Ocado: The Tesla of Grocery
Every so often technology emerges that is so far ahead of everything else it seems like magic. Tesla and everything else Elon Musk creates falls into this category. So does Ocado, builder of the Ocado Smart Platform, an automated robotic system for grocery warehouses.
Think I am guilty of overstatement? Watch this video.
In the United Kingdom, where Ocado is based, shoppers know it primarily as a $1.5 billion online grocer with an immense fleet of trucks that delivers 280,000 grocery orders per week to 580,000 active customers.
However, Ocado is not primarily a retailer. Ocado is a technology company and creator of the Ocado Smart Platform – a hardware, software, logistics, robotics and AI system – that automates the picking and packing of individual grocery orders in massive warehouses.
In 2018, Ocado will approach $2 billion in sales and make a small profit. However, these figures pale in comparison to the vast potential Ocado has in becoming the standard platform for revolutionizing warehouse operations, last-mile delivery, and online grocery.
Redefining the Retail-Technology Interface
Ocado has been perfecting its cutting-edge technology for several years, according to James Donkin, general manager at Ocado, in an exclusive interview with RIS. Donkin notes that Ocado initially thought it could “buy third-party packages and glue them all together, but the plan went away very quickly when we tried to apply it to grocery.”
Instead, Ocado began an internal building program to develop “a monorail system, a train system and a conveyor-based fulfillment center,” says Donkin. Then in a radical move, it began experimenting with robots that whizz around at high speed on top of aluminum stacks arranged in three-story grids.
“Today, on staff, we have 1,200 developers and engineers, mobile and web development teams, data scientists, and robotics engineers,” says Donkin. “We design and build the software and hardware and the three-story aluminum grids in our warehouses. We build it all, the entire Ocado Smart Platform.”
In an era where many grocers (and retailers in general) use manual labor to physically pick and pack online orders or use off-the-shelf technology in warehouses, Ocado created an automated system that uses advanced robotics’ systems that it built itself.
Ocado’s technology is unique because it is the only system that can provide automated robotics service for food packing, which requires operating in three temperature environments – ambient, chilled and freezer.
Big data and Google Cloud also play an important role in the Ocado Smart Platform. “We store and analyze immense amounts of data,” says Donkin. “We use customer data and customer analytics, data from delivery drivers, and, of course, warehouse and robot maintenance data. This amounts to petabytes of data, but storing big data is no longer an issue for us. Instead, what we focus on is processing it and using it in advanced analytics.”
“Traditional warehouse managers sit in front of screens monitoring status reports,” explains Donkin, “but when you have hundreds of robots operating at high speed we have to stream the data into reports and flag items that need attention in an exception-based model. For robot maintenance, we use predictive analytics reports to help us achieve high levels of efficiency and productivity.”
Putting AI to Work
Working with such huge databases offers Ocado an opportunity to use artificial intelligence (AI) and machine learning in two important customer-facing ways beyond robot maintenance and supply chain analytics.
“First, we use customer-facing AI/machine learning for interactions with the customer,” says Donkin. “We pre-populate the customer’s market basket based on what AI thinks the customer needs for their next weekly order. It examines previous order history, favorite items and the cadence you buy them.”
“Second, we use algorithms to make recommendations at the checkout aisle before you get to the payment screen,” continues Donkin. “This includes things you might have missed, sales you might have missed, promotions you might have missed.”
AI is also used for demand forecasting, fraud detection, filtering e-mails in the contact center, optimizing routes for the delivery drivers, and a new project currently in the works – powering a robotic assistant to do repair work in the warehouse using voice commands.
Smart Platform for Hire
Recently Ocado made headlines in the U.S. by signing an exclusive deal with grocery giant Kroger to build a fleet of 20 robot-powered distribution facilities. This followed other recent blockbuster deals with Sobey’s in Canada and Groupe Casino in France.
No doubt the flurry of deals is the result of the successful launch of the Ocado Smart Platform earlier this year by Morrison’s, a $17 billion retailer in the highly competitive UK grocery market. The Morrison’s project stands as a proof-of-concept for using Ocado’s advanced technology in an external environment. The project took two years to roll out, so it is safe to estimate that Kroger, Sobey’s and Groupe Casino will not be able to go live with the Ocado Smart Platform until late 2019 or early 2020.
With online grocery sales rising to $12 billion in 2017 and heading to $100 billion by 2024, according to the Food Market Institute and Nielsen, Ocado is in an ideal position to capitalize on the boom. Not because it is an online grocer, but because it has developed a technology platform that revolutionizes the industry.