SUPPLY CHAIN

Kroger’s Robotic Supply Chain Ready to Accelerate

AN INNOVATIVE APPROACH TO LAST-MILE FULFILLMENT IS POISED TO RESET SHOPPERS’ EXPECTATIONS OF HOME DELIVERY. By Mike Troy

ver the course of the next 18 months, The Kroger Co. is set to open seven of its robotic customer fulfillment centers powered by technology from leading online U.K. grocer Ocado. Two of the facilities, known as sheds, are already open in Monroe, Ohio, near Kroger’s hometown of Cincinnati, and Groveland, Fla., northwest of Orlando. Since the facilities first began rolling out five months ago, the initial sales, repeat business and net promoter scores have given Kroger’s top executive confidence that the company can double its 2020 online sales of $10 billion by 2023. To do so, Kroger is relying on a supply chain approach so unique that it had to be built from scratch. The technology, the infrastructure, the workflows inside the shed, and even the vehicles used for deliveries are purpose-built for Kroger’s approach, which involves a facility so complex that it took two years to construct and make operational. This complexity is immediately apparent upon stepping inside the newest facility, in Groveland.

“Supply chain in the future is going to be so much different than supply chain in the past: Every facility will end up becoming a distribution point, and it will be significantly more complicated,” Kroger chairman and CEO Rodney McMullen tells Progressive Grocer during an interview at the structure. “The thing you have to remember about Kroger is half of our volume is fresh, and fresh is a lot more complicated to be able to pull that off. I think complicated is fun. It is fun to be part of a team doing something that hasn’t been done before. No one wants to just keep doing what’s been done.”

What Kroger is doing appears to be working. McMullen doesn’t share specific sales or productivity figures, but does indicate that the facility is exceeding the company’s expectations, generating high net promoter scores and repeat purchase rates. The positive performance is notable, considering that prior to the opening of the Groveland shed, Kroger didn’t have a meaningful presence in Florida.

At full capacity, the Groveland shed, located at 7925 American Way, will generate sales revenues equivalent to 20 to 25 stores, according to McMullen. The service area currently extends through the center of Florida to the greater Tampa Bay area in the west, all the way to the east coast from Jacksonville to Daytona. Prior to the shed’s opening, Kroger’s physical presence in Florida was limited to a single store in the far northeastern corner of the state.

A robot swarm operating in the hive at Kroger's newest fulfillment center, in Groveland, Fla., is capable of picking a 50-item order in roughly five minutes.

“For years and years, we’ve tried to figure out ways to come to Florida,” McMullen notes. “One of the things that is an advantage for us is about half of the people that live in Florida are from somewhere that Kroger serves. The comment that we would always get is ‘When are you coming to Florida?’”

Now that Kroger is in Florida, Gabrielle Arreaga, Kroger’s SVP of supply chain, affirms McMullen’s earlier comment about the Groveland shed’s performance, when he spoke during the grand-opening ceremony on July 29: “This facility is outpacing our expectations.”

The shed sits at the center of a hub-and-spoke model, with distribution nodes present in the Tampa and Jacksonville markets, which Arreaga says are performing very well.

“We’ll keep expanding and eventually reach all the way to south Florida,” she adds.

“What’s so exciting about this is that this is the future,” Stuart Aitken, Kroger’s chief merchant and marketing officer, said at the same grand-opening gathering of roughly 100 local dignitaries. “When Floridians think about food, we want them to think Kroger, and this is truly a unique way to deliver the freshest food to our customers. When that van shows up at your doorstep, it is an incredible experience. We are providing a solution that you haven’t seen before.”

How it Works

Kroger’s new facility is a three-level marvel of e-commerce and supply chain sophistication, powered by technology from Kroger’s U.K. partner Ocado. The ground floor contains receiving and sortation processes specially created for robotic picking. For example, merchandise arrives at 21 inbound receiving bays, half of which are dedicated to ambient products, and the other half for chilled.

Pallets of products then flow to work stations along a wide and long conveyor belt for a process called decanting. Cases of products have to be opened by workers in a currently manual process, with individual products, known as eaches, placed into totes, which are then placed in a large vertical and horizontal storage area called the hive. The shed contains multiple modules with multiple pick stations per module, which are located on the second level.

Once the hive is populated with products, the robotic retrieval devices, which move swiftly within 5 millimeters of one another on a grid located on the third level, fetch individual items to place in totes that can hold three orders apiece. The robots move remarkably quickly and act as a swarm in the hive to pull an order with 50 items in about five minutes.

A system of color-coded totes helps keep everything organized throughout the facility. The totes holding products in the hive are white and are washed daily. Red totes capable of holding three bags sit inside of white totes that robots transport throughout the hive to retrieve orders. Other totes are colored green for produce, yellow for meat and blue for frozen products.

Once orders are filled, they’re loaded onto specially designed delivery vans with three zones for ambient, frozen and chilled products. The shed has 15 bays for delivery vans, and drivers are aided by a proprietary system that helps optimize order delivery routes.

Orders destined for west coast or east coast markets are loaded on trailers at one of 12 bays. Those shipments are then offloaded at the spoke facilities in Tampa and Jacksonville, and placed on delivery vans. As Kroger looks to extend operations into heavily populated areas in south Florida, it will require hub facilities in those markets as well, but the timing of such a move hasn’t been disclosed.

“You have to earn your right to expand,” McMullen says. “Right now, we’re focused on the Orlando area, Jacksonville and Tampa. Over time, we have a facility here that has the capacity to do a lot more.”

Kroger will be expanding its sheds to other markets in the next 18 months, with Atlanta the most likely next location, followed by Dallas, according to McMullen.

“Between late this year and next year, there are seven facilities that should open,” he says.

Atlanta is a well-established market for Kroger, so the approach to operations and marketing there will be more similar to the approach taken when the grocer opened its shed in Cincinnati a few weeks before the Florida opening.

“One of the things we are learning in Cincinnati is how do you leverage both the shed and the stores, because we do find a meaningful number of customers who find pickup just as handy as delivery,” McMullen says.

Ultimately, Kroger is agnostic about the fulfillment method as it builds a new type of grocery supply chain to execute a seamless customer experience.

Fulfillment center workers open cases of products during a process called decanting to load individual items into the hive.

Supply chain in the future is going to be so much different than supply chain in the past: Every facility will end up becoming a distribution point, and it will be significantly more complicated.”