Listening to Walmart Inc executives talk through the company’s future is a reminder of how difficult the recent past has been. Like a lot of retailers, Walmart was forced to put its e-commerce business into overdrive to meet a COVID-19-pandemic-induced surge in online shopping. It first struggled to fill shelves as shoppers cleared out merchandise and then rushed to shed merchandise when supply chain knots loosened.
Now it says it has big plans to restore operating margins and drive profitability. Over two days last week, Walmart executives outlined their strategy to expand sales by 4 percent and grow operating income 4 percent or more over the next three to five years. The company aims to better leverage its online-offline model; diversify income streams; and scale high-return investments. However, its most far-reaching tack was automation.
Walmart, the biggest employer in the US, envisions dramatically changing the nature of retail work as it deploys robots to take on more, and more complex, tasks. As a bellwether for the industry, what Walmart does has ramifications for everyone else. On the one hand, its automation investments offer a blueprint for competitors to follow that could reduce costs, but on the other, it could lead the way on how to responsibly manage this new era of job insecurity.
In Walmart’s future vision of the company, people are important, but costly assets when compared to newer, and increasingly cheaper, automation technologies. By the end of 2026, about 65 percent of stores would be serviced by automation and about 55 percent of the fulfillment center volume would move through automated facilities. The company estimated that this would shave about 20 percent from the average cost of moving a product along its factory lines.
Walmart showcased its supply chain innovation to financial analysts on Tuesday last week at its Brooksville, Florida, regional distribution center. There, automated forklifts unload trucks, and large robots sort cases and ferry them through the 130,064m2 distribution center. Such automation helps the company react more quickly to consumer demand and improve its delivery service with consistency and predictability.
It also reduces the amount of physical labor involved while increasing pay, Walmart US chief executive John Furner said, adding that it helps lower costs, meaning a better return.
Walmart Inc chief executive Doug McMillon has covered this ground before. In December last year, he told investors that automated warehouses eliminate a lot of time workers spend in the back room of stores sorting merchandise.
Along with investments in advertising and fulfillment services, “that’s when you have a more attractive income statement,” he said.
So, less monotonous work and more pay, but lower overall costs — the unspoken tradeoff is often fewer workers.
Already the company is cutting jobs from its warehouses as it ramps up automation. It plans to cut 2,000 e-commerce fulfillment jobs in the US and continues to close underperforming stores, leading to additional employee layoffs.
It is difficult to escape the reality that with more automation will come a further streamlined workforce — a process that will be on rinse and repeat with ever increasing technological sophistication. Technology can improve work productivity and relieve people of some backbreaking tasks like hauling heavy boxes around a fulfillment center. It also creates opportunities for workers to improve their skills and become technicians rather than manual laborers. With each innovation though, new tasks will be added to the robot roster.
This has serious implications for those people without a college education who have traditionally depended on retail or warehouse work to break into the workforce. Automation leaves less need for less educated workers, who may not have the advanced technical skills to operate robots. That could further increase the gap between rich and poor, as workers without a college education find fewer job prospects.
Of course, Walmart is not alone in its sprint toward automation. Amazon.com Inc has long used robots in its warehouses, which it credits for its supply chain success. However, more traditional brick-and-mortar stores are also embracing automation. Nordstrom Inc uses automation across its supply chain, which helped it increase its distribution center productivity and speed by 20 percent. Panera Bread Co and Popeyes Louisiana Kitchen Inc are testing automated ordering in some drive-throughs where robots replace the employees who used to take customer orders.
Walmart’s big plans for automation simply reflect a broader transition across industry where workers work alongside robots. However, workers who are not prepared for that future will lose out. What is Walmart’s responsibility here? The company is already ramping up its investment in preparing workers for a more technological future.
In an ideal world, Walmart and its peers would do more. They could support programs outside of universities and colleges (or partner with them) to train workers in the kind of technologies that are becoming staples in the industry. For instance, Google created a fund to invest in non-profit programs that train workers without a college education in information technology support, data analytics and project management so they can move on to high-paying jobs.
If Walmart is going to be a leader in transforming the retail workplace, it also carries some responsibility for ensuring that, at the other end, workers can still thrive. Not just robots.
Leticia Miranda is a Bloomberg Opinion columnist covering consumer goods and the retail industry. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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