In a cavernous shed on an industrial park in Hampshire, hundreds of robots are at work in the “hive”. In Ocado’s latest Customer Fulfilment Centre (CFC), 65,000 orders a week are prepared for some of the grocer’s 645,000 online customers. It is probably the most technologically advanced such centre in the world.
In a cavernous shed on an industrial park in Hampshire, hundreds of robots are at work in the “hive”. In Ocado’s latest Customer Fulfilment Centre (CFC), 65,000 orders a week are prepared for some of the grocer’s 645,000 online customers. It is probably the most technologically advanced such centre in the world.
Instead of ferrying crates on a long line of conveyor belts, as many CFCs do, it uses a three-dimensional grid system, or hive, to assemble customers’ orders. Washing-machine-sized robots whizz this way and that on the top of the grid, pausing only for a second to pick up products and ferry them to “pick stations”, where people put the orders together. An air-traffic-control-style system choreographs the movements of the 700 bots scurrying over an area the size of three football pitches, with just half a centimetre to spare between them.
This is the operating platform that has turned Ocado, founded in 2000, into one of the giants of contemporary retail. The company at last came of age on May 17th when it announced a deal to supply America’s biggest supermarket chain, Kroger, with the same technology in up to 20 new CFCs across America. The news sent Ocado’s stock soaring by more than 50%.
The Path to Success
Started as an online grocery company, Ocado is now as much a tech startup as anything. Its success points to a future in which retail is dominated by online shopping. And it throws into sharp relief the continuing woes of Marks & Spencer, a retail giant of the bricks and mortar era, which has been slow to adapt to the digital era and is paying the price. On May 23rd it announced a 62% fall in annual profits. It will close a third of its 300 stores by 2022 in an attempt to cut costs.
Ocado is now valued at £5.7bn ($7.6bn), and venerable M&S at £5bn. M&S is on the brink of dropping out of the FTSE 100, and may even by replaced by Ocado. If it were, there could be no better symbol of the old economy making way for the new.
For Ocado, it is a moment of vindication. Analysts were long sceptical about a company that produced little profit, and thus looked overvalued. Ocado’s management argued that it was investing for future growth, especially in technology. It teamed up with Morrison’s, a British supermarket, in 2013, and in the past year has sold its operating platform not only to Kroger but to four other supermarkets in Europe and Canada. The company also has expansion plans at home. It is building the world’s largest automated CFC for online groceries at Erith, just outside London. Here 3,500 swarming robots will prepare 200,000 orders a week.
The Industry
It is notoriously hard to make money in online grocery shopping, which most supermarkets do as a sideline to their offline business. But, says Bryan Roberts of TCC Global, a consultancy, by so extensively automating the picking and delivery process, Ocado has proved that it is possible to do so. This is what makes it a successful “disrupter”. So much so that it is now emerging as the main challenger to Amazon in online groceries.
Paul Clarke, Ocado’s chief technology officer, argues that the bespoke AI and robotics systems that the company has developed for its CFCs will have applications beyond grocery shopping. “That’s the bigger game,” he says. The company is developing robotic hands for the delicate manipulation of fragile goods. Before long the grocer could be eating more firms’ lunch.
(Free) Via - The Economist
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