As businesses begin to reopen in the wake of COVID-19, questions abound about the most cost-effective ways to manage a supply chain that can handle surges and disruptions. Those questions have prompted AutoStore to present a four-part blog series on the topic, starting with a look at the problems of in-store picking, which is often a grocer’s first choice method, because it requires the least change to infrastructure. Since that method is increasingly proving to be flawed, we now turn to a more viable option: dedicated out-of-store fulfillment spaces, AKA fast pick areas and dark stores.
Essentially, fast pick areas and dark stores solve the problems posed by in-store picking by taking the picking out of the store. Simply put, they’re storage areas that double as a dedicated space to process online orders. (For the purposes of this blog, we will use the two terms interchangeably; the main difference is that dark stores are bigger and can process more inventory.)
Here are some potential benefits of utilizing dark stores and fast pick areas:
In a supply chain that utilizes well-run dark stores or fast pick areas, all these benefits add up to significant competitive advantages, such as expanding the area your business serves, increasing product availability, and reducing the cost of operations.
Fast pick areas and dark stores can operate either manually, using automation such as AI and robotics technology, or any blend of the two. That flexibility is what makes it scalable, not only as your customers increasingly turn to eCommerce, and also as robotics technology becomes more available and affordable.
Of course, establishing a dark store may require substantial overhead at the outset, as well as a drastic restructuring of your store’s layout and management systems. This can be a difficult transition without strong support and a clear vision. That’s why it’s essential that your business understands the inner workings of dedicated fulfillment centers and the various technologies available, and how switching to this model might change your business over time.
Some grocery stores that have closed are being converted to dark stores. For example, three Sam’s Club locations have become dedicated fulfillment centers serving their parent company, Walmart. As of late 2019, Ahold Delhaize reported an investment of $480 million to convert and optimize fast pick areas and dark stores, all in the Northeast, as part of its plan to bolster its eCommerce platform.
Not surprisingly, the recent health crisis has accelerated many grocers’ adoption of dark stores. In recent months, some of the biggest chains in the country – including Kroger, Whole Foods, Stop & Shop, and Giant Foods – have all reported opening temporary or permanent dark stores to support the increased demand for online grocery.