Technology secret to success at Ocado

The secret to online grocer Ocado.com’s success as the UK’s fastest-growing retailer is its technology, according to ceo Mel Smith, CBE, who delivered the 20th City Food Lecture online yesterday (10 February).

Addressing a virtual audience of over 1,400 on the role of new technology in the future of UK food retailing, Smith said Ocado’s use of cutting-edge technology and automation has transformed the online grocery space both in the UK and overseas.

Its automated customer fulfilment centres (CFCs), which operate using a sophisticated system of ‘hives’ and rapid robot ‘pickers’, means Ocado can hold more stock in a smaller space, and offer customers the greatest choice and freshest food, she said. This highly-automated process also means orders are fulfilled faster and at a lower cost.

The company also uses algorithms to track food shelf-life, thereby cutting waste, she added. And Ocado’s driver-routing technology cuts delivery time by calculating the most efficient routes, enabling the retailer to deliver 95 per cent of its orders on time – which is “extroadinary” in the industry, Smith said.

“What our technology means for our customers is that they have more choice of fresher food that’s delivered as they ordered it, and on time and to their front doors,” Smith said.

She added that Ocado’s technology not only benefits customers, but makes its model the most profitable in the industry by reducing costs throughout the supply chain.

“Because we have a near-perfect view of what our customers have in their baskets up to 28 days in advance, we are able to incredibly accurately predict what we need from our suppliers. Because we pick orders faster, we also fulfil more orders at a lower cost per pick,” Smith said. “Ocado is at the forefront of technological innovation.”

Going forward, supply chain efficiencies will be central to ensuring Ocado can continue to grow and serve more customers, she said. And the retailer is already working on increased automation in its CFCs.

“Developing robotics that mimic the speed quality and efficiency of a human picking is not easy, but we have an amazing tech team and they have more or less done just that. We introduce robotic picking in our warehouse in Erith in 2019, and we now have three robotic arms operating with double the rate of pick for ambient products. This is a hugely exciting innovation for us that will ensure we can fulfil even more orders as we roll out this technology to other CFCs in the future.”

Longer term, Smith said the biggest step forward will be taken when retailers can become a "real partner" for customers by helping them plan meals from their weekly shop.

“Ocado has always been at the forefront of innovation to make the customer journey as easy and simple as possible when shopping for groceries online. We were the first UK supermarket to launch our app on Amazon Alexa and first in the world to have our app on the Apple watch,” she said. “As technology advances, we will be able to make our customers’ lives even easier by sharing the often, onerous task of meal-planning.

“At Ocado, we already help our customers build their order by showing them products that they purchased frequently which they've forgotten to put in their basket. And we also point out where they have incomplete promotions, so they can save all the money that they can. The next obvious step for us is likely to be around meal-planning support: suggesting and completing recipes based on what's already in your basket, and also ways for you to use up the left-over food that we know is in your fridge.

“The growing number of smart appliances also opens up a number of obvious possibilities to reduce the amount of time you take to plan your weekly shop. Smart appliances are filled with sensors and connect to the internet. A smart fridge would be able to take a look inside and work out what’s running low, and what’s going out of date, and add it to your basket.”

Delivery is another area that's likely to see massive leaps in technology to become more environmentally friendly at a lower cost, Smith said.

“We have continued to make huge strides forward reducing our carbon footprint. Last year we doubled the number of hybrid electric and natural gas vehicles we have on the road, and a third of our lorries are now powered by natural gas. A few weeks ago we launched our very first electric cargo bikes for the Zoom delivery business, and they're completely powered by green energy sources.

“The biggest challenge for using electric vans to deliver groceries is battery storage capacity. Our vans need to carry enough energy around to keep the food at a constantly chilled temperature. As battery capacity increases, and the ability to store renewable energy improves, there will be even more electric vehicles used for delivery and this will be really important to lower the level of pollutants and improve our air quality especially in urban areas. “

Despite “a lot of buzz” around the potential for driverless vans, Smith thinks they are some way off being introduced in a robust and scalable way.

“That's not to say, though, that they don't have the potential to have a massive impact on the cost of last-mile delivery,” she said. “There are still lots of decisions to make around how to operate a driverless grocery delivery service, and we don't really have the answers to many of these big questions yet. But our drivers at Ocado are such a much-loved part of our proposition that, for me, it would be quite hard to see a world without them.”

Smith concluded her lecture by thanking the entire Ocado team for its hard work and dedication over an “extraordinary” year, which saw its UK capacity increase 40 per cent to meet soaring demand from new and existing customers during consecutive lockdowns.

“It's extraordinary how much Ocado has done to change the way the world shops. Ocado will continue to be at the forefront of developing and implementing new and innovative solutions to give our customers and grocery customers all over the world the best possible online grocery experience,” she said.

“I'd like to finish today with a heartfelt thanks to all our extraordinary colleagues at Ocado. Without their dedication and tenacity, increasing the capacity 40 per cent and delivering more food to more households would not have been possible. So I just really want to thank everyone at Ocado who have done an amazing job feeding the nation. They have really been rock stars. Thank you.”