The impact of investments on e-grocery logistics operations

Abstract

In recent years, various business models have been implemented in e-grocery retailing, however, in most cases, without success. The biggest stumbling block has been logistics, and some inefficient operation has frequently led to capital being used up on operating expenses. Therefore, improving overall logistical efficiency can be seen as one of the most important steps towards profitability. This dissertation aims at understanding different e- grocery logistics system implementation alternatives. The main objective is to study how best to implement an e-grocery business from the logistical point of view so as to ensure profitability. The second objective is to identify, model, and evaluate different logistical solutions that can be used in e-grocery retailing. Solutions for achieving greater picking efficiency are presented and modelled. Special attention is paid to investments in the automation of picking. Different unattended reception solutions and revenue models are identified and examined. The potential of the revenue models is evaluated with modelling and concrete examples. The last objective is to find and evaluate cost-effective combinations of logistical solutions in different market situations so as to enable the successful implementation of an e-grocery business. According to the results, the general rule that cost savings in picking cannot be realised with automation if demand and capacity utilisation varies significantly applies also to the e-grocery business. Therefore, the focus should be more on creating a flexible distribution centre with manual solutions. Another result suggests that shared reception boxes with an open system have the potential to be profitable as a part of the e-grocery logistics system. However, customer demand is currently uncertain and therefore capacity utilisation is crucial. Finally, the way in which the order of implementing logistical solutions affects e- grocery business investment is presented. The flexibility of individual solutions and solutions’ inter-dependencies when choosing an investment strategy are discussed.