Walmart says its automated supply chain is ‘ready to scale’

Dive Brief:

• Walmart plans to invest heavily over the next year in a more automated e-commerce fulfillment environment, according to executive comments at the company’s Investment Community Meeting Thursday and capital expenditures guidance in its earnings release.
• “Our automation plan is now ready to scale,” CEO Doug McMillon said at the meeting. “We’ll 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.”
• Walmart envisions automation helping to expand fulfillment capacity at a time when the retailer is trying to bring more customers to Walmart+, a competitor to Amazon Prime. “We’ve got a limit on how much we can pick and deliver from stores,” McMillon said. “The automation that we’re investing in will help change that.”

Dive Insight:

Walmart plans to spend $14 billion on capital expenditures during fiscal year 2022, which it said will “focus on supply chain, automation, customer-facing initiatives and technology,” according to its earnings release.

“We’ve had several automation tests going on,” McMillon said. “I’m very pleased to share a few of the most important forms are now ready to scale,” noting that many of them are designed to increase productivity.

In November, Walmart noted that it was — following in the footsteps of Target — beginning to fulfill more e-commerce deliveries from its brick-and-mortar locations in the run-up to peak season.

“We’ve created a program that routes some Walmart.com orders to be fulfilled straight from our stores,” Senior Vice President of Customer Product Tom Ward wrote last year. “We’ll use our existing local delivery capabilities to get orders to customers faster, while reducing the load on our online fulfillment centers.”

Walmart is now making 1.5 million deliveries every week from its stores — seven times more than last year —  through Spark and third-party partners, McMillon said Thursday.

“Instead of an associate walking the store to fulfill an order from our shelves, automated bots retrieve the items from within the fulfillment center,” Ward wrote last month. “The items are then brought to a picking workstation, where the order can be assembled with speed.”

Last month, Walmart announced it was working to build out its network of local fulfillment centers. These LFCs, as Walmart calls them, are the facilities located “inside of or built beside our stores,” as McMillon noted, without directly referring to the LFC format.

The way Walmart describes the LFC brings to mind an Amazon fulfillment center, with its hundreds of robots carrying shelves to pickers. But Walmart’s LFC also allows for customer pickup as one of the omnichannel options — which is not happening at Amazon fulfillment centers. Walmart’s fulfillment technology partners include Alert Innovation, Dematic and Fabric.

“The way that we’re tying all the supply chain assets together with automation, and our fulfillment centers down to the last mile up to the point of delivery to, and including, inside the home — it’s a really exciting proposition,” Walmart U.S. CEO John Furner said Thursday during the meeting.

One of Walmart’s goals is to have a more interconnected supply chain, McMillon said.

“I think the next few years will represent more change in our supply chain than even the grocery DC rollout we did to support supercenters,” he said.