Will automated fulfillment centers deliver big results for Walmart?

Photo: Walmart
Jun 07, 2022

Walmart is counting on four high-tech fulfillment centers (FCs) to further drive its same-day and next-day delivery ambitions.

Walmart will open the FCs over the next three years in Joliet, IL; McCordsville, IN; Lancaster, TX; and Greencastle, PA. Combined, they’ll employ over 4,000 employees, including control technicians, quality audit analysts and flow managers.

“These FCs 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,” wrote David Guggina, SVP of Innovation and Automation, Walmart U.S. in a blog entry.

Walmart currently makes use of 31 dedicated e-commerce warehouses and 4,700 stores to fulfill its online orders.

The high-tech FCs feature automated, high-density storage systems that streamline a manual, twelve-step process into five robotics-driven steps: Unload, Receive, Pick, Pack and Ship. In the picking process, warehouse workers only have to wait for a tote to bring the ordered item instead of walking up to nine miles each day across multiple floors to find product.

Will automated fulfillment centers deliver big results for Walmart?
Photo: Walmart

Mr. Guggina stated, “We’ve been perfecting this system in our fulfillment center in Pedricktown, New Jersey, and have seen how the benefits of this technology are wide-ranging and include: more comfort for associates, double the storage capacity and double the number of customer orders we’re able to fulfill in a day.”

Among the predicted time benefits:

  • The four FCs alone will provide 75 percent of the U.S. population with next- or two-day shipping on millions of items, including Marketplace items; 
  • Combined with traditional FCs, Walmart will reach 95 percent of the U.S. population with next- or two-day shipping; 
  • Tapping store inventory, Walmart promises to offer same-day delivery to 80 percent of the U.S. population.

Only four mega-FCs are planned. Mr. Guggina wrote, “Our priority is to strategically locate our FCs to pair most effectively with its stores and 210 distribution centers.”

The highly-automated FCs are seen as an answer to Amazon’s logistics powerhouse, although Target, Best Buy, Macy’s and Lowe’s are among those talking up the benefits of in-store fulfillment.

DISCUSSION QUESTIONS: Will automated warehouses ultimately be more important to same-day and next-day delivery than in-store fulfillment? How will Walmart’s four mega-warehouses stack up to the supply chain systems of such rivals as Amazon and Kroger?

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13 Comments on "Will automated fulfillment centers deliver big results for Walmart?"

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Neil Saunders

This is a sound investment that allows Walmart to catch up with both Amazon and Kroger. Automation is a necessity in online fulfillment because online is already low margin and cost increases in labor and shipping erode that still further. Part of the solution is to increase efficiency and reduce the need for humans in the fulfillment process. All that said, Walmart’s main advantage is its extensive network of stores – which reach almost all areas of the U.S. in a way that no other retailer does. They need to leverage that asset as well as using centralized fulfillment centers.

Bob Amster

Ship-from-store and FCs each provide a different benefit. Stores provide the proximity to the customer to complete that last mile, while the efficiency of a fully-automated FC should provide unequaled speed and accuracy of picking, packing and shipping multiple orders D2C, or to a regional redistribution hub. Very little is black or white anymore.

Scott Norris

Very much an “all of the above” approach as no single strategy covers all the bases – regional centers won’t help with perishable grocery but are excellent for hard and soft goods. I also like Target’s deployment of metro-area consolidation points that leverage store fulfillment while still trying to moderate the number of vehicles and unproductive trip-miles.

Lisa Goller

Automated warehouses are strategic assets for greater efficiency and economies of scale than in-store fulfillment.

Walmart needs these automated hubs to protect its grocery leadership from Amazon, Kroger and Instacart.

David Naumann

Automated warehouses create new opportunities for retailers to increase supply chain efficiency and help alleviate the challenges caused by labor shortages. Warehouse automation technology, and specifically robotics, has seen dramatic improvements in the past couple years and companies are now seriously considering upgrading their warehouse operations.

Ken Morris

It’s impressive how much coverage Walmart is getting out of just four FCs added to their traditional system. Automated warehouses are table stakes in the big game of retail. But it will take micro-fulfillment Centers (MFCs) closer to customer doorsteps to pull off same-day delivery. Next-day or two-day shipping is so 2019.

These MFCs run in a store environment, take up a relatively small cube space, pick 10+ times faster than a person, and are very cost effective. I see these MFCs taking center stage, much like the kitchen in many restaurants where the robotics zip around in a glassed-in enclosure while you pick your produce and meat.

Gene Detroyer

In-store is the Goldberg solution to same-day and next-day challenges.

Most simply, the fewer locations a retailer can service their inventory, the more efficient use of working inventory capital. Too often, people don’t think about the cost side of inventory. The investment in inventory requires an ROI, just as any investment does. The value of being able to service customers from a minimum number of locations rather than spreading the inventory across hundreds of stores is significant.

Walmart may be able to give their customers the same service with 50 percent to 75 percent less inventory.

Gary Sankary

Walmart’s advantage in reaching more customers in one day, at least over Amazon, is their massive existing store and fulfillment network. These mega centers will certainly make a big different speeding up their level of service and expanding their reach to more places across the country. I’m not thinking about this as one element being more important than the other. I think the real killer here is the total network. And I do think this will help them to compete more effectively in the home delivery space with their other rivals.

Mel Kleiman
Mel Kleiman
President, Humetrics
5 months 24 days ago

I want to forget the customer side of the formula and focus on the employee side. This will be a win for the employees and the company.

Fewer employees needed to fill orders make their jobs more valuable, equaling higher pay and greater flexibility.

Brian Delp
5 months 24 days ago

I don’t think it’s a question of “more important” as each of these delivery points need to work in sync with one another to create an ecosystem of omni-service to the consumer. With stores being further utilized for fulfillment, and this upgrade of DCs is a rapid catch-up tactic to Amazon and Kroger. Great move.

Richard J. George, Ph.D.

This will make a competitive difference as well a difference for customers. While Walmart’s network of stores provides real logistical advantages, in store picking and order fulfillment detracts from the shopper store experience. If the automated fulfillment centers can address this issue, as well as enhance online shopping margins, this could be a big win for Walmart.

Mohamed Amer, PhD

The Walmart distribution and fulfillment network is unlike any other, thanks to 75 percent of its more than 4,700 stores that fulfill online orders. The company’s 31 dedicated e-commerce FCs and now the four high-tech fulfillment centers. The result is greater and more efficient coverage with better optimized “carton miles.” Time, capacity, and carton miles are crucial measures in evaluating retail supply chains and effective inventory flow.

Anil Patel

Providing convenience is a crucial factor in delivering a superior customer experience. Today, retail service is not solely limited to stocking-up products but the new outlook of “bringing the store to the customer” has become an equally important aspect. Amazon has changed the dynamics of retail, we can say that retailing has become a game of supply chain, and providing the right product at the right time is the need of the hour. Walmart’s new high-tech fulfillment centers will ensure optimization. Bringing automation and facilitating one-day and two-day delivery options will help Walmart catch up with the pace.

"Automated warehouses create new opportunities for retailers to increase supply chain efficiency and help alleviate the challenges caused by labor shortages. "

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