Walmart to open five automated distribution centers amid online grocery growth

July 10, 2024 11:16 AM PDT | By Invezz

Walmart to open five automated distribution centers amid online grocery growth — Image source: Invezz

Upgrades in Walmart’s supply chain infrastructure

The initiative marks a substantial upgrade in Walmart’s supply chain infrastructure, responding to the increasing consumer preference for online grocery shopping, including store pickup and home delivery, which contributed to a 22% rise in U.S. e-commerce sales in the latest quarter.

In recent years, Walmart has progressively automated its supply chain facilities, encompassing distribution centers for shelf-stable items and fulfillment centers handling online orders.

Automation is a strategic priority for Walmart, as CEO Doug McMillon indicated in April 2023, expecting it to drive faster profit growth compared to sales over the next five years.

Enhanced inventory management and cost efficiency

Dave Guggina, Walmart’s executive vice president of supply chain, highlighted that these new automated facilities provide enhanced inventory management capabilities.

They offer a more accurate inventory view, facilitating faster grocery deliveries to stores and reducing the need for “safety stock” to prevent stockouts.

The high-tech centers boast double the storage capacity of traditional sites and can handle over twice the volume, significantly enhancing efficiency.

Walmart’s capital expenditures for the year are projected to be 3% to 3.5% of net sales, around $22 billion, which includes investments in automation and store remodels, exceeding its typical annual spending of $12 billion in recent years.

Future outlook for Walmart’s automated distribution network

Looking ahead, Walmart aims for substantial automation in its supply chain by early 2026, with approximately two-thirds of stores serviced by automated facilities and 55% of fulfillment center volume processed through these advanced centers.

This shift is anticipated to reduce unit costs by about 20%.

Inside these facilities, an automated storage and retrieval system swiftly selects items for restocking store shelves, assembling them into dense pallets ready for delivery, minimizing manual handling and potential damage to fragile items.

The first of these centers has already been tested in Shafter, California, with the second operational in Lancaster, Texas, near Dallas.

The remaining centers will be located in Wellford, South Carolina; Belvidere, Illinois; and Pilesgrove, New Jersey.

Impact on Walmart’s workforce

While Walmart remains the largest private employer in the U.S. with approximately 1.6 million employees, the introduction of automation will reshape roles within its workforce.

It expects overall headcount to either maintain or increase, with a shift towards fewer manual labor positions and greater demand for roles like truck drivers and supervisors overseeing automated systems.

This transition is poised to improve working conditions by reducing physical demands on employees, who will now oversee automated operations.

Expansion of existing distribution centers

Additionally, Walmart is expanding and automating four existing distribution centers for fresh food in Mankato, Minnesota; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tennessee, alongside retrofitting a legacy facility in Winter Haven, Florida, with automation technology.

Walmart’s substantial investment in automation underscores its commitment to enhancing supply chain efficiency and supporting the growth of its online grocery business. By harnessing advanced technology, Walmart aims to stay competitive in an increasingly digital retail landscape.

The post Walmart to open five automated distribution centers amid online grocery growth appeared first on Invezz

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