Walmart is investing in distribution center technology to optimize packing products, save store space and, potentially, address some long-term labor expenses and uncertainties, as it adapts its supply chain during the ongoing COVID-19 pandemic.
The retailer said it is teaming up with robotics company Symbotic to implement new automation technology in dozens of regional distribution centers. The technology would target the packing, storage and unloading processes, getting products to stores more quickly while requiring less rigorous manual labor, Joe Metzger, executive vice president of supply chain operations at Walmart U.S., wrote in a company post this month.
“Along with saving time, limiting out-of-stocks and increasing the speed of stocking and unloading, we’ll also have the chance to train associates on how to use the new equipment, creating new skills and preparing them for jobs in the future,” he wrote. “And because the technology decreases the need for our associates to handle freight, it removes one of the toughest aspects of supply chain work in material handling.”
The move comes at a time of heightened awareness of labor conditions at retail warehouses, of the challenges of implementing social distancing in these workplaces, and of the difficulty of hiring labor for relatively low-wage roles. Such tech investments highlight some of the ways retailers might be looking to address what they see as costs and vulnerabilities in their distribution systems, experts said.
“You want to take a lot of the manual labor out of the equation,” said Stanley Lim, assistant professor of supply chain management at the University of San Diego School of Business.
“One of the issues is that when individuals are not able to come into work because of restrictions or other reasons, that reduction in labor is going to cause a problem in the ability to continue to have those products and services flow through the supply chain,” he said. “If you can take that uncertainty out of the equation, or at least run with a lower workforce, you can continue and deliver the products with a high in-stock rate to the consumer.”
The move reflects Walmart’s ongoing investments to strengthen its e-commerce business, and its efforts to prevent the kind of inventory shortages it experienced during the early months of the pandemic last year as customers went on panic-buying sprees.
These types of investments in automating warehouses, and even in the more experimental realm of autonomous delivery vehicles that Walmart Stores Inc. has been venturing into in recent years, also reflect a broader shift among retailers toward developing so-called smart logistics operations, said supply chain experts.
“Walmart has always been a supply chain and logistics leader, [and] I’m not surprised that Walmart is investing heavily in technology,” said Shiliang Cui, an associate professor of operations and information management at Georgetown University’s business school.
“This is actually a trend that a lot of [retail] companies are going toward,” he said.
The pandemic has led to widely reported disruptions at ports, and created trucking shortages that have generally highlighted the vulnerabilities of global supply chains. Although investments in distribution facilities doesn’t necessarily address those broader pressure points, experts said it still helps retailers trying to nail that all-important and often expensive phase of the chain: last-mile delivery to get the product into consumers’ hands.
The pandemic has also accelerated the move toward digitization that retailers like Walmart have been investing in even in the years before it began, said Lim of the University of San Diego School of Business.
“A lot of the technologies around omnichannel retail — which is the ability to provide services across multiple channels on and offline and facilitate a variety of delivery options — those are things that were on the agenda of multichannel retailers for the last three to five years,” he said.
Walmart’s investments also reflect the retailer’s long-term thinking on an issue that is usually not immediately visible to consumers, and often felt only in times of inventory shortages and empty shelves, experts said.
“I think something that’s interesting about supply chains is that if you look at the investment that Walmart’s making in its automation, it’s great, but what’s really interesting that retailers always have to think about is, it’s not something that customers actually see,” said Lauren Beitelspacher, an associate professor at the Babson College marketing division. “Nobody ever goes to a retailer, or has a favorite retailer, because of its sophisticated supply chain.
“[But] when you have fewer stockouts, you can build more of a relationship and more of a trust based on consistency with the customer,” she added. “Additionally, efficient supply chains reduce costs.”