The Future of Grocery Fulfillment: Kroger and Ocado’s Evolving Partnership
By Ed Romaine, VP of marketing and business development, high-performance order fulfillment and manufacturing integrated solutions, at Integrated Systems Design
Kroger’s exclusive partnership with UK-based automated warehouse operator Ocado is currently under review—a significant development that could reshape large-scale automated fulfillment and grocery distribution in the U.S. According to Mark Hamstra in Supermarket News, Kroger is conducting a thorough site-by-site evaluation of its automated fulfillment centers (CFCs) while considering a pivot towards utilizing its extensive 2,700+ store network for online order fulfillment.
This scrutiny has rattled Ocado’s stock price and ignited discussions industry-wide regarding the balance between centralized, highly automated fulfillment systems and store-based rapid delivery models.
Why It Matters
Kroger and Ocado initially joined forces in 2018, aiming for up to 20 robotic fulfillment centers across the nation. With eight centers currently operational and additional locations slated for Phoenix and Charlotte by early 2026, the rollout has faced delays, including the closure of three “spoke” facilities last year. Should this trend continue, their exclusive agreement could be at risk of termination, thereby allowing Ocado the opportunity to form partnerships with other U.S. retailers.
Ocado’s Automated Fulfillment Technology: Power Meets Capital
Ocado’s Customer Fulfillment Centers are some of the world’s most sophisticated, utilizing thousands of autonomous robots that operate on a grid system to handle totes with exceptional speed and precision. This grid design makes vertical cube storage viable, maximizing density while enabling rapid item retrieval. Robots traverse the grid to assemble orders, facilitating efficient packing for delivery.
Ocado vs. AutoStore: A Comparative Analysis
Notably, Ocado’s technology shares similarities with AutoStore’s widely recognized automated fulfillment systems. AutoStore, which pioneered the grid-and-robot method, once litigated against Ocado for alleged patent violations—a legal battle spanning several countries. The dispute culminated in a 2022 settlement, permitting both companies to continue their operations.
Both systems address the same core challenge: enabling high-density, goods-to-person picking in a compact space through fleets of robots accessing totes within their respective structures. The primary distinction lies in design specifics and control software—otherwise, the technologies remain remarkably alike.
The Bigger Trend: Flexibility as the New ROI in Automated Fulfillment
Kroger’s reassessment serves as a critical reminder for retailers: technology choices must be adaptable to fluctuating market demands. “Aligning customer expectations and deploying the right automated fulfillment technology is crucial,” comments Ed Romaine, who emphasizes that ISD’s OEM-agnostic approach aids in these efforts.
Romaine highlights ISD’s 8-step OptimalOps-Process designed to articulate current versus future state market demands and ensure flexibility within deployed technologies. Automation is not merely a matter of speed and efficiency; it’s also about anticipating future requirements.
Success in the evolving landscape hinges on a coherent alignment between selected solutions, customer expectations, cost concerns, and long-term growth strategies. Agility becomes essential, especially when considering Kroger’s evaluation of its store network for distribution—a shift toward a more responsive hub and spoke system rather than relying solely on centralized fulfillment centers.
A Takeaway for Retailers and Operators
Kroger’s actions remind us that automation investments are not a one-time decision. They necessitate ongoing analysis against ROI, service-level expectations, and emerging technologies. At ISD, our OptimalOps-Process assists clients in assessing current operations while modeling future requirements. This proactive approach enables tailored solutions that cut costs, enhance throughput, and offer necessary flexibility to meet future demands.
About ISD – Integrated Systems Design
Integrated Systems Design is a leading systems integrator specializing in automated fulfillment solutions across warehouses, manufacturing, distribution centers, retail, assembly, and wholesale applications. Our focus is on enhancing processes and productivity while significantly reducing operational costs.
We offer a blend of consulting services addressing immediate challenges alongside strategic planning for future scalability. ISD designs systems that cater to individual client needs, ensuring suitability for various handling and storage demands.
Our product suite includes automatic storage and retrieval systems (ASRS), conveyors, autonomous mobile robots (AMRs), robotics, batch stations, shuttles, pick-to-light solutions, carousels, vertical lift modules (VLMs), sortation systems, and comprehensive software tools for inventory management and control in warehouse management systems (WMS), manufacturing execution systems (MES), and enterprise resource planning (ERP).
Ed Romaine
About the author: Ed Romaine serves as VP of marketing and business development focusing on high-performance order fulfillment and manufacturing integrated solutions at Integrated Systems Design. For inquiries, please reach Ed at 215-512-2613 or via email at eromaine@isddd.com.