Wall Street Times

Walmart shifts focus on automation for the future

Image Commercially Licensed from: DepositPhotos
Image Commercially Licensed from: DepositPhotos

WalmartPrice increases and raising interest rates have transformed the economic environment, forcing businesses to reconsider their plans.

Walmart, a worldwide retailer, has expanded the use of automation throughout its supply chain to increase profitability.

The future of Walmart

During its investor presentation last week, Walmart highlighted its automation objectives.

The company would benefit from automation in order to better manage inventory, replace shelves, and react to internet enquiries.

Investors were shown the company’s 1.4 million-square-foot facility in Brooksville, Florida.

This is the world’s first automated distribution center for packaged foods and other shelf-ready home products.

Furthermore, Walmart intends to use the same Symbotic automation in all 42 regional distribution facilities.

In 2022, Walmart will acquire a controlling share in Symbotic, a warehouse technology company.

According to the firm, more than a third of its facilities will have automated delivery by the end of January.

A broader plan

Walmart’s automation is part of a larger strategy to boost earnings.

Revenue will expand at a 4% yearly pace in the next years, according to CEO Doug McMillon.

Despite this, the percentage is lower than the 8% reported in the three years preceding the epidemic.

It is, however, faster than the growth rates of 3.1% and 3.6% reported in the three years preceding the global pandemic.

McMillon also predicted that profitability will rise faster than sales over the next five years as Walmart focuses on automation while increasing higher-margin categories such as:

  • Advertising
  • Last-mile delivery
  • Fulfillment services

New ways to shop

According to Doug McMillon, Walmart has expanded its online transaction choices and accelerated item delivery.

The company now offers a broader product portfolio, featuring separate brands in a variety of industries.

Furthermore, the company’s third-party marketplace is being used by more providers.

“We’re now in a phase that is less about scaling store pickup and delivery, e-commerce assortment, and e-commerce FC [fulfillment center] square footage and more about execution and operating margin improvement,” said McMillion.

Walmart intends to automate more than two-thirds of its stores within three years.

More than 55% of fulfillment center duties will be handled by automated facilities, and unit prices may fall by 20%.

Read also: US Federal Reserve hikes interest rates

A shift in workforce

Walmart is widely considered as one of the largest employers in the United States, and as a result of the automation endeavor, the company’s 1.6 million employees may be laid off.

During the Brooksville plant tour, just a few people were present on the distribution center floor.

However, the overall number of employees has remained constant.

Automation, according to David Guggina, executive vice president of Walmart’s US supply chain operations, is about expanding capacity rather than job elimination.

Guggina argues that retention has improved since the task is less physically taxing.

While he could not give exact turnover figures, he did indicate that no employees departed the factory in the year after its automation.

Meanwhile, Doug McMillon believes the retailer’s employees will be kept.

He did, however, imply that the framework will be altered.

For example, Walmart may need fewer staff to deliver pallets in warehouses but more employees to fulfill online sales.

Layoffs and automation spending

Hundreds of thousands of Walmart workers have been let go across the country.

The layoffs, according to McMillon, were spurred by an increase in online sales during the early years of the epidemic, with the corporation attempting to discover their sales pattern outside of the holidays.

Walmart has not stated how much money it plans to invest on automation programs.

The business expects capital expenditures to be somewhat higher than in 2022, ranging between 2.5% and 3% of revenues, according to Chief Financial Officer John David Rainey.

Rainey also stated that 90% of the company’s capital expenditures will be directed into high-return industries such as e-commerce, retail improvements, and supply chain.

Changed routines

As a result of Walmart’s expanded rollout, some employees’ behaviour have already altered.

James Molina began documenting his story at the Brooksville distribution center in 1995.

He went on to say that he had previously managed inventory for years but had become bored of lugging large boxes with a pallet jack or forklift.

Molina, on the other hand, may be present when the robots empty the cargo and may intervene if something goes wrong.

Because scanners capture everything, he wouldn’t need a pen and paper.

Molina can also leave work without feeling weary, which allows him to teach high school soccer.

“I even kick the ball sometimes,” said Molina.