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Kroger said yesterday that it is opening a new "spoke facility," powered by Ocado, in Central Ohio, that it says "will extend the grocer's reach and ability to provide fresh and friendly services to its customers … The 61,000-square-foot facility located on Shook Rd in Lockbourne will collaborate with the fulfillment hub in Monroe, Ohio and serve as a last-mile cross-dock location that efficiently extends the fulfillment network reach to customers up to 200 miles away from the hub. At full capacity, customers in more than 250 Central Ohio ZIP codes can experience Kroger Delivery. The facility will employ up to 200 associates."

Gabriel Arreaga, Kroger's senior vice president and chief supply chain officer, says that "the new service is an innovative addition to the expanding digital shopping experience available to Kroger customers. Our delivery business continues to accelerate with the growth of fulfillment and spoke facilities."

Kroger describes the network this way:

"The delivery network relies on highly automated fulfillment centers. At the 'hub' sites, more than 1,000 bots whizz around giant 3D grids, orchestrated by proprietary air-traffic control systems in the unlicensed spectrum. The grid, known as The Hive, contains totes with products and ready-to-deliver customer orders.

"As customers' orders near their delivery times, the bots retrieve products from The Hive and are presented at pick stations for items to be sorted for delivery, a process governed by algorithms that ensures items are intelligently packed. For example, fragile items are placed on top, bags are evenly weighted, and each order is optimized to fit into the lowest number of bags, reducing plastic use.

"After being packed, groceries are loaded into a refrigerated delivery van, which can store up to 20 orders. Powerful machine learning algorithms optimize delivery routes, considering factors such as road conditions and optimal fuel efficiency. Vans may travel up to 90 miles with orders from the hub and spoke facilities to make deliveries.

"Associates at the spoke facility will deliver orders within their service area, adding ZIP codes as demand grows."

Kroger currently operates customer fulfillment centers in Monroe, OH, Groveland, FL, Forest Park, GA (Atlanta) and Dallas, TX with additional customer fulfillment centers slated for California, Frederick, MD, Phoenix, AZ, Pleasant Prairie, WI, Romulus, MI (Detroit), Cleveland, OH, Charlotte, NC as well as South Florida and a still unannounced market in the Northeast.

KC's View:

It is fascinating to watch Kroger move these distribution pieces around the board … this is a high-stakes game, and these kinds of technology and real estate investments are expensive.  But that's the only way to do something like this … you push your chips to the middle of the table.