Online Grocer Takes A Fresh Approach To Technology

Online grocer FreshDirect has found success where many have failed. But the 6-year-old company has kept a pretty tight rein on its business, expanding slowly only in the New York metropolitan area. Now, with a new IT infrastructure built with blade servers and virtualization technology to withstand more traffic, FreshDirect has growth on its mind.

FreshDirect made its first deliveries in July 2002, and since then has carefully extended its service base by ZIP code areas, from Brooklyn to Queens and Manhattan. With annual revenue of around $150 million, and intentions to continue to expand its boundaries, the company hired in 2004 chief technology officer Myles Trachtenberg, who in the past year led the company through an enterprise refresh centered around the use of blade servers and virtualization technologies. The revamp was completed this past September.

The technology refresh was part of what Trachtenberg says is the company's belief that it can use a variety of industry best practices to succeed. "I like to think of us as three types of businesses pulled together," he says. FreshDirect has sought to emulate the E-commerce success of Amazon.com, the just-in-time manufacturing capabilities of Dell, and the distribution expertise of FedEx.

About 99% of FreshDirect's business is generated through its Web site, but the company has attempted to differentiate its service from other grocers offering home delivery, including large national chains such as Albertsons and Safeway, by concentrating on the shipping and manufacture of fresh foods, which accounts for about 70% of company sales, says Trachtenberg. FreshDirect operates from a 300,000-square-foot manufacturing and distribution facility in Long Island City, N.Y. The facility has more than a dozen different temperature zones ranging from 38 degrees to -40 degrees designed to preserve the quality of its fresh meats and produce. The company acquires its meats, seafood, and produce daily from outlets in the New York area, and then specifically prepares and packages the food for delivery.

When Trachtenberg joined FreshDirect, its storefront infrastructure was running on Sun Microsystems servers that had been purchased more than five years earlier. Trachtenberg wanted to update the systems to create an infrastructure that would ensure high availability to meet customer demands for quick and easy online experience, as well as the scalability to allow FreshDirect to continue to expand. In addition, Trachtenberg says he wanted to move to an Intel-based system.

After evaluating systems from IBM, Hewlett-Packard and others, the company decided on blade servers from Egenera Inc. Now, the company has 15 server blades based on Xeon processors ranging from 2.4 to 3.1 GHz, running on RedHat Linux 3.0. FreshDirect is also is using virtualization technology from VMware to double usable server capacity.

Keeping the FreshDirect Web site in operation is essential to getting the company to grow, Trachtenberg says. Currently, the Web site handles about 4,000 orders a day, each with an average of 30 items, which requiring the movement of about 1 million items in the warehouse each week.

Prior to the Egenera server installation, the average response time on the FreshDirect Web site was around eight seconds. Today, the response time is two seconds during peak demand, and one second during low demand periods, Trachtenberg says.

Using the blade servers and virtualization, FreshDirect has straightforward redundancy to guard against system downtime, and the hot-swap capabilities of the blades eases any needs for hardware changes, Trachtenberg says. Although he believes the current implementation will be adequate for growth in the near term, FreshDirect can also easily add additional blades to the existing chassis when expansion is necessary.

Within its data center, FreshDirect is using SunFire 480 and 1280 servers to run its SAP ERP software. Trachtenberg has dedicated two 1280s as database servers, two 480s as application servers, one 480 as a test server, and one 480 as a development server. Its sortation, or pick-and-pack system, runs on three miles of conveyors covering two mezzanine levels, and is managed with a Sun 420R and Dell PowerEdge 2650.

Inside the warehouse, each order is broken up for sorting and packing. The order is first run through a logistics application by RouteSmart Technologies, which uses algorithms to divide up orders based on destination, delivery schedules, and capacity.

The logistics information is fed into the SAP application, and waves of batch processing are completed through the plant. Ten delivery trucks are loaded at any given time, and FreshDirect then provides delivery within a two-hour window.

How rapidly FreshDirect expands its territory in the next year or two has yet to be determined, Trachtenberg says. "We think there is still a lot of growth left in the areas we serve now," he says. "In New York City alone, I'd say there is definitely potential for between $300 million and $500 million a year."

Regardless, FreshDirect has managed to stay open in an industry that's filled with failures. In fact, FreshDirect was built upon the bones of a predecessor in the market, Webvan. Founded in 1999, FreshDirect was established in part by using equipment it bought from the defunct Webvan at auction. "The road is littered with a lot of corpses in this market," says Christine Spivey Overby, an analyst with Forrester Research. "But FreshDirect's model makes sense within the context of New York, in particular, because it's a city where it has been very difficult to find quality fresh produce and meats without paying exorbitant prices."