Ocado started its operations 18 years ago and since then the company has tried to disrupt itself by adopting technology. This mantra proofed to be successful and helped the online retailer to reach a revenue of $1,4 billion in 2016 making it the world’s largest online-only grocery chain (Olson, 2017).
For retail companies, like Ocado, the firm’s efficiency is significantly influenced by its warehousing. Therefore, the business improved heavily its warehousing technology and developed a grid system. Enabled by a Novel Radio Communication System thousands of robots are able to communicate to each other and move along a grid to stack and select food boxes (McDonald, 2018). One robot can pick and pack an average order of 50 items in 5 minutes and travel between 50 km and 60 km a day (Godwin, 2018). Ocado’s new warehouses are able to deal with 50.000 kinds of products, three temperature regimes and products that have to be separated. In total the company processes 1,7 million items a day across its four fulfilment centers (Olson, 2017).
If you are interested to see how the warehouse automatization of Ocado looks like, have a look at the following video of Tech Insider:
Source: (TechInsider, 2018)
After the company realized how efficient and reliable the warehouse technology works and that it could also be useful for other retailers it released the Ocado Smart Platform. The platform works like a rental model. The customer pays rents for the robots and the system which will be operated by Ocado (Olson, 2017). Hence, the platform represents a new source of revenue for the online grocery chain.
Ocado invested heavily in the development of its software and acquired off-the-shelf technology if there was no need for re-invention. Almost 1.000 people are employed at Ocado Technology where the development takes place (Herrod, 2017). According to David Sharp, the head of technology at Ocado, his employees are working disruptively by choosing a big problem and then finding a transformational change. Sharp adds that “you have to work in the science fiction area to have the right thoughts” (McDonald, 2018). Let’s see what other exciting ideas Ocado comes up with in future.
References
Godwin, H. (2018). Step inside Ocado’s next generation warehouses. Retrieved 13 September 2018, from https://www.ocadotechnology.com/blog/step-inside-ocados-next-generation-warehouses/index.html
Herrod, E. (2017). Ocado : disrupting itself with technology, 1–7. Retrieved from https://internetretailing.net/magazine-articles/magazine-articles/ocado-disrupting-itself-with-technology
McDonald, C. (2018, September). How Ocado has disrupted its own model. ComputerWeekly, 9–11. Retrieved from https://www.computerweekly.com/news/252448108/How-Ocado-has-disrupted-its-own-model
Olson, P. (2017). Ocado Is Building A Robot Army To Shop For Your Groceries. Forbes, 1–6. Retrieved from https://www.forbes.com/sites/parmyolson/2017/11/16/ocado-robots-ai-grocery-delivery/#4701d89d3d36
TechInsider. (2018). Inside A Warehouse Where Thousands Of Robots Pack Groceries. Retrieved from https://www.youtube.com/watch?v=4DKrcpa8Z_E&feature=youtu.be
Thank you for your post, Moritz. It is very interesting to read about this fascinating technology. The video gives a clear overview of the use of the technology in the warehouse. I think this is disruptive indeed and will change the retail industry in the future. I would personally like to order my food at a online shop as Ocado, despite that I find the lay-out of the webshop not very attracting. Maybe there is room for improvement in that area. You end the blog with some information about Ocado Technology, where the development takes place. Talking about development, I am wondering, do you think Ocado will have captured a comfortable market share before others learn to build and use comparable technology? Ocado faces some stubborn competitors and will have a hard time staying ahead of their rivals.
Thank you for your comment, Marco! It’s not easy to answer your question. I think that in terms of warehousing Ocado has at the moment a competitive advantage in the UK. The technological advantage is underlined by the fact that competitors are already willing to pay for the technology rather than developing it on their own. Nevertheless Ocado should be aware of new entrants like Amazon Fresh that invest heavily in new technologies. Those new entrants might be able to decrease the share of Ocado rapidly.