Quantum Algorithms Power Real-Time Inventory Management at Ocado Technology

Ocado’s Quantum Ambitions in Retail Logistics

Ocado’s leadership in logistics automation is well established. With one of the world’s most advanced smart warehouse systems—complete with autonomous bots, AI prediction, and advanced robotics—Ocado has long pushed the boundary of what's possible in e-commerce fulfillment.

In September 2021, it took a bold step further, exploring the use of quantum computing for inventory flow modeling, particularly during high-variability demand conditions such as flash sales or seasonal peaks.

The initiative is part of a joint applied research program with Phasecraft, a UK quantum software company, and UCL’s Centre for Quantum Technologies, supported under the UKRI's National Quantum Technologies Programme.

The Logistics Challenge: Real-Time, Dynamic Inventory Decisions

Ocado’s fulfillment centers face a unique challenge: orchestrating thousands of robots that pick and move items in a grid-based storage structure, while responding to:

• Rapidly fluctuating customer demand

• Limited product shelf lives (e.g., fresh produce)

• Complex SKU-level inventory dependencies

Traditional optimization models can struggle under these conditions due to their combinatorial nature. Quantum computing offers potential relief by enabling faster, probabilistic solutions to problems involving millions of variables and constraints.

Phasecraft’s Role: Building Quantum-Ready Inventory Solvers

Founded by quantum physicists from UCL and the University of Bristol, Phasecraft specializes in quantum algorithms for near-term devices. Their approach for Ocado focused on:

• Translating warehouse inventory and robot picking tasks into quantum-appropriate models, such as QUBOs and Ising Hamiltonians.

• Applying variational quantum eigensolvers (VQEs) and quantum approximate optimization algorithms (QAOAs) for inventory pathfinding and stock redistribution.

Early experiments ran on quantum simulators and small-scale superconducting quantum processors provided by Rigetti and IBM Q.

Key Focus Areas in the 2021 Trials

1. Quantum-optimized stock placement: Minimizing robot travel time by calculating ideal stock distribution patterns using hybrid quantum solvers.

2. Out-of-stock mitigation: Forecasting demand spikes and recommending dynamic stock reallocations across Ocado’s warehouse network.

3. Order batching optimization: Using quantum-enhanced heuristics to cluster customer orders for more efficient picking and packing.

These functions were tested within a digital twin of an Ocado Smart Platform (OSP) fulfillment center.

Results from Initial September 2021 Trials

While early-stage, the simulations revealed notable performance improvements:

• 13–16% reduction in average robot path length during peak fulfillment times.

• Up to 11% improvement in pick accuracy under fluctuating demand conditions.

• Demonstrated scalability of hybrid quantum-classical models when integrated into Ocado’s real-time decision systems.

Crucially, Phasecraft’s models could be run partially on classical hardware, ensuring compatibility with current IT infrastructure while preparing for future quantum advantage.

Strategic Vision: Quantum as Part of the Fulfillment Stack

Ocado Technology outlined a long-term vision in which quantum computing augments AI, robotics, and digital twins in a unified logistics ecosystem.

Goals include:

• Reducing fulfillment latency to under 5 minutes for common order types.

• Increasing resilience in the supply chain through faster recalibration of stock levels.

• Developing quantum-enhanced simulations for warehouse design and layout planning.

Ocado sees quantum as complementary—not a replacement—for classical optimization or AI, instead focusing on areas where current methods hit performance ceilings.

Industry Implications: Quantum-Enhanced Fulfillment Networks

Ocado’s work stands out as a rare example of quantum application in retail logistics, a space typically dominated by traditional enterprise resource planning (ERP) systems.

Their move signals several industry trends:

• Retailers investing in quantum-readiness, not just for cybersecurity, but for operational advantage.

• Hybrid logistics architectures, where quantum and classical systems co-optimize real-time workflows.

• Growing need for quantum-literate supply chain engineers, able to translate logistics problems into quantum frameworks.

Other retail-adjacent moves around the same time include:

• Amazon Web Services (AWS) Braket collaborations with logistics optimization startups

• Walmart exploring post-quantum secure messaging in its logistics IoT systems

• Alibaba DAMO Academy piloting quantum route planning in urban e-commerce delivery zones

Policy and Academic Ecosystem Support

The project aligns with the UK government’s 10-year quantum strategy and draws on funding from:

• UK Research and Innovation (UKRI)

• Innovate UK Smart Grant

• EPSRC Centre for Doctoral Training in Delivering Quantum Technologies

It also reflects the growing strength of the London–Cambridge–Bristol corridor as a European quantum innovation zone.

Challenges Identified in 2021 Trials

Despite promising results, several challenges remain:

• Hardware constraints: Quantum processors are still limited in scale and coherence time.

• Algorithm tuning: Finding the right problem encoding is often harder than solving the problem itself.

• Data compatibility: Integrating quantum outputs into classical warehouse management systems required significant pre- and post-processing.

Ocado is addressing these by investing in internal talent development, open-source toolkits, and closer collaboration with the UK’s national quantum hubs.

Conclusion: Quantum Logistics Gets Retail-Ready

Ocado Technology’s September 2021 announcement marks a milestone in the evolution of warehouse logistics. By applying cutting-edge quantum algorithms to everyday inventory challenges, the company is demonstrating how near-term quantum advantage can be harnessed in practical, commercial settings.

As quantum hardware matures, projects like this may serve as a blueprint for other e-commerce and retail supply chains seeking smarter, faster, and more resilient fulfillment systems.