On a typical evening at online grocer FreshDirect LLC’s highly automated distribution center in NYC, workers fillet, wrap and label individual orders of swordfish and then push the packages on conveyor belts that run through the building. Trucked in that day from Nova Scotia, the fish might spend less than 24 hours there before hitting the streets bound for homes from Connecticut to Washington, D.C.
Designed to keep food fresh longer and move it faster, the operation is the online grocer’s multimillion-dollar bet on the fastest-growing sector in the grocery business. FreshDirect helped build the e-commerce home-delivery market, and now with Amazon and big grocery chains like Kroger piling on investments, companies are jockeying for position in the growing business, reports The Wall Street Journal (July 18, 2018). Amazon, Target and others have invested hundreds of millions of dollars to expand food delivery and build out their grocery e-commerce operations. Peapod has expanded to 24 markets and is investing in technology to cut its handling and delivery costs. Walmart’s Jet.com will open a fulfillment center in NYC this fall to help roll out same day grocery deliveries there.
The grocers are trying to solve one of the toughest problems in home delivery: Getting food to doorsteps in the same condition consumers would expect if they went to the store themselves. Delivering perishables is tricky: Fruit bruises, meat spoils, eggs break. Botched deliveries can upend dinner plans, leaving customers angry, and hungry.
FreshDirect’s logistic hurdles start well before delivery. It must get products from its suppliers to the building, process the food, then pick, pack and ship orders before the quality degrades. So the new facility has 15 different temperature zones. Tomatoes do best at 55 degrees, but chicken and meat like it to be 32 degrees, which gives them more of shelf life.
Classroom discussion questions:
- List each of the 10 OM decisions that FreshDirect is facing now?
- Why is NYC a hub of on-line groceries?