Walmart Warehouse Automation Generates Higher Profits


BROOKSVILLE, Fla. — At first glance, this warehouse looks like a lot: forklifts unload pallets onto the backs of dozens of tractor-trailers. Canned soup, sodas and cleaning products parade on the conveyor belts. Store-related merchandise is sorted by department and store aisle before being stacked like an elaborate game of Tetris.

The difference? Tasks are powered by giant automated claws and rolling robots, instead of people. Driver’s seats on forklifts are empty.

Welcome to the future of walmart.

At an investor event last week, the big-box retailer previewed how it plans to use automation to more quickly and cost-effectively manage inventory, stock shelves and track orders. online orders. The company gave investors a tour of an approximately 1.4 million square foot facility in Brooksville, Florida, the first automated distribution center for packaged foods and other shelf-stable household items.

Walmart plans to add this same automation from Symbolic — a warehouse technology company in which Walmart took a majority stake last year — to all of its 42 regional fulfillment centers, though it didn’t share a timeline for doing so. By the end of January, about a third of stores will be delivered from the automated facilities, the company said.

Walmart’s automation is part of a larger plan to boost profits. CEO Doug McMillon said in the coming years the retailer’s revenue will grow by around 4% year-over-year – a slower rate of growth than the roughly 8% it has seen over the past three years fueled by the Covid pandemic, but still faster than the 3.1% and 3.6% growth the retailer posted in the three years before the pandemic.

McMillon added that he expects profits to grow at a faster rate than sales over the next five years as Walmart adds automation and expands higher-margin businesses like advertising, last mile delivery and fulfillment services.

He said Walmart has given customers more ways to shop online and get those purchases faster. It offers more general merchandise, including exclusive brands in categories such as clothing. And it also has more sellers who have joined its third-party marketplace.

“We are now in a phase that is less about scaling in-store pickup and delivery, e-commerce assortment and e-commerce FC [fulfillment center] square feet and more on execution and improving operating margin,” he said.

In three years, Walmart predicts that about two-thirds of its stores will be served by some sort of automation, about 55% of fulfillment center volume will go through automated facilities, and that average unit costs could improve by around 20 %.

Workforce changes

For Walmart, the nation’s largest employer, the automation push means rendering some of its 1.6 million roles obsolete.

At the Brooksville facility during the Investor Tour, few people appeared to be on the fulfillment center floor, although Walmart said its overall workforce at the facility had not changed.

David Guggina, executive vice president of supply chain operations for Walmart US, said automation is about increasing capacity, not about cutting jobs. He said retention has improved significantly because the job isn’t as physically demanding. He declined to share specific turnover numbers, but said the first year after the Brooksville facility was automated, no employees left their jobs.

In an interview with CNBC, McMillon said he expects the retailer’s workforce to remain roughly the same size. But he said his lineup was going to change. For example, he said, Walmart may need fewer people to unload pallets at warehouses, but more people to deliver online orders to customers’ doors.

Symbolic Walmart

Courtesy of Walmart

Bear fruit

Brad Thomas, retail analyst at KeyBanc Capital Markets, toured the Tampa-area facility at the investor event. He said he was sold on the investments after seeing real results in the back of a nearby store.

Thomas referred to two trailers full of pallets ready to be unloaded from the distribution center. One was manually packed by employees and included a pile of items from many departments stacked in a messy pile. A box of Pop-Tarts precariously supported other items at the bottom of the towering palette.

The other trailer was packed by a robot, organized using automation for quick and easy unloading for workers. Like the items together, the heaviest on the bottom.

The contrast, Thomas said, helps highlight what he sees as a significant transformation for Walmart — the company’s “most exciting setup in the past 10 years.”

“A decade ago, Walmart was still catching up in areas like e-commerce, and I think a lot of the investments they’ve made are paying off,” he said. “We actually see areas like automation where arguably Walmart is more of a leader than a follower.”

Other retailers are also pushing towards automation. grocery giant Kroger is opening huge robotic hangars with British company Ocado to grow its online grocery business, including one that has allowed it to break into the Florida market without building a single store.

Amazon has increasingly automated the picking and sorting of parcels in its warehouses. It is Acquisition of $775 million from Kiva Systems in 2012 was a pivotal moment in this transition, giving Amazon access to robots capable of transporting shelves of goods from worker to worker, speeding up the fulfillment process.

Walmart is banking on automation to help get more online orders for customers the next day or with two-day shipping. The retailer currently picks, packs and ships orders from 31 fulfillment centers across the country and plans to build four automated fulfillment centers, including one that has already opened in Joliet, Ill., 45 miles southeast. from Chicago.

The retailer has 46 additional fulfillment centers to support the fresh side of its grocery business and has an automated grocery fulfillment center in Shafter, California. He plans to open another in Lancaster, Texas later this year and one in Spartanburg, South Carolina next year.

It’s also testing mini fulfillment centers in the back of stores where employees work side-by-side with automation to pick up grocery orders online.

– CNBC’s Annie Palmer contributed to this report.

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