Walmart will trust automation to improve profits
Walmart — Increased prices and rising interest rates have altered the economic landscape, causing firms to reevaluate their strategies.
To boost profitability, Walmart, an international retailer, has extended the use of automation throughout its supply chain.
The future of Walmart
Walmart detailed its automation goals during its investor presentation last week.
Automation would allow the organization to better manage inventory, replace shelves, and respond to online inquiries.
The company’s 1.4 million-square-foot factory in Brooksville, Florida, was exhibited to investors.
This is the first automated distribution facility for packaged foods and other shelf-ready household items in the world.
In addition, Walmart plans to deploy the same Symbotic automation in all 42 regional distribution centers.
Walmart will purchase a majority stake in Symbotic, a warehouse technology firm, in 2022.
According to the corporation, by the end of January, more than a third of its facilities will have automated delivery.
A broader plan
Walmart’s automation is part of a bigger plan to increase profits.
According to CEO Doug McMillon, revenue will grow at a 4% annual rate in the next years.
Nonetheless, the proportion is lower than the 8% reported in the three years preceding the pandemic.
It is, however, faster than the 3.1% and 3.6% growth rates observed in the three years preceding the global pandemic.
McMillon also forecasted that over the next five years, profitability will climb faster than sales as Walmart focuses on automation while expanding higher-margin categories such as:
- Last-mile delivery
- Fulfillment services
New ways to shop
According to Doug McMillon, Walmart has given customers more options for online transactions and speedier delivery of items.
The firm now has a bigger product offering, including distinctive brands in a number of industries.
Furthermore, more suppliers are utilizing the company’s third-party marketplace.
“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.
Within three years, Walmart plans to automate more than two-thirds of its shops.
Automated facilities will handle more than 55% of fulfillment center tasks, and unit prices may decline by 20%.
Read also: Meta will charge users for its subscription service
A shift in workforce
Walmart is widely regarded as one of the largest employers in the United States, and the company’s 1.6 million employees may be laid off as a result of the automation effort.
Only a few individuals were present on the distribution center floor during the Brooksville facility tour.
The total number of staff, however, has remained unchanged.
According to David Guggina, executive vice president of Walmart’s US supply chain operations, automation is about increasing capacity rather than eliminating jobs.
Guggina claims that because the work is less physically demanding, retention has improved.
While he was unable to provide specific turnover data, he did state that no employees left the factory in the year after its automation.
Meanwhile, Doug McMillon is certain that the retailer’s employees will be retained.
However, he did hint that the structure will be changed.
Walmart, for example, may require fewer employees to transport pallets in warehouses but more employees to complete online purchases.
Layoffs and automation spending
Hundreds of thousands of Walmart employees have been laid off around the country.
According to McMillon, the layoffs were prompted by a rise in internet sales during the early years of the pandemic, with the company seeking to determine their sales pattern outside of the holidays.
Walmart has not disclosed the amount of money it intends to invest in automation initiatives.
According to Chief Financial Officer John David Rainey, the company forecasts capital expenditures to be somewhat higher than in 2022, ranging between 2.5% and 3% of revenues.
Rainey also claimed that 90% of the company’s capital expenditures will go toward high-return industries including e-commerce, retail enhancements, and supply chain.
Some employees’ behaviors have already changed as a result of Walmart’s extended rollout.
Beginning in 1995 at the Brooksville distribution facility, James Molina documented his narrative.
He added that he had previously managed inventory for years but had become tired of carrying massive boxes with a pallet jack or forklift.
Molina, on the other hand, may witness the robots unloading the container and intervene if something goes wrong.
He wouldn’t need a pen and paper because scanners catch everything.
Molina is also able to leave work without feeling tired, allowing him to teach high school soccer.
“I even kick the ball sometimes,” said Molina.