Walmart is automating its regional distribution centers (Photo: Business Wire).
Walmart has big plans for its supply chain — and for its top-line growth.
At the kickoff of its two-day 2023 Investment Community meeting, Walmart unveiled a plan for what the discount titan says is “a new more connected and automated supply chain which will improve the experience for customers and associates and simultaneously increase productivity.” Over half of Walmart’s fulfillment centers could be automated within three years..
The retailer also said it is targeting 4% sales growth during the next three to five years, which would add more than $130 billion of sales on top of its roughly $600 billion base currently. It is targeting growing operating income at an even faster rate
"We believe that we have the building blocks in place to help define the next chapter of retail and do so while driving strong growth and shareholder returns," said John David Rainey, Walmart executive VP and CFO. "The investments we’ve made have positioned us well and stand to generate steady and sustained growth at higher margins."
According to Walmart, it is reengineering its supply chain to develop a more intelligent and connected omnichannel fulfillment network that will feature greater use of data, intelligent software and automation. The retailer expects the outcome to improve in-stock levels, inventory accuracy and flow across all fulfillment channels.
By the end of fiscal year 2026, Walmart believes roughly 65% of stores will be serviced by automation, approximately 55% of its fulfillment center volume will move through automated facilities, and unit cost averages could improve by approximately 20%.
Next-gen fulfillment center, regional distribution models
Walmart is making this announcement several months after debuting a proprietary supply chain automation system in its new high-tech fulfillment center located in Joliet, Ill. Described as the "first-of-its-kind" for Walmart, the 1.1 million-sq.-ft, high-tech facility is the first of four state-of-the-art fulfillment centers dedicated to e-commerce that Walmart plans to open during the next three years. It will store millions of items available on Walmart.com, that are then picked, packed and shipped directly to customers.
The new center will also fulfill third-party Walmart Marketplace items shipped by Walmart Fulfillment Services (WFS), the company's end-to-end fulfillment service for third-party e-commerce sellers.
First announced in June 2022, Walmart's new next-gen centers will feature an automated, high-density storage system that, among other benefits, will allow the retail giant to double the number of customer orders it can fulfill in a day.
Once completed, the four next-gen centers for Walmart could provide 75% of the U.S. population with next- or two-day shipping. The other three locations are McCordsville, Ind.; Lancaster, Texas; and Greencastle, Pa. The four facilities will collectively employ more than 4,000 associates.
The discount giant is also extending an existing agreement with artificial intelligence (AI)-based supply chain technology company Symbiotic LLC to implement Symbotic’s robotics and software automation platform in all 42 of its regional distribution centers over the coming years.
Walmart showcased its new supply chain model at its Brooksville, Fla., regional distribution center. The company demonstrated how the increased item storage allows the distribution center to provide what it says is a more consistent, predictable and higher-quality delivery service to stores and customers, and react more quickly to customer demand.
In this model, stores operate as a place to shop and as fulfillment centers and delivery stations. Distribution and fulfillment centers hold a mix of items, from suppliers and sellers.
As changes related to automation are implemented across the business, Walmart says one result will be the emergence of roles that require less physical labor but have a higher rate of pay. Over time, the company anticipates increased throughput per person, due to the automation, which it says will occur while maintaining or even increasing its number of associates as new roles are created.
However, media reports indicate that Walmart is currently eliminating thousands of positions related to its e-commerce supply chain. This includes layoffs of more than 1,000 workers at two e-commerce fulfillment centers in Texas, as well as 600 jobs at a Pennsylvania facility, 400 at a Florida hub and 200 at a New Jersey center.
In March 2022, Reuters initially reported that Walmart would be adjusting its headcount in its e-commerce supply chain operation by making “hundreds” of job cuts at several fulfillment centers across the country.
“We are in a unique position to serve our customers and members however they want to shop, which will fuel continued growth,” said Doug McMillon, Walmart president and chief executive officer. “As we grow, we will improve our operating margin through productivity advancements and our category and business mix, and drive returns through operating margin expansion and capital prioritization.”