Fulfillment Revamp: Maximizing Grocers’ Efficiency And Boosting Profit

An explosion of online delivery demands has forced grocery giants to rethink things. In particular, they need to change fulfillment plans and keep costs at bay as they prioritize the customer experience.

Although sales were up, the grocery industry experienced $298 million in margin loss on their digital grocery business. Consequently, Amazon planned to lay off 18,000 workers, added fees to once-free food deliveries, and limited warehouse expansions.

With tight profit margins and rising inflation, Ocado saw a 3.8% loss due to reduced basket value and investments in capacity for future growth. As stores look to boost customer service, they take two different fulfillment approaches. One scales down to minimize spending, and the other expands to create space for streamlined logistics.

Fulfillment is the most costly part of e-grocery, but now that customers have had a taste for e-commerce, there’s no going back. What can grocers do to remain competitive? Let’s take a look.

Use Local Stores As Fulfillment Platforms

Today’s challenges start with customers wanting groceries in a couple of hours. Grocers must deliver perishables and frozen foods quickly and under the right conditions (for longer journeys, not a car).

This leaves 70% of grocers fulfilling e-grocery requests in brick-and-mortar locations, as cited by Grocery Drive in 2023. However, that’s not the only thing you need to keep in mind.

Monitor the Shelves Frequently

The most prominent industry complaint is product unavailability. In fact, 45% of customers expressed concern about out-of-stock items according to a Food Industry Association 2022 report. That’s why grocers must get their local inventory in check to keep prices low and customers happy.

For store fulfillment to work well, grocers need to keep inventory accurate—and reflect this accuracy in online stores. Smaller retailers that use their store products to fulfill online orders must centralize on and offline sales data. They also need to check this daily to ensure they replace each purchase, whether made online or in-store.

One way to ensure retailers can fulfill orders when items are in demand is to update online stores with stockouts quickly. If it is not automated, “order success” captains should be able to change the status in real time easily.

An effective substitution rule is another way to alleviate stockout issues. Grocers can indicate this logic if an item is not available. The final measure is communicating stockouts and replacements with customers via mobile app notifications, SMS, or phone.

That said, monitoring shelves won’t solve all your problems. So let’s look at a few other solutions.

Set Up Stores With Designated Areas for Perishable, Frozen and Chilled Items

Larger corporations use micro-fulfillment centers (MFCs) like Instacart, Kroger, and Ocado, who just invested in a new one. With automation, pallet forklifts, and layouts designed specifically for online orders, grocers can pick, pack, and fulfill much faster than traditional manual methods.

However, others are shutting down MFCs because they are a significant capital investment. Customers don’t pay the driver for a return trip, meaning long drives to out-of-the-way MFCs are another cost for retailers.

Instead, smaller retailers with fewer than 100 orders may organize a dedicated section in their existing fridge and freezer. Nevertheless, for mid-to-large-sized grocers, the leg work from running to each chilled, frozen, and temperate aisle once the customer arrives may also cause delays and frustrations for staff and shoppers alike. And the bags could be located like a jigsaw.

Therefore, grocers need a designated area near the entrance with a labeling system for customers, goods, bags, and packing stations. For instance, customer A has three bags across each section. When the driver comes, they know to collect bags X, Y, and Z from stations 1, 2, and 3. Depending on the size of your store, organizing shelves by the hour of the collection could also help efficiency.

Though setting up stores with designated areas can help improve your fulfillment, we’ve got one more tip for you.

Equip Order-Success Captains with the Tools They Need

Are the orders ready for the driver? Has the inventory been updated in the system? Did staff take orders correctly and put them in the right location? Or is the store receiving customer complaints? While each team member has their KPIs, someone must always be on hand to oversee the whole process. This is where barcodes that talk to central systems are essential.

Barcodes and corresponding hardware are affordable and great for tracking orders, inventory, and misplacements. Grocers can use a mobile app to scan items, but the handheld barcode scanner is the most efficient. The good news is that today, these devices can talk to mobile apps, minimizing the need for additional hardware. Meaning “order-success” captains can receive all the updates they need from their phones.

Already, when staff members receive online customer orders, they look at their phones. They “pick” and scan the item and the packaging destination, so the system knows the team member has it. What’s more, standard picking software alerts them if they identify an incorrect product for that bag’s destination. Integrating the system with mobile devices allows “order-success” captains to oversee alerts and review the process alongside customer feedback.

Even further, stores can create virtual shelves and staging areas. By automating the cross-checking between staging location codes, customer reference numbers, order data, and delivery destination, stores can create apps that help staff know where to place and pick products.

The bottom line is that without converting a store into a warehouse, there are things you can do with existing technology to be more efficient. But stores must rethink their layout to coexist online orders with the main store. Plan smart, create a human role for each process stage, and let technology help you.