The Supply Chain Matters blog provides an update on U.S. grocery and food retailer Kroger’s technology deployment partnership with UK based robotics firm Ocado Group

In May of 2018 we alerted our readers to Kroger’s increased equity stake in United Kingdom based grocery robotics retailer Ocado Group. The U.S. grocery retailer invested approximately $247 million, equating to a 6 percent stake in the U.K. firm. In return, Kroger would license Ocado’s unique robotics-based automated warehouse technology to process online orders in a capability termed “anything, anytime and anywhere.”

The deal called for the construction and deployment of three new automated warehouses targeted for online customer fulfillment automation, growing to a total of 20 warehouses over three years.

The first shed, announced in November 2018, involves a $55 million investment and will reportedly be located in a northern suburb of Cincinnati Ohio. Kroger executives touted the facility as “redefining the grocery shopping experience for customers along the East Coast.”

This week, industry publication Supermarket News reports that the partners have announced two additional fulfillment centers or “sheds” targeting the central Florida and the mid-Atlantic regions as the next two areas. According to the report, no specifics were shared relative to exact locations or timetables for construction.

 

Supply Chain Matters Perspective

There is good and perhaps concerning news relative to Kroeger’s bold online strategy thus far.

In the good column, are reports that the grocery retailer’s online sales are already growing at a robust growth rate of 60 percent in its latest third-quarter. That is without any of the Ocado sheds. As Supermarket News rightfully indicates, Ocado’s technology will allow Kroeger to turn up the heat on competitors for online reach. The obvious online elephant in the room is competitor Amazon-Whole Foods, which has challenges of its own with increased overall pricing  and large discounting for Amazon Prime members to spur utilization of online buying.

While the three U.S. fulfillment centers are announced, there is a long way to go before permitting and construction is completed, systems are tested, and operations are fully conducted. From our lens, the key target is the ability to have some form of Ocado capability in-place by the all-important Q4 holiday period. That is a mere seven months from now. That places a lot of pressure on deployment teams, especially since the first facility will likely have to shake-out what will likely be U.S. online consumer buying preferences and patterns. While the robotics-based has garnered a lot of experience in UK grocery markets, the U.S. could provide several differences.

This is not to state that sometime this Fall, we get to eat our words, but rather in the world of online fulfillment, events move fast and capability and learning needs to move just as fast.

Bob Ferrari

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