Battle of the middle mile starts autonomously
Loblaw is partnering with Gatik to launch an autonomous food delivery fleet. This is a solution for the “middle mile,” which will assure links between distribution centres and stores. Consumers will not see autonomous vehicles driving up to their homes yet, but that day will surely come soon.
These cold-chain capable, boxed vehicles have already been roaming Toronto streets for another grocer for some time. They even experienced last year’s winter, so Gatik is aware of potential perilous road conditions when operating its fleet. Captured data by Gatik will give the company the experience needed to make the supply chain more efficient.
E-commerce is clearly driving this decision. The “middle mile” is where gains can be exponential, even though the last mile may be the costliest. This is the obscure part of the supply chain consumers do not see but are severely affected by. Food prices are more manageable when costs are under control. With this partnership, Loblaw will be able to move food from automated picking facilities multiple times a day to support its PC Express online grocery service in the Greater Toronto Area.
Online sales by grocers have increased nearly 90% since October 2019. For Loblaw, online sales growth is nearly 200% compared to last year. In food retail, online sales represent close to 3.3% of all sales in 2020 compared to 1.7% last year, according to Nielsen. This is just incredible growth. With such a market shift, some supply chain adjustments are required. Unlike Sobeys, which is creating a unique and independent infrastructure to develop Voilà by Sobeys, Loblaw is opting to make its supply chain more cyber-friendly. Both approaches can work. With these initiatives, grocers gain the ability to make more money online, something they have hesitated to do for years. With COVID-19, grocers are fully committed. Moving forward, they will want consumers to buy more food online, and they'll get better at providing this service.
Vehicles operated by Gatik will not be entirely autonomous, however--vehicles will have a safety driver to start. Neither Gatik nor Loblaw could say when the autonomous fleet would be driving around without any humans, but it's just a matter of time.
Eliminating humans from the food supply chain is an option that has gained currency throughout the pandemic. For one, jurisdictions around the globe managing routes have struggled and have had to think about restaurants, rest areas and how to keep truckers and staff safe while keeping the region's food secure. Humans, as vectors for transmitting the virus, or any disease for that matter, are seen as a liability when a public health crisis occurs. Supply chains are increasingly becoming more automated, so Loblaw’s move with Gatik is anything but surprising.
This humanless food supply chain is an ideal for now, but Loblaw’s call is significant enough to allow most of us to dream. Given the economics of food distribution in Canada though, this innovation is unavoidable, and Loblaw appears to be out of the gate first, embracing what lies ahead. Digitizing the supply chain can only help grocers better serve the Canadian market. With such a vast country, with few people living in it, making the middle mile more efficient is key. It does not necessarily mean that Loblaw’s (or any other grocer’s) intent is to eliminate all human involvement in the handling of food throughout its operations. It will however seek different skills and knowledge to support its online ambitions. The sector needs strong employees and always will. But with omnichannel, employees will be expected to play different roles, and most of the work will have to be about data management, not handling food per se.
The last mile is an autonomous fleet’s next frontier, the most exciting one for the industry, and likely for consumers as well. Canadians may not be there yet, but grocers like Loblaw are signalling to the Canadian public that the horse has left the virtual barn.
