How Walmart is achieving new levels of growth through automation

Earlier this month, some of Walmart’s senior executives and shareholders gathered in Tamper for its annual Investment Community Meeting.

Over the last five years, the retail giant has seen sales growth of 6% and operating income growth increase by 3%. In February 2021, CFO John Rainey said the business had a plan to achieve 4% sales growth on average with greater than 4% operating income growth.

“Since that time, our compounded annual growth in sales and operating income has been 8.2% and 4.8%, respectively. Higher inflation has been a partial driver of our top line, while at the same time, pressuring the mix of our business, putting pressure on the bottom line,” Rainey said on April 5, 2023.

So what has been the key to Walmart’s success? Technology investment certainly has played a role.

“The benefit of any technology platform is being able to scale it at a lower marginal cost,” Rainey told investors.

“The investments in our supply chain, coupled with the retail ecosystem that we have created, are what we believe will allow us to realise more attractive returns through operating and fixed cost leverage.”

Walmart’s finance team have made targeted technology investments that will allow the business to generate steady and sustained growth at higher margins. “We think the opportunity for operating income growth over the next three to five years could be better than what we’ve outlined,” Rainey said.

Targeting automation investment

During his session, Rainey took stock of how the retail landscape had changed over the past five years. He noted customers now prefer “multi-channel offerings, convenience, value and selection”.

“It’s proving challenging to provide all these things at attractive economics,” he said. But technological deployment is helping.  “Automation enables us to improve our throughput at lower cost, and to change how our associates work, in new and better ways,” Rainey explained.

“Most notably, it allows us to reallocate labour hours closer to customers to improve both the customer and associate experience.”

Prathibha Rajeshekar, senior vice president for automation and innovation at Walmart US, said Walmart had started to automate several processes throughout its fulfilment and distribution centres.

She said the business was being “intentional in [its] approach, carefully considering the why, where, and how of each implementation.” Walmart’s automation strategy has centred on its people – incorporating technology and automation to allow its staff to do their jobs more efficiently.

As a result, some o Walmart’s fulfilment centres are now able to complete double the number of orders they used to be able to fill in a day due to certain processes being automated.

“By designing automation with our people in mind, we’ve surpassed our Associate Net Promoter Score in these facilities,” Rajeskhar said adding that customers also feel the benefit as packages are delivered faster than ever before.

However, she said she was most proud that Walmart associates no longer have to work long distances when customer orders are ready to be fulfilled. “Instead, they stand at an ergonomically designed workstation that is designed for their comfort and products come to them,” she said.

Walmart has automated processes at several its fulfilment centres, most recently in Illinois.  Similar automation has also been introduced at perishable distribution centres.

“These automated FCs are setting an entirely new precedent for the speed of fulfilment. The massive, automated storage and retrieval system that you see is designed to hold tens of millions of (stock keeping units), which is double the storage capacity compared to a traditional FC,” Rejeshekar said.

By the end of the 2026 fiscal year, Walmart believes roughly 65% of stores will be serviced by automation, approximately 55% of the fulfilment centre volume will move through automated facilities, and unit cost averages could improve by approximately 20%.

Comments are closed.