Walmart's automated grocery distribution centers.
Courtesy: Walmart
Walmart Supermarket Shopping said Wednesday it will open five automated fresh food distribution centres across the country, as the retailer seeks efficiency and growth in its online grocery business.
The company’s new facility will average about 700,000 square feet. The refrigerated and frozen areas feature automation for storing and retrieving perishable items, such as strawberries and frozen chicken pieces, that are later sold in stores or added to customers’ e-commerce orders.
Walmart is the nation’s largest grocery company, but it’s been modernizing its supply chain to keep up with customers increasingly picking up orders in parking lots or having groceries delivered to their doors. Store pickup and delivery drove the company’s e-commerce earnings up 22% in the U.S. in the most recent quarter.
The retailer has been automating supply chain facilities across the country, including distribution centers that handle shelf-stable 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 sales over the next five years.
In an interview with CNBC, Dave Gogina, Walmart's executive vice president of supply chain, said the automated facilities give the company a more accurate picture of its inventory and allow it to get groceries to stores faster.
“We know what we have, how much, where it is, all in near real time,” he said. “And we know it at a much better level of efficiency than we could with manual processes or legacy software.”
He said this allows Walmart to operate more cost-effectively by better forecasting demand and reducing money spent on “safety stock,” which is extra product kept in the warehouse or at the back of the store to avoid running out completely.
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 site, Gogina said.
Automation is helping drive spending at Walmart. The company said its capital expenditures this year will be between 3% and 3.5% of net sales, or about $22 billion based on the midpoint of its forecast. The total, which includes its automation expansion and hundreds of store remodels, is higher than the $12 billion Walmart has historically spent on capital annually in recent years.
Walmart said that by early 2026, about two-thirds of its stores will be serviced by some form of automation, and about 55% of its distribution center volume will move through automated facilities. The retailer said average unit costs could improve by about 20% by then.
What does the automated attachment look like?
Inside the facility, an automated storage and retrieval system can quickly pick up items a store needs to restock its shelves and transport them to an area where they are assembled into a dense pallet ready for delivery to stores. Instead of relying on a worker to manually stack these items into a cube like a real Jenga puzzle, the automated system helps push and stack them to place fragile items like eggs and peaches on top.
Automation can build personalized store platforms that include only the specific items needed to fulfill online grocery orders, Gogina said. These refrigerated or frozen products can be kept in the back of the store and used exclusively to fulfill those orders.
Walmart's automated grocery distribution centers.
Courtesy: Walmart
Gogina declined to say how much each facility would cost to build and how it would compare to traditional distribution centers for perishable goods.
Walmart has already built and tested the first of five automated fresh-food distribution centers in Shafter, California. It recently opened a second in Lancaster, Texas, near Dallas. The company plans to open three more in Wilford, South Carolina; Belvidere, Illinois; and Bellsgrove, New Jersey.
In addition to the new buildings, Walmart is expanding four of its traditional fresh food distribution centers to include automation. It will add about half a million square feet to each of the facilities in Mankato, Minn.; Mebane, North Carolina; Garrett, Indiana; and Shelbyville, Tenn. It is also renovating an older facility in Winter Haven, Fla.
Automation will bring changes to workers — and could cut jobs at some facilities. Walmart, the nation’s largest private employer with about 1.6 million workers, expects to have the same total headcount as it does now, or more, in the coming years, Gogina said.
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 also be the case at automated food distribution centers, he said. Workers at the company’s traditional facilities act as “industrial athletes,” carrying hundreds of boxes an hour and walking long distances every day. In the new facilities, he said, they play the role of supervisor.
