Walmart Embraces New Technology To Revolutionize Supply Chain

Dustin Caudell
Mon, Aug 15, 2016
Walmart is implementing drone use in their distribution centers.
Walmart is implementing drone use in their distribution centers.

Walmart's busy distribution centers may start buzzing more than usual soon, thanks to the drones sent in to help with supply chain logistics management. At their annual shareholders meeting the big box giant pushed technological advancement as a way to keep ahead in the industry, something the company has always been known for.

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Walmart's drones are still in the testing phase; managed by Walmart's emerging sciences and technology group. It will be testing the drones for the next 6 to 9 months. Currently the distribution centers are filled with human employees equipped with digital barcode data collection scanners for pallets to monitor and manage the billion dollar company's supply chain. Once the drones have been thoroughly tested, the hope is that they will mimic the same patterns as their human counterparts, but will do so much faster with less risk.

This is Walmart's most recent move to make their supply chain more efficient. The big box giant recently began reusing boxes multiple times to lower costs and analyzing data on how to better pack their boxes. According to their analysis, it would be more efficient to use 27 different kinds of boxes than the 12 they have now, and plans are underway to pack shipping containers more completely and efficiently, saving fuel and maximizing space. It is also rolling out efforts to cut down on items being out of stock. By reducing the number of options for certain items available in-store, like bottled water, they will have to stock less. Target, one of Walmart's main competitors, is also eliminating excess options to save their employees time and money, and to cut down on out of stock items, noting that customers are actually burdened by too many choices.

New Technology to Stay in the Game

The push for new technology to manage business on every level is a familiar move, but some were surprised to find it coming from Walmart. Famous for its vast shopping centers and low prices, the giant has long operated under the belief that brick and mortar is the best option, a "build it and they will come" philosophy so prevalent that 90% of Americans now live within 10 miles of a Walmart. Despite their heavy presence, sales have been declining, due in part to a changing marketplace and to several image-tarnishing viral campaigns. Earlier this year Walmart announced it would be closing 269 stores, primarily their smaller "express" locations.

Declining numbers are being blamed on a higher level of e-commerce from the average consumer, particularly through Amazon.com, which saw a 27% increase in e-commerce sales in America in their first quarter of 2016.

Walmart's main goal is still to grow, and that is where the warehouse drones will come in. Drones could speed up warehouse operations substantially and address logistical challenges of managing inventory at their 190 distribution centers. The question is, will their competitors follow suit? If the drones prove successful as a supply chain management tactic, it could very soon become a reality of big box stores everywhere.

Growth in the E-Commerce Age

Walmart may have started a supply chain revolution, but it also may be too late to the party. Amazon made news when, in 2013, it announced plans to move forward with drones that operate as part of its delivery network called Amazon Prime Air. Currently Amazon's drones are undergoing extensive tests which, if proven successful, could decrease delivery time to half an hour on certain items. That is bad news for the big box giant, which is growing its e-commerce business but has not seen as many gains as it wanted.

Walmart's drone initiative to improve automated data collection is part of their plan for the company's continued growth. The US market accounts for 3/4 of Walmart's annual sales, but with customers fleeing online the company's expansion may be slower going than they would like. If drones have an effect on distribution it is likely that other companies will follow suit, but if Amazon's Prime Air takes off as promised, it may not be enough to keep Walmart in the lead.

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