Bad news abounds about supply chains these days, with shortages of everything from cars to coffee cups. The better news: Many companies are innovating fixes that could help prevent these kinds of snafus from becoming the new normal.
When it comes to technological fixes for the systems that make and move goods around our economy, the solutions that get the most attention—self-driving trucks, say, or the idea that pouring magic AI sauce on problems could make them go away—aren’t the ones making a difference.
Rather, entrepreneurs are tackling the most basic challenges that plague all supply chains. Their innovations include more nimble systems for managing warehouses and tracking inventory. They are also developing software and services that make it easier to rent out unused warehouse space, or to help retailers position goods closer to consumers so they can reach them quickly. And they are working on new ways to automate parts of the labor-intensive supply chain, not just to reduce the need for scarce workers but to help make the employees that companies do hire more productive and happy.
This level of interest in fixing our nation’s supply chains is unusual. Despite their utmost importance for businesses that make actual stuff, supply chains until recently weren’t exactly a magnet for venture capital. But lately, and especially since the Great Toilet Paper Crisis of 2020, supply-chain technology is suddenly hot.
“I don’t want to call it a tipping point, but there is obviously a big change happening now,” says Willy Shih, a professor and supply-chain expert at Harvard Business School. Driving this change is the pandemic era’s accelerated adoption of e-commerce and a labor crunch in the logistics industry—all while
is racing to build as many warehouses as it can, as close to customers as possible, so that it can offer more things than ever in one day or less, he says.
Amid a surge of money into tech startups in general, investment in tech-focused supply-chain companies in particular has exploded over the past year. It totaled $24.3 billion in the first nine months of last year, almost 60% higher than the total for all of 2020, according to data from PitchBook.
The companies taking all this investment, and their customers and partners, have come up with a wide variety of strategies for dealing with—or even profiting from—the recent chaos in supply chains.
Robots to the rescue
In a 716,000 square foot warehouse in Olathe, Kan., Accelerate360, the company that puts magazines and other products in the checkout aisles of more than 90% of the grocery stores in the U.S., is using one of the most highly automated robotic fulfillment systems in the world. Built by a Canadian company called Attabotics, its biggest and most striking feature is a gigantic and nearly featureless white cube that sits in the middle of the warehouse, looking as much like contemporary art as it does a piece of technology.
Inside it, robots the size of large suitcases, which the company calls “ants,” move on tracks up and down as well as side to side, grabbing bins of goods stored anywhere within the cube. The system allows for much faster access to goods than competing systems Accelerate360 considered, says Chief Strategy Officer Matt Ratner. Other systems’ robots only move in two dimensions, across the tops of similar storage systems, and must “dig,” by pulling up other bins of goods, to get at bins that are buried underneath, he says.
The way the system was designed was inspired by actual ant colonies, which are built vertically rather than horizontally, says Scott Gravelle, chief executive of Attabotics.
Consolidating much of their fulfillment of consumer packaged goods—everything from umbrellas to straws—into this warehouse in Olathe helped Accelerate360 to accomplish in this one facility what would have required four or five times as many humans if it were a totally manual process, says Mr. Ratner. This helps the company with hiring—the company doesn’t have to do as much of it—and has allowed it to expand its operation during the pandemic even as it competes with nearby
United Parcel Service
hubs for workers, he adds.
The white cube in Olathe is one of the largest Attabotics has installed. Mostly, the company is focused on powering smaller warehouses that are closer to consumers, says Mr. Gravelle. By making this kind of storage denser than ever, his goal is to let companies put fully automated warehouses in places they simply don’t fit at present—a goal many other companies in the “microfulfillment” industry share.
Building many more of those small warehouses closer to consumers is exactly what companies need to do in order to compete with Amazon, says Dr. Shih. Not surprisingly, perhaps, Amazon asked, through Attabotics, whether it could tour Accelerate360’s facility in Olathe, but Accelerate360 declined, says Mr. Ratner, because of concerns that Amazon would learn and might copy valuable trade secrets relating to how the facility is laid out and operates.
Amazon declined to comment about its interest in Attabotics. A spokesperson for Attabotics said they could not comment on any potential client interactions.
Because this system is so automated, goods go untouched by humans from the moment they enter the robot cube until the moment they are boxed and ready to be put on a truck—a sharp contrast with, for example, Amazon’s largely human-driven enterprise. This kind of fully automated storage and retrieval won’t work for every class of goods, but as the systems get better, they could start to displace workers and allow companies to run their warehouses 24/7 with more efficiency.
More flexible systems
In Delanco, N.J., inside a 250,000 square-foot refrigerated warehouse, workers are busy cataloging and storing the leftovers, rejects and odd lots of America’s snarled grocery supply chains.
Chaos elsewhere in America’s supply chain for food has repeatedly led to empty grocery store shelves, and shortages of customer favorites even in stores otherwise amply supplied with the basics. But the resulting pallets full of goods that are late or in some way don’t meet the expectations of the distribution managers working in the warehouses of large grocery chains have actually been a boon for the business of Misfits Market, a company that got its start sending boxes of “misshapen” or otherwise off-spec—but perfectly edible—fruits and vegetables to customers.
Giving a recent virtual tour of Misfits’ Delanco facility, CEO and founder Abhi Ramesh showed off pallets stacked with boxes of produce and packaged goods that his inventory managers scored for a fraction of their usual cost—everything from mint-chocolate-chip-flavored Soylent drinks nearing their expiration date and butternut squash with minor blemishes to boxes of Bragg apple cider vinegar sold in a lot too small for a normal grocery distributor to accept. Most goods like this come to Misfits’ warehouse because someone at a different facility rejected them, often simply because they weren’t what they were expecting to arrive on a truck that day.
“The existing grocery supply chain is built in a super rigid way,” says Mr. Ramesh. As a result, thousands of tons of food are wasted every day because of minor issues. “If a reefer truckload of blueberries arrives 12 hours late to a grocery cross-dock, seven out of ten times that’s rejected because the dock space is filled, and the distributor already placed a last-minute buy to replace it,” he adds.
To make Misfits work, Mr. Ramesh’s engineers had to create a much more flexible system for taking in goods and then offering them for sale on the company’s website. Nearly the entire system was built from scratch, since Misfits’ model—taking groceries no one else can sell, and marking them down until someone, somewhere, is willing to buy them—is unique to the past few years of the penetration of e-commerce into the grocery and fresh produce markets.
Wider adoption of the kinds of systems used by Misfits would require more consumers to shift away from demanding perfect produce and giant stores offering infinite variety. But if the company and others like it succeed, it could also eliminate waste and enhance efficiency in a supermarket supply chain that has struggled to cope with the disruptions of the past two years.
To deliver some of its boxes of food, Misfits is turning to a delivery startup that illustrates another example of more flexible software enabling business models that can accommodate the challenges of the supply chain.
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The company, Veho, has been poaching drivers from others in the gig economy, like Uber Eats or Instacart, by offering workers more predictability in their schedules, says Fred Cook, Veho’s co-founder and chief technology officer.
One way Veho accomplishes this is by setting expectations for the companies that use its service. Veho is not an on-demand delivery provider, but aims to compete instead with FedEx and UPS. Drivers use their personal cars and can sign up for delivery routes for Veho through an app. Because Veho is strictly a next-day delivery service, drivers don’t have to rush an order to earn tips, as they would with an on-demand service, says Mr. Cook.
“With our model, you could claim a 4-hour route that paid $100 and has 25 packages, and if you take an hour longer to do those deliveries, we’re actually fine with that.”
Who wins, who loses?
New technologies in supply chains can have world-altering effects. Just think of how the advent of the shipping container made possible globalization as we know it.
These changes take time, though, and companies face urgency not just from current supply-chain disruptions but because Amazon is building on a huge head start, says Dr. Shih. No individual retailer can compete with Amazon’s logistical scale—which is one reason other companies are banding together to leverage each others’ infrastructure and innovations. Companies like UPS (through its subsidiary Ware2Go) are trying to expand into fulfillment as well as delivery, and
recently announced a new last-mile delivery service that will carry other retailers’ goods.
Alliances and investment notwithstanding, analysts predict that costs to move and store goods will continue to rise through 2022. All this investment in supply-chain technology isn’t fixing immediate shortages or bottlenecks.
But further out? Dr. Shih says that who wins and who loses in supply chains will depend on who is able to use automation and software to pare down the industry’s dependence on workers, and to make those who remain that much more productive.
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Write to Christopher Mims at [email protected]
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