I was just discussing the logistics of Internet-based grocers with some colleagues, and I came across this Forbes piece, Will Work With Food, about FreshDirect, which is succeeding where WebVan failed:
FreshDirect’s continued success depends entirely on product quality and logistical prowess. “The challenge is for the 33 pieces to show up in the factory at the same time to get on the truck,” says Kelly McGowan, chief information officer. He still spouts the lingo of his old job on Wall Street, comparing food delivery to the electronic transmission of stock and bond trading orders.FreshDirect worries about things as minuscule as the number of times an item gets scanned before it gets to the packing station. There, workers wearing snowsuits (parts of the warehouse are chilled to 36 degrees) take items off a conveyor, scan them and put them in a cardboard box.
If the wrong item gets sent to the packers by mistake, a runner exchanges it, holding up the order and possibly the entire refrigerated truck. Over the last few years the company invested in additional scanners so that items get scanned three times before they reach the box, providing extra places to catch mistakes. The additional 50 cents it costs to find an error is a lot less than the $6 or so it would cost if the error slipped through. “We’re eliminating human error as much as possible,” says Operations Manager Ariel Ramirez.
FreshDirect benefits from not having to arrange items as a store would, with high-profit items at eye level and low-profit bulk items down low. Instead, items on eight long shelves are arranged based on how often they’re ordered, how much they weigh and how delicate they are. Heavy jugs of Tide detergent go at the beginning of the picking process and fragile sliced breads at the end. Pickers take the items off the shelves and put them into a nine-box array that moves between picking bays on an overhead track, like a ski lift.
If orders are finished but their picking basket has to wait in line behind incomplete orders, the company wastes money. Pickers now send 35% of all orders through quicker, cutting the boxes’ travel time from 45 minutes to 30. The software creates one pick list for items stored in farther-out aisles and another for closer-in items, where most of the pickers work. Where once an order traveled an average of 1,000 feet in the warehouse, now it goes 830 feet.
FreshDirect’s 150 drivers must race to meet the two-hour window the company promises customers. Without maps or GPS, Manhattan-bound drivers have to know the intricacies of service elevators, parking spots and difficult building superintendents. That’s why new drivers deliver 35% fewer orders than experienced ones. During rush hour FreshDirect limits the number of delivery slots it offers and keeps drivers away from crowded streets, instead dispatching a bigger truck to serve as a base for deliverymen pushing handcarts to customers’ apartments.
The kitchen where FreshDirect’s executive chef, Michael Stark, prepares his packaged meals is increasingly automated, too. Stark spent two years translating his recipes into the SAP factory software. When an order for lasagna comes in, the system checks the kitchen’s inventory and orders meat, pasta, cheese and tomato sauce, routing the meat to the deli for grinding. There’s more automation to come, with machines to grill pizzas and form meatballs.
New Yorkers already turn to Stark for 1,000 rotisserie chickens a week. As the company gets bigger, squeezing costs is as important as squeezing oranges.