Chewy's fulfillment operation is in the early stages of a 180-degree turn.
After years of research and searching, vetting and testing, the pet supplies e-tailer opened its first automated fulfillment center in Archbald, Pennsylvania, last month. The plan has been in the works for years, Mike Gilbert, Chewy's vice president of operations, said in October, the day after launching the inbound operations of the automated facility.
The timing turned out better than the operations team could have known.
"Growth curves that were supposed to play out over years have been compressed into quarters and even months," said CEO Sumit Singh on an earnings call in September, touting the company's investment in technology and talent to handle the growth. Chewy's sales have grown 47% YoY for the last two quarters.
The final tech stack in the Pennsylvania facility is the result of four priorities Singh brought to Gilbert: worker safety, cost structure, delivery speed, and minimizing product damaged during fulfillment and delivery.
Gilbert expects a 45% improvement in operational efficiency in terms of cycle time between a customer order submission and a box landing on a truck. He also expects greater picking accuracy and 30% lower fulfillment costs. With a pandemic to contend with and a digital holiday shopping season ahead, Chewy's technological decisions are in for the ultimate test.
Sorting through the tech market
Gilbert assembled a team two years ago to come up with an automation plan and spearhead the implementation. Experts in mechanical and industrial engineering, fulfillment processes, and warehouse software from around the company came together to cover every corner of the fulfillment process and choose the best-fitting technology. Gilbert, an Amazon alum, said the team's past experiences were invaluable in whittling down the vast array of automation solutions on the market.
Chewy specifically wanted to lessen warehouse traffic and eliminate or reduce heavy lifts for workers. Both changes should lead to faster throughput and fewer on-the-job injuries.
Safety is a top concern for the Chewy team, and experts say the concern is climbing the list of priorities for warehouse operators seeking new technology.
"Crucially, this doesn’t mean getting employees out of warehouses but rather optimizing workflows to automate repetitive tasks that put them in close contact with their coworkers," said Adam Kline, senior director of product management for Manhattan Associates.
In Chewy's existing facilities, people move around the facilities to pick stationery goods, walking miles per shift, said Gilbert.
"You get a lot of congestion in the site as a result of it, especially as you scale up an operation. There becomes a point where it's almost a point of diminishing returns — where you can't really get more out of the building because you have so much congestion inside," he said.
It's a common problem, according to Kline. "We can look at a non-automated facility and see forktrucks, pallet jacks and people moving product on foot, and it looks not dissimilar to the congestion we see on our roadways – right down to the daily rush hour and seasonal holiday peaks," Kline said. "You can see the improvement in the transition to an automated facility in which aisles and cross-aisles are mapped, tasks are deliberately constructed, and traffic is minimized."
The solution Chewy landed on was a goods-to-persons system orchestrated by a network of conveyor belts and pneumatic rollers. Gilbert said he expects a significant drop in the time between a customer clicking submit on an order and that order landing on a truck.
Building the tech stack
Chewy's new automated model for fulfillment knits together technology from multiple vendors (which Gilbert declined to name for competitive reasons). High-speed sortation systems will ferry goods to pickers on conveyor belts, rollers and some robots — complemented by a top-to-bottom redesign of storage tailored to Chewy's assortment.
"It can range from small toys and treats all the way up to 50-pound bags of dog food ... so we've really focused on how we slot the building," Gilbert said. The building will be divided into zones based on SKU velocity, with slightly different technology and systems in each.
"We have one area of the building where we have robotics that are bringing products to team members to select and then place into picking containers that will ultimately convey their way through the rest of the processes," he said, adding that workers in this zone will be stationary.
Other pickers will still make lateral movements but nothing near the miles they walked previously. Plus, each order will need fewer overall touches.
"There becomes a point where it's almost a point of diminishing returns — where you can't really get more out of the building because you have so much congestion inside."
Vice President of Operations at Chewy
The Chewy select team scoured trade shows and found a lot of interesting technology, according to Gilbert, but very little that was a perfect fit. Much of the automation Gilbert and his team found was excellent at doing one task, in consistent conditions, but add varied box sizes, and you're out of luck.
The patchwork nature of the solution the team landed on is the norm, said Joe Dunlap, managing director at CBRE. Vendors tend to be experts in one technology, and fulfillment operations leaders often create a custom cocktail to fit their business — leading to a rise in importance, and number, of integrators.
"This automation trend that's occurring these last few years has brought more integrators out of the woodwork who specialize in certain kinds of automation. And in some of these [robotics-as-a-service] solutions, the vendors themselves are integrating them because it's so unique," Dunlap said.
Gilbert's team brought Chewy's real order volume to potential vendors and integrators to run simulations. The team traveled across the U.S. to get honest feedback from users. Running scenarios quickly whittled down the field.
"It basically shrunk the pool down until about 30% was remaining. And then it started going through the vetting process of really getting into detailed design work and understanding differences in cost," Gilbert said.
Don't call it a test
Even in a normal business environment, supply chain technology slip-ups can cost millions. But retailers doing well in the pandemic will take the risk — as long as the right controls are in place to ensure a smooth rollout, Dunlap said.
"You have to be careful about tearing down racking and implementing it in sort of a phased fashion so that you can light it up or turn it on in sequence and keep the business running," Dunlap said.
Chewy's warehouse management system team has been there every step of the way to ensure a smooth transition, according to Gilbert. Chewy doesn't have a custom WMS, but after years of iterating and custom coding on top of third-party product, it might as well, Gilbert explained.
"Our WMS team played a huge role in integrating with this new technology because there's a lot of handoffs when you have a warehouse control system and on top, our WMS," he said.
The e-tailer's planning cycle for new facilities is generally three to four years out — present circumstance excepted — so Chewy's operations team will soon be tasked with predicting how much of the current flood of demand will stick. For now, the focus is on executing the transition to the new automated processes without any hiccups.
"This is not a test," Gilbert said. The Chewy team will analyze this first automated facility to plan its next move. Changing the width of an aisle by inches could make a difference for efficiency, Gilbert said as an example.
"While we've all had experience with these types of technology and equipment, there are always things that you learn along the way," he said.
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