CFC Construction with 'Okado' Applied... Lotte "Changing the Online Grocery Market Landscape"

Lotte Shopping, Busan CFC 25 Years Completion & 200 Billion KRW Investment
45,000 Items & 30,000 Daily Deliveries... Fully Automated Process
Up to 6 Okado CFCs "Online Grocery Innovation"

Lotte Shopping is starting construction of a state-of-the-art automated logistics center to strengthen its online grocery business.

Lotte Shopping announced that on the afternoon of the 5th, it will hold a groundbreaking ceremony at the site of the Customer Fulfillment Center (CFC) in the International Industrial Logistics City, Gangseo-gu, Busan. This comes about a year after signing a partnership agreement with the UK-based global retail tech company Ocado in November last year. Busan was selected as the location for the first Customer Fulfillment Center, and after securing the site and completing facility design and other preparations, full-scale construction will begin. The groundbreaking ceremony will be attended by Shin Dong-bin, Chairman of Lotte, and Kim Sang-hyun, Vice Chairman and General Representative of Lotte Distribution HQ.

Lotte Shopping Okado Busan Customer Fulfillment Center (CFC)
Photo by Lotte Shopping.

The Busan CFC is Lotte Shopping’s first logistics center applying Ocado’s integrated solution, the Ocado Smart Platform (OSP). It will have a total floor area of approximately 42,000㎡ (about 12,500 pyeong), increasing product assortment efficiency to offer about 45,000 SKUs, roughly double that of existing online logistics centers. The daily delivery processing capacity is also expected to double to about 30,000 orders. The investment cost is approximately 200 billion KRW.

Starting from the end of 2025 when construction is completed, it is expected to provide an innovative shopping experience to about 2.3 million households in the Gyeongnam region, including Busan, Changwon, and Gimhae. At the CFC, all processes?from demand forecasting and inventory management based on data and AI to product picking, packing, and delivery route scheduling?will be fully automated. With up to 33 dispatches per day, it is anticipated that deliveries will be made on time without delays at the customer’s preferred time. This will dramatically improve inconveniences that domestic consumers have experienced during online grocery shopping, such as product spoilage, stockouts, omissions, wrong deliveries, and delayed shipments, thereby enhancing shopping convenience and customer satisfaction.

The core of the Busan CFC is the grid-shaped rail system called the "Hive," which stores products, and the robots called "Bots" responsible for picking and packing. The Hive can store more than 45,000 items, and over 1,000 Bots move on top of the Hive at speeds up to 4 meters per second to pick and pack products. The Bots communicate with the server 10 times per second and move along optimized routes to minimize the time from customer order to delivery.

A service system optimized for domestic consumer lifestyle patterns will also be established. It will provide services tailored to Korean living environments, such as fresh food purchasing tendencies and densely populated residential and traffic environments. Considering the high demand for refrigerated and frozen food purchases, the system will expand cold storage and delivery systems. Also, taking into account the prevalence of apartment complexes and frequent traffic congestion, a customized frame suitable for domestic delivery vehicles will be separately developed, and the delivery box design will be newly planned. The website and online application (app) will be enhanced to improve user convenience in line with the high level of domestic online shopping.

The Busan CFC will operate as an eco-friendly logistics center. All products delivered from the Busan CFC will be transported to customers using electric vehicles. Solar power facilities capable of producing about 2,000 MWh of electricity annually will be installed on the building’s rooftop parking lot. This accounts for about 30% of the Busan CFC’s electricity consumption. It is expected to reduce carbon dioxide emissions by more than 1,000 tons annually.

It is also expected to contribute to revitalizing the local economy through job creation and expanding sales of local products. It is explained that more than 2,000 stable jobs will be created for personnel needed to operate the logistics center and delivery services. Lotte Shopping said, "We expect to create various social values such as discovering local businesses, expanding sales channels through product sourcing and sales, and mutual growth," adding, "The construction and operation of the logistics center will also have a growth effect on related industries in the region."

Lotte Shopping plans to expand the number of CFCs applying the Ocado Smart Platform to six nationwide by 2030. The second CFC, following Busan, will be built in the metropolitan area to provide a differentiated shopping environment for customers in Seoul and Gyeonggi Province.

Vice Chairman Kim said, "The Busan CFC is the first key infrastructure laying the foundation for Lotte’s new online grocery business," emphasizing, "Based on the six customer fulfillment centers to be built in Korea, Lotte Shopping will leap forward as the number one destination for online grocery shopping in the country."