Ocado unveils new technology to take on Amazon and rapid grocery start-ups
U.K. retail tech company Ocado on Wednesday unveiled a suite of new products aimed at helping large grocery chains take on Amazon and a wave of new rapid grocery delivery start-ups.
While Ocado is most well known for its online supermarket, a top focus for the company is robotics and automation tools that it deploys in warehouses to pick and pack items and prepare them for delivery.
Ocado sells its technology to top retailers including Kroger, Britain’s Morrisons and France’s Casino.
Technical innovations in robot design and smart logistics management sees Ocado position itself to dominate the increasingly-demanding grocery delivery space, while making it cost effective for smaller and localised retailers to potential offer same day delivery.
The innovations unveiled today include: the world’s lightest and most efficient grocery fulfilment bot; dramatically lighter grids; robotic arms that pick groceries directly from the grid, a solution that automates the most physically demanding job in a Customer Fulfilment Centre; the world’s first virtual distribution centre; a capability for short lead time deliveries; and a capability for powering retailers’ own storefronts with the intelligence behind the Ocado Smart Platform.
These innovations will allow Ocado Group and its Ocado Smart Platform (OSP) partners to install the platform much faster and in simpler, highly optimised, more cost-effective buildings, requiring lower capex, with a faster time to go-live. In addition, partners will be able to achieve greater throughput from the same or smaller footprint, lower labour costs, and address labour shortage challenges.
These advanced capabilities mean that OSP users will be able to offer their customers an even better online grocery proposition across choice, short lead times, and value, with the best economics, thanks to the structural and systemic advantage that the reimagined OSP gives them.
Ocado’s latest tech features ‘head-turning’ piece-picking technology
For Ocado Group, Ocado Re:Imagined offers higher returns from lower capital costs and operating expenses, an even greater Total Addressable Market available to the business, and the expectation of an acceleration in the sign-up of new partnerships in the years to come, in addition to further orders from existing OSP partners.
The launch can be split into two areas: improved robotics to make creating distribution centres cheaper, easier and quicker to build; and a range of developments that radically rethink logistics.
Robots are go
The robotic innovations cover the latest 600 series bot, an optimised grid for the 600, automated frame loading and on-grid robot arms.
The 600 Series bot is the world’s lightest and most efficient grocery fulfilment bot, built using our expertise in additive manufacturing, with more than half of its parts 3D printed. It is cheaper to build and operate than its predecessor, ultra-energy efficient, and high performing. The 600 Series bot has continual software updates and on-demand parts which means higher utilisation of each bot. This lighter bot unlocks a cascade of benefits for optimised CFC design. This will enable the reimagined Ocado Smart Platform to be installed into simpler, more cost-effective buildings, as well as in micro fulfilment centres near the customer.
Ocado’s new 600 Series warehouse robot
The 600 grid and optimised site design. The lightweight design of 600 Series bot allows us to build lighter grids, faster. These new grids can be built in parallel, taking weeks, not months, to install and at a much lower cost. Because the 600 Series bots are highly energy efficient and require a lot less power to achieve the same throughput from the same footprint, new sites will require less chill equipment, lowering energy consumption levels and overall construction costs. The dramatic reduction in material used for our lighter grids not only makes site design easier, it also allows us to install our new technology into simpler buildings, significantly reducing the timelines and costs associated with the construction of purpose-built facilities.
Automated Frameload is a new process that automates the loading of totes with ready-for-delivery customer orders onto delivery frames ready for dispatch, replacing the manual process currently in place. The automation of this process leads to lower labour costs and higher productivity per employee.
On-grid Robotic Pick is the last piece of the robot launch. This process automates the picking and packing of customer orders directly from the grid. For this to work in grocery, robotic arms need to be able to pick tens of thousands of products of varying shapes, sizes, weights, and fragility and pack them densely in bags with human precision and accuracy.
Ocado Group has developed the technologies - machine vision, deep reinforcement learning and advanced sensing - which are required to pick and pack grocery items in a highly efficient and cost effective way without any prior knowledge of what those products are. The benefits of On-grid Robotic Pick include lower labour costs; reduced footprint; higher throughput in the fulfilment centre; optimisation of warehouse design leading to lower construction costs; and the ability to automate stock consolidation during off-peak hours as a key enabler for Ocado Orbit (see below) and consolidate stock better in off-peak periods.
Revamping logistics
The second part of the launch concerns some radical automation of the distribution process which should make delivery cheaper and easier for a raft of operators and could totally shake up the time-lag on grocery delivery from days to hours.
The first part concerns Ocado Orbit, the world’s first Virtual Distribution Centre. One of the advantages of OSP is that it does not require a network of regional distribution centres to deliver products to the fulfilment centre. Product is brought by the manufacturer to the CFC directly. Manufacturers only find this cost-effective, however, when they can deliver products in sufficiently large quantities. Under the current model, this means that CFCs need to be a certain minimum size to achieve the necessary economics for suppliers.
Ocado Orbit addresses this challenge by creating a system whereby multiple smaller footprint warehouses share a "virtual distribution centre", which will use the latest software in AI and Machine Learning, in a seamless supply ecosystem. Each warehouse acts as a primary supply hub for a fraction of the stock but all have access to the combined range, offering their customers the choice of a large range. Ocado Orbit enables smaller fulfilment centres, closer to the customer, to be able to offer a large range, short lead times, and value simultaneously.
Ocado Swift Router, meanwhile, is an innovation by Ocado Group that enables delivery of last minute, short lead time orders as well as larger, longer lead-time orders, all from the same van. This means that partners need no longer make a trade-off between the benefits of short lead time orders and a today-for-tomorrow service and customers can have choice, value and lead times that work for them all together for the first time.
Finally, Ocado Flex means that partners can use their own webshop and app solutions while taking advantage of the intelligence of OSP. As a result, they no longer need to write-off historic investment in their webshop to be able to benefit from OSP’s market-leading customer proposition.
Shares of Ocado rose more than 5% on Wednesday. The stock has declined sharply in the past year, slumping 46%, with investors fretting over high-growth stocks as economies emerge from the Covid-19 pandemic and central banks begin to talk of tightening monetary policy.
Rapid delivery race
The news comes as retailers face competition not only from Amazon, but a slew of upstarts offering grocery delivery in a matter of minutes. Firms such as Getir and Gorillas have emerged across Europe and parts of the U.S. recently, backed by a flood of cash from venture capitalists.
Such companies rely on so-called dark stores, tiny warehouses that are designed to ship online orders rather than serve customers in-store.
Tim Steiner, Ocado’s CEO, said he doesn’t think these rapid grocery players pose a meaningful threat to big retailers.
“There’s very little differentiation between all the players out there,” Steiner said on a call with reporters Wednesday. “They’re all remarkably similar.”
Some start-ups have been acquired by larger players of late, with Getir buying U.K. rival Weezy and Gorillas snapping up French firm Frichti. Ocado’s chief said he’s “not surprised” to see consolidation in the sector given how crowded it’s become.
As for how the company plans to fund building all its new technology products, Steiner said cost shouldn’t be an issue since the new robots will be more capital-efficient than its current models. But he added the firm has enough cash on its balance sheet — as well as access to bank financing — to eventually deploy them at scale.
Ocado plans to roll out the products to its retail partners by the end of 2023. The initiatives are unlikely to have a material impact on Ocado’s full-year 2022 results, the company said.
