonder, a Scottsdale, Ariz.-based company that specializes in the digital supply chain and omnichannel commerce fulfillment.

Also, usage of pop-up distribution centers (DCs), dark stores and micro-fulfillment centers will double as retailers pivot to customer-driven commerce, said Blue Yonder, which surveyed 300 senior executives across retail and e-commerce who are responsible for logistics and fulfillment operations in the U.S.

Retail executives are turning to automation to enhance their retail supply chains and give them more control over their online shopping experiences, according to Blue Yonder. Retail executives also recognize that pop-up DCs, micro-fulfillment centers and dark stores can help them keep online inventory as close as possible to consumers, allowing them to fulfill orders rapidly and profitably.

The survey also found:

• As e-commerce continues to grow, so will the automation of fulfillment networks, with 14% of retailers having automation across their fulfillment locations today and 21% expecting full automation in the next 12 months.

• 17% of drug store/health and beauty retailers currently have all fulfillment locations automated — more than any other vertical.

• Over the next two to three years, retailers’ usage of pop-up DCs will double, rising from 12% of networks today to an expected 26%; dark stores will double from a small base, growing from 6% of networks today to 12%; and micro-fulfillment centers will nearly double, rising from 15% of networks today to 27%.

• 64% of retailers currently provide buy online, pick up in store (BOPIS) services and contactless shopping experience, but usage of this will decrease by roughly 8% over the next two to three years. With COVID-19 vaccine deployment, consumers are anticipated to return to the stores, which could account for the anticipated decrease.

“Retailers are expanding their fulfillment network and footprints in part to address last-mile delivery while meeting the surge in e-commerce orders in the short-term,” said Ed Wong, senior vice president for Blue Yonder’s global retail sector. “Equally important, they understand that accurately predicting demand is critical for sustaining revenue growth and advanced, omni-fulfillment capabilities and that locations embedded with automation are the key to quick and efficient fulfillment. Having the right supply chain solution to gain that end-to-end visibility will be a key to retailers’ success.”

To meet the demand of customer-driven commerce and increase fulfillment, retail executives will need to expand capacity and improve labor productivity, according to Blue Yonder. To do this, retailers will need to improve their picking processes and warehouse costs, which aligns with their plans to invest in local fulfillment hubs, or dark stores, which is a more cost-efficient warehouse option that enables faster and more efficient picking processes, the report said.

The study also found that over the next year:

• The majority of retail executives want to prioritize increasing existing capacity (43%) and improving labor productivity (42%).

• Roughly half of grocery retailers (49%) and pet care retailers (49%) cited expanding existing capacity as an area they would like to improve — more than any other vertical.

• Over half of drug store/health and beauty retailers (52%) and pet care retailers (52%) selected improving labor productivity as an area they would like to prioritize — more than any other vertical.

• Almost 40% of retail executives want to improve picking processes (39%) and reduce warehouse/distribution center costs (38%).

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