City Food Lecture 2021: technology will drive customer loyalty says Ocado CEO

By Pelican MD Michael Bennett

5 minute read

Key takeaways:

  • COVID-19 is proving to be the catalyst for a permanent shift to online grocery shopping
  • The key to success is cutting-edge technology and automation throughout our supply chain
  • Future grocery technology will help customers spend less time shopping, giving them more time to do what really matters

Pelican is proud to be a sponsor of The City Food Lecture, one of the most prestigious events in the food industry’s calendar, which took place last night.

It is organised by the seven City of London livery companies involved in agriculture and food: the Worshipful Companies of Bakers, Butchers, Cooks, Farmers, Fishmongers, Fruiterers and Poulters.

It normally brings together 700 industry leaders, academics and liverymen and students from leading universities at The Guildhall in London every February, but, like so many events, was transferred online due to the ongoing lockdown.

This year’s keynote speaker was Mel Smith CBE, the CEO of Ocado. Addressing an international online audience of over 1,400 food and drink industry leaders, the largest to ever attend the event, she said technology has been the driving force behind Ocado’s success and enabled the company to service the rapid rise in online shopping in the last 12 months.

In case you missed the event live you can watch a full recording here, or read some of the highlights of the fascinating keynote address…

A revolution in online shopping

“In the many years I have been working in the grocery industry, there have been remarkable shifts in the way we shop for our food, enabled by new and emerging technologies. It’s funny to think now, but back in 2000 when Ocado was founded, only half of us owned a mobile phone, and a quarter of households didn’t have a computer. 20 years later, 1 in 5 households now buy their groceries online and can shop on their laptop, phone, iPad, Alexa and their watches.

The growth in online sales has wildly accelerated over the past year. Before the pandemic, online grocery sales accounted for 7% of the total market. In 2020, the channel almost doubled to 13%.

It’s not an exaggeration to say COVID-19 is proving to be the catalyst for a permanent shift to online grocery shopping. 30% of UK consumers say they will shop more for groceries online after the crisis has ended. Those customers who try online shopping quickly recognise the benefits of better choice and less effort.”

The role of new technology and automation

“Despite the challenges [of 2020], we increased our capacity from existing sites by 40% and delivered a total of 17.7 million orders, all while maintaining our best-in-market customer experience, delivering 96% of orders on time and keeping our rate of substitutions below 4%. The key to our success is the cutting-edge technology and automation we use throughout our supply chain.”

“Our products are held in stacks of crates in a densely packed grid. Each stack of crates is ordered by our algorithm to keep frequently bought products near the top and lower volume lines towards the bottom. To pick a customer order, our robots whizz around the grid at four metres per second to collect the right crates from the stacks and deliver them to the chutes. Once the robot has deposited the crate down the chute, human pickers will take the items they need and place them into shopping bags. This entire process is done at the speed of 170 units per hour, meaning one picker can pack an order in about 15 minutes. The technology in our customer fulfilment centres for picking and packing orders means we can hold much more stock in a smaller warehouse space.”

“Our on-time delivery rate is 95% because we use driver routing technology to optimise the number of deliveries that can be made on a single trip. The technology uses a real-time optimisation algorithm which helps us to decide which deliveries to assign to each van and the order in which they should be completed. This algorithm makes several million route calculations per second using real-time traffic data. It also uses inputs from sensors in our delivery vans to create the best route. All this ensures we give our customers certainty on when we will show up and minimises the amount of time waiting for their order.”

“Our technology not only benefits our customers, but also makes our model profitable by reducing costs throughout the supply chain.”

Reducing food waste

“We produce hardly any food waste. This is partly because we have a really short supply chain but also because we have a perfect view of what our customers have in their baskets, up to 28 days in advance. This means we are better able to predict what we need from our suppliers and minimises potential waste from buying too much.”

“Our short supply chain ensures food is fresh with a long date life. Our food goes from our suppliers to the customer fulfilment centre where it’s packed. It is then either delivered to one of our 18 spokes around the country where orders are transferred into delivery vans, or alternatively it comes directly from the fulfilment centre straight to our customers. By skipping the middleman and not delivering to regional DCs and stores first, we don’t waste precious food life. We reduce food waste as products spend less time in the supply chain, ensuring our customers receive the freshest food every time.”

“Our technology allows us to track the amount of life left on food in our customer fulfilment centre. Every item of food on Ocado has a Product Life guarantee, where we ensure that products will have a guaranteed minimum number of days life once delivered. When food no longer meets this minimum life threshold, we donate the products to food banks and our charity partners with plenty of days’ life remaining, ensuring it doesn’t go to waste and can be used to feed those in need.”

Rapid delivery

“One of the biggest trends in the grocery market is the growing demand for rapid delivery. This is driven by customers who need to top-up between main shops, who accidentally left something off the shopping list that they need right now, who have busy lives and are unable to plan several days in advance, and who like the idea of shopping online but don’t meet the minimum spend requirements. To serve this growing market, in March 2019 we launched Ocado Zoom, which is the best immediacy service in the market with a range size of 10,000 fresh and ambient products delivered in under an hour, or for a slot later in the day. Zoom orders are fulfilled from a micro version of our customer fulfilment centres. Our technology means we can hold a 10,000-product range in a 10,000 square foot warehouse, offering customers more choice than your average convenience store.”

Looking ahead

“As technology advances, we will be able to make our customers’ lives even easier by sharing the often-onerous task of meal planning. At Ocado, we already help customers build their order by showing them products they purchase frequently that are not currently included in their basket. The next step is likely to be better support for meal planning; suggesting and completing recipes based on what is in your basket and ways to use leftover food. An average family could save £700 a year by simply not binning food, so helping our customers use food before it goes off would help them to manage their budgets and reduce food waste.”

“5G and the growing number of smart appliances open up huge new possibilities to reduce the amount of time you take to plan your weekly shop. Smart appliances are filled with sensors and connect to the internet to upload and analyse collected data. The future will link your basket to your fridge. Your smart fridge would then be able to take a look inside, work out what you are running low on and what is going out of date, and add it to your basket.”

“The future of grocery technology will help customers spend less time shopping for groceries, giving them more time back to do what really matters in their lives.”

Pelican Communications is a specialist in the environment & CSR, food, packaging & logistics and trade association sectors and offers a range of services such as strategy, design, content creation, public relations and people development. Contact us for marketing and communications expertise.

 

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