Automated distribution centers for Walmart grocery business.
Courtesy: Walmart
Walmart said Wednesday it will open five automated fresh food distribution centers across the country as the retailer pursues efficiencies and grows its online grocery business.
New discount facilities average about 700,000 square feet. The cold and frozen areas have automation that stores and retrieves perishable items such as strawberries and frozen chicken nuggets that are later sold in stores or added to customers’ e-commerce orders.
Walmart is the nation’s largest grocer, but it’s modernizing its supply chain to keep up with customers who are increasingly picking up orders in parking lots or getting groceries delivered to their doors. In-store pickup and delivery drove the company’s U.S. e-commerce gains 22% in its most recent quarter.
The retailer has automated supply chain equipment across the country, including distribution centers that handle shelf-stable items and fulfillment centers that help pack and ship online orders. Automation, along with higher-margin businesses like advertising, is a key reason why CEO Doug McMillon said in April 2023 that Walmart would grow its profits faster than sales over the next five years.
In an interview with CNBC, Dave Guggina, Walmart’s executive vice president of supply chain, said the automated facilities give the company a more accurate view of its inventory and allow it to get groceries into stores faster.
“We know what we own, in what quantity and where it is, all in real time,” he said. “And we know that at a level of capability that’s significantly improved over what we’ve been able to achieve with manual processes or legacy software.”
This allows Walmart to operate more cost-effectively by better predicting demand and reducing money spent on “safety stock,” extra product held in a warehouse or in the back of the store to avoid running out, it said. he.
High-tech facilities also allow for more density. Each distribution center has twice the storage capacity and can process more than twice the volume of a traditional site, Guggina said.
Automation is contributing to higher spending at Walmart. The company has said its capital expenditures for the year will be 3% to 3.5% of net sales, which would translate to roughly $22 billion based on the midpoint of its guidance. The total, which includes its automation expansion and hundreds of store remodelings, is higher than the $12 billion Walmart has historically spent on capital expenditures each year in recent years.
Walmart has said that by early 2026, about two-thirds of its stores will be served by some form of automation and approximately 55% of the fulfillment center’s volume will move through automated facilities. Average unit cost could improve by about 20% by then, the retailer said.
What an automated structure looks like
Inside the facilities, the automated storage and retrieval system can quickly grab the items a store needs to replenish its shelves and transport them to an area where they are assembled into a dense pallet that is ready to go. delivered to stores. Instead of relying on a worker to manually stack those items into a cube like a real-life Jenga puzzle, a robotic system helps push and stack them to place fragile items like eggs and peaches on top.
Guggina said automation can build custom pallets for a store that include only the specific items needed to fulfill online grocery orders. These refrigerated or frozen products may be kept in the back of the store and used exclusively to fill those orders.
Automated distribution centers for Walmart grocery business.
Courtesy: Walmart
Guggina declined to say how much each facility costs to build and how that compares to traditional distribution centers for perishables.
Walmart already has built and tested the first of five automated fresh food distribution centers in Shafter, California. It recently opened a second in Lancaster, Texas, which is near Dallas. It plans to open three more in Wellford, South Carolina; Belvidere, Illinois; and Pilesgrove, New Jersey.
Along with the new construction, Walmart is expanding four of its traditional fresh food distribution centers to include automation. It will add about half a million square feet to each of the facilities in Mankato, Minnesota; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tennessee. It is also renovating a legacy facility in Winter Haven, Florida.
Automation will bring changes to workers — and could cut jobs in some facilities. Guggina said Walmart, which is the nation’s largest private employer with roughly 1.6 million workers, expects to have as many total employees as it has now. or more, in the coming years.
But he added that Walmart expects to increase productivity without hiring at the same rate as in the past. The roles he needs will also change, he said. For example, it may need fewer people on the warehouse floor and more people to drive trucks in its fleet.
This will also be the case in automated grocery distribution centers, he said. Workers at the company’s traditional facilities act like “industrial athletes,” lifting hundreds of boxes per hour and walking many miles each day. In the new facilities, he said, they play the role of supervisor.