Loblaws is partnering with Gatik, an autonomous vehicle provider from the United States, to launch the first 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 which are not very large, have already been roaming Toronto’s streets for some time for another grocer. 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.
What is driving this decision is clearly e-commerce. 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, Loblaws will be able to move food from automated picking facilities multiple times a day to support their PC Express online grocery service in the Greater Toronto Area. The fleet will likely be expanded as this partnership is being presented as a long-term work-in-progress, if you will.
Online sales by grocers have increased almost 90% since October of 2019. For Loblaws, online sales growth is almost at 200% compared to last year. In food retail, online sales represent close to 3.3% of all sales 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, Loblaws 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. For a few years, grocers were dithering with the concept. With COVID-19, grocers are fully committed now. Moving forward, they will want us to buy more food online, and will get better at providing this service.
Vehicles operated by Gatik will not be entirely autonomous, however. All vehicles will have a safety driver as a co-pilot for now. Since consumers are connecting with these vehicles, the approval process will probably be faster, but neither Gatik nor Loblaws could say when the autonomous fleet would be driving around without any humans at all. It is essentially just a matter of time.
Eliminating humans from the food supply chain is an option which 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 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 human-less food supply chain is an ideal for now, but Loblaws’ 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 Loblaws 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 Loblaws’, 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 as the sector morphs into an omnichannel beat of sort, 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 us as well. Canadians may not be there yet, but grocers like Loblaw are signaling to the Canadian public that the horse has left the virtual barn.