• Supermarket chain Kroger has announced its plans to develop two automated micro-fulfillment centers (MFCs) powered by British online supermarket group and technology provider Ocado. 

• One of the MFCs will be an Ocado “Zoom” facility, which will allow Kroger to fulfill fresh food and essential item deliveries within 30 minutes from a selection of around 10,000 products. This also marks Ocado’s first “Zoom” facility in the US. The other MFC will be medium-sized and will facilitate same-day and next-day deliveries from a selection of around 35,000 items.

<ul><li>Ocado entered into an exclusive partnership with Kroger in May 2018 to construct several customer fulfillment centers (CFCs), which are large-scale fulfillment centers with higher storage capacities, catering to a wider area. The partnership was further extended in November 2020 to develop in-store fulfillment capabilities.</ul>

• Analyst QuickTake: Kroger’s expansion to MFCs indicates strengthening demand for the same, stemming from the increasing need for instant or same-day delivery, driven by the Covid-19 pandemic. Kroger has been focusing on large-scale fulfillment centers so far, to primarily serve next-day deliveries. The company had to partner with delivery company Instacart to offer same-day delivery. However, the orders are processed at the store and not from a CFC. The MFCs would facilitate Kroger’s operational strategy of utilizing a combination of different fulfillment structures to drive efficiencies downstream (with faster delivery) as well as upstream (with existing CFCs acting as a major supply hub for the MFCs in Florida).