Walmart to build local fulfillment centers at dozens of stores

Following a two-year pilot, Walmart plans to add micro-fulfillment centers to more of its stores through partnerships with three automation technology providers.

Tom Ward, senior vice president of customer product at Walmart U.S., said in a blog post on Wednesday that the Bentonville, Ark.-based retailer has teamed up with Alert Innovation, Fabric and Dematic to build local fulfillment centers (LFCs) at dozens of stores. Using robotics technology and artificial intelligence (AI), the compact, modular warehouses — inside or attached to a store — are designed to fill online orders for pickup and delivery more quickly, enabling Walmart stores to handle increased digital order volume and provide more convenience to customers.

Such capability will be critical for Walmart as its e-commerce sales continue to surge, driven in part by higher online orders during the COVID-19 pandemic. Online sales jumped 79% at Walmart U.S. and 41% at Sam’s Club for the fiscal 2021 third quarter ended Oct. 31. 

Walmart started piloting its first LFC, using Alert Innovation's automation technology, at the Salem store in late 2019.

The decision to begin roll out LFCs across the store base comes after Walmart began piloting its first LFC at its supercenter in Salem, N.H., in late 2019 using Alert’s automation technology, according to Ward.

“It’s clear that one of Walmart’s competitive advantages is our stores. And today, stores are transforming to serve more and more purposes. We’re using them to fill pickup and delivery orders, make Walmart.com deliveries and more. We have a great operation that will serve us well for years to come, but we aren’t stopping there,” he said in the blog. “Our customers love the speed and convenience of pickup and delivery, and we’re committed to finding faster ways to serve them, which is why we’re scaling the number of stores that will also serve as local fulfillment centers. We’re already planning dozens of locations, with many more to come.”

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The LFCs can store thousands of products, with items ranging from fresh and frozen food and other consumables to electronics. Automated bots retrieve ordered items from the fulfillment center, instead of an associate having to walk the store to pick products from shelves. The items then are brought to a picking workstation, where the order can be assembled faster.

“We’ve always said personal shoppers are the secret to our pickup and delivery success, and that remains true. So, while the system retrieves the order for assembly, a personal shopper handpicks fresh items like produce, meat and seafood, and large general merchandise from the sales floor,” Ward explained. “Once the order is collected, the system stores it until it’s ready for pickup. This whole process can take just a few minutes from the time the order is placed to the time it’s ready for a customer or delivery driver to collect.

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Alert Innovation's bots retrieve ordered items from the fulfillment center, instead of an associate having to walk the store to pick products from shelves. (Photo courtesy of Walmart)

Results from the LFC pilot in Salem were “impressive,” Ward noted. The Alert automation system created more availability for online customers since orders were picked and process faster, and the speedier fulfillment enabled orders to be delivered or picked up within an hour, he said. In addition, one LFC can fill orders for many stores, allowing other Walmart locations to realize benefits from the automated facility.

“We’ll be building local fulfillment centers with various technology partners, including Alert Innovation, Dematic and Fabric,” Ward said. “With these partners, we’ll be testing different orientations and add-on innovations to understand what works best in different environments. For example, in some locations, we’ll be adding onto our stores. In others, the fulfillment centers will sit inside the existing store footprint.”

Automated pickup points also will be added to some Walmart stores, enabling customers and delivery personnel to drive up, scan a code and retrieve their orders, Ward said. Walmart already offers a number of turnkey pickup options, including 24-hour, drive-up automated pickup kiosks — first launched in mid-2017 near Oklahoma City — and Pickup Towers inside more than 1,600 stores, as well as in-store pickup lockers and freestanding pickup-only facilities.

“These local fulfillment centers help unlock our ability to expand even faster to meet their needs today, while also setting a new foundation to serve them in the future,” Ward wrote in the blog. “We’re excited about this new chapter for our business and what it means for our customers.”

Walmart first announced plans to test Alphabot robotics from North Billerica, Mass.-based Alert Innovation at the Salem location in August 2018. The LFC and Alphabot system are housed in a 20,000-square-foot extension to the store. 

Results from the LFC pilot in Salem were “impressive,” according to Tom Ward, senior vice president of customer product at Walmart U.S.

According to John Lert, founder and CEO of Alert Innovation, Walmart’s LFC rollout “represents a major step in the evolution of local fulfillment” and marks the largest deployment of automated micro-fulfillment technology to date by any retailer.

“Walmart was the first food retailer to recognize the need to automate fulfillment of online orders at store-level. As a result, four years ago, Alert Innovation began working with Walmart to create the Alphabot technology designed specifically to automate order-fulfillment at the store level. Alphabot helps serve customers faster by automating the picking, storage and dispensing of orders,” Lert said in a statement. “The team at Alert Innovation is proud to join Walmart on this journey and look forward to helping them better serve their customers in this new way at scale,” he added. 

Elram Goren, co-founder and CEO of Fabric, noted that the Tel Aviv, Israel-based company’s software-led robotics and modular fulfillment technology will give Walmart more economically sustainable and operationally scalable automation that can be implemented in any store or other location.

“We’re excited to announce today that we’ve partnered with Walmart to bring them our micro-fulfillment technology as part of their local fulfillment center initiative. Having the largest retailer in the world and the leading innovator in the online grocery space as our customer is an honor, and this is a true testament to the speed, efficiency and scalability of our solution,” Goren stated, adding that Fabric is expanding its U.S. presence. “As consumers are shopping for their groceries more and more online, the need for same-day and one-hour deliveries becomes critical. And as our solution was built for on-demand, Fabric is in a unique position to enable retailers to meet this need for speed.” 

Walmart also reportedly is nearing the completion of a 630,000-square-foot, high-tech distribution center for fresh and frozen foods in Shafter, Calif., that’s expected to become fully operational this spring. Announced in October 2018, the DC will use automation technology from Witron, a German warehousing storage and logistics firm, to process distribution of produce, dairy, eggs, flowers, frozen foods and other perishables to Walmart and Sam’s Club stores. Tim Cooper, senior vice president of supply chain for Walmart, said at the time that the Shafter facility will be able to process 40% more products than a traditional DC.