Supply chain projects underway at supermarket giant Coles are expected to have a transformative impact on the retailer’s operations as they come online over the next five years. But in the short term, Coles is expanding its partnership with UberEats, launching its own subscription delivery program and bringing wearables into stores to meet the changing demands of shoppers.
Throughout 2019 the grocer has unveiled elements of a wide-ranging transformation program, underpinned by technology, including a shift to Microsoft’s Azure cloud, a major investment in warehouse robotics and new SaaS systems.
Speaking with Which-50, Coles Chief Information and Digital Officer Roger Sniezek said looking back a decade ago when Wesfarmers acquired Coles, the conglomerate made big investments in stores which “proved to be very effective in recovering Coles and driving it forward”. In 2019, as an independent ASX-listed company, its strategy is more heavily focused on technology.
The digital chief said the technology strategy aims to provide “the right range for customers in the right place” as efficiently and effectively as possible, Sniezek said.
He identified two projects in particular, from suppliers Witron and Ocado, which are expected to be transformative in terms of both cost and customer experience.
At the beginning of the year Coles selected German company Witron to build to two automated distribution centres as part of a supply chain modernisation program which will supply grocery products to more than 240 Coles supermarkets in New South Wales and more than 170 supermarkets in Queensland by the end of 2023.
As well as being more cost effective for Coles, the new high tech warehouses will allow the retailer to move products to stores with greater certainty and better availability for customers.
“Yes it’s a cost transformation, but it’s also a transformation for what we can do for our customers and our team members because we can then make everything easier for them, for example by having the pallets arrive exactly right for that store with everything ordered by aisle for them.”
Coles is also making a large investment in the end-to-end systems behind its online sales, selecting British company Ocado to construct two automated fulfilment centres in Sydney and Melbourne and deliver a new ecommerce platform.
The robotics technology and a new suite of software is designed to help improve profit margin on ecommerce sales and double the number of home deliveries the retailer can make.
It’s this combination of software and hardware that Sniezek says makes the offering from Ocado superior to other systems.
“Ocado is again transformative because it’s the only company in the world that has got a combined ecommerce website offering coupled with the automated fulfilment centre,” he said.
The close connection between the ecommerce platform with the automated order management systems in the warehouses will give a more detailed view of inventory in real time as customers are placing their online orders.
Both the Ocado and Witron warehouses are expected to take between three to four years to build. In the meantime Coles is making moves to compete with its long term rival Woolworths and a new challenger, Amazon.
Last week Coles announced a subscription program which would give members free delivery on online orders for $14 or $19 a month, depending on the time of delivery, on orders over $100. Both Woolworths and Amazon have launched subscription offerings for grocery deliveries in the last two months.
Speaking about the new delivery program, Sniezek said, “Yes, Ocado is coming down the track but we are continuing to constantly innovate in all areas of our business.”
In the world of online marketplaces the company is expanding its partnership with UberEats to include alcohol deliveries on 70 products from a dozen Liquorland retailers in Victoria.
As part of the trial Coles is using the Uber platform with low-cost links into their own systems.
“Because they are trials at the moment we try to do those in a pretty innovative way without doing too much heavy plumbing. As with any trial as it goes larger, then we will go and ensure we industrialise the process,” Sniezek said.
The supermarket is also beginning its cloud and AI journey. Coles is building an enterprise data platform on top of Microsoft’s Azure cloud, which provides the foundations the retailers’ AI program.
“The reason why that makes so much sense in cloud is because we need to be able to scale this out to a huge compute power for a short period of time, conclude the stuff that we need to run and then we can scale it back and then frankly, we only we only use and we only pay for the resources that we consume for that short period of time. And on top of that is where our data scientists will be running a lot of their AI models.” he said.
The data science team now consists of more than 35 people, built up over the last three to four years. The company began its AI journey with a handful of people doing one-off projects and is now building major models that become part of its core technology offering, Sniezek said.