In This Blog:
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- ➤Kroger Fell To The Risks Of Over Automation: How The Starts Didn’t Align For Them
- ➤The Problem of Over Automation (Patterns Repeating Across US Industries)
- ➤5 Dangers of Over Automation (That Appear on Your Profit and Loss)
- ➤How Smart US Businesses Are Approaching Automation Instead
- ➤Remote Staff Helps US Businesses Scale Without Getting Locked In
- ➤FAQs About the Risks of Over Automation
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A $2.6 billion write-down?! Now that’s a massive impairment charge that can topple E-commerce and supermarket empires.
And it’s Kroger’s highlight for 2025-2026. A painful lesson, pulled apart and dragged to the depths by the risks of over automation.
They also shut three automated fulfillment centers in Wisconsin, Maryland, and Florida.
One of the largest supermarket chains in the United States made such a huge blunder that it cost them their market position and innovation credibility. All because they overinvested in large automated warehouses, specifically automated robotic fulfillment, and did away with most of the previous human operational backbone.
The model was built for projections that didn’t reflect actual numbers or customer base behavior. With the human layer dialed down to almost nothing, there was no one to catch the error in time.
There’s so much to unpack from this story, so many lessons American companies ought to learn, as SMEs jump eyes-closed, headfirst into full-on automation and AI over-reliance.
Here’s a breakdown of what happened to the 2,7000-location-strong (now fewer) chain. What did they do wrong, and how can you avoid the same mistakes?
What are the risks of over automation?
Over automation happens when a business fully replaces human judgment, flexibility, and decision-making with automated systems beyond what the work requires. The result is rigid processes that can’t adapt to changes in market conditions. Processes aren’t able to adjust when customer needs or demand fluctuate.
Kroger Fell To The Risks Of Over Automation: How The Starts Didn’t Align For Them
It began as one of 2018’s most-awaited partnership announcements: Kroger, a household name in America’s retail industry, and Ocado, a UK-based company that develops automated warehouse technology for grocery retailers worldwide.
Drafting an ambitious plan was always the goal. Nothing’s too big for one of the world’s largest grocers.
What was the pitch? To build up to 20 automated Customer Fulfillment Centers in different states. The backbone would be Ocado’s robotic grid technology. Very compelling.
So Kroger ran with it. Automation was to be in charge of picking grocery orders at record speeds. Human labor was reduced to less than the pre-AI definition of the bare minimum. The outcome would be lower costs and through-the-roof volume growth.
The Kroger automation failure:
Projections for online grocery demand were at 15 to 20% post-COVID. But outside theory, it was stabilizing at 10 to 12% in total US grocery spend. Nowhere near the first number.
The problem is that the robots were wired mainly for volume density. When volume through orders and human judgment weren’t present, the cost of relying on the machines made for a dismal misalignment in returns.
The exit, the site shutdowns:
September 2025 arrived, and Kroger was doing a “full site-by-site analysis.” Two months later, there was no other way but to close facilities, which they did. By Q3, the impairment charge loomed over at $2.6 billion, and the $350 million penalty payment to Ocado followed.
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Kroger acknowledged the core flaw: “the automated centers were built in locations without sufficient order density to justify the technology investment.”
On Automation Investment Strategy
What of Ocado, the author behind the full, rigid automation hero poised to conquer the vast dominion of online grocery shopping? Their shares dropped to their lowest since the company’s 2010 IPO.
Important: Automation is not wrong. It’s not the villain here. What led to Kroger’s billion-dollar miscalculation was that the system was designed for a single, immovable set of conditions. When those very conditions changed, it fell apart.
The Problem of Over Automation (Patterns Repeating Across US Industries)
Over automation risks aren’t found in the retail industry alone. A survey by Careerminds of 600 HR professionals found that among organizations that conducted AI-driven layoffs, 32.7% had already rehired between 25 to 50% of the roles eliminated.
35.6% brought back more than half.
Over 50% of HR leaders in the US said AI systems required significantly more human oversight than anticipated, and they saw the same story in reruns, firsthand.
- Forrester finding: 55% of employers regret laying off workers because of AI.
- McDonald’s AI drive-through test: ran AI order-taking in 100 US locations; videos went viral showing machine errors of hundreds of dollars of chicken nuggets added to orders, caramel ice cream replaced with sticks of butter
The “Automate Completely and Rigidly, Assess Later” Cycle
This has been a recurring cycle with US businesses as of late. Companies invest in full, fixed automation to eliminate headcount, and really, to reduce costs to as low as they can go. The technology, though, can’t handle variability, the thing humans flourish in.
Later on, businesses try to undo their decision on automation reliance and deal with the financial burden of having done so. Or they move to degraded operations, all the while still locked into the system as dictated by their contracts.
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The rush to automate financially-driven decisions can backfire, and predicted “much of this work will be given to lower-wage human workers, offshore or at lower salary.”
On Automation Backfire & Outsourcing Trends
When it comes to the risks of automation, it talks of automation without adaptability, and the adaptability plus oversight part is usually best taken up by humans who understand not just the process. They understand the customer.
5 Dangers of Over Automation (That Appear on Your Profit and Loss)
The damage from over-automation builds behind the curtain, and across systems no human is reviewing, until it strikes your P & L hard. Here are the risks of over-automating.
#1. Your System Optimizes for Conditions That Are No Longer There
Automated systems are guided by preset assumptions, “logic” as the tech world likes to use as a synonym. Demand levels, customer behavior. Such assumptions age, because circumstances do, too. The market changes. Innovations take place.
Fixed automation can’t recalibrate, and will keep running the program as is, and as costs burn on along the way.
MIT researchers working with Symbotic identified that the primary challenge in large-scale automated fulfillment is “the orchestration layer that can’t adapt when conditions shift.”
What To Do: Before signing contracts for deploying any automation system, get into the details of the specific conditions it’s built within. Ask about volume and process stability. Then, determine what happens when conditions change, and how to integrate human assessment.
#2. Rigid Automation Infrastructure Creates “Sunk Cost Traps”
It’s harder to exit capital-intensive automation, even if it stops working to your business’s benefit. Kroger’s write-off is a sunk cost trap, enterprise-level. The smaller version, ones that plague some US SMEs, can be just as damaging.
A $40,000 annual software contract that no one on the team can fully use, or an automated CRM workflow that generates wrong lead scores, and nobody has the knowledge or expertise to fix it.
Note: Failed automation projects cost at least 2 to 3x their initial investment when you factor in maintenance, workarounds, profit loss, and eventual replacement.
What To Do: Before any automation investment, ask: “If this doesn’t work in 3 to 5 months, will we be able to stop it? Can the automation be technically halted completely? What about risk assessments and privacy policy? Will the contract allow it?”
#3. You Lose the Human Judgment That Catches Errors Before They Snowball Downhill
Processing routine inputs, that’s where automated systems shine. But exceptions? Things that aren’t locked in a pattern? They struggle through that blur, or ignore it altogether, until it compounds and breaks the system itself.
Invoices that look wrong or customer complaints that have more to say between the lines and invisible gestures. Leads that score low, but the salesperson knows it’s ready to purchase or subscribe. These add up until it’s too late for a simple fix.
But when a human is there, watching daily, errors are caught right away.
A 2026 Orgvue study found that 32% of organizations that cut jobs expecting AI-driven cost savings had to rehire after discovering the technology couldn’t fully replace the work.
What To Do: Map every automated workflow or automation strategy to the type of human judgment it replaces. If that judgment is contextual, relational, or exception-driven, it doesn’t need to be fully automated. Let it work with a human checkpoint instead.
#4. Over Automation Is A Slow Burn Leading To Customer Distrust
60% of US consumers say they’re less likely to go back to a brand that doesn’t give them the option to speak to or interact with a human, rather than a chatbot or a series of click prompts.
Certain touchpoints may seem like transactions from the outside. But when attended to by humans, they turn into genuine engagements. They become avenues for creating business-to-customer experiences, and later on, brand trust and loyalty.
The outcomes of automation reliance can be gradual, and in short-term metrics, hidden from the system. Click-through and opens look okay, KPI-wise, but are teetering towards disengagement because the underlying relationship with the customer is gone.
Did you know banner:
Customer acquisition costs are 5 to 7x higher than retention costs.
What To Do: How are your customer-facing touchpoints? Which ones carry emotional weight or relationship value, but are passed on to full automation? Those need human involvement, regardless of what efficiency and productivity metrics say.
#5. You Become So Dependent on Systems, You No Longer Understand Workflows and Outputs
Being wholly dependent on automation means automation layers accumulate without human supervision. Everything piles up into a mass of data that you and your team no longer know how to interpret.
Nobody knows why this lead was left in that channel, or why follow-up sequences stopped. What created the problems that led to complaints?
This accumulates into an “automation debt.” Processes are running on logic that’s nowhere near how your business is doing today. There’s no patching up to be done. Not anymore. An overhaul is what’s needed, and it’s slow as it is expensive.
What To Do: Conduct an automation documentation audit. Every active automated workflow should have: an owner (the human team), a documented logic map, a review date, and a defined exit path. If any of these are missing, that’s a vulnerability, rendering the workflow a liability.
How Smart US Businesses Are Approaching Automation Instead
Reliability and adaptability. Not one or the other. Making the right move is to choose automation for high-volume, low-variability work. The human for everything contextual, relational, variable, and exception-driven. The human is to oversee automation solutions, risk management, problem-solving, and security threats. Even backup systems and fail-safes need to be proactively assessed by the specialist.
Automate the repeatable, while keeping what’s adaptable in human hands.
Assessing Risks of Over Automation: What US Businesses Should Automate and What Should Remain Human
A skilled professional who can pivot and apply judgment in the grey areas costs less over 24 months than infrastructure locked into conditions it can’t adapt to.
Coordination between humans, robots, and existing tools, that’s the formula. The robot as the support structure around human strategy and tools.
Remote Staff Helps US Businesses Scale Without Getting Locked In
The human your business needs is the judgment layer that makes automation work. Remote Staff has spent 18 years placing professionals with US SMEs looking to hire professionals who specialize in their business’s needs, whether AI-augmented or fully human.
Candidates go through a strict vetting process. The professionals in our talent pool have done the work, and each one carries project histories to back it up.
Full-time, part-time, or project-based, depending on where your operation is right now. As for payroll, onboarding, and HR support, they’re on us.
FAQs About the Risks of Over Automation
What is over automation in business?
Over-automation is when a business deploys automated systems beyond the point where they add value, replacing or dangerously narrowing the involvement of human judgment, adaptability, and relationship management. In over-automation, systems are bound to fixed or rigid processes that can’t respond to change. It becomes a problem because, without accounting for variability and exceptions, the systems themselves stop becoming useful. They cause even more problems, from costs to customer attrition.
What are the hidden risks of over-automation? (Are we giving AI too much control?)
The five most documented dangers or risks are: systems that optimize for conditions that no longer exist, sunk cost traps from capital-intensive infrastructure, loss of human judgment that catches errors early, customer trust erosion at relationship-critical touchpoints, and operational dependency on automation that nobody fully understands.
How do I know if my business is over automated?
You’ll know with these four signals:
• Automation costs more than it saves when human correction time is factored in.
• Team works around the system rather than with it.
• When conditions change, your team does more work correcting because the system can’t.
• Errors only surface when it’s too late to reverse them.
Two of these are a strong enough warning.
Why is Kroger closing automated grocery fulfillment centers?
Kroger is closing three of its automated Customer Fulfillment Centers after the facilities failed to generate the order volumes needed to justify the cost of the technology. The robotic systems, built in partnership with UK-based Ocado, were designed for a level of online grocery demand that someone signed off on without checking whether the numbers were there or where human supervision should have been permanent. It’s one of the most documented cases of over-automation in recent US business history.
Does automation actually work?
Yes. Automation works when it’s matched to task type and scale requirements. Adaptability also needs to be factored in. Or if that’s not an option, you should be clear on which systems work with rigid automation and which ones require a flexible approach. Automation fails when it’s deployed as a substitute for strategic flexibility.
Avoid the Risks of Over Automation Through Human Intervention
Rigid, over-automation is a strategy problem before it’s a financial one. What happens when the tool absorbs so much of the operation that nobody’s left to question whether it’s still doing the right thing? Or that because of automation fully replacing human specialists, no one’s left to deal with human-centered challenges?
Kroger built a system for a version of the market that didn’t have answers to the human factor. Nobody was positioned to catch it early enough. $2.6 billion later, the lesson is all over the news, and they’re paying for it.
Smarter and adaptable: the lesson coming out of the 2025-2026 Kroger story.
The businesses getting automation right are using it where it belongs: with human oversight.
Ready for the automation side of your operation to join your team’s adaptable half? Call us today or Request a Callback.
Vaune Everis Cura has always been a writer in the truest sense, drawn to the art both as a personal creative pursuit and as a profession. Her experience penning content across digital marketing spaces and collaborating with business owners and market shapers has broadened her craft to include strategic direction and SEO insight. Having spent years with the InterContinental Hotels Group before stepping boldly into freelancing, she understands that at the centre of it all are genuine, meaningful brand–customer relationships built on purposeful, human content.
