"Critical to our operation is the software that controls it. This software is largely developed in-house."
We invest in our infrastructure to service the growing demand for our business and continually seek to drive efficiency throughout our end-to-end operations.
Inside our CFCs we invest in, and deploy, technology and automation to drive the overall efficiency of our business. This involves optimisations throughout the operation – from receiving, putting away and managing stock, picking and organising orders, loading delivery vehicles to efficiently routing and delivering customers' orders. We work in partnership with hardware equipment manufacturers to develop equipment suitable for application in our fulfilment operations.
These optimisations allow us to operate with strong stock control and high productivity, the lowest inventory and product waste levels in the industry and a smaller van fleet than would be required for similar sales volumes using store or dark store assets.
Critical to our operation is the software that controls it. This software is largely developed in-house by a highly skilled team, and cannot be bought "off the shelf" on the open market. The in-house nature of our software development allows for rapid solution development as efficiency improvement opportunities are identified. This proprietary technology protects our business and makes it difficult to replicate.
Enhance efficiency of future capacity and drive scale benefits
We now operate the world's two largest and most sophisticated single pick grocery stores – CFC1 in Hatfield and CFC2 in Dordon. The CFCs form a critical part of the unique end-to-end solution Ocado has developed for online grocery retail.
CFC2 opened on time and on budget in February 2013, and when operating at full capacity will generate over 180,000 orders per week, equivalent to around £1 billion of sales.
Our CFCs have been designed and built to handle the unique challenges that exist in picking groceries with speed, accuracy and efficiency. These stem from the task of picking a basket of multiple items (typically more than 50 discrete products) across three different temperature zones and having a customer's order ready to go on a delivery vehicle in the same short time window as the other multiple orders scheduled to go on the same vehicle.
Future CFCs – improving capital efficiency
We shall commit to further CFC capacity at the appropriate time, with the next commitment likely during 2014. While the existing CFCs represent the most efficient warehouse operations of their kind, we concentrate on improving capital efficiency with the objective of a more scalable and modular approach in the future. Such developments will underpin future expansion in the UK and international markets.
Non-food and spokes
We forecast our future capacity needs, and invest in appropriate fulfilment assets and delivery spokes. We opened a dedicated non-food warehouse in January 2013 which forms part of our integrated fulfilment process. We expect to open further spokes in 2014, and commenced operations in the first of these in Ruislip Middlesex, in February.
Expanding the scale of our business enables us to improve our gross margins and work more closely with suppliers. We can also improve the efficiency of our delivery operations as customer density increases and allocate administration and fixed costs more efficiently.
High speed conveyor line inside CFC2
Extensive stock area in CFC2