Local fulfillment centers (LFCs) refer to relatively compact warehouses, installed inside or next to stores, that use modular structures to store inventory in close proximity to the sales site. As applied by Walmart, they also feature a remarkable level of automation, prompting greater efficiency and benefits that the retailer plans to leverage further.

The warehouses are equipped with extensive, advance technology and bots that pick the orders from the LFC shelves. All these products get dropped together at designated stations, where human workers gather the specific items needed and assemble them as needed, whether for restocking store shelves or for delivery to customers waiting curbside. Furthermore, cold and perishable items are left to the workers to select and transport, whereas the bots take over nonperishable and other products. In delineating these responsibilities, Walmart carefully notes that it does not plan to replace human workers completely with automated bots.

Although many LFCs serve just one store, when there are multiple stores in a close geographic range, Walmart has found ways to leverage the warehouse’s capabilities more efficiently, to support multiple store operations. The greater efficiency created by the bots is key to Walmart’s efforts to offer same-day shipping to customers, without having to expand its employee rolls too drastically.

The benefits of the few existing LFCs that Walmart already has installed, including not just greater efficiency but also expanded market share, earned through its improved operations, are encouraging it to introduce them more widely. Other retailers are experimenting with micro-fulfillment centers too, including Albertsons, Meijer, and Kroger. Across the grocery industry then, LFCs may emerge as a critical step in the supply chain that demands strategic consideration and careful designs.

Discussion Question:

1. Are automated fulfillment centers and bots ultimately likely to replace human workers, if they offer greater efficiency and other benefits?
2. How should retailers determine where to locate LFCs? What considerations do they need to include in these location decisions?

Source: George Anderson, “Will Walmart Gain an Unrivaled Edge by Automating its Local Grocery Fulfillment?” Retail Wire, January 27, 2021