Automated distribution centers for Walmart’s grocery business.
Courtesy: Walmart
Walmart The company said Wednesday it will open five automated fresh food distribution centers across the country as retailers pursue efficiency and grow their online grocery business.
The discount store’s new facilities average about 700,000 square feet. Refrigerated and frozen areas have automated capabilities to store and retrieve perishable items such as strawberries and frozen chicken nuggets, which are then sold in stores or added to customers’ e-commerce orders.
Walmart is the largest grocer in the United States, but it is modernizing its supply chain to keep up with the growing number of customers picking up groceries in parking lots or having groceries delivered to their homes. Store pickup and delivery boost company’s growth E-commerce grew by 22% in the United States during the most recent quarter.
The retailer has been automating supply chain facilities across the country, including distribution centers that handle shelf-stable merchandise and fulfillment centers that help pack and ship online orders. Higher-margin businesses such as automation and advertising are what CEO Doug McMillon said in April 2023. Profits will grow faster than sales in the next five years.
Dave Guggina, executive vice president of supply chain at Walmart, said in an interview with CNBC that automated facilities give the company a more accurate view of inventory and the ability to deliver groceries to stores faster.
“We know almost instantly what we have, how much and where,” he said. “We know the proficiency level is a significant improvement over what we could achieve through manual processes or legacy software.”
He said this allows Walmart to improve operating costs by better predicting demand and spending less money on “safety stock,” which is extra product stored in warehouses or in the back of stores to avoid running out completely. .
High-tech facilities also allow for higher density. Each distribution center has twice the storage capacity and more than twice the processing capacity of a traditional site, Gugina said.
Automation helps Walmart increase spending. The company said capital expenditures this year will account for 3% to 3.5% of net sales, which would equate to about $22 billion at the midpoint of its guidance. total, including automation and Hundreds of stores remodeledhigher than the $12 billion Wal-Mart has spent annually on capital expenditures in recent years.
Walmart says that by early 2026, about two-thirds of its stores will be The service will be provided through some kind of automation, and approximately 55% of the fulfillment center’s volume will be transported through automated facilities. The retailer said average unit costs could rise by about 20% by then.
What does an automated facility look like?
Inside the facility, automated storage and retrieval systems quickly grab the items a store needs to replenish its shelves and transport them to an area where they are put together into dense pallets, ready for shipment to stores. Instead of relying on workers to manually stack these items into cubes like real-life Jenga puzzles, the robotic system helps push and stack them, placing fragile items like eggs and peaches on top.
Gugina said automation could create customized pallets for stores that contain only the specific items needed to fulfill online grocery orders. These refrigerated or frozen products can be kept in the back of the store specifically to fill these orders.
Automated distribution centers for Walmart’s grocery business.
Courtesy: Walmart
Gugina declined to say how much each facility will cost to build and how it compares to traditional perishable distribution centers.
Walmart has The first of five automated fresh food distribution centers was built and tested in Shafter, California. The company recently opened a second location in Lancaster, Texas, near Dallas. The company plans to open three additional clinics in Wellford, South Carolina; Belvedere, Illinois; and Pierce Grove, New Jersey.
In addition to the new building, Walmart has expanded four traditional fresh food distribution centers to allow for automation. It will add approximately 500,000 square feet to each of the facilities in Mankato, Minnesota; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tennessee. It is also renovating an older facility in Winter Haven, Florida.
Automation will bring changes to workers and may eliminate jobs in some factories. Gugina said Wal-Mart is the largest private employer in the United States, with about 1.6 million employees, and expects the total number of employees to be the same as now. Or more, in the next few years.
But he added that Walmart wants to increase productivity without hiring at the same rate it has in the past. The roles it requires will also change, he said. For example, fewer people may be needed on a warehouse floor and more people may be needed to drive the trucks in a fleet.
This will also be the case with automated grocery distribution centers, he said. Workers in the company’s traditional facilities serve as “industrial athletes,” moving hundreds of boxes per hour and walking miles per day. In the new facility, they play the role of supervisors, he said.
