Supermarket Chain Shifts to Local Fulfillment, Closing Six Distribution Centers

These changes are set to impact several distribution centers across the United States, with closures planned for completion by the end of the first quarter of 2026. Ahold Delhaize and Kroger are closing a combined total of nine distribution centers by the end of Q1 2026 as they shift to store-based fulfillment models to enhance efficiency.

Two major supermarket chains, Ahold Delhaize and Kroger, have announced significant changes to their distribution and fulfillment strategies, marking a shift from centralized operations to more localized, store-based models. These changes are set to impact several distribution centers across the United States, with closures planned for completion by the end of the first quarter of 2026.

Ahold Delhaize's Transition to Store-Based Fulfillment

Ahold Delhaize, a prominent supermarket chain, is closing six of its centralized distribution centers (DCs) as part of a strategic move to adopt store-based fulfillment models. The transition aims to enhance efficiency and bring the fulfillment process closer to the end consumer. Among the locations affected are the distribution center in Manassas, Virginia, and five centers in Pennsylvania. This decision aligns with the ongoing trend in the retail industry to decentralize operations and leverage existing brick-and-mortar stores for fulfillment purposes.

The company has assured that delivery and pickup services will continue uninterrupted, supported by partnerships with third-party service providers like Instacart and DoorDash. Additionally, Ahold Delhaize has committed to offering other positions to the associates affected by these closures, aiming to minimize the impact on its workforce.

Kroger's Shift Away from Robotic Fulfillment Centers

Kroger, another major player in the supermarket industry, is also making significant adjustments to its fulfillment strategy. The company plans to close three robotic fulfillment centers located in Groveland, Pleasant Prairie, and Frederick. These closures are part of a broader strategy to shift fulfillment operations to existing brick-and-mortar stores, thereby reducing reliance on centralized robotic facilities.

In a related move, Kroger has decided to scrap plans for a new fulfillment center in Charlotte but will continue with the construction of a facility in Phoenix. The company's investment in robotics has not delivered the anticipated positive impact on e-commerce earnings, prompting this strategic pivot. As a result, Kroger will incur a $350 million fee payable to Ocado, its robotics partner, for the changes in its fulfillment strategy.

Challenges and Opportunities with Automation and Robotics

The use of Autonomous Mobile Robots (AMRs) in warehouse operations presents both challenges and opportunities for the supermarket chains. These robots are designed to navigate warehouse environments dynamically, requiring integration with core systems and fleet management software to function effectively. AMRs can augment human workers, offering improved labor efficiency and order accuracy without necessitating significant infrastructure changes.

To optimize the use of AMRs, companies must evaluate warehouse space, considering factors such as aisle widths and docking areas. Dynamic slotting and space optimization are essential to accommodate the robots and ensure seamless operations. Additionally, ongoing support and software updates are necessary to maintain the efficiency and functionality of these robotic systems.

Real-time insights from AMR dashboards provide valuable data, enabling companies to make informed decisions and enhance their fulfillment processes. By leveraging these insights, supermarket chains can add flexibility to their operations and respond more effectively to changing consumer demands.

Financial Impact and Strategic Implications

The strategic shifts by both Ahold Delhaize and Kroger are expected to have significant financial implications. Kroger, in particular, is planning to close 60 underperforming locations over the next 18 months, resulting in a net loss of 30 stores. These closures are part of a broader effort to streamline operations and focus on more profitable areas.

The transition to store-based fulfillment models and the integration of mobile automation technologies represent a broader trend in the retail industry. As companies strive to enhance efficiency and reduce costs, the role of technology and localized strategies becomes increasingly important. These changes underscore the evolving landscape of supermarket operations, where flexibility and responsiveness to consumer needs are paramount.

As Ahold Delhaize and Kroger navigate these transformations, the ongoing evaluation of fulfillment strategies and the implementation of advanced technologies will be crucial in maintaining competitiveness and meeting the demands of modern consumers.