Ocado robot fire sparks £10m loss as driver shortage adds to costs – The Guardian

Ocado

Online retailer says about 300,000 orders were lost as a result of collision at Erith warehouse

Tue 14 Sep 2021 10.10 BST

Ocado has revealed that the fire at its warehouse in south-east London in July will leave it with a £10m loss, and warned it expects to spend up to £5m hiring and paying delivery drivers amid a nationwide shortage.

The blaze at the facility in Erith, caused by the collision of three robots – the online supermarket’s third fire in three years – resulted in 300,000 orders, or about £35m of revenue, being lost.

Ocado said the business disruption cost it £10m, plus another £10m for stock and other write-offs. The resulting net cost, not covered by insurance, is estimated to be £10m, which will drag down profits for the current year.

Ocado also faces a bill of up to £5m this year because of the rising labour cost of large goods vehicle and delivery drivers as well as warehouse staff. A surge in online shopping during the pandemic coupled with a national driver shortage caused by Brexit and the Covid crisis has forced Ocado, and other supermarket groups, to raise hourly rates and offer signing-on bonuses.

Tim Steiner, the chair, said the company was not just concerned about driver shortages. “It’s the broader labour shortages in the whole country that we are working to mitigate the impact of,” he added.

He declined to say how much Ocado was paying in bonuses, but said it was “not material amounts individually”. Tesco is offering lorry drivers a £1,000 signing-on fee until the end of September.

Ocado revenues were down 1.8% in the first six weeks of its latest quarter, the 13 weeks to 29 August, which worsened to a 19% slump in the remaining seven weeks of the quarter because of the fire. Overall, revenues fell 10.6% to £517.5m in the quarter, while average orders a week increased by 1.4% to 338,000.

The online grocer said it had ramped up warehouse capacity at Purfleet in Essex and Andover in Hampshire, with the latter processing 20,000 orders a week. This helped offset additional safety measures at Erith, which Ocado expects to return to pre-fire capacity by the end of November, in time for Christmas.

Steiner is confident of a “bumper Christmas” with Ocado delivery slots usually selling out months in advance. He downplayed the issue of food shortages, saying: “We see small interruptions but nothing substantial.” The finance chief, Niall McBride, said Ocado had a wider product range than some rivals that it could “flex up or down”.

Last week the Food and Drink Federation’s Ian Wright warned food shortages could become permanent in Britain as the just-in-time delivery system was no longer working, although the country would not run out of food.

Ocado is building vast warehouses and has replaced human pickers with robots that crisscross a giant chessboard-style grid layout to sort its orders. Steiner said its latest robots, introduced at the start of the year, could not cause a fire as their “lithium ion cells are so well protected” inside them, while the old model robots were getting a service patch to prevent future blazes. He stressed that Ocado was only selling its new robots to other companies.

Ocado said it had attracted a record number of new customers, up 64,000 to 805,000 in the last quarter. In the first six weeks, orders a week climbed 22% while the value of the average basket continued to normalise to £124, down from £141 a year earlier, as consumers spend more on the high street amid the easing of pandemic restrictions.

{{#ticker}}

{{topLeft}}

{{bottomLeft}}

{{topRight}}

{{bottomRight}}

{{#goalExceededMarkerPercentage}}{{/goalExceededMarkerPercentage}}

{{/ticker}}

{{heading}}

{{#paragraphs}}

{{.}}

{{/paragraphs}}{{highlightedText}}

We will be in touch to remind you to contribute. Look out for a message in your inbox in October 2021. If you have any questions about contributing, please contact us.

Leave a Reply

Your email address will not be published. Required fields are marked *