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Walmart’s automation push is paying off.
In Walmart U.S., more than 45 percent of the retail giant’s e-commerce fulfillment center volume is now automated, with roughly 1,800 stores receiving some level of freight from 15 regional distribution centers that are in varying stages of automation implementation.
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“As a result, our supply chain teams are processing more units through our DCs and FCs,” said John David Rainey, executive vice president, chief financial officer at Walmart. “And while we’re spending more on capex than we have historically, we’re pleased with the returns from these investments, particularly the automation of our supply chain.”
By the end of 2024, Walmart expects about 3,000 of its 4,600 total U.S. stores to receive deliveries from the automated facilities.
“The ability for a store to get a load in that is palletized is so helpful. As we build more density in these [fulfillment] centers, not only is it by aisle, in many cases it’s by section when an associate needs to stock a pallet. I remember working in stores years ago and it was a bit of a treasure hunt to try to find the items you needed, the cases you needed,” said John Furner, president and CEO, Walmart U.S., who noted that the combination of automated fulfillment and in-store location technology “makes it much easier for our associates to access inventory and get those things in front of people.”
Delivery costs are getting sliced at a high pace as well, which is helping to narrow global e-commerce losses, notably in the Walmart U.S. and Flipkart businesses. According to Rainey, net delivery costs per order have been cut nearly 40 percent year over year.
While in-store pickup is growing at a faster rate than Walmart’s in-store or Sam’s Club sales, deliveries are accelerating even faster than pickup, CEO Doug McMillon said in the call.
Rainey shared another reason for the company’s improvements in delivery, noting that the proximity of stores to customers has enabled faster delivery times.
Store-fulfilled delivery was up about 50 percent in the second quarter, Rainey said, with customers “increasingly choosing and paying for delivery of their e-commerce orders in under one hour or under three hours.”
America’s largest retailer is pouring billions into automation projects to hasten the fulfillment and delivery process, already having opened four “next-gen” distribution centers in Illinois, Indiana, Texas and Pennsylvania. The company also plans to open a fifth high-tech facility to open in Stockton, Calif. by 2026. The fulfillment centers are built to enable next-day and two-day shipping across the U.S. on more products, and double the storage capacity of a traditional Walmart warehouse.