After three years of planning, Kroger has finally gone live with its leading-edge automated warehouse concept known as a customer fulfillment center (CFC).
The supermarket giant and Ocado, one of the world’s largest dedicated online grocery retailers, are introducing the CFC model in Monroe, Ohio, a city north of Cincinnati. Kroger broke ground on the $55 million, 375,000-sq.-ft., high-tech customer fulfillment center in June 2019.
The CFC model combines vertical integration, machine learning, and robotics with affordable and fast delivery service for fresh food. In May 2018, Kroger and Ocado formed an exclusive partnership to introduce CFCs in the U.S. The facility leverages proprietary technology solutions focused on artificial intelligence (AI) and advanced robotics and automation to create more seamless and efficient fulfillment, picking and delivery capabilities for enhanced digital commerce capabilities across the U.S.
How it Works
In the highly automated CFCs, over 1,000 robots travel around giant 3D grids, orchestrated by proprietary air-traffic control systems in the unlicensed spectrum. The grid, known as “The Hive,” contains totes with products and ready-to-deliver customer orders.
As customers' orders near their delivery times, the robots retrieve products from The Hive which are presented at pick stations for items to be sorted for delivery, a process governed by algorithms that ensures items are intelligently packed. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use.
After being packed, orders are loaded into a temperature-controlled Kroger delivery van which can store up to 20 orders. Machine learning (ML) algorithms dynamically optimize delivery routes, considering factors like road conditions and optimal fuel efficiency.
The Monroe CFC carries thousands of popular grocery products, can fulfill orders up to 90 miles away, and represents one of the models engineered for the flexible Kroger Delivery network, which will also include smaller facilities as well as spoke locations. The CFC can fulfill thousands of orders per day and has the capability to support fulfillment of pickup orders.
Kroger expects to open a second CFC in Groveland, Fla., a city west of Orlando and a new geography for Kroger, in spring 2021. Kroger has also announced plans to open CFCs in Dallas; Forest Park, Ga. (Atlanta); Frederick, Md.; Phoenix; Pleasant Prairie, Wis.; and Romulus, Mich. (Detroit); as well as in the Pacific Northwest and West regions. As the network expands, Kroger will announce additional locations.
Starting in spring 2021, the Monroe and Groveland CFCs will begin fulfilling orders for customers. After placing an order via Kroger.com or the Kroger app, customers in regions where there is a CFC will have their groceries delivered by a Kroger Delivery associate in a temperature-controlled van. The associate will ensure order freshness and satisfaction, manage order changes, and inform customers of their loyalty membership benefits like earned fuel points and digital coupon savings. The network will also continue to leverage stores and third-party partners to deliver certain orders.
At every CFC, on-site associates will support delivery operations and help process, package, and load orders. The Monroe CFC will employ nearly 400 associates, with roles focusing on customer service and engagement, engineering, operations, inventory and quality management, and transportation.
"2020 was a pivotal year for grocery e-commerce, with Kroger's digital business scaling to over $10 billion—and achieving a record digital sales increase of 116%," said Rodney McMullen, Kroger chairman and CEO. "We're incredibly proud to achieve this milestone that advances our position as one of America's leading e-commerce companies. The momentum we're experiencing is well-timed with the evolution of Kroger Delivery, underpinning the permanent shift in grocery consumer behavior and need for enterprising and modern e-commerce and last-mile solutions—today's true competitive horsepower.
"The introduction of the first CFC marks a historic milestone for grocery retail in the U.S.," said Tim Steiner, co-founder and CEO of Ocado Group. "Since signing our partnership in 2018, Ocado and Kroger teams have worked in tight-knit collaboration to lay the foundation to advance their state-of-the-art fulfillment ecosystem across the country, supporting Kroger to reach customers anywhere with anything, at any time."