As I was chatting to Isabel Richards, Head of UK Development Centres at Ocado Technology, the image of a disgruntled couple from a recent local newspaper story popped into my head. Said couple had placed an online order with their local supermarket, picked their hour delivery slot, and the order had failed to arrive. They had to phone and email the supermarket several times to finally receive their items a few hours later, leaving them very disappointed and sharing their experience with the local press.
This seemed a little harsh on the retailer in my view, considering the huge demands on online shopping fulfilment at present, but as Richards notes, the pressure from customers is only going to increase:
Over the pandemic, there was a time where people were just like, ‘If you get me food whenever, whatever, then it keeps me alive’. But in normal times - and this is something that Ocado has been exposed to over its 20-year period - people want to get what they ordered and they want to get it when they ordered it for. People continue to get more discerning, and it's only a one-way direction; as people adapt to technology, they want it even faster.
Despite multiple supply chain challenges during the pandemic, Ocado Retail's order accuracy only dropped to 98%, down from a norm of 99%. This was enabled by the nature of the firm’s business, which has been built from day one as an online retailer with technology as its foundation rather than a traditional bricks and mortar grocer. Hefty investments in areas like Artificial Intelligence (AI) helped ensure its technology platform was able to keep up with customer demand.
AI and the warehouse
There are examples of AI and automation throughout its platform, from the customer-facing side down to the warehouse.
In the web shop, for example, the site learns about what you like and what you order often, and Ocado uses AI to start personalizing the experience. It might suggest you have forgotten an item because you normally buy it or start to limit what you see.
At the supply chain level, AI is being used for demand forecasting to analyse what people have been ordering, but also what items are in baskets and therefore what Ocado is going to need to order and when to order it, given the constraints of when suppliers can send new packages and in what size.
But it’s in the all-important warehouse where automation is having the biggest impact. Ocado has warehouses made up of huge grids highly and densely packed with storage containers full of products. Across the top of this grid, there are robots moving back and forth, retrieving the correct box containing the items for picking (Phil Wainwright covered how the robots work in more detail when the warehouse first opened: Ocado put robots in its warehouse. Here's what happened next).
Today, the firm’s warehouse in South-East England is able to pick up to two million items a day; a 50-item shop can be done in fewer than 10 minutes. Richards explains:
AI drives that process to make sure that we are storing and retrieving all the products in the most efficient way. The popular things start to be easier and easier to pick. So it’s highly automated, but it also is in a position where we can simulate how the warehouse will work. We learn from those simulations, and we automatically update those algorithms so that the picking and packing is very efficient.
However, Ocado still faces a challenge with the robots over their limitations as item pickers. While they’re capable of swiftly locating the right storage container to fulfil customer orders, they can’t yet be trusted to pack the items themselves. Here, Ocado still needs to employ humans to remove each item on the customer order from the storage container and pack it into a shopping bag. Robotic pick is one of the big projects Ocado Technology currently has underway, says Richards:
When you think about the range of products, the typical CFC [Customer Fulfilment Center] might have upwards of 50,000 products, and then you think about the sensitivities and manipulation of some of these products, things like bananas or soft fruits, the picking challenge is very difficult in grocery. For some time, we have been investing in and researching robotic picking, which is another way of optimizing those key customer metrics.
Ocado now has live robotic picking in some of its warehouses, and over the last year the firm has been accelerating its focus on robotic manipulation with two acquisitions. Piece-picking robotics developer Kindred Systems and robotic-arm designer Haddington Dynamics will both help enhance the robots’ intelligence around where to pick up certain food items.
Richards joined Ocado in 2015, when it was at the early stages of another big technology project – to develop the firm’s platform for international sales. The Ocado Smart Platform provides retailers, such as Kroger, with all the software and hardware they need as a service, including websites, mobile apps, supply chain systems, robotic warehouses and delivery devices. Richards says the development work continues:
We realized we needed to rebuild the foundations of our platform so that we factored in the national demands, that we could use the latest tools, the most flexible and newest technologies, cloud computing, and also to be able to handle the scale that we would have.
The idea is you're selling to these humongous businesses, you have the competency, but you need to build up the new technology platforms from scratch. How do you get it to a level of maturity such that a very, very big business can adopt it wholesale for their end to end processes.
As part of this major tech project, Richards took on the role of an internal retailer whose customers were the Ocado staff. One of the first tasks achieved by the fledgling Ocado Smart Platform being built by the hundreds of engineers was to deliver a chocolate bar from the vending machine to an employee’s desk.
From one chocolate bar to nine of the world's largest retailers now running their operations off of the platform, including the M&S / Ocado Retail joint venture and Morrisons in the UK, France’s Casino as well as Kroger in the US. Richards says:
It gives retailers everything they need to run an online grocery operation that does two things. One, it gives a very compelling customer experience, but it also drives the economics that are going to make that operation sustainable for the retailer.
We have all of these different retailers who are very substantial businesses in themselves. As an example, in Kroger, they have 500,000 employees. These are big businesses investing in one platform, which then really can help them innovate more and more over time. So it's not a one-off you buy it and then it's done. It’s buying into a platform that has got a huge amount of investment and will continue to evolve over time.
There are currently 2,200 people working in Ocado Technology supporting its product in 11 locations across seven countries. In the summer of 2019, Richards oversaw the opening of the firm’s first Development Center in London. This is now home to 120 employees and is just over 20 miles away from Ocado’s Welwyn Garden City hub, where 400-plus staff focus on automation and robotics research. So why set up in the pricey capital rather than expand in the existing location? Richards explains:
There's a key element, which is talent. It’s focusing on making the best of the talent in those places. But I think even more importantly, there is an opportunity to play into that entrepreneurial culture, but with the benefits and support and opportunity of a FTSE 50 company. It also gives us the opportunity to tie right into the tech community in London, the opportunity to host meet-ups and to exchange the things that we're learning very directly with the community that's there.