Kroger's Ocado Group move doesn't spell end for CFCs but overly complex mega sites are done
Centralised fulfilment isn’t dying, rather it’s evolving. So says Oda Systems’ Isabelle Baumann.
She was speaking in reaction to US grocer Kroger saying it would close three underperforming warehouses developed using Ocado Group technology.
This, she noted, has already led some analysts to declare the “end of the customer fulfilment centre (CFC).” But while it definitely signals something of significance, that isn’t it.
In a LinkedIn post, Baumann said: “The old, oversized model simply grew too many unnecessary limbs to move efficiently. What we’re seeing now isn’t the end of centralised fulfilment, it’s the beginning of a leaner, more sensible version.”
“What’s ending is the era of over dimensioned, overly complex mega-sites. They offered massive capacity but also massive running costs, and they needed extraordinary volume to break even. And it’s the end of the idea that a CFC can generate demand on its own. There’s no “if you build it, they will come” in grocery.”
She added: “This is an expensive lesson, and Ocado’s CEO Tim Steiner more or less said so at Groceryshop: “we’ve learned how to build them smaller and start them smaller.” That’s the real story: not the death of CFCs, but the death of the supersized CFC.”
The next generation looks different, Baumann argues. It’s lean by design, efficient by default, and radically cheaper to build and run. Automation where it supports the flow, not as a monument to CapEx.
“The Oda Norway Lean Fulfilment Centre manages comparable throughput to large automated sites, but with roughly half the footprint, half the build time, and a far lower investment and operating cost. It’s also significantly simpler to maintain,” Baumann commented.
“And importantly, revenue per square metre is already higher than Ocado’s newest Luton site (€430/m² vs. €397/m²). This isn’t an argument against MFCs or gig-based models. They make sense for quick commerce, top up shopping, and testing new markets. The hybrid ecosystem Kroger is moving toward is the right approach for them, for now. But as demand grows, every solution eventually has to stand on two things: physics and positive unit economics.”
She concluded: “Pricing will shift. Constraints will appear. And when it comes to solving the full basket weekly shop at prices customers will accept, the efficiency and scale effects of a centralised model still matter for any operation that needs to be profitable at scale. This isn’t the end of centralised fulfilment. It’s a shift toward a version that’s lighter, simpler, and truly fit for purpose.”
2025 RTIH INNOVATION AWARDS
Supply chain automation was a key focus area at the 2025 RTIH Innovation Awards.
We received a record number of entries and many fantastic examples of the continued resilience and dynamism of the retail space during hugely challenging times.
For a full rundown of all of the shortlisted entries, click here.
Our 2025 hall of fame entrants were revealed during a sold out event which took place at The HAC in Central London on 16th October and consisted of a drinks reception, three course meal, and awards ceremony presided over by award winning comedian, actress and writer Tiff Stevenson.
In his welcome speech, Scott Thompson, Founder and Editor, RTIH, said: “This is the awards’ fifth year as a physical event. We started off with just 30 people at the South Place Hotel not far from here, then moved to London Bridge Hotel, then The Barbican, and last year RIBA’s HQ in the West End.”
“But I’m conscious of the fact that, to quote the legend that is Taylor Swift, You’re only as hot as your last hit, baby. So, this year we’ve moved to our biggest venue yet, and also pulled in our largest number of entries to date and broken attendance records.”
He added: “This year’s submissions have without doubt been our best yet. To quote one of the judges: The examples of innovative developments across both traditional and digital retail spaces were truly remarkable.”
Congratulations to our winners, and a big thank you to our sponsors, judging panel, the legend that is Tiff Stevenson, and all those who attended our 2025 gathering.
Continue reading…