Kroger Breaks Ground on New Highly Automated DC with Partner Ocado
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Supply Chain Digest, June 2019
By SCDigest Editorial Staff
Grocery giant Kroger made big news in May 2018 when it announced an agreement with UK on-line grocer turned distribution center automation company Ocado to build what it says will ultimately be 20-Ocado-designed DCs for efulfillment over the next three years.
Interestingly, the deal involves Ocado not only designing the DCs but operating them as well. As part of the deal, Ocado said it would “discontinue discussions with other U.S.-based retailers” – though that exclusivity is dependent on Kroger meeting targets for automated DC construction and volumes.
Als part of the deal, Kroger also took a 5% stake in Ocado for $247 million.
In the system in the UK, Ocado robots sit atop a rectangular grid, with containers beneath the grid holding the 50,000-plus SKUs Ocado sells. The robots move at four meters a second (about nine miles an hour), controlled by software that knows what items are needed for orders at any given time.
Each robot lowers a hook and the grabs and pulls in a container, then moves across the grid to a location where a stationary human associate stands below. After the robot lowers the container, the worker either replenishes the container if it is empty, or selects items from the container for customer orders, before the robot moves on.
Ocado said in mid-2017 it was processing an order of 50 items, including produce, meat and dairy, in just five minutes using the new robotic system. Fulfilling a similar order at one of the company’s older, mostly manual facilities takes an average of about two hours.
As development plans for the Kroger sites moved forward, with the first three locations selected, there was an odd twist earlier this year when Ocado’s flagship DC in the UK burned to the ground. Some – and we assume that includes Kroger – naturally wondered if the mobile robots in the Ocado system were somehow to blame.
And in a way they were. Shortly after the fire, Ocado said the huge blaze was caused by an electrical fault in a battery that caused one of the robots to catch fire. Ocado said at the same time that customers for its system such as Kroger were not deterred from moving forward with the system despite the fire.
All that in prelude to the groundbreaking last week for the first of the new automated DCs, in the town of Munroe, OH, about halfway between Cincinnati – where Kroger is headquartered – and Dayton.
Even with the robots, the new DC is expected to employ 400 workers. It will cost some $55 million to construct and equip the 335,000 square foot facility.
“Kroger is joining with the best partners in the world to co-innovate and leverage technology to redefine the customer experience,” said Rodney McMullen, Kroger CEO. “We are incredibly excited to partner with Ocado to transform the industry and deliver on our “Restock Kroger” vision to serve America through food inspiration and uplift.”
A news release said the DC was designed to provide customers with “anything, anytime and anywhere.”
The Munroe facility is expected to go live in 2021.
Two more Ocado DCs have been announced for central Florida and the Mid-Atlantic. Kroger said in March that it expects to break ground for a 375,000-square-foot facility in Groveland, FL later this year.
It’s a giant bet on ecommerce. In fiscal 2018, digital sales surged 58% at Kroger. The supermarket giant said that, during the year, it expanded on-line grocery delivery and/or pickup service to 91% of households in its trade areas – soon to be served with much higher levels of automation.
