Walmart Deploys Robotics To Compete With Amazon in First of New Fulfillment Centers
Walmart, the nation's largest retailer, has opened the first of its four new next-generation fulfillment centers to bolster its distribution network to compete with e-commerce juggernaut Amazon.
"This 1.1 million-square-foot facility features robotics, machine learning and automated storage resulting in increased productivity and a better service for our customers and faster delivery times,” John David Rainey, Walmart executive vice president and chief financial officer, told Wall Street analysts.
Walmart's rival, Seattle-based Amazon, has several large warehouses in the Joliet area, signing a lease earlier this year for 1 million square feet at 4300 Brandon Road in Joliet, not far from Walmart's new high-tech fulfillment center.
Retailers including Walmart, Amazon and Target are streamlining supply chains to more quickly and efficiently fulfill online orders. Online giant Amazon already has a number of highly automated mega warehouses across the nation, including one in Wilmington, Delaware. Walmart is playing catch-up with Amazon, which has said it will be tempering its distribution-network expansion, in that regard.
And the effort to bolster online deliveries has moved beyond industrial properties to stores. Walmart is adding what it describes as small "compact, modular" warehouses to some of its its Supercenters. And last week Target announced it will be debuting larger-format stores that will have additional space for order fulfillment, to house expanded storage and pickup areas.
Robotic Illinois Facility
In June, Walmart said it planned to open four high-tech fulfillment centers, with the first one in Illinois originally set to open this summer, though that ended up being pushed back to the end of September. At the time of the announcement, Walmart said it had 31 dedicated e-commerce fulfillment centers and 4,700 stores located within 10 miles of 90% of the U.S. population to fulfill online orders.
The new fulfillment centers "will be the first of their kind for Walmart, using the powerful combination of people, robotics, and machine learning to set an entirely new precedent for us on the speed of fulfillment while continuing to create a positive work environment for our associates," according to the retailer.
The next high-tech fulfillment centers are slated for: 5259 W. 500 N, McCordsville, Indiana, 2.2 million square feet, opening next spring; 1915 Ebberts Spring Court, Greencastle, Pennsylvania, 1.5 million square feet, set to open in 2024; and Lancaster, Texas, 1.5 million square feet, slated to open next year.
Walmart partnered with Knapp, a tech company for intelligent fulfillment solutions, to develop an automated, high-density storage system that streamlines a manual 12-step process into just five steps. The company said it perfected the system at its fulfillment center at 3 Sorbello Road in Pedricktown, New Jersey, achieving benefits such as doubling storage capacity and doubling the number of customer orders it can fulfill in a day.
The four planned next-generation facilities alone could provide 75% of the U.S. population with next- or two-day shipping on millions of items, Walmart said. Combined with its traditional fulfillment centers, the retailer will be able to reach 95% of the U.S. population with next- or two-day shipping, and by making use of the reach of its stores, it can offer same-day delivery to 80% of the population. The four high-tech facilities will employ more than 4,000 people when they open over the next three years.
Walmart has a 15-year lease for its new Illinois fulfillment center from CenterPoint Properties of Oak Brook, Illinois, according to CoStar data.
Amazon's nearby site at 4300 Brandon Road, also leased from CenterPoint, marked the first major lease for the e-commerce firm this year in the Chicago market after completing nearly two dozen deals in the region early on in the pandemic, according to CoStar.
With the added capacity that the high-tech centers will give it, Walmart is converting a traditional Atlanta fulfillment facility to focus on orders for its Walmart Fulfillment Services business, delivering orders for third-party sellers.
‘Market Fulfillment Centers’
On the earnings call, Rainey said Walmart has acquired Alert Innovation, a robotics automation company that develops material-handling technology for order fulfillment in retail supply chains. Walmart has been working with Alert to customize technology for it market fulfillment center, or MFC, build-out since 2016. Those centers aim to let Walmart leverage its store footprint for storage and fulfillment.
"MFCs are positioned inside or attached to Walmart Supercenters and use robotics and [artificial intelligence] to fill online orders more quickly,” Rainey said.
Walmart has described an MFC as a "compact, modular warehouse built within, or added to, a store" that use automated bots to retrieve the items for an order.
Bill Read, executive vice president at Retail Specialists, reported on Walmart's MFCs in August, saying the retailer first tested the system in 2019 in Salem, New Hampshire, and announced a few new locations, including two in Jacksonville, Florida.
"An average Walmart Supercenter is 180,000 to 210,000 square feet," Read said in his report. "By adding [an] MFC to 10,000 to 20,000 square feet of its existing stores, it can significantly speed up its pickup and delivery speeds."
In a Walmart MFC store, "you simply order and drive up to the drive-thru lanes, have your order loaded into your car and you’re on your way," according to Read.
"Everyone saves time," he said. "The MFC can store the most commonly bought items, pull and package your order in a much smaller area of the store and do it faster."
Walmart reported for the third quarter ended Oct. 31 overall revenue grew 8.7%, to $152.8 billion, and U.S. comparable sales increased 8.2%. The company also raised its full-year guidance.
Walmart, as in the second quarter, said even higher-income consumers are coming to its stores to save money in a year with record inflation.
"Walmart is well positioned to serve customers and gain greater trip frequency during tougher economic periods, and we have even more tools to do so in this cycle," Rainey said. "For example, we've continued to gain grocery market share from households across income demographics, with nearly three quarters of the share gain coming from those exceeding $100,000 in annual income."
Neil Saunders, managing director of GlobalData, in a note to clients Tuesday, talked about how the tough economic environment is helping Walmart's sales.
"Even those at the upper end of the income spectrum are looking to bring costs under control and buying more from Walmart — even if just everyday consumables — has become a point of mitigation," Saunders said.
He added that "among lower-income consumers, loyalty to Walmart has remained strong. There has been some churn with people shopping around more and incorporating players like Aldi into the mix, but Walmart remains the key destination for those looking to save money."