Did AI play a role in Ocado's 1,000 job cuts?

Online grocery firm Ocado announced plans last week to slash 1,000 jobs from its workforce of about 20,000 people.

The firm, which has headquarters in Hatfield, Hertfordshire, suggested the company's tech wizards had been victims of their own success.

"We have largely completed a very significant phase of investment in our robotics and automation capabilities," said chief executive Tim Steiner.

Steiner is talking about AI. But did it really play a role in the company's decision to cut so many jobs?

Former employee John Williams remembers working at the original warehouse in Hatfield more than 20 years ago when the company was "tinkering" with robotic systems.

At the time, Ocado Group was out on its own, pioneering the not-so-popular idea of online supermarket shopping.

"They had a sophisticated-looking connecting system – like a robotic trolley – that went around by itself," he recalled.

"It was regarded as the automatic shopper, but it didn't quite work. It had to be loaded by people."

He worked in the unloading team until 2004, and said at the time, it was not yet clear that robots could one day "replace us".

In 2023, Ocado announced the closure of the Hatfield warehouse and opened new sites where robots were used to pick and transport food items, leading to a steadying reduction of the human workforce.

On Thursday, the company said the 1,000 redundancies would be made across the world, mainly across technology and support roles.

The move would save them £150m, a spokesperson said.

Speaking to the BBC, analysts could not be sure whether technology was taking anyone's job at Ocado this time around.

However, they said the redundancies were likely the result of rival companies putting AI to good use and finally catching up with Ocado's success.

Julie Palmer is managing partner at BTG Begbies Traynor, which is a company providing advice to businesses facing insolvency.

She also pointed out that Ocado was one of the first entrants into the online delivery markets.

"What AI has meant though, is that the number of other retailers that have used their platform can now start building these things for themselves quite quickly and cheaply."

While automation has been used in the past, Palmer said computers and technology were rapidly changing the industry.

"That was a bit of a pussycat compared with the roar of the lion that we're going to see with AI marking through some of the sectors such as retail," she said.

"I think it is a real sign of things to come."

Jonathan De Mello, from consultancy firm JDM Retail, said some of Ocado's clients in the US and Canada had cut ties with them and invested in their own technology.

"Before it was about creating the most cutting edge tech. Ocado warehouses were by far ahead of anyone else," he said.

"Now their clients are learning from Ocado and utilising technology and looking to replicate it."

Retail analyst Natalie Berg believes AI has played a factor, but said the redundancies reflected "deeper structural challenges".

She said Ocado's model was not agile enough for customers who wanted groceries delivered quickly and in a matter of hours.

Not far away, Tesco is cutting 180 jobs from its head office in Welwyn Garden City.

But Nick Brown, chairman of the Welwyn Hatfield Chamber of Commerce, said this was probably "due to quite different circumstances".

He said the cost of living crisis had possibly affected retail margins and what people were prepared to pay for things.

"People haven't got cash to buy the expensive stuff, which is where the bigger [profit] margins are," he explained.

The national officer for tech workers at the Communication Workers Union, John Chadfield, has given Ocado credit for the way it has communicated news of the redundancies.

"It is nice to see a company being honest by saying, 'actually we're having to make cuts because of competition, and we need to make efficiencies' instead of saying something like, 'it's because we're putting in mystical AI that will replace all these jobs'."

Chadfield said one of the downsides of being a "pioneer" was that competitors "come along and take advantage of all that".

"It looks very much like Ocado are having to re-evaluate their overheads in order to remain competitive with all the other people in the landscape now."

Welwyn Hatfield Borough Council and Labour MP Andrew Lewin have requested an "urgent meeting" with Ocado.

Rose Grewal, the Labour leader of the council, said she was "deeply disappointed" by the news.

Steiner said last week that Ocado was reshaping parts of the company to "simplify our operating model".

He also thanked colleagues whose "talent and hard work have made a lasting contribution to Ocado".

The business declined to comment when asked about the role of AI in any job cuts.

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