Global Courant 2023-04-12 02:44:17
BROOKSVILLE, Fla. – At first glance, this warehouse looks like many: forklift trucks unload pallets from the back of dozens of tractor-trailers. Canned soup, soft drinks and cleaning supplies whiz past on conveyor belts. Store-related merchandise is sorted by department and aisle before being stacked high like an elaborate game of Tetris.
The difference? Tasks are powered by giant automated claws and rolling robots, rather than humans. The driver’s seats on the lift trucks are empty.
Welcome to the future of walmart.
The big-box retailer previewed at an investor event last week how it plans to use automation to more quickly and cost-effectively manage inventory, stock shelves and track online orders. The company took investors on a tour of an approximately 1.4 million square foot facility in Brooksville, Florida – the first automated distribution center for packaged foods and other non-perishable household items.
Walmart plans to add that same automation from symbolic — a warehouse technology company in which Walmart took a majority stake last year — to all of its 42 regional distribution centers, though it had no timeframe to do so. By the end of January, about one-third of stores will receive distribution from its automated facilities, the company said.
Walmart’s automation is part of a broader plan to increase profits. CEO Doug McMillon said the retailer’s sales will grow at about 4% year-over-year for the next few years – a slower growth than the roughly 8% it saw in the past three pandemic-fueled years, but still outpacing growth of 3.1% and 3.6%, the retailer booked in the three years prior to the pandemic.
McMillon added that he expects earnings to grow faster than sales over the next five years as Walmart adds automation and expands its higher-margin businesses such as advertising, last-mile delivery and fulfillment services.
He said Walmart has given customers more ways to shop online and make 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 store pickup and delivery, e-commerce assortment and e-commerce FC (fulfillment center) square footage and more about executing and improving the operational margin,” he said.
Three years from now, Walmart expects about two-thirds of its stores to be served by some form of automation, about 55% of its fulfillment center volume to go through automated facilities, and average unit costs to improve by about 20%.
The workforce is shifting
For Walmart, the country’s largest employer, the automation means some of its 1.6 million functions become obsolete.
At the Brooksville facility, during the investor tour, few people appeared to be on the distribution center floor, though Walmart said the overall number of employees at the facility has not changed.
David Guggina, executive vice president of Walmart’s US supply chain operations, said automation is about increasing capacity, not cutting jobs. He said retention has improved significantly because the work isn’t as physically demanding. He declined to share specific sales figures, but said the first year after the Brooksville facility went automated, not a single employee left their job.
In an interview with CNBC, McMillon said he expects the retailer’s workforce to remain about the same size. But he said the composition will change. For example, he said Walmart might need fewer people to unload pallets in warehouses, but more people to deliver online orders to customers’ doorsteps.
Walmart symbolic
Courtesy: Walmart
Walmart has not shared how much it will spend on the automation projects. At last week’s investor event, Chief Financial Officer John David Rainey said the company expects capital expenditures to be slightly higher than last year, at about 2.5% to 3% of sales.
He said about 90% of the company’s capital expenditures will be in “high return areas” such as e-commerce, supply chain and retail investments.
As Walmart plans for the larger rollout, some employees have already changed their routines. Jose Molina, who shared his experience as part of the organized tour, began working at the Brooksville distribution center in 1995. For years, he said, he kept inventory with pen and paper. He got tired of lifting heavy boxes with a pallet truck or operating a forklift.
With the automation, Molina watches the robots unload the truck and intervenes if they encounter a problem, he said. Scanners keep track of each item so he can skip pen and paper or mental arithmetic. He leaves work without feeling exhausted and coaches high school football at the end of his day.
“Sometimes I even kick the ball,” he said.
bear fruit
Brad Thomas, a retail analyst with KeyBanc Capital Markets, took a tour of the facility in the Tampa area during the investor event. He said he was sold on the investment after seeing real-world results in the back of a nearby store.
Thomas was referring to two trailers loaded with pallets and ready to unload from the distribution center. One was manually packed by employees and contained a number of items from different departments piled in a haphazard pile. A box of Pop-Tarts dangerously supported other items at the bottom of the towering pallet.
The other trailer was packed by a robot, organized using automation for quick and easy unloading for workers. Please keep items together, heaviest at the bottom.
The contrast, Thomas said, helps highlight what he considers a major transformation for Walmart — the “most exciting company setup it’s had in the last 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’re actually seeing areas like automation where Walmart is arguably more of a leader than a follower.”
Other retailers are also focusing on automation. Supermarket giant Kroger is opening massive robot-powered warehouses with UK-based Ocado to expand its online grocery business, including a warehouse that allowed it to enter the Florida market without building a single store.
Amazon has increasingly automated the picking and sorting of packages in its warehouses. Are Acquisition of $775 million of Kiva Systems in 2012 was a pivotal moment in that transition, giving Amazon access to robots that can carry shelves of goods from employee to employee, speeding up the fulfillment process.
Walmart is turning to automation to deliver more online orders to customers next day or with two-day shipping. The retailer currently collects, packs and ships orders from 31 fulfillment centers across the country and has plans to build four automated fulfillment centers, including one that has already opened in Joliet, Illinois, 43 miles southeast of Chicago.
The retailer has an additional 46 distribution centers to support the fresh side of its grocery business and operates an automated grocery distribution center in Shafter, California. It has plans to open another one later this year in Lancaster, Texas, and next year in Spartanburg, South Carolina.
It is also testing mini-fulfilment centers in the back of stores, where employees work side-by-side with automation to get online grocery orders ready.
— CNBC’s Annie Palmer contributed to this report.
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