In addition to this report, I have written multiple articles on the topic of micro-fulfillment. The articles can be found here. Scroll through the list of articles to find all of the articles I’ve written about micro-fulfillment and the grocery industry.
This Forbes article that I wrote dives deeper into the need for grocery retailers to embrace micro-fulfillment.
I am a champion for the micro-fulfillment industry, and I believe in the value of micro-fulfillment to the retail industry, not just grocery retailers. The latest market research indicates that the the micro-fulfillment market will be worth $10B by 2026, with an estimated 2,000 micro-fulfillment centers (MFC) installed.
I disagree with the research because it presumes that only grocery retailers or large retailers like Walmart, Target, and Amazon, will purchase and install MFCs. This is false. Uber, DoorDash, Instacart, Kohl’s, Gap, Ulta Beauty, UPS, FedEx, Costco, and many other companies can and will benefit from the use of MFCs. This article provides additional information on this topic.
I recently hosted two webinars on the topic of micro-fulfillment centers (MFC). Based on the size of the audience for each webinar and the number of questions asked by audience members, the topic of micro-fulfillment is growing in popularity. The question I am asked the most whenever I host a webinar, or when I write an article on the topic of micro-fulfillment is this: What is the best micro-fulfillment solution on the market?
I will attempt to answer the question in this article.
I am also frequently asked: What are the biggest mistakes companies make when assessing and selecting a micro-fulfillment solution?
Before I proceed, I must point out that evaluating and selecting a micro-fulfillment system isn’t easy. Unfortunately, the process is made more difficult by a number of mistakes companies make during the search process. For example, based on my experience and discussions with companies that have gone through the search process for a micro-fulfillment solution, I believe the following are the biggest mistakes that are made:
- Companies fail to understand that micro-fulfillment isn’t just robotics they can purchase and install, micro-fulfillment is a strategy that can provide a competitive advantage. I always recommend that companies should identify their optimal micro-fulfillment strategy before they begin the process of selecting for micro-fulfillment automation.
- Companies don’t invite all the recognized leaders in micro-fulfillment to take part in their RFP process. Instead, companies perform a Google search on the topic and invite the companies that have generated the most press. This is a terrible idea.
- Companies continue to allow inexperienced team members to lead the search for a micro-fulfillment solution. Having prior work experience at Amazon, Walmart, eBay, Google, Microsoft, Tesla, or any number of other companies, doesn’t make anyone an expert in micro-fulfillment. Having prior experience in fulfillment or supply chain management doesn’t make anyone an expert in micro-fulfillment. Micro-fulfillment requires a specific set of skills and knowledge.
- Companies continue to fail to understand how critical software is to the success or failure of their MFC strategy. Assessing the software of every MFC vendors they evaluate is a must-have. (If an MFC company lacks robust and capable software, do not select that company to be your MFC provider).
For the record, any company that doesn’t evaluate all the leading micro-fulfillment solutions on the market is making a mistake. Any company that allows inexperienced individuals to lead the search for a micro-fulfillment solution is making a mistake. What’s one of the signs indicating that a team leading the search for a micro-fulfillment solution are inexperienced and unqualified? Not inviting all MFC companies on the market to take part in a micro-fulfillment RFP. The only exception to the rule of evaluating all the leading MFC companies is if an experienced consultant or industry expert hired by the company determines there is no reason to invite certain MFC providers to participate in an RFI or RFP.
The future of retail and the future of business is robotics and technology. Although the topic of this article is micro-fulfillment, I encourage all companies interested in micro-fulfillment to stop asking, “What’s the best micro-fulfillment solution on the market?” and instead ask, “What is the optimal robotics, technology, and micro-fulfillment strategy that we can leverage across our ecosystem to reduce costs and complexity, increase customer experience, enable growth and create a competitive advantage?”
See the difference?
Finally, let me state this: Micro-fulfillment isn’t just for grocery retailers. All retailers including big box, warehouse clubs, DTC, home improvement, convenience stores, department stores, and specialty retailers, can all leverage micro-fulfillment to their advantage.
The Missing Piece of the Puzzle
I embraced the value of micro-fulfillment in 2009 after completing a Master’s in Supply Chain Management at Penn State University. In 2013, I completed my third masters, a Master’s of Science in Merchandising. The degrees triggered a desire inside me to research the global retail industry. After months of research, I became convinced of the value of micro-fulfillment, and I designed one of the first micro-fulfillment centers. You can read about it in this article.
I also discovered the missing piece of the puzzle when it comes to micro-fulfillment: hardware automation is just part of the equation. In fact, I believe the easiest aspect of micro-fulfillment is getting the hardware to work assuming a retailer hires a qualified system integrator to install the MFC. The biggest challenge in micro-fulfillment is getting the business case to work, meaning reducing the cost to serve (the cost to fulfill and deliver orders). Reducing cost to serve depends on optimizing the supply chain, product assortment mix, and labor planning. Automation isn’t enough.
Retailers that install MFCs without understanding the need for applying science across their supply chains and store operations to maximize the value of MFCs will achieve little to no ROI. I encourage retailers to contract consultants to help them create the business case for automation, and identify all of the ways in which costs can be decreased across operations and the supply chain.
A Crack in the Dam
I am often asked why more retailers haven’t embraced micro-fulfillment. The reason is this: traditional retailers won’t lead and the industry responds to fear. For example, when Amazon acquired Whole Foods, grocery executives were convinced that Amazon was going to steal their market share in a matter of months. To prevent this from happening, executives contracted Instacart to provide online grocery fulfillment and delivery. Amazon hasn’t taken anyone’s market share. Yet.
It’s false that the grocery industry hasn’t embraced micro-fulfillment. Amazon, HEB, Albertsons, Kroger, and Walmart, have either installed micro-fulfillment systems, or are in the process of doing so. I anticipate that will become more aggressive in their use of micro-fulfillment, and this will drive other retailers to embrace micro-fulfillment and the use of robotics for additional automation.
Walmart has also made changes to their MFC program, and I’m confident it will help push Walmart in the right direction. As the largest retailer in the U.S., Walmart should also be the leader in using micro-fulfillment centers throughout its retail ecosystem. I have recommended to Walmart to accelerate installing MFCs.
I believe the real ‘game changer’ related to micro-fulfillment is the fact that H-E-B, arguably the best grocery retailer in the U.S., selected AutoStore to provide the company with multiple MFCs. I believe this is the crack in the dam of resistance that will eventually generate a raging torrent of interest in micro-fulfillment by grocery and other retailers not wanting to be left behind.
H-E-B’s decision to select AutoStore makes them the leader in micro-fulfillment among grocery retailers. I anticipate Albertsons, Ahold-Delhaize, Kroger, Publix, Giant Eagle, Whole Foods, Target and other grocery retailers will accelerate their interest in micro-fulfillment. Kroger’s partnership with Ocado isn’t enough – Kroger will have to introduce micro-fulfillment into their retail ecosystem of stores, and I believe Kroger may select a system from AutoStore or Attabotics.
I have recommended since 2017, that Instacart should open micro-fulfillment centers to automate online grocery fulfillment for their grocery customers. I believe this is going to occur. I also believe that Instacart will develop the ability to analyze the needs of their grocery retailers, identify the optimal number and location of MFCs, and recommend the best MFC solution to each customer. In turn, Instacart will bid out the installation of the MFC they recommend to system integrators and contractors.
I have recommended to DoorDash since 2019, to acquire Instacart, and open automated micro-fulfillment centers. I’ve recommended to Uber since 2019 to assess opening micro-fulfillment centers and acquiring Instacart. It’s also possible that DoorDash will choose to build their own capabilities similar to Instacart and not acquire the company. DoorDash can easily open their own micro-fulfillment centers by partnering with any number of vendors. This too will be a game changer for the micro-fulfillment industry if it happens.
I can’t mention micro-fulfillment without mentioning the role that system integrators play. System integrators install micro-fulfillment systems, customize software solutions, and provide additional automation in the form of AMRs, AGVs, etc. The leading system integrators include: AHS, Muratec, Knapp, FoodX Technologies, S&H Systems, Conveyco, NanoFC, Dexter, Tompkins Robotics, Myrmex, Geek+, HDS, i-Collector, Storojet, Grey orange, Otto, etc.
I believe there will be consolidation among system integrators as MFC and robotics companies choose to vertically integrate, or sign exclusivity agreements with one dedicated system integration partner.
For example, AutoStore has a relationship with 14 different system integrators: Kardex, Swisslog, Kuecker Pulse Integration, Dematic, AM Logistics Automation, Okamura, LG CNS, Fortna, Hormann Logistik, ALStef, Bastian Solutions, TKSL, Lalesse Logistics Solutions, and Element Logic.
Industry experts believe that SoftBank and TH Lee, the owners of AutoStore, will eventually insist that AutoStore vertically integrate and acquire a system integrator, probably Fortna, Swisslog, Kardex, or Bastian Solutions. Acquiring a system integrator will allow AutoStore to generate significant additional revenue as the company will do their own sales, install their own technology and software, and provide lifetime maintenance services to their customers.
It’s hard to disagree with experts who recommend AutoStore should vertically integrate, but I’m going to. I believe AutoStore should maintain their relationship with integrators and not make any acquisitions.
My Methodology
Ranking the micro-fulfillment players is difficult but I believe my methodology is fair. I spoke with dozens of industry experts, customers, system integrators, and members of the press, in off the record discussions to ensure that everyone I spoke with would feel comfortable speaking to me.
On one end of the spectrum exists traditional shuttle and AS/RS companies like Dematic, Fabric, KNAPP, Vanderlande and Honeywell Intelligrated. The systems utilized by these companies offer good, not great, reliability but their architecture is far from ideal for a small MFC. Specifically, there are too many single points of failure, and the technology is incredibly expensive to maintain given so many moving parts. The technology used in these systems was meant for large warehouses and fulfillment centers, and scaling the technology down for use in micro-fulfillment centers didn’t produce the best results.
On the other end of the spectrum exists the emerging 3D technology players like Attabotics, Alert Innovation, AutoStore, and Exotec. The systems offered by these companies have great architecture, low maintenance costs, and high density with no single point of failure. AutoStore has hundreds of successful installations globally.
Attabotics and Alert Innovation have only installed their systems at a few customers. There is no easy way to build up reliability in technology other than installing many systems, identifying issues, and making improvements.
Out of all the MFC companies, I believe AutoStore and Attabotics have the best combination of reliability, architecture and density.
I am unable to rank certain micro-fulfillment vendors higher because of their inability to manage their supply chains and ensure continuity of supply.
I rank the MFC solutions below.
What follows is only my opinion. I do not work for any of the MFC companies I evaluate in this article. I encourage all companies interested in micro-fulfillment to perform their own due diligence before making any decisions.
First Place Goes to Alert Innovation
I’m a fan of Alert Innovation for many reasons. Among them, founder John Lert, has created one of the most unique micro-fulfillment powered store concepts in existence, the Novastore. I created a similar design in 2013, and people have contacted me over the years to complain that John stole my design. This is false. John and I independently came up with a similar concept at nearly the same time. I can assure everyone that John’s design is his own.
Although I’m a fan of Alert Innovation, I am also disappointed in the company for not doing a better job of marketing their system, and for not being a thought leader in the industry. Alert Innovation should have sold more systems to more companies at this stage in the life of their business. I am also concerned about the reliability of Alert’s system. These weaknesses must be addressed.
Alert Innovation has secured Walmart as a customer, and one MFC has been installed inside a Walmart store in New Hampshire. I congratulated Alert on being acquired by Walmart. Walmart has an incredible opportunity to leverage their stores as distribution centers. Based on discussions with Walmart team members, the jury is still out on whether or not Alert Innovation will be able to meet Walmart’s needs.
I shared my concerns with many people at Walmart regarding the challenges I believe they will encounter when installing Alert’s system. Full disclosure: When I was asked by individuals at Walmart to rank the best MFCs on the market, I ranked AutoStore and Attabotics above Alert Innovation. Why? Because I’m not concerned about AutoStore and Attabotics being able to install reliable systems to meet the needs of their customers. I am concerned that Alert Innovation may be a mirage company – there isn’t anything there.
I also recommended to Walmart to have a backup plan in the event they have to divest Alert Innovation.
This is a link to a case study outlining how Walmart and Alert are working together.
Alert Innovation’s, Alphabot helps to enable quicker, more efficient order picking than other MFCs on the market. The system operates inside a 20,000-square-foot warehouse-style space, using autonomous carts to retrieve ambient, refrigerated and frozen items ordered for online grocery. After it retrieves them, Alphabot delivers the products to a workstation, where a Walmart associate checks, bags and delivers the final order.
This link outlines the features that are unique to Alert Innovation’s Alphabot; arguably one of the most advanced system ever created.
The e-Grocery Micro-Fulfillment Center design by Alert Innovation is another example of an MFC company creating a system that is highly advanced technologically.
My advice to Alert Innovation, is to approach DoorDash, Uber, Instacart, and Amazon about opening Alphabot-powered micro-fulfillment centers across the USA, to give these companies the ability to fulfill online orders for groceries and other retail products. However, if Alert Innovation can’t meet the needs of Walmart, they won’t be able to meet the needs of the companies I listed.
Regardless of the fact that Alert Innovation has designed one of the best micro-fulfillment system on the market, they will fail to achieve their potential if they don’t do a better job of improving the performance and reliability of the system; marketing their solution; becoming more aggressive at sales; and becoming more aggressive at approaching retailers with options for cost-effectively owning or leasing a system. Alert has potential but potential isn’t enough. Alert must be able to execute; something I’m not sure they can do.
I am concerned that Alert Innovation may be nothing more than an interesting company with an innovative system that will fail to live up to the hype. Alert Innovation is only ranked first on the list because the system can do a small number of things that AutoStore can’t, and AutoStore is having issues with their supply chain.
For the record, every company exploring the topic of micro-fulfillment should evaluate Alert Innovation’s system and software, and come to their own conclusion.
Second Place Goes to AutoStore
AutoStore has been in business since 1996 and they have perfected the use of robotics, software and specialized materials and construction to build one of the most dependable and capable micro-fulfillment solution on the market. AutoStore has over 700 customers globally and the company enjoys a nearly 100% repeat business relationship with their customers.
AutoStore was recently selected by the grocery retailer H-E-B, to provide them with a large number of MFCs to be installed across their retail ecosystem. There continues to be a myth, driven by AutoStore’s competitors, that the AutoStore system can’t fulfill groceries. This is not a true statement. AutoStore has one of the best systems for automating grocery fulfillment. Also, AutoStore lags other systems on the market in terms of their inability to pick across all three temperature zones: chilled, frozen and ambient. Note: AutoStore has invested capital in developing a new chilled and frozen capability but doing so has significantly increased the price of their system.
AutoStore is unique in that they perfected the use of the cube-based system that allows inventory to be stacked vertically in bins; this greatly reduces the amount of space required to install and operate an AutoStore. The AutoStore system can also be configured to fit in nearly any space. However, AutoStore does not exceed 16 bins vertically resulting in being unable to fully take advantage of buildings with high ceilings.
AutoStore is a good system for grocery fulfillment. Is it a great system? Based on off the record discussions with multiple industry experts, the collective opinion is, no. In my opinion, AutoStore is one of the better systems on the market. However, I’m not sold on the way AutoStore’s robots have to go mining to find the products needed to fulfill orders. I continue to believe that AutoStore should design a system whereby robots can mine for products at the top and at the bottom of the micro-fulfillment center simultaneously, as this would create arguably one of the fastest solutions on the market, if not the fastest solution.
Retailers interested in AutoStore, which has generated a lot of press, must also assess systems from Geek+, Berkshire Grey, Alert Innovation, HAI Robotics, and so on. The challenge for AutoStore is that they have created the Rolls Royce of micro-fulfillment systems in an industry that only requires a used BMW or a Ford. Note to all retailers: DO NOT overpay for any micro-fulfillment solution.
I am also concerned about AutoStore’s inability to manufacture and deliver their technology to meet customer demand. According to off the record discussions with AutoStore personnel, as of 2021, AutoStore is facing a lead-time of nearly 14 to 18-months to deliver a system to customers. Even if the lead time was only 90-days, that’s still too long in this market. At a time when more retailers are actively exploring micro-fulfillment solutions, AutoStore is unable to meet demand. This is one of the reasons why AutoStore can’t be ranked higher than second place.
I’m confident that AutoStore is actively working to solve their manufacturing and inventory problems. However, all companies interested in micro-fulfillment must ensure that they get the facts from AutoStore, regarding when all of the required parts, (Bins, Grids, Ports, Robots, Controller) to assemble and install a micro-fulfillment center will be available and delivered. (Companies need to ask this question of all MFC vendors they evaluate).
AutoStore would be ranked number one if it wasn’t for potential issues within their supply chain.
Third Place Goes to Geek+
I have to mention Geek + in this article even though the company isn’t considered a competitor in micro-fulfillment by most retail analysts reports that I’ve read. I disagree. I believe Geek + is destined to become one of the largest fulfillment, micro-fulfillment and robotics companies in the U.S. and the world.
Geek + is a Beijing, China-based startup that makes warehouse fulfillment robots similar to those of Amazon’s Kiva. To date, Geek + has raised nearly $400M in funding. The startup has 10,000 robots deployed worldwide, and the company has 300 active customers in 20 countries.
I have worked with Geek + and I think their robots, software and other technologies are second to none. I strongly recommend the company and its products.
In regards to micro-fulfillment, the company has created the Geek+ RoboShuttle, a bin-to-person picking solution that can achieve high-density storage by using the innovative Geek+ C200 and narrow aisle design, while maintaining high efficiency. The standard 9-meters warehouse can store 18-layer 3.50m high-cargo boxes and 24-layer 2.5m high-cargo boxes, fully utilizing the warehouse space.
The Geek+ RoboShuttle™ system was certified as “Best of Intralogistics 2020” by the world-renowned IFOY award, one of the industry’s most prestigious recognitions. Compared with the traditional shuttle system, RoboShuttle has higher flexibility, efficiency and return-on-investment.
It is conceivable that within the next two to three years, Geek + may be in the top three in terms of companies that have sold the most micro-fulfillment solutions. It’s also probable that Geek+ may become a preferred solution over AutoStore and other very expensive MFC systems.
The advantage Geek + has is that they’re a technology company that specializes in smart logistics. They’re not a company that specializes only in micro-fulfillment. Their use of innovative robotics and artificial technologies is arguably the most advanced of nearly every company I’ve listed in this article. However, I am not keeping Geek+ on the list for future reviews.
Fourth Place Goes to Berkshire Grey
Berkshire Grey is a pioneer in transformative, AI-enabled robotic solutions to automate online order fulfillment and store replenishment operations for leading retail, 3PL, grocery, and eCommerce companies.
- Comprehensive Portfolio: Enterprise grade AI-powered solutions that span the entire supply chain.
- Proven Performance: Trusted by the world’s leading eCommerce companies for mission critical operations.
- Exceptional People: World-class technologists with over 1000+ years of robotic experience.
Based on my research, and discussions with industry experts, Berkshire Grey should be considered the ‘Gold Standard’ of robotics and fulfillment companies. The reason why the company isn’t ranked higher is because they haven’t revealed more information related to their micro-fulfillment technology. However, the company is actively engaged with several large retailers on micro-fulfillment and additional automation projects.
If Berkshire Grey continues to grow and sign clients at their current pace, it’s plausible that they could become the leading MFC and automation company on the market. It’s also possible that Berkshire Grey will crater. I’ve had discussions with multiple sources from the company, and I’m concerned about the growing number of operational issues, and the failure to do a better job of installing their solutions. Berkshire Grey is on the edge of a cliff – they can back away and survive or they can fall off the cliff and crash.
Fifth Place Goes to Addverb Technologies
India-based Addverb is by far one of the most interesting robotics companies on the market. Addverb is focused on intra-logistics automation utilizing what they call a 4D approach: Discover, Design, Deliver and Dedicated Support. Based on my analysis, I believe Addverb’s hardware and software are among the best on the market. Let me rephrase my last comment – Addverb’s software is arguably the best when compared to the rest of the micro-fulfillment vendors.
I like the fact that Addverb’s MFC system can pick across three temperature zones – chilled, frozen and ambient. Addverb also has additional technology like AMRs to further automate the entire process associated with fulfilling online and curbside grocery orders. Addverb’s technology can be utilized to fulfill orders across different industries including specialty retail, sporting goods, apparel, and so on,
According to Addverb, they’re in the process of finalizing an agreement with a leading-edge logistics company in the U.S. to install their technology and open automated Micro-fulfillment as a Solution (MaaS) facilities across the U.S. We’ll see if it happens.
Addverb has created one of the best videos describing micro-fulfillment and how they view the industry. However, like Alert Innovation, I wonder if Addverb is a mirage company. If Addverb is unable to close any deals, they will be removed from future lists.
Sixth Place Goes to Exotec
Without a doubt, my sixth place pick, Exotec, offers one of the most interesting and unique solutions on the market. This video does a great job of explaining the Exotec system. Exotec is growing in popularity; the company has raised over $100M. The capital has positioned Exotec for explosive growth.
Exotec is a France-based company (all robots are manufactured in Lille, France) but there are now Exotec teams in Atlanta and Tokyo, selling the Exotec solution to customers. The company currently has 14 running systems around the world. Clients include Gap, Leclerc, Cdiscount, Uniqlo and Carrefour. Being selected by Gap, proves one thing – Exotec is a high-quality system. Gap gave Exotec credibility and Exotec has put that credibility to good use by selling their system to five additional companies as of October 2021, when I updated this paper, and Exotec is in discussions with many other companies.
Although the Exotec robots are first-class in terms of quality and capabilities, their logistics software that coordinates the movements of all the robots, and integrates with other software required to run all operations, is not as good as other software on the market. However, Exotec is aware of this and they’re working diligently to improve their software.
Note: Exotec reached out to me to state that they won’t be competing against micro-fulfillment companies. Exotec will be removed from the list in the future.
Seventh Place Goes to Attabotics
Let me begin by stating that Attabotics is technically the most advanced MFC system on the market. That’s the good news. The bad news is that Attabotics has been forced to deal with some system challenges over the last year.
Attabotics is most notable for its “3D” storage system, with wheeled carts capable of moving on an X, Y, or Z axis. I can attest to the fact that Attabotics is a technical marvel.
Attabotics raised an additional $50M in Series C funding in August 2020, and the company is positioned well for future growth and continued development of its system. Attabotics has deployed their system in six locations across North America at companies in the food, B2B and retail sectors. I’m confident that Attabotics, will put the capital they’ve raised to good use by making additional improvements to their technology.
The CEO/CTO of Attabotics, is Scott Gravelle. Scott Thinks BIG and he is willing to question everything. This is a TED talk by Scott. Scott knows what has to be done, and he is actively making sure that Attabotics achieves its potential.
Let me reiterate: Attabotics has created one of the best MFCs on the market. I rank Attabotics second behind AutoStore but way ahead of Alert innovation. My concern is that systems like Attabotics can take longer to bring to market due to the level of complexity. It’s possible that Attabotics may have to release several more generations of their robotics before the optimal system has been created. Because of the uncertainty surrounding Attabotics, I am not able to rank them higher.
I believe it will be 2024 or 2025 before Attabotics signs their first grocery customer. If Attabotics executes to the level I believe they can, it’s possible that Attabotics will earn the top spot ahead of AutoStore.
Eighth Place Goes to Fabric
CommonSense Robotics was founded in Israel by Elram Goren, Ori Avraham and Shay Cohen in 2015. I was contacted by individuals who worked for CommonSense Robotics when the company was founded asking for my advice on different topics. I was happy to share my opinion.
CommonSense Robotics changed its name to Fabric in 2019.
I like Fabric because they offer multiple options for customers to leverage their technology. Companies can purchase or lease the Fabric platform and have it installed inside their stores or in warehouses, or companies can place their products inside micro-fulfillment centers owned and operated by Fabric. The latter model is similar to a concept I created that I call Micro-fulfillment as a Service (MaaS).
Fabric has raised $136M and is seeking $50M in additional funding according to sources. Fabric’s executive team made the right decision to secure additional funding lest they run out of cash. A startup can easily burn through $136M in as little as 12 months.
I’m not concerned about Fabric wanting to raise additional capital, I’m concerned that in my opinion, Fabric’s shuttle-based system is one of the most basic on the market. For example, this is a link to the a video that explains the Fabric system, and this is a link to the Exotec system.
Notice anything? Both solutions are very similar but what solution appears to have the better design, robots and software? Based on my unscientific poll that I’ve conducted multiple times, individuals who watch the Fabric and Exotec systems in action overwhelmingly select Exotec.
I believe Fabric should make several design changes to their solution. Specifically, I recommend that the Fabric solution become more like the Exotec platform. Fabric has a solid team of engineers and I’m confident that if given direction to improve the design and functionality of the Fabric solution, they can do so. This isn’t the option I prefer.
I’m also concerned about penchant for several individuals who work for Fabric, to use hyperbole when speaking about the company and its future. For example, Steve Hornyak, Fabric’s Chief Commercial Officer, made the following quote in a July 28, 2020, Grocery Dive article titled, FreshDirect, Fabric to launch micro-fulfillment powered grocery delivery in DC-area:
Hornyak said Fabric expects to have 10 MFCs running by the end of this year and between 50 and 100 by the end of next year. Within five years, he anticipates the company will be running as many as 1,000 MFCs.
I appreciate Hornyak being a cheerleader for Fabric, but I believe it’s nearly impossible for anything Hornyak claimed in the quote to become a reality. I see no reason, none, for Hornyak, or anyone else at Fabric, to wildly exaggerate the future of the company. It is very dangerous to create a false perception when it comes to predicting the growth of any company. (If there was an ‘Entertainer of the Year’ award, I would give it to Steve; he is truly one of the funniest people working in the industry). However, Hornyak is also very good at what he does. I believe Hornyak will be successful in convincing Instacart to either select Fabric’s MFC or acquire Fabric. If this occurs, I reserve the right to contact Instacart and voice my concerns. Instacart doesn’t employ any executives with experience in micro-fulfillment. On the surface, selecting Fabric may seem like a good idea for the executives leading the discussions with Fabric. I know otherwise.
Due to the number of people who speak to me about Fabric, I feel I have no choice but to offer my unbiased advice free of charge to the company.
The first thing Fabric should do is hire a CEO with the understanding that he/she has complete authority over the strategy and direction of the company. The founders of the company should have no input, zero. I’ve stated many times at conferences and during webinars that I believe most founders make terrible executives. I have nothing personal against the founders of Fabric. However, in my opinion, I believe mistakes have been made that should have been avoided.
Let me be clear, if I ran Fabric, I would make many, many changes starting with the corporate strategy.
Second, my preferred option is for Fabric to evaluate the available MFC solutions that are on the market and seek out a partnership. I strongly recommend Fabric to partner with another MFC vendor, and eventually end production of Fabric’s shuttle system. Fabric is at a disadvantage when it comes to the cost of their solution because they sell so few. Without volume, Fabric is unable to negotiate favorable terms to reduce their manufacturing costs. A partnership with another MFC vendor would provide many benefits to Fabric’s current and future customers.
Third, Fabric should evaluate selling the company. Fabric is a good company with a good MFC solution. I believe Fabric is an ideal acquisition target for several retailers and other companies.
I want Fabric to succeed. Please do not interpret any of my comments as being malicious towards Fabric, I can assure you no malice is intended. In fact, I remain convinced that Instacart and Fabric will partner on opening micro-fulfillment centers. If this happens, Instacart will have to invest in Fabric so that company can make substantial changes to it’s manufacturing and also enter into partnerships with companies to use better equipment.
I’m frustrated that Fabric isn’t the company I know it can become. I’m frustrated that Fabric isn’t living up to its potential even with so many talented individuals in the company. Hubris can kill careers, and hubris can kill companies. Regardless of the amount of capital raised, survival is not assured for Fabric.
Fabric may be able to sign an agreement with one or more large customers, but I’m not convinced that the company will be able to deliver the number of systems required. I also believe that any large customer that signs an agreement with Fabric, may become frustrated at the lack of progress and continued issues with the technology and software. Again, this is only my opinion.
My final piece of advice is this: Fabric should contact the consulting firm Capgemini, and hire them to lead an Accelerated Solutions Environment (ASE) engagement. I believe it is exactly what Fabric needs the most in my opinion.
If I didn’t want the best for Fabric, I wouldn’t offer my advice.
Ninth Place Goes to Dematic
Dematic is a 202-year-old company yet its micro-fulfillment solution didn’t become commercially available until 2019.
Based on the information I received, it appears that Dematic only has one customer for its MFC solution, the grocery retailer, Meijer. The fact that Dematic only has one customer isn’t a concern to me.
What does concern me is that in my opinion, Dematic’s MFC hardware and software solution are simply too basic for any retailer to consider. This video of the solution speaks volumes.
Dematic is a company that designs, builds and implements solutions for warehouses, distribution centers and production facilities. When interest in micro-fulfillment began to grow, Dematic made the decision to apply technology they leverage on full-scale, large fulfillment and warehouse projects to create a Dematic micro-fulfillment solution. On the surface, this appears to be a wise decision. However, the facts prove otherwise.
I believe Dematic used brute force to create their version of a micro-fulfillment system including software to run the MFC. However, the Dematic MFC isn’t competitive when compared to the other MFCs on the market.
I recommend that Dematic should disband their MFC team and exit the MFC market altogether.
Dematic may not appreciate my opinion, but it is better for the company to exit the MFC space early vs. losing millions of dollars trying to sell a solution that can’t compete with the other MFC solutions I’ve evaluated. I also want to make it clear that Dematic exiting the micro-fulfillment space in no way negatively impacts revenue or the potential for future growth. Dematic is a fabulous company with an incredible reputation.
If Dematic wants to be successful in micro-fulfillment, an option they should consider is acquiring Fabric, and rebranding the company to Dematic Micro-Fulfillment Solutions. Dematic should pursue an acquisition of Addverb, Geek+, or my favorite choice for Dematic to acquire, Exotec.
Without major changes at Dematic, I will not be ranking them on future lists.
And Tenth Place Goes to…
I’m sure individuals knowledgeable about the micro-fulfillment industry were expecting to see the name of ‘Takeoff’ listed in tenth place. However, there is no actual tenth place for this reason – I no longer consider Takeoff to be a MFC company. Instead, I believe Takeoff is the next Ocado. Here’s why.
I’ve watched Takeoff develop as a company since it was founded in 2016 by Jose Vicente Aguerrevere, Rafael Pieretti V, and Max Pedro. Jose and Max lead the company today but Rafael chose a career in medicine. I provided free consulting to the founder early in the history of the company which is how I met Max and Jose.
For the record, I credit Max and Jose with being the individuals who created the micro-fulfillment industry. I also believe Jose and Max are among the most skilled executives in the industry and I believe they are the ideal team to lead Takeoff for years to come.
Takeoff has operated as a traditional MFC company since it was founded and it uses a solution form the company KNAPP. Takeoff has many MFC customers and the company is the most well-known brand out of all the MFC companies on the market. The challenge for Takeoff is that AutoStore, Attabotics, Alert Innovation, and Exotec offer better micro-fulfillment solutions. Fabric and Takeoff are very similar in terms of the capabilities of their systems.
For several years, I’ve spoken about Takeoff on webinars and I’ve written articles where I’ve mentioned the company. Most recently, I’ve begun to offer my opinion on what I believe Takeoff will do in terms of its corporate strategy. Among the ideas I’ve shared is that Takeoff could choose to enter into a partnership with Exotec or Attabotics, and use their solution for micro-fulfillment and focus on using KNAPP for larger warehouse and fulfillment projects.
The problem I kept encountering is that no matter how many times I heard myself share my opinion about Takeoff, I didn’t believe what I was saying was correct. It’s certainly plausible that Takeoff could partner with Exotec or Attabotics. It’s possible that Takeoff and Fabric could merge. However, none of those options are big ideas. It’s just a change in hardware while maintaining the same strategy. Why would two of the brightest leaders in micro-fulfillment maintain the status quo?
And then it hit me. They wouldn’t maintain the status quo, and they wouldn’t think small, they would THINK BIG.
During this period of evaluating potential options for Takeoff to follow, I read an article about the fact that the British retailer Ocado is worth an estimated $20B even though the company only sells 1.7% of the groceries in the U.K. By comparison, Tesco, the largest grocery retailer in the U.K. with a market share of 27%, is only worth $21.5B. How could that be? How could Ocado be nearly as valuable as Tesco while only controlling 1.7% market share? What makes Ocado so valuable?
Answer: Software and technology. Ocado isn’t a robotics company, they’re a software and technology platform company. Big difference.
In discussions with Takeoff, their goal is to pivot from micro-fulfillment to being a technology platform. I anticipate that Takeoff is going to try and transition from being an MFC company to becoming a technology company that licenses their platform to MFC companies and their customers. As I stated earlier in this article, software is the Achilles Heel of many MFC companies. Software is also the Achilles Heel of many retailers when it comes to online grocery ordering, fulfillment and delivery. Takeoff is an ideal position to try and leverage their platform to fill this gap.
Although I’m confident Takeoff will try and license their software, I’m convinced they will struggle to entice MFC companies and their customers to sign an agreement. Why? Because Takeoff is an MFC company that has a relationship with KNAPP. Takeoff is viewed as being a competitor.
To shift the paradigm, Takeoff may become hardware agnostic. Any MFC company, regardless of their hardware, will be able to sign an agreement with Takeoff to provide and manage all technology requirements related to online grocery ordering, fulfillment and delivery. Becoming a technology company changes Takeoff from being a competitor to an ally.
The question that must be answered is this: Will Takeoff succeed? I believe they will try. I also believe they will fail. I don’t believe Takeoff will survive past 2025.
Conclusion
Grocery retailers will continue to lose up to $25 on every online order they fulfill. Increased volume does nothing to reduce online fulfillment costs. Grocery retailers must be prepared for the possibility that online penetration will increase to between 20% to 25% by 2025. This means grocery retailers will see a significant drop in customers inside their stores. Grocery retailers will also experience increased costs and a significant drop in earnings. Grocery retailers need to take steps to prepare for this eventuality. Micro-fulfillment is a must-have to automate online grocery fulfillment, along with a real estate strategy to reduce the size and number of stores based on consumer behavior and operational needs.
I anticipate that more changes will take place at grocery and other retailers between 2020 and 2030, than took place between 1900 and 2020. All retailers need to ask and answer this question: What’s our micro-fulfillment strategy? For those grocery retailers that choose not to own or lease their own micro-fulfillment centers, I encourage you to assess, Micro-fulfillment as a Solution (MaaS). This model provides retailers with all of the value of micro-fulfillment without the high capital costs or complexity.
I want to leave executives, board members, and individuals tasked with selecting a micro-fulfillment solution with this reminder: Your careers and reputations are on the line when you select a micro-fulfillment solution. Do not, under any circumstances, fail to perform your due diligence when evaluating micro-fulfillment companies. Invite the leading MFC companies I listed in this article to participate in your micro-fulfillment RFP process, and conduct a thorough evaluation of each.
