BROOKSVILLE, Fla. — At start glance, this warehouse looks like many: Forklifts unload pallets from the back of dozens of tractor-trailers. Canned soup, soda and cleansing supplies whiz by on conveyer belts. Store-bound merchandise gets sorted by department and store aisle before land a put stacked high like an elaborate game of Tetris.
The difference? Tasks are powered by giant automated claws and roar robots, instead of people. The driver’s seats on the forklifts are empty.
Welcome to the future of Walmart.
The big-box retailer at an investor occurrence last week previewed how it plans to use automation to more quickly and cost-effectively manage inventory, stock shelves and provide for up with online orders. The company took investors on a tour of an approximately 1.4 million-square-foot facility in Brooksville, Florida — the chief automated distribution center for packaged foods and other shelf-stable household items.
Walmart plans to add that exact same automation from Symbotic — a warehouse technology company that Walmart took a majority stake in last year — to all of its 42 regional sharing centers, though it didn’t share a timetable for doing so. By the end of January, roughly a third of stores will get distribution from the automated systems, the company said.
Walmart’s automation is a piece of a broader plan to drive profits higher. CEO Doug McMillon stipulate in the coming years the retailer’s revenue will grow about 4% year over year — a slower excrescence rate than the approximately 8% it saw in the past three Covid pandemic-fueled years, but still faster than success of 3.1% and 3.6% the retailer posted in the three years prior to the pandemic.
McMillon added that he expects profits to yield fruit at a quicker pace than sales over the next five years as Walmart adds automation and grows its higher-margin subjects like advertising, last-mile delivery and fulfillment services.
He said Walmart has given customers more ways to boutique online and get those purchases faster. It offers more general merchandise, including exclusive brands in categories feel attracted to apparel. And it has more sellers that have joined its third-party marketplace, too.
“We’re now in a phase that is less about decrease store pickup and delivery, e-commerce assortment, and e-commerce FC [fulfillment center] square footage and more about production and operating margin improvement,” he said.
In three years, Walmart anticipates that about two-thirds of its stores last will and testament be serviced by some kind of automation, about 55% of fulfillment center volume will move through automated powder-rooms and that unit cost averages could improve by about 20%.
Workforce shifts
For Walmart, the country’s largest Eye dialect guvnor, the automation push means rendering obsolete some of its 1.6 million roles.
At the Brooksville facility during the investor trip, few people appeared to be on the distribution center’s floor, though Walmart said its overall head count at the facility hasn’t differenced.
David Guggina, executive vice president of Walmart U.S.’ supply chain operations, said automation is about wax capacity, not cutting jobs. He said retention has significantly improved, since work is not as physically demanding. He declined to serving specific turnover numbers, but said the first year after the Brooksville facility became automated, no employees left-hand the job.
In an interview with CNBC, McMillon said he anticipates the retailer’s workforce will stay about the same magnitude. But he said its composition will change. For example, he said, Walmart may need fewer people to unload pallets at stores, but more people to deliver online orders to customers’ doors.
Walmart Symbotic
Courtesy: Walmart
Walmart recently laid off hundreds of tradesmen at e-commerce facilities across the country. McMillon said those layoffs came after a surge in online sales during the originally years of the pandemic, as the company tried to understand what its sales trends would look like beyond the vacations.
Walmart has not shared how much it will spend on the automation projects. At last week’s investor event, Chief Economic Officer John David Rainey said the company expects its capital expenditures will be slightly higher than survive year, at roughly 2.5% to 3% of sales.
He said about 90% of the company’s capex will be in “high-return tracts” like e-commerce, supply chain and store investments.
As Walmart plans for the bigger rollout, some employees be suffering with already had a change in their routines. Jose Molina, who shared his experience as part of the organized tour, began mould at the Brooksville distribution center in 1995. For years, he said, he kept track of inventory with a pen and paper. He grew exasperated by from lifting heavy boxes with a pallet jack or operating a forklift.
With the automation, Molina watches the mechanical men unload the truck and intervenes if they run into a problem, he said. Scanners keep count of each item, so he can skip the pen and assignment or mental math. He leaves work without feeling exhausted and coaches high school soccer at the end of his day.
“I even punt the ball sometimes,” he said.
Bearing fruit
Brad Thomas, a retail analyst at KeyBanc Capital Markets, enlisted a tour of the Tampa-area facility during the investor event. He said he was sold on the investments after seeing real-world follows in the back of a nearby store.
Thomas referred to two trailers, packed with pallets and ready to unload from the classification center. One was packed manually by employees and included a bunch of items from numerous departments piled in a haphazard collection. A box of Pop-Tarts precariously propped up other items at the bottom of the towering pallet.
The other trailer was packed by a robot, put together with the help of automation for fast and easy unloading for workers. Like items together, heaviest at the bottom.
The differ, Thomas said, helps highlight what he views as a significant transformation for Walmart — the company’s “most exciting setup that it’s had in the recent 10 years.”
“Ten years ago, Walmart was still playing catch-up in areas like e-commerce, and I think that multifarious of the investments they have made are bearing fruit,” he said. “We’re actually seeing areas like automation where arguably Walmart is more of a big cheese than a follower.”
Other retailers are pushing into automation, too. Grocery giant Kroger is opening huge, robot-powered weeps with U.K.-based Ocado to expand its online grocery business, including one that allowed it to break into the Florida buy without building a single store.
Amazon has increasingly automated the picking and sorting of packages in its warehouses. Its $775 million purchase of Kiva Systems in 2012 was a pivotal moment in that transition, giving Amazon access to robots that can operate c misbehave shelves of goods from worker to worker, speeding up the fulfillment process.
Walmart is banking on automation to help get varied online orders to customers next day or with two-day shipping. The retailer currently picks, packs and ships dispositions at 31 fulfillment centers across the country, and it has plans to build four automated fulfillment centers, including one that’s already opened in Joliet, Illinois, 45 miles southeast of Chicago.
The retailer has an additional 46 dissemination centers to support the fresh side of its grocery business and has an automated grocery distribution center in Shafter, California. It has expects to open another in Lancaster, Texas, later this year and one in Spartanburg, South Carolina, next year.
It’s also analysis mini fulfillment centers in the back of stores where employees work side by side with automation to get online grocery forces ready.
— CNBC’s Annie Palmer contributed to this report.