Walmart Opens Five Automated Distribution Centers

Automated distribution centers for the supermarket chain Walmart.

Thanks to: Walmart

Walmart reported Wednesday that it will open five automated fresh food distribution centers across the country as the retailer strives for efficiency and grows its online grocery business.

The discounter’s new facilities average about 700,000 square feet. Cold storage and freezer areas have automation that stores and retrieves perishable items such as strawberries and frozen chicken nuggets that are later sold in stores or added to customers’ e-commerce orders.

Walmart is the nation’s largest grocer, but it’s modernizing its supply chain to keep up with customers who are increasingly picking up orders in the parking lot or having groceries delivered to their homes. In-store pickup and delivery drove the company’s 22% U.S. e-commerce gain in the most recent quarter.

The retailer is automating supply chain facilities across the country, including distribution centers that handle nonperishable items and fulfillment centers that help pack and ship online orders. Automation, along with higher-margin businesses like advertising, is a key reason why CEO Doug McMillon said in April 2023 that Walmart would grow its profits faster than revenue over the next five years.

In an interview with CNBC, Dave Guggina, Walmart's executive vice president of supply chain, said the automated facilities give the company a more accurate picture of inventory and can therefore get groceries to stores faster.

“We know what we have, in what quantity and where it is, all in near real time,” he said. “And we know that at a level of capability that is significantly improved over what we could achieve with manual processes or legacy software.”

This allows Walmart to operate more cost-efficiently because it can better predict demand and spend less money on “safety stock” — extra products kept in a warehouse or at the back of the store to prevent them from running out entirely, he said.

The high-tech facilities also allow for greater density. Each distribution center has twice the storage capacity and can handle more than twice the volume of a traditional location, Guggina said.

Automation is helping drive higher spending at Walmart. The company said capital expenditures for the year will be 3% to 3.5% of net sales, which equates to about $22 billion based on the midpoint of guidance. The total, including the automation expansion and hundreds of store renovations, exceeds the $12 billion Walmart has spent annually on capital expenditures in recent years.

Walmart has said that by early 2026, about two-thirds of its stores will be served by some form of automation, and about 55% of fulfillment center volume will go through automated facilities. Average unit costs could improve by about 20% by then, the retailer said.

What an automated facility looks like

Within the facility, the automated storage and retrieval system can quickly grab the items a store needs to replenish its shelves and move them to an area where they are assembled into a dense pallet ready to be delivered to stores. Instead of relying on a worker to manually stack those items into a cube like a real-life Jenga puzzle, a robotic system helps push and stack them, putting fragile items like eggs and peaches on top.

Guggina said the automation can build customized pallets for a store that hold only the specific items needed to fulfill online grocery orders. Those refrigerated or frozen items can be stored in the back of the store and used exclusively to fulfill those orders.

Automated distribution centers for the supermarket chain Walmart.

Thanks to: Walmart

Guggina declined to say how much the individual facilities would cost to build or how that compares to traditional distribution centers for perishables.

Walmart has already built and tested the first of five automated fresh food distribution centers in Shafter, California. It recently opened the second in Lancaster, Texas, near Dallas. It plans to open three others in Wellford, South Carolina; Belvidere, Illinois; and Pilesgrove, New Jersey.

Along with the new construction, Walmart is expanding four of its traditional fresh food distribution centers with automation. It will add about half a million square feet to each of the facilities in Mankato, Minnesota; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tennessee. It also is in the process of retrofitting an old facility in Winter Haven, Florida.

Automation will bring changes for workers — and could eliminate jobs in some facilities. Guggina said Walmart, the nation's largest private employer with about 1.6 million workers, expects to have the same number of employees overall as it does now, or more, in the coming years.

But he added that Walmart expects to increase productivity without hiring at the same pace as in the past. The roles it needs will also change, he said. For example, it may need fewer people on the warehouse floor and more people to drive trucks in its fleet.

That will be the case at the automated grocery distribution centers, he said. Workers in the company’s traditional facilities act like “industrial athletes,” lifting hundreds of boxes an hour and walking many miles each day. In the new facilities, he said, they play the role of supervisors.

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