Kroger debuts first Ocado automated fulfillment center

The Kroger Co. today ushered in its e-commerce model of the future with the official launch of the first of 20 planned Ocado-powered automated warehouses for filling online grocery orders.

Located in Monroe, Ohio, the 375,000-square-foot customer fulfillment center (CFC) uses artificial intelligence, advanced robotics and automation to enable more seamless and efficient fulfillment, picking and delivery, Kroger said Wednesday. The facility, employing technology from U.K.-based partner Ocado Group, is designed to provide customers “anything, anytime, anywhere” via the Kroger Delivery service and extend the supermarket giant’s products to a larger geographic footprint.  

Inside the CFC, more than 1,000 bots containing totes with products and ready customer orders dash across huge 3D grids — known as “The Hive” — that are managed by proprietary air-traffic control systems in the unlicensed spectrum, according to Cincinnati-based Kroger. When order delivery times near, the bots retrieve the products from The Hive and bring them to pick stations, where items are sorted for delivery. Kroger noted that algorithms govern the pick-and-sort process to ensure that products are packed intelligently, with fragile items on top and bags evenly weighted. Each order is optimized to use fewer bags, reducing plastic use.

Related:Kroger to ‘lead with fresh, accelerate with digital’ in 2021

'The momentum we’re experiencing is well-timed with the evolution of Kroger Delivery, underpinning the permanent shift in grocery consumer behavior,' Kroger CEO Rodney McMullen said.

Next, packed orders are loaded into a temperature-controlled Kroger Delivery van that can transport up to 20 orders. Machine-learning algorithms weigh factors such as road conditions and fuel efficiency to dynamically optimize delivery routes, Kroger said. Each CFC covers a delivery radius of up to 90 miles.

Currently, the Monroe CFC carries thousands of popular grocery products and can fill thousands of delivery orders daily, Kroger said. The facility also can support the fulfillment of pickup orders.

The launch of the Monroe CFC comes about 22 months after Kroger broke ground on the $55 million facility. Kroger had announced a soft opening of the CFC when reporting fiscal 2020 results in early March. And at the month’s end, during its virtual 2021 Investor Day conference, the company cited the pivotal role to be played by the Ocado CFCs in its goal to “accelerate with digital” under its strategic growth plan.

Kroger and Ocado executives premiered the Monroe facility in a virtual press conference on Wednesday.

“2020 was a pivotal year for grocery e-commerce, with Kroger’s digital business scaling to over $10 billion and achieving a record digital sales increase of 116%,” Kroger Chairman and CEO Rodney McMullen said in a statement Wednesday on the Monroe CFC’s launch. “We’re incredibly proud to achieve this milestone that advances our position as one of America’s leading e-commerce companies. The momentum we’re experiencing is well-timed with the evolution of Kroger Delivery, underpinning the permanent shift in grocery consumer behavior and need for enterprising and modern e-commerce and last-mile solutions—today’s true competitive horsepower.”

Related:Kroger names Phoenix as newest Ocado automated warehouse site

Inside the CFC, more than 1,000 bots containing totes with products navigate huge 3D grids — known as The Hive — to fulfill orders.

Kroger and Ocado unveiled their partnership in May 2018, saying at the time that they plan to open 20 CFCs in the United States over the next three years. So far, Kroger has announced 10 CFCs. Besides the Monroe facility, they include locations in Groveland, Fla.; Forest Park, Ga.; Dallas; Frederick, Md.; Phoenix; Pleasant Prairie, Wis.; and Romulus, Mich., as well as two unspecified sites in the Pacific Northwest and West.

More CFC locations will be announced as the delivery network expands, Kroger said. Plans call for the facility in Groveland, west of Orlando, Fla. — a new market area for Kroger — to begin filling online orders for customers this spring.

“The introduction of the first customer fulfillment center marks a historic milestone for grocery retail in the U.S. Since signing our partnership in 2018, Ocado and Kroger teams have worked in tight-knit collaboration to lay the foundation to advance their state-of-the-art fulfillment ecosystem across the country, supporting Kroger to reach customers anywhere with anything, at any time,” stated Tim Steiner, co-founder and CEO of Ocado Group.

“This moment marks the next phase of our partnership, and it comes against the backdrop of soaring demand for online grocery options in the U.S. and worldwide,” he explained. “In the coming years, we will open more automated CFCs across a range of sizes with Kroger. We will also roll out components of our software solutions to stores in collaboration with Kroger’s existing seamless platform to support fulfillment of curbside pickup orders. The breadth of this fulfillment ecosystem will be crucial in helping Kroger to continue to win in e-commerce across the U.S.”

Packed orders are loaded into a temperature-controlled Kroger Delivery van that can transport up to 20 orders.

The Monroe CFC represents one of the models for the Kroger Delivery network, which also will include smaller facilities plus spoke locations that will extend the area served by each CFC beyond its 90-mile range, according to Kroger.

The retailer has said the Groveland and Forest Park CFCs will be 375,000 square feet, while the Frederick, Pleasant Prairie and Dallas facilities will be 350,000 square feet. At 135,000 square feet, the Romulus CFC is the smallest announced to date, followed by the Phoenix facility at 200,000 square feet. Kroger reported that the CFCs in the West and Pacific Northwest will measure about 300,000 square feet and 200,000 square feet, respectively.

“We’re excited to be building a distribution network that creates a more equitable food system by providing greater accessibility to fresh food through the power of innovation,” commented Gabriel Arreaga, senior vice president and chief supply chain officer at Kroger. “Kroger’s network of customer fulfillment centers will accelerate our e-commerce capabilities, focusing on more cost-effective supply chain and last-mile delivery solutions, seamless customer experiences and new career opportunities.”

Kroger noted that members of its supply chain, technology and digital, data and analytics, operations and merchandising teams have been collaborating on the design of the Kroger Delivery network. On-site associates at each CFC will support delivery operations and help process, package and load orders. The Monroe CFC will employ almost 400 associates in roles ranging from operations and customer service and engagement to engineering, inventory and quality management, and transportation.

“Kroger is uniquely positioned to transform grocery e-commerce because of our innovative and knowledgeable delivery associates’ commitment to providing fresh food and delivering a rewarding customer experience,” McMullen added. “Kroger Delivery brings together the expertise of our team and the efficiency of technology to create an in-stock, fresh and friendly experience for every customer, every time.”

Shoppers place their orders via Kroger.com or the Kroger mobile app, and customers in markets served by a CFC will have their groceries delivered by a “knowledgeable” Kroger Delivery associate, Kroger said. The company noted that it will provide an “industry-leading” level of customer service, with delivery person ensuring order freshness and satisfaction, managing order changes, and informing customers of their loyalty membership benefits, such as earned fuel points and digital coupon savings.

Kroger said it's aiming for a high level of customer service, including variable fees, from the Kroger Delivery network.

Kroger said it will offer variable delivery fees that don’t require customers to give a tip and are guided by such factors as shopper loyalty, delivery window popularity, route optimization and order lead time. This fee structure will enable Kroger to provide additional discounted options when feasible, creating a personalized offering for customers, the company added.

“We more than doubled our e-commerce business last year and, through our industry- leading seamless ecosystem, we continue to provide fresh food to our customers in a way that fits the structure of their day — whether it’s coming to our stores, picking it up, delivering to a convenient location, or directly shipping products to their homes,” according to Yael Cosset, senior vice president and chief technology and digital officer at Kroger. “The Kroger Delivery network leverages our proprietary set of assets and enables us to increase customer reach, concentrating on availability, proximity and convenience for communities in both existing and new geographies like Florida.”

The delivery network also will continue to leverage stores and third-party partners, such as Instacart, to deliver certain orders, Kroger said. At the fiscal 2020 year-end, the retailer had 2,223 pickup sites and 2,472 delivery locations, covering 98% of the households in its market areas.