Friday 28th Oct 2016 - Logistics Manager

Ocado pushes ahead with CFC expansion following Morrisons deal

Ocado expects to pull forward its next customer fulfilment centre project as capacity at the new Dordon site is being used faster than originally planned.

The move reflects the impact of the deal with Morrisons, which has now started deliveries in the Midlands from the CFC2 site at Dordon.

In the group’s results for the year to 1st December, chief executive Tim Steiner said: “During the coming year, we are likely to commit to the next CFC project to ensure that we continue to have sufficient fulfilment capacity to accommodate future growth.

“In addition, we are looking at options to modularise future fulfilment capacity investments, to further improve our capital efficiency and potentially reduce the lead time to build.”

Ocado plans to invest further in CFC1 to increase capacity and to improve resilience, as well as opening additional spoke locations. It said it would share both costs and capacity with Morrisons.

Anticipated capital expenditure in 2014 on capacity (CFCs, spokes and vehicles) is approximately £100 million, excluding expenditure on new CFCs. Steiner said more details would be forthcoming later this year.

As well as increasing capacity, Ocado has been working on improving efficiency. Productivity at CFC1  rose from 121 units per hour in 2012 to 135 UPH last year. CFC2 was being ramped up during the year, but Steiner said the new site had demonstrated its potential for improved efficiency and orders became cheaper to be picked from CFC2 that CFC1 during the second half of the year.

Delivery productivity also improved with deliveries per van per week rising from 152 in 2012 to 160 last year.

Distribution costs, at £200m, decreased as a percentage of revenue from 22.1 per cent to 21.6 per cent.

Sales revenue for 2013 was up 16.7 per cent on 2012 at £792.1m while EBITDA was up 32.8 per cent to  £45.8m. Overall, Ocado made a pre-tax loss of £12.5m for the year.

Steiner said: “We are confident that we are well positioned to benefit from future strategic developments as online grocery shopping increases in popularity.”