The Kroger Co. is rapidly extending the reach of fast online delivery via a network of automated fulfillment centers and smaller spoke locations.
America's largest grocery retailer will add spoke facilities in Austin and San Antonio, Texas and Birmingham, Ala. As a continuation of Kroger's entry into Florida in 2021 without physical stores, the new Texas and Alabama facilities will serve as last-mile cross-dock locations to help open new online shopping geographies for the company. They are all expected to open later in 2022, pending final lease negotiations, and will each employ up to 161 workers,
The 70,000-sq.-ft. spoke facility in northeast Austin will collaborate with a high-tech customer fulfillment center (CFC) hub in Dallas to fulfill online orders of fresh food. Introduced in partnership with U.K.-based online grocer Ocado in May 2018, the CFC model combines vertical integration, machine learning, and robotics with affordable and fast delivery service for fresh food. CFC facilities leverage 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.
The 67,000-sq.-ft. spoke facility in northeast San Antonio will also collaborate with the CFC hub in Dallas and expected to become operational later this year, creating up to 161 job opportunities. Meanwhile, the 50,000-sq.-ft. spoke facility in Birmingham will collaborate with a CFC hub in the metro Atlanta area serving.
Kroger Delivery automated hub and spoke model
CFC represents one of the models engineered for the grocer’s flexible, vertically integrated Kroger Delivery network, which also includes smaller automated facilities and spoke locations, such as a recently-opened Louisville facility. In CFCs, more than 1,000 robots traverse 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 stations for items to be sorted for delivery via an algorithmic sorting process. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the fewest number of bags, reducing plastic use.
Once completed, orders are loaded into a temperature-controlled Kroger delivery van, which can store up to 20 orders. Machine learning algorithms dynamically optimize delivery routes, considering factors like road conditions and optimal fuel efficiency. Drivers may travel up to 90 miles with orders from facilities to make deliveries.
"Kroger today looks very different than it did in 1883 when we opened our first store. But the core principles that made that store successful – service, selection, value, and our commitment to our customers – remain the bedrock of our business," said Rodney McMullen, Kroger chairman and CEO. "I'm incredibly excited for the future of Kroger, and both thriving physical stores and digital solutions are part of it. We continue to feel great about the momentum we're experiencing with Kroger Delivery and our partnership with Ocado.”
"Kroger's digital investments are focused on driving expanded capacity, improving the customer experience, and developing new, innovative propositions via our strategic partnerships, including our Kroger Delivery fulfillment network powered by Ocado technologies," said Yael Cosset, Kroger CIO officer and chief digital officer. "Kroger's growing seamless ecosystem continues to scale and allow us to reach customers who are not in the proximity of a store with delivery services, and we're committed to doubling both our digital sales and profitability passthrough rate by the end of 2023 and our continued network expansion will help us reach this target."
"We're excited to continue extending the Kroger fulfillment network, with dedicated facilities of various sizes providing added scale, reliability of experience, and benefit of automation and wide customer reach, in both current operating regions as well as in new parts of the U.S.," said Gabriel Arreaga, Kroger senior VP and chief supply chain officer. "This network is enabling Kroger to create thousands of technology, operations, logistics, and customer care jobs and improve access to fresh food in cities eager for the variety and value offered by Kroger that once could only be accessed through our stores."