Kroger is opening automated warehouses across the country to build a bigger, more profitable online grocery business.
GROVELAND, Fla .– Inside a giant warehouse, several hundred robots and Kroger employees are busy preparing grocery orders online.
The nation’s largest supermarket operator has opened automated facilities, called hangars, in Ohio and Florida – and more are underway. The hangars are the result of Kroger’s agreement with UK online grocer Ocado to use technology to fill customers’ e-commerce orders quickly and do it more profitably.
One of the hangars is in Monroe, Ohio, near Kroger’s Cincinnati headquarters, and the other is in Groveland, Fla., A fast-growing town about 30 miles west of Orlando. . CNBC had the opportunity to look inside the establishment as it reported on how the grocer was attempting to start an online grocery delivery business in Florida, where he only has one store.
For Kroger, hangars represent a huge investment. Each costs at least $ 55 million to build. It’s a risky bet, especially when you consider that he has to share a portion of every sale with Ocado. To pay for Kroger, their online business needs to grow rapidly.
Here’s a closer look at how Kroger uses their hangar in Florida to deliver groceries to customers, based on a visit to the establishment and interviews with business leaders:
Stocked and ready to go
Kroger employees put groceries and other merchandise in plastic bins. These bins are engulfed by a grid where robots help retrieve items for customers’ online orders.
Each shed contains approximately 31,000 different grocery, personal care and household items. Trucks arrive at the doors of industrial-sized warehouses to unload pallets of grains, soups, vegetables, packets of paper towels and more. They are transported by forklift to a settling station.
Once there, employees unpack the pallets and break down the shipping boxes. They scan and sort similar items in plastic bins – almost like stocking a giant, high-tech vending machine.
Key information about each bag is entered into a computer, including the number of items it contains and product expiration dates. The automated system uses the data to monitor inventory levels and flag products that are at risk of deteriorating or not meeting Kroger standards. (For example, Kroger guarantees 10 days of freshness for milk.)
Meanwhile, another group of employees are loading delivery bins with blue plastic bags. These containers will be used to collect items for customer orders.
A hive of activity
Kroger Ocado robot delivery system
Courtesy of: Kroger
The engine of each hangar is a high-tech grid of approximately 200,000 plastic bins. The bins are stacked on top of each other in rows. Some are full of items that have not yet been distributed to a customer, like loose onions, boxes of Pampers diapers, or bags of gummy worms. Others are empty. And a third category is filled with bagged groceries chosen for a customer.
The bags move like a game of Tetris. Seen from above, the grid – or beehive – is roughly the same size as a football field. It has two sides: a refrigerated side for perishable foodstuffs and an ambient side for consumer packaged goods with long shelf life and household items.
The bins are color coded. White bins are “beehive bins” that remain in the grid. They are filled and emptied from their stock, but are never used as a delivery receptacle for a customer.
Other small bins go inside these “beehive bins”. The red bins contain refrigerated and room temperature items. Blue bins are used for frozen items.
The meat goes in a yellow tote. Fruits and vegetables go green. And anything that could contaminate food, like deodorant and laundry detergent, ends up in an orange bag.
Some grocery stores get an extra layer of protection. For example, bunches of bananas stay in a cardboard box inside the bag to minimize the risk of crushing.
All are swallowed up by the grid system, made up of conveyor belts and chutes.
The hive remains active almost 24 hours a day. A night shift from 9 pm to 6 am tends to be the busiest. This is when employees shop for next day deliveries. There is also a day shift from 6 a.m. to 5 p.m. From 5 p.m. to 9 p.m., the network may be down for any necessary maintenance.
In Kroger’s sheds, employees hand-pick pints of ice cream, pizza, and more from a large walk-in freezer. They are packed with dry ice.
Behind the scenes, Ocado’s software powers the robots in an elaborate choreography. Dishwasher-sized robots slide across the racks of plastic bins. Each has wheels that allow them to go in four directions and a tape-like metal tape at each of its four corners.
Almost like a carnival game, the robots can unwind the metal ribbon, grab onto the tote, and grab it in its stomach from several feet away.
Robots run this complex system of storage and retrieval. They move through the bins and come up with the best routes to get them to outbound or inbound lanes, so employees can fill them with inventory and process customer orders.
Frozen items are not part of any of the shelves. Instead, they’re kept in a large walk-in freezer that’s kept at minus 10 degrees. Employees handpick pizzas, ice cream pints, microwave dinners and more. These items are placed in blue foam-lined bins with dry ice to keep them cold during the delivery journey.
Pick up and packing
Groceries are picked up by employees and put in bags inside plastic bins. The bins are color coded.
In the middle of the hive, the employees stand at the picking stations. Some work on the ambient side, which is kept at around 70 degrees. Others choose in an area that looks like the inside of a 34-degree refrigerator. Here, most of the employees wear heavy coats and winter hats. On the refrigerated side, the rack is much smaller – eight bins deep versus 21 deep – because each item that goes into a bin has a much shorter shelf life.
Workers at picking stations have a conveyor belt next to them that serves bins full of items they need to grab for a customer. They stand in front of a counter that spits out three different bins at once to fill them with customer purchases.
Each employee’s computer screen shows which items should accompany a customer’s order. A green light will also appear above the correct bag and a small screen will display the quantity of the item to add to the bag. They scan the items, much like a cashier in the store.
The software that powers the entire grid makes it possible to group similar orders together, for example by matching customers who have ordered the same type of ketchup or yogurt. It also tells the system how to choose, so fragile items like loaves of bread and egg cartons are last.
When an employee has finished filling a batch of bins, he presses a button and the containers are swallowed up by the grid.
Employees soak lettuce and paint berry shells in Kroger’s sheds to ensure they are fresh and of high quality.
Along the way, Kroger has several checkpoints to catch moldy fruit, leaked milk, or other issues that can leave a bad impression – and potentially, scare customers away. One of them is a back room where employees soak lettuce, store asparagus stalks in water, paint containers of strawberries, and perform other types of quality checks.
It also has a team of quality assurance employees who monitor the picking stations and perform spot checks. Pick-up station employees are also encouraged to report any item that does not look or smell good.
On the road
Kroger employs a team of delivery drivers who drop off groceries at customers’ doors. The trucks are temperature controlled.
When customer shopping is done, the red and blue bins travel to the end of a conveyor belt to a station for outgoing orders. They are spat out in a sequence, so that an entire sales order is gathered, regardless of the temperature of the items. Orders destined for a similar destination are also grouped together, so that they end up in the same delivery van.
The outlet station is located on the refrigerated side of the installation for quality control.
The bins are loaded into metal frames on wheels and loaded into the back of a temperature-controlled delivery van. Each van has a refrigerated section and a room temperature section to ensure the chocolate does not melt and the six-beer packs arrive cold. It can hold up to 80 delivery bins, which can serve between 10 and 25 customers.
To extend the reach of its delivery service, Kroger uses a star model. He picks and packs orders in the hangar, where he has a fleet of parked delivery vans. It also has additional delivery vans parked and ready at other locations. They pass the bags, almost like a relay race.
In Florida, it has delivery centers in Jacksonville and Tampa. Statewide, it has a total of 500 delivery drivers. It has nearly 400 more employees working in its hangar in Groveland. Each can deliver within a radius of approximately 90 miles.
At the door
Kroger’s delivery trucks are temperature controlled. They include a refrigerated compartment that keeps gallons of milk, six-beer packs, and other items cool.
When delivery drivers arrive at customers’ homes, they unclip the bags from the corners of the tote and carry these bags to the door.
They review the order with a customer, remind them of potential substitutions if an item was out of stock, and review one of Kroger’s perks – points that match and can be used for fuel discounts. If a buyer is not satisfied with an item, they can return it to the on-site delivery driver for a refund.
Customers choose a delivery window that suits their schedule and can opt for contactless delivery. They can order up to a week in advance or as quickly as two hours, depending on their location, said Brandon McBurney, general manager of the Kroger distribution network in Florida. Most have ordered around 24 to 48 hours before when they want their groceries to arrive, he said.