Kroger, Ocado Group grow with state-of-the-art fulfillment, personalization

NRF Supply Chain 360: Redefining ecommerce distribution through technology-driven solutions

The NRF Supply Chain 360 conference and expo was held in Cleveland from June 20-21, 2022. This event explores the modes and methods needed to build a stronger, more sustainable supply chain and ensure resiliency in challenging times. Learn more about the conference here.

When Kroger and Ocado Group first aligned in 2018, the relationship was full of promise about the coming ecommerce market. But no one could have imagined what would happen next. Back then, online grocery represented “something around 2 percent of all grocery sales,” said Ocado Solutions’ Senior Vice President David Hardiman-Evans.

“That was four years ago. Today, some of the leaders in the industry are talking about penetration online in grocery reaching something around 20 percent in the next few years. That’s massive growth.” In between, the pandemic helped mature and refine the relationship, with countless lessons about capacity-building, fulfillment and personalization learned along the way.

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Hardiman-Evans joined Kroger’s Senior Vice President, Supply Chain Gabriel Arreaga for “The future of grocery retail now: Employing the latest innovations in automation, distribution, and fulfillment to deliver fresh food to more neighborhoods.” The NRF Supply Chain 360 keynote was moderated by Jon Gold, NRF vice president, supply chain and customs policy. It explored how Kroger — large-scale but also local in nature, with 2,700 stores and 11 million visits per day — has overcome the challenges of not being able to “stockpile fresh food,” using cutting-edge technology and end-to-end cold solutions to fulfill and deliver online orders. Those deliveries are made in custom-built refrigerated vans designed to be driven without a commercial license to open up workforce opportunities.

Ocado is both a U.K.-based online grocery retailer and a global provider of technology solutions. Ocado’s customer fulfillment centers are highly automated warehouses built for the grocery industry; Kroger’s partnership with Ocado allows the U.S. supermarket to use online grocery delivery in new markets without opening bricks-and-mortar locations.

During the presentation, Arreaga announced the addition of a new customer fulfillment center in Aurora, Colo., powered by the Ocado Group. It aims to redefine customer experience in the Denver metro area. Overall, Kroger and Ocado are live with five state-of-the-art fulfillment centers in Ohio, Florida, Georgia, Texas and Wisconsin. Others are slated for California, Maryland, Arizona, Michigan and North Carolina, as well as additional sites in Florida and Ohio and the Northeast.

“We were really good at retail in our bricks-and-mortar,” Arreaga said. “And from one day to the other, we had already a track record of being able to do pick-up grocery, to be able to actually meet the customer where they wanted from an ecommerce perspective. But we really didn’t have a lot of experience in how to create that great experience in delivering to people’s homes.” The partnership with Ocado allowed that to happen.

From early on, Arreaga said, Kroger and Ocado aimed to excel at the Net Promoter Score, and succeeded; when the customer fulfillment center opened in Florida, it surpassed Apple. But Kroger has also desired to make the best use of data collected. Good thing, too; as time has gone by, consumers have shifted their expectations for grocery ecommerce, becoming more discerning about assortment, freshness, price, availability and more.

The data available through ecommerce, Hardiman-Evans said, allows retailers to understand customers “with such a level granularity that just wasn’t possible in physical retail.” This helps drive personalization, he said, but also provides opportunities to work with other important stakeholders in the distribution chain of getting product to customers, and to use the data in forecasting.

“For example, in our U.K. retail business, we run over 20 million sales forecasts a day to vastly improve the accuracy of the way we work with our suppliers in ordering product,” he said. That helps reduce waste.

At Kroger, Arreaga said, the availability of immediate information about the wants and needs of customers makes it easy to cater to them. The company recently launched its Boost membership program, for example, enabling the customer to engage with Kroger in a variety of ways. But data also helps Kroger upstream in “getting the right product, at the right moment.”

A decision made by a customer online has a direct impact in a variety of areas, Hardiman-Evans said. That data, for example, affects the way robots store and move product around a warehouse, as well as impacts routing calculations for the greatest efficiency in delivering that product out to the customer.

“Building a supply chain or a wider value chain is not building separable parts and hoping they all work together,” Hardiman-Evans said. There’s much talk about the power of data, but it’s a single data flow that enables a highly efficient supply chain.

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