The Kroger Co. last week said it is launching its Customer Fulfillment Center in Monroe, Ohio, the first of its kind in the U.S. to combine “vertical integration, machine learning, and robotics with affordable, friendly, and fast delivery service for fresh food.” The company will be using technology from Ocado Group PLC under a partnership that began in 2018.
Cincinnati-based Kroger was founded in 1883 and has close to 500,000 associates serving 60 million households annually. Hatflield, U.K.-based Ocado has been developing robots, artificial intelligence, and automated storage and retrieval systems (ASRS) for online grocers such as Ocado Retail Ltd. It acquired Kindred Systems for $262 million and Haddington Dynamics for $25 million in November 2020.
“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%,” stated Rodney McMullen, chairman and CEO of Kroger. “We're incredibly proud to achieve this milestone that advances our position as one of America's leading e-commerce companies.”
Partners
Kroger and Ocado partnered to develop proprietary systems using AI, robotics, and automation for order fulfillment, picking, and delivery. They said their goal was to expand Kroger's market reach. The companies began building the new $55 million CFC in June 2019.
“The introduction of the first Customer Fulfillment Center marks a historic milestone for grocery retail in the U.S.,” said Tim Steiner, co-founder and CEO of Ocado Group. “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.”
“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 added. “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.”
Kroger Delivery
Kroger Delivery is a vertically integrated network, enabling coverage of up to 90 miles from the hub location and even more territory when spoke locations are integrated, said the companies. In these CFCs, more than 1,000 robots move around 3D grids, also known as “the shed,” orchestrated by “air-traffic control” systems in the unlicensed spectrum. The ASRS grid, known as “The Hive,” contains totes with products.
As customers orders near their delivery times, the robots retrieve products from the Hive and present them to pick stations to be sorted for delivery. Algorithms ensure that items are intelligently packed, said Kroger. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use.
After being packed, orders are loaded into a temperature-controlled Kroger Delivery van, which can store up to 20 orders. It uses machine learning to optimize delivery routes, considering factors like road conditions and optimal fuel efficiency.
The Monroe CFC measures 375,000 sq. ft., includes seven “modules,” and carries thousands of popular grocery products. Kroger said its configuration includes Ocado technology engineered for the flexible Kroger Delivery network, which will also include smaller facilities. The CFC can fulfill thousands of orders per day and support pickup orders.
Last week, Ocado partnered with Oxbotica, which is developing software for autonomous vehicles. The company has also filed suit against AutoStore Technology AS over ASRS patents.
More CFCs to come
Kroger plans to open another CFC in Groveland, Fla., west of Orlando. The company also plans to open CFCs in Dallas; Phoenix; Forest Park, Ga.; Frederick, Md.; Pleasant Prairie, Wis.; and Romulus, Mich., as well as in the West and Pacific Northwest.
“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,” said Gabriel Arreaga, Kroger's senior vice president and chief supply chain officer at Kroger. “Kroger Delivery'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.”
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