Ocado buys robotics firms to cut warehouse costs

4 November 2020

Online grocery platform Ocado has acquired two robotics firms in a move it believes will help cut warehouse costs at its customer fulfilment centres (CFCs). 

The company has purchased advanced piece-picking robotics company Kindred Systems for $262m and robotic-arm designer and manufacturer Haddington Dynamics for $25m.

Ocado said it expected the purchase to accelerate the commercialisation of robotic picking and other automation tasks for Ocado Smart Platform (OSP) clients – who include retailers around the world, to reduce the annual £7m costs per CFC of picking activities.

“The solution for grocery picking will fit seamlessly into our current CFC and micro fulfilment centre footprints and will be fully-integrated into OSP,” said the company.

“Given the significant costs associated with the decant and picking functions within CFCs – up to £7m of annual cost per CFC – automation solutions have attractive economic potential for both Ocado and our partners.”

Ocado said it may be possible to further reduce warehouse costs by engaging robotics in tasks such as de-palletising and de-trashing, as well as other applications like food handling and vertical farming over the medium term.

In results for the first half of 2020 Marks & Spencer, which owns 50% of Ocado’s retail business, said Ocado Retail generated £38.8m towards company profits, but revenue growth was constrained by capacity limits at warehouses.

However M&S also said that investment would drive substantial growth, with 40% additional capacity coming on stream by autumn 2021.

Tim Steiner, CEO of Ocado, said: “We consider the opportunities for robotic manipulation solutions to be significant, both for Ocado Smart Platform clients and across the fast-growing online retail and logistics sectors.

“Ocado has made meaningful progress in developing the machine learning, computer vision and engineering systems required for the robotic picking solutions that are currently in production at our customer fulfilment centre in Erith.

“Given the market opportunity we want to accelerate the development of our systems, including improving their speed, accuracy, product range and economics.”

Kindred Systems uses deep reinforcement learning – a form of artificial intelligence that improves the learning process of handling disparate items – to develop piece-picking robots with AI-powered vision and motion control.

Haddington Dynamics specialises in the design and manufacture of low-cost, lightweight robotic arms that can be manufactured at a relatively low cost via 3D printing.

In February SM reported that Ocado was planning to spend £600m in 2020 opening a series of robotic warehouses for overseas partners.

It said that in 2020 and early 2021 it planned to bring the number of high-tech CFCs around the world to 30.

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