During the first few months of operation, Racking Machine, Seattle-based company that optimizes the process of storing store shelves for supermarkets and grocery stores, has no name.
Co-founders Stefan Kalb and Bede Jordan went on a ski trip outside Salt Lake City about four years ago when they began to discuss what, exactly, can be done about the problem of food waste in the US.
West Washington University graduate with a degree in actuarial science, Kalb said he started his food company to make a difference in the world. While Molly does promote healthy eating, the problems experienced by Kalb and Bede Microsoft engineer, who handles at Shelf Engine might have a greater impact.
Food waste is not only bad because of inefficiencies in dealing with major problems in the US with food insecurity for citizens, it is also bad for the environment.
Shelf Engine proposes to overcome this problem by providing estimates of demand for perishable food. The idea is to squeeze out inefficiencies from the ordering system. Usually about a third of food is thrown away from the bakery section and other items that are very rotten are stored on store shelves. Shelf Engine guarantees sales for the store, and any items that remain unsold will be paid for by the company.
The Shelf Engine gets information about how many sales stores typically see for certain items and then can estimate how many requests for certain products there will be. The company makes money from arbitration between how much it pays for goods from vendors and how much is sold to wholesalers.
This allows food ingredients to reduce food waste and has a wider variety of products on the shelf for customers.
Shelf Engine initially went to the market with the product he hoped to sell to the grocery store, but found more appeal by becoming a market and perfecting its model on how much certain items needed to be stored on store shelves.
The next item on Bede and Kalb’s agenda is to gain insight into secondary sources such as imperfect product retailers or other grocery stores that function as outlets.
The business model has shown results in about 400 stores in the Northwest, according to Kalb, and now has another $ 12 million in financing to go to market.
The funds came from Garry Tan’s Initialized and GGV (and the managing director of GGV Hans Tung has a seat on the company board). Other investors in the company include the Capital Foundation, Bain Capital, 1984 and Correlation Effort .
Kalb said the money from the round would be used to improve the engineering team and the sales and acquisition process.
Investing in Shelf Engines is part of a wave of new technology applications that are coming to the grocery store, as Sunny Dhillon, a partner at Signia Ventures, wrote in an article for Extra Crunch from TechCrunch (membership required).
“Food margins will always be thin, and the difference between profitable and unprofitable wholesalers is often only pennies,” Dhillon wrote. “Thus, as e-grocery adoption becomes more common, retailers must not only optimize their fulfillment operations (for example MFC), but also logistics delivery to the customer’s doorstep to ensure speed and quality (eg darkstores).”
Beyond Dhillon’s version of a dedicated shipping network with mobile fulfillment centers and illicit shops, there is plenty of room for chains with existing real estate and special shopping options to increase their margins on perishable goods, too.
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