Ahead of the start of the pandemic, Walmart worked for years on automation across various sectors —including distribution center technology, fulfillment center technology, and store-level market fulfillment center technology.
By working with tech companies such as Fabric, Alert Innovation and Dematic, Walmart is ramping up the build out of mini, automated fulfillment centers in stores across the U.S.
According to a recent blog by Walmart U.S.’s Tom Ward, senior vice president of customer product, a local fulfillment center (LFC) is a compact, modular warehouse that is built within a store’s existing footprint or added to a store location.
Walmart, like Kroger, Target and other large grocery chains, built out its remote shopping capabilities during the pandemic by having employees manually pick-up items from shelves that were on customers’ shopping lists prior to delivering the goods outside at a pre-designated location for payment and loading.
While online grocery shopping proved to be popular last year during the coronavirus pandemic, stores were often overwhelmed by the large demand, which led to longer fulfillment cycles.
Walmart’s LFCs can store thousands of items that it knows are in the most demand. Automated bots pull the items off of a shopper’s list from within the fulfillment center before another robot sends them to a workstation where they can be assembled and bagged prior to delivery.
Walmart can augment some products, such as canned goods and electronics, with personnel shoppers that handpick fresh items, such as produce or meat.
“Our automation plan is now ready to scale,” Walmart CEO Doug McMillon said during last month’s earnings call. “We will be investing in our distribution centers, our e-commerce fulfillment centers and in-market fulfillment centers, which will in many cases be inside of or built beside our stores.”
During the earnings call, McMillon also said Walmart’s CAPEX was projected to be $14 billion in fiscal year 2022, which includes large investments in automation, e-commerce, supply chain and additional technologies.
Walmart’s Brett Biggs, EVP and CFO, said the company expects e-commerce sales globally to be over $100 billion in the next couple of years. Automation is set to make grocery fulfillment easier and more profitable while also enabling aisle-ready pallets that can go directly to a store floor for faster stocking.
A Head Start
Walmart started testing its first local fulfillment center in Salem, New Hampshire, in late 2019, which gave Walmart a leg up once the pandemic hit. The benefits to date have included the ability to do more orders at a faster rate — with pickups or deliveries within an hour of ordering — as well as fulfilling orders for nearby stores from one LFC.
In his blog, Rice said Walmart will be adding automated pickup points for some stores, which will enable customers and delivery drivers to drive up to a location, scan a code, receive the order, and go.
Walmart plans to work with Alert Innovation, Dematic and Fabric on testing different orientations and add-on features to find the best solutions across different environments.
“In the U.S., we thought, based on how large the country is and how people like to drive their cars — they do drive-throughs for food and banks and everything else — that we had the opportunity to really focus on pickup for a few years, which was obviously economically advantageous for us,” McMillon said. “On the automation side, I think we’re going as quickly and as aggressively as we can and should go. These things will take some time.
“If we find that it’s working really well and we can go faster, I’m going to be in the camp of wanting to go faster, because this looks like it’s going be really great for our supply chain, great for customers, [and] great for the company from a financial point of view.”
McMillon said automation was also a key strategic component for Walmart+, which competes against Amazon Prime. While Amazon is working to build warehouses closer to customers in large urban areas, Walmart has more than 4,000 stores across the U.S. to potentially provision with its LFCs. By contrast, Amazon has close to 500 Whole Foods stores in North America.
“E-commerce deliveries are important, but the supercenter perishable assortment is obviously really important,” McMillon said. “And we’ve got a limit on how much we can pick and deliver from stores. The automation that we’re investing in will help change that. And the other capacity choices that we’re making will help unlock that, which will enable Walmart+ to grow more.”
Walmart hasn’t said how many LFCs it plans to have in place this year, or when the automatic pickup points will go live.
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