Ocado is to slash the headcount of its technology research & development teams, as it seeks to “take advantage of new AI tools to drive greater productivity” in its innovation function.
Speaking on Ocado’s full-year results this morning, the company’s CEO Tim Steiner said: “We will continue to innovate but we’ll be spending less going forward in R&D.” Technology R&D capex is expected to be around 20% of recurring revenues by 2027.
The number of roles set to be lost from the function was not shared, but Steiner said the headcount reduction would be a “low single-digit percentage of global workforce”.
The company’s R&D team is based across eight countries in multiple offices, with around half of them based in the UK.
Ocado has spent around £800m in R&D over the past four years, resulting in developments like Ocado’s ‘On Grid Robotic Pick’, which sees AI-powered robotic arms select items directly from the product-packed grids in CFCs, and ‘Automated Frameload’, which loads totes on to van frames for dispatch “with no human touch”.
However, Steiner said the company had come to “the tail-end of some of that development cycle” with coming innovations “more software driven” and “not as intensive” in terms of R&D spend.
The move was “absolutely to keep a rein on costs and drive towards being cash flow positive” Steiner said.
While conceding that across the business, AI tools had led to a “not enormous, very low double-digit productivity increase” Steiner said the company could “see a lot of progress being made in that space”.
“We’re also able to take advantage of a number of the new AI-type tools that are coming into the market and in the market that drive up the productivity of our engineering teams as are many tech firms around the world,” he said.
“We will continue to innovate but we will be spending less.”
Ocado reported today it had narrowed its losses last year as it benefited from a strong performance in its grocery arm.
Ocado’s revenue was up 14.1% to £3.2bn in the year to 1 December, with operating losses falling 4.9% to £374.5m.
Ocado said sales in its retail business, a joint venture with M&S, jumped 13.9% in the period to £2.69bn, driven by a 12.5% rise in weekly orders.
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