Retailers must invest in automation, says Dematic

Jason de Kauwe, strategy and innovation director at Dematic, describes how the retail industry can use COVID-19 to spur itself into the future.

The COVID-19 pandemic has irreversibly altered life as we know it. Across the spectrum of business, every industry has undergone a forced reckoning as they adapt to the ‘new normal’ and respond to rapidly changing demands from their customer base.  

Perhaps the most permanent change is to be found within the retail industry. As shops closed their doors during lockdown, online channels grew in importance.  

In the grocery industry for example we saw a huge surge in demand for online shopping. By the end of 2020, online orders are expected to account for as much as 10% of total grocery  purchases (Rakuten Intelligence) – a 6-7% increase compared to where online grocery ordering spending was before the pandemic. 

Whilst the move away from in-person shopping has been a growing trend for some time, no one could have anticipated such an abrupt rise. In this way, the pandemic has greatly accelerated the modernisation and digitisation of the retail industry, but so much change in such a short period of time has also created real challenges for the sector. COVID-19 has highlighted how imperative it is for retailers to be able to adapt to major fluctuations in demand.  

Lockdown challenges

One immediate issue was the insufficiency of traditional distribution operations in catering for the surge in demand. The traditional method of housing large numbers of inventory in one central location does not offer the sort of flexibility required to restock items rapidly across the country. Many retailers turned to third-party services as a result, but because of the universal increase in demand they also did not have the capacity to help. 

Quickly boosting workforces with temporary staff was also no longer a viable option. Historically, when faced with peaks in demand, retailers would resort to manual labour, hiring thousands at a time to ensure efficient delivery. The pandemic disrupted that practice as busy warehouses proved incompatible with social distancing guidelines and manpower alone struggled to meet the sheer onslaught of demand.  

The rise of the robots

COVID-19 was a crisis very few predicted, more predictable however are the spikes in consumer demand which are becoming increasingly frequent and extreme. If grocery and the wider retail industry is to become agile enough to thrive in today’s volatile environment, it’s clear that these outdated and traditional supply chain strategies must evolve. 

In the battle to meet rising and unpredictable consumer demand, automation will be the weapon that turns the tide in favour of retailers. COVID-19 will undoubtedly be the tipping point for supply chain automation. 

One of the big areas for investment is in micro-fulfilment: small but highly efficient fulfilment operations close to consumers that can be located in the back of a store or in an urban fulfilment centre. Micro-fulfilment is capable of responding to peak demand by shifting smoothly between online and in-store fulfilment allowing retailers to take ownership of online delivery speeds whilst maintaining excellent customer service.  

In our experience, the surging need for online delivery has also necessitated a more general presence of warehouse management software capable of making data-based decisions which improve the distribution process. The most sophisticated warehouse management software can streamline the entire intralogistics supply chain, helping retailers effectively respond to consumer demand.  This was one of the reasons that Dematic recently acquired Digital Applications International Limited (DAI), a UK-based software company specialised in logistics automation solutions. DAI’s acquisition meant an expansion of our WMS capabilities allowing us to provide tailored insight into market and consumer trends using data captured by our software. Armed with this data, customers will be able to act ahead of time, adapting to key market shifts such as that experienced during COVID-19.  

At present, the long-term impacts of COVID-19 are still unknown, and if this year has taught us anything it’s that every industry must protect themselves against the unexpected. Whilst COVID-19 has created huge challenges for the industry. Retailers must look at it as a catalyst for growth and an opportunity to invest now in technology that will secure its future.  

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