Robotics-powered ‘microfulfillment’ startup Fabric raises $200M

Fabric, a startup developing a “microfulfillment” automation platform for retailers, today announced that it raised $200 million in series C funding led by Temasek with participation from Koch Disruptive Technologies, Union Tech Ventures, Harel Insurance & Finance, Pontifax Global Food and Agriculture Technology Fund, Canada Pension Plan Investment Board, KSH Capital, Princeville Capital, Wharton Equity, and others. With a valuation of over $1 billion and $336 million in capital raised to date, Fabric plans to expand its headcount and build a network of microfulfillment centers across major cities in the U.S.

According to McKinsey, ecommerce sales penetration more than doubled to 35% in 2020, the equivalent of roughly 10 years of growth within a few months. The surge in online shopping has been compounded by a desire for faster shipping — a tough ask in the midst of a pandemic. While the same-day delivery market in the U.S. is poised to grow by $9.82 billion over the next four years, a worldwide labor shortage — not to mention backups at critical ports of call — make the prospect daunting for merchandisers without economies of scale.

Above: An isometric view of a Fabric fulfillment center.

Image Credit: Fabric

Fabric claims to level the playing field with a modular, software-led robotics approach to fulfillment. AI orchestrates robots within its microfulfillment centers’ walls to break orders into tasks and delegate them autonomously. Some robots bring items awaiting shipment in totes to teams of employees who pack individual orders. Operating in rooms with ceilings as low as 11 feet, other robots move packaged orders from temperature-controlled zones for fresh, ambient, chilled, and frozen products to dispatch areas, where they’re loaded onto a scooter or van for delivery.

Fabric’s customers choose either a platform model to run and operate independently on their real estate or a service model in which fulfillment is offered as a service with an investment.

“Fabric’s solution was designed from the ground up for local, on-demand ecommerce, which means it was designed to achieve high throughputs in small urban footprints, with low operational costs and maximum flexibility,” Fabric CEO Elram Goren told VentureBeat via email. “By combining our software, automated robotics, and logistics expertise, Fabric helps brands and retailers to future-proof their businesses with profitable unit economics. Robotics and automation bring a range of efficiencies to the ecommerce fulfillment space, increasing throughput per square footprint and decreasing the reliance on costly manual labor. Keeping fulfillment local speeds up delivery times while reducing shipping costs.”

Microfulfillment

Microfulfillment centers — located inside existing stores or structures that hold a market’s worth of goods — are increasingly being hailed as the answer to speedy shipping in space-starved city centers. For example, Calgary, Alberta-based Attabotics’ solution condenses aisles of warehouse shelves into single vertical storage structures that roving shuttles traverse horizontally.

As for Fabric, which was founded in 2015 and now employs over 300 people across its Tel Aviv, New York, and Atlanta offices, it’s among the most successful startups in the emerging segment. The company runs microfulfillment operations for grocery and retailers in New York City, Washington, D.C., and Tel Aviv and has partnerships with FreshDirect and Walmart as well as Instacart. For Instacart, Fabric plans to integrate its software and robotics solutions with Instagram’s technology and network of shoppers. And for Walmart, the company intends to add microfulfillment centers to dozens of store locations as part of a pilot involving other technology providers including Alert Innovation and Dematic.

“[W]e’re building our robots to be as robust and simple as possible from a hardware perspective, shifting the heavy lifting as much as possible to our software stack, to allow for scalability, lower costs, and robustness. At the same time, our software leverages our robotics architecture and topology, which allows it functionality and performance optimization opportunities that are unparalleled in the market,” Goren said.

In something of a proof of concept in December 2019, Fabric launched an 18,000-square-foot grocery site in Tel Aviv that’s now delivering orders to online customers. Fabric’s first sorting center, also in Tel Aviv, covers 6,000 square feet and services over 400 orders a day for drugstore chain Super-Pharm.

“We’re utilizing AI and machine learning in many different ways,” Goren added. “We have task resource allocation and planning that uses supervised machine learning to predict the duration, resource, and demand of each possible resource assignment which then works with other optimization algorithms such as genetic algorithms and Bayesian optimization. We enable retailers forecasting and prediction capabilities over their stock, to make sure they always have the right items in the right place at the right time. Stock level optimization is composed of two stages: First, time series forecasting predicts future demand for each product, and expected replenishment time. Second, an optimization algorithm maximizes stock availability for orders while minimizing the total costs of replenishment shipments and not exceeding available storage. These are just some of the software components that we’re continuing to develop.”

As logistics and fulfillment challenges continue to mount, companies are embracing automation across the entire supply chain. According to one estimate, 4 million commercial warehouse robots are to be installed in over 50,000 warehouses by 2025. Amazon alone uses over 350,000 autonomous robots to automate order fulfillment, the company recently reported.

The concept is catching on particularly quickly among grocers and convenience stores with small delivery radiuses. On-demand food and goods startup Gopuff employs hundreds of microfulfillment centers in its delivery network. And Kroger, Albertsons, and H-E-B are using — or actively exploring — microfulfillment for online customers.

Fabric rival Attabotics raised $25 million in July 2020 for its robotics supply chain tech, and InVia Robotics last summer nabbed $20 million to bring its subscription-based robotics to ecommerce warehouses. Softbank recently invested $2.8 billion in robotics and microfulfillment company AutoStore. In the European Union, supermarket chain Ocado deployed a robot that can grasp fragile objects without breaking them. And startup Exotec has detailed a system called Skypod that taps robots capable of moving in three dimensions.

“[The pandemic] has changed very little, really, and at the same time — it accelerated everything. People still like to get more, pay less, and get it faster. Retailers still like to sell more and make more. But there has been a leap of a decade in this past year, and this is what we’re seeing. COVID caught retailers and brands off guard and has forced them to move much faster than they had planned for,” Goren said.