Insight: Improving the efficiency of online grocery deliveries

The challenge

Online grocery shopping is big business and is getting even bigger. UK online grocery sales reached record levels during the COVID-19 crisis, according to market research firm Nielsen, with a year-on-year growth of 103%.

Online grocery orders now account for 13% of all grocery shopping - and this move to online is only accelerating.

With more and more households to deliver to, grocery companies face a significant challenge - how to grow their business, maintain customer service and reduce their carbon footprint.

Grocery deliveries present unique challenges compared with other online deliveries. As they often include perishable and frozen food, someone needs to be at home to receive the order, so customers demand a narrow delivery window, as well as low delivery costs.

What we did

Through a Knowledge Transfer Partnership, Dr Yang, teamed up with Ocado Technology – who build the sophisticated Artifiical Intelligence, Machine Learning and automation technology powering ambitious online grocery companies around the world, like Ocado.com in the UK - to look at ways of making deliveries even more efficient.

Currently most companies use a static system for planning routes – they try to balance demand across time slots, based on an average using historical data. Once bookings have been made, they plan routes.

Using Big Data, Forecasting and Machine Learning to understand customer shopping behaviour, Dr Yang and her team at Ocado Technology developed a live automated system, capable of checking bookings in real-time and steering customers towards delivery slots, which would allow for more efficient routes.

For example, if six households within a five-mile radius have booked their delivery for between 10am and 12pm on Tuesday, then customers with accounts registered within the same radius could be offered a cheaper delivery price, in return for booking their delivery in the same timeslot on the same day.

For regular customers with delivery passes, which mean they pay a monthly fixed price for deliveries so cost is not an issue, an eco-friendly button enables them to book slots at the same time as their neighbours – giving them the satisfaction of doing the right thing for the environment.

What we changed

The new system promises:

• More efficient delivery routes – reducing costs for retailers
• Environmental and health benefits – more efficient routes mean shorter travelling distances, reduced fleets and fewer emissions
• Improved customer service – customers will benefit from an overall reduction in delivery prices and tailored delivery slots, based on their own shopping behaviour.

This would have significant benefits for both retailers and customers.

“Ocado Technology is on a mission to transform the future of grocery retail through serial technology innovation.

“Initial work by Dr Yang informed the direction of our approach to the interlinked challenges of demand management and routing optimisation.

“Even a modest improvement in routing efficiency would provide significant operational and environmental benefits,” said Tim Bickley, Team Lead - Data Science, Ocado Technology.