Last week The English Apple Man reported on the broader aspects of The City Food Lecture.
The City Food Lecture, now in its 20th year is an annual, invitation-only high-profile fixture in the City of London and international food industry calendars. The Lecture is delivered every year by a leading figure in the food business who is invited to speak about the issues they regard as most important in shaping the way food is produced, distributed, marketed, sold and consumed.
The Key Note Speaker for the City Food Lecture 2021 was Mel Smith CBE, the Chief Executive of Ocado Retail, the world's largest pureplay online grocer.
In this week's Journal The English Apple Man expands on the content of Mel Smith's Lecture.
Mel introduced herself, noting her 20 years experience and her role now as CEO of Ocado Retail - The World's largest grocery only retail on-line seller
Formed in February 2019, Ocado Retail is a 50-50 joint venture between M&S and Ocado Group. It is responsible for ocado.com, online pet store Fetch and Ocado Zoom, a one-hour grocery service. It has a quarter-of-a-million active customers and a 15% share of the UK online grocery market.
The title of the lecture was: 'the role of new technology in the future of UK food retailing'.
Mel Smith discussed how Ocado's model overcomes the challenges facing traditional retailers in serving customers online, and share plans for future online innovation.
"In 1984 at the age of 11, my childhood fascination, when I worked in a local grocery store stacking product in date order, inspired me to get involved in food. When I joined McKinsey in the late 1990's I grasped the opportunity to be involved with retail at all levels, from selling gumboots to farmers, to pharmaceuticals and fresh food.
Life before Ocado: I was Strategy Director for Marks & Spencer with responsibility for group strategy, M&S Bank and M&S Services. Before that, I was the Bupa Global Strategy and Marketing Director, and Chief Operating Officer at TalkTalk. Before joining the corporate world, I was a partner in McKinsey's Retail practice, working with grocers on every continent. I hold an LLB (Hons)/Bcom. from Auckland University and an MBA from Kellogg.
OCADO RETAIL - Technology driven growth.
"This technology allows us to keep much more stock in much less space, it also allows us to offer much more stuff to many more customers in less time".
"Back in 2,000 when OCADO was formed, only half of us owned a mobile phone, most likely a Nokia Brick and 1/4 did not have a computer and now 20 years later, 1 in 5 households are ordering their food shopping on line, on their Laptop, their Phone or a smart watch or even asking Alexa to stock them up with toilet paper."
The growth in online grocery has almost doubled since the start of the pandemic, in 2019 the on-line grocery accounted for 7% but during 2020 it increased to 13%.
The UK has one of the highest on-line penetrations in the world and we expect it to double again n the next few years. It's not an exaggeration to say that COVID has created a lasting shift in grocery shopping habits.
McKinsey say it takes shoppers two months to change their habits and having had 9 months, I don't expect shoppers to change back. Thirty per cent of UK consumers say they will shop more for groceries online after the crisis has ended.
Mel said: "I for one am delighted with my on-line shopping and always pleased to see my Ocado Driver arrive with all my shopping needs for the week. While my husband and I do enjoy popping out to the Fishmonger or Cheese Parlour, 95% of what we eat is delivered on-line!
Ocado Retail now has an unbeatable proposition, we have twice the range of our nearest on-line competitor, we have 50,000 items on our site. We have the freshest food because we have the shortest supply chain, 95% of orders are delivered on time, 99% of that delivered is exactly what you ordered,
We are also the most sustainable grocer in the UK with almost zero % food waste.
We and our customers donate to many community needs, food banks etc. and last year donated £8 million to worthy causes.
Ocado has been rated by WHICH to be the best on-line retailer for the last three years in a row.
Last year (due to COVID) was very challenging with increase in orders and bigger baskets ordered. We increased capacity from our sites by 40% and delivered in total 17.7 million orders to our loyal customers throughout the UK.
The Customer Fulfilment Centre (CFC) is where all the action takes place.
Our unique CFC design is configured to accommodate much greater storage capacity than large store-based alternatives, with a scalable product range. The infrastructure within our CFCs is modular and tailored to grow in line with your business.
The storage and picking process is enhanced by Ocado's in-house built state of the art warehouse management system. This orchestrates the movements of proprietary-design 'bots' across the top of a grid structure called 'the Hive'. Through this process, we are able to pick a 50 item order within a matter of minutes.
Storage within the grid is 4D optimised to reduce customer lead times and place products in the optimum locations to fit the future order profile.
The performance is only possible because of the technology driving the system. Algorithms enable a highly sophisticated system to operate at a high speed moving the 'bots' (crates) around at 4 metres a second.
Click on Video OCADO GROUP Technology
The bots are held in stacks maximising the space and the bots with the most popular items are held nearest the 'picking point' - so when a 'manual picker' selects items for a shopping basket, (order) the items can be accessed at the speed of 170 units per hour so the picker can carryout the task in about 15 minutes. Ocado Retail have improved the picking time by 7% since 2019.
It takes a picker selecting a basket in a traditional Supermarket about an hour to select a basket, four times longer than at Ocado Retail.
Product Life.
Mel continues; as we cut out unnecessary movements in the supply chain, our products spend less time in the food chain, with no deliveries to distribution hubs and onto retail stores. Our products go straight to our CFC packing centres, into vans and out to the consumer. The system ensures customers get the freshest food possible.
Our system ensures the consumer gets product with the longest possible shelf life. Any product that falls below that life is withdrawn from the system and donated to food banks before the proscribed end of life, allowing consumption while still legal & edible.
Optimising delivery time.
Mel explained; "we use algorithms to calculate the most efficient routes and sensors on our vehicles calculate in 'real time' traffic allowing the most accurate and economic delivery.
In 2019 we achieved 196 deliveries per van per week.
Because we have an incredibly short supply chain, and up to 28 days understanding of what you, the consumer wants, we can stock product efficiently by only ordering from the supplier what we need,
As a result our food waste is only 0.04% compared to the industry waste of 2-5% depending on retailer.
This is not only efficient, environmentally friendly and morally exemplary, but also delivers a positive financial influence on profits!
Mel Smith has been CEO of OKADO Retail for 18 months and also has responsibility for OCADO ZOOM
Ocado Zoom offers deliveries within one hour of ordering and is designed to appeal to the younger consumer who may order supper at short notice. Mel said while orders are promised within the hour, on average they arrive after 40 minutes. The fastest recorded delivery was 8 minutes! Ocado Zoom offers 10,000 items.
Looking ahead, Mel Smith continues: "Technology will continue to improve performance and one possibility/probability is 'robot rather than human' picking. However, selecting the right item, handling it carefully and packing it efficiently is 'some task' for a robot!
We have however robotic picking on trial at one of our CFC's.
Gathering information is the future key, using data and smart fridges, Ocado Retail will be able to predict what we eat and ensure we only buy what we need, rather than ordering food we already have 'sufficient of' in our larder!
There is so much more detail one could report from Mel's excellent Lecture, but I think it's enough to digest for this week, so until next week
Take care
The English Apple Man
And finally; Mel is also responsible for FETCH