Walmart looks to bet $200 mln on autonomous forklifts -sources
26/07/2024 12:00
By Siddharth Cavale and Jeffrey Dastin
NEW YORK, July 26 (Reuters) - Walmart WMT.N has plans
to potentially spend $200 million on self-driving forklifts as
part of broader efforts to automate more warehouse operations,
according to three people familiar with the matter.
The world's largest retailer wants autonomous forklifts to
move pallets of goods in its distribution centers, which
replenish Walmart stores. It has intended to buy possibly
hundreds from Fox Robotics and invested $25 million in the
Austin-based startup, the sources said.
The rollout, which Walmart could stop at any time, would
occur in stages over several years and hinges on the retailer's
satisfaction with the "FoxBots," said the people, who were not
authorized to discuss the plans publicly.
Details about Walmart's investment and rollout have not been
reported before. They underscore the company's strategy for
warehouse automation, which aims to grow profit and help it
compete with retailers like Amazon.com AMZN.O .
Camille Dunn, a Walmart spokesperson, declined to comment on
the $200 million spending plans. She referred Reuters to an
April announcement that said Walmart had piloted the technology
and would add at least 19 FoxBots to four facilities, noting
that deployments are "an evolving process" from proof of concept
to rollout.
"We evaluate the performance at each phase to determine if
the technology meets our ability to better serve customers," she
said in an email. "Some initiatives we scale, some initiatives
we don't."
Fox Robotics said its customer deals are confidential.
In recent years, Walmart has focused increasingly on
robotics to help it replenish stores, manage costs and keep the
price of goods low.
Analysts from Jefferies estimated the company could add $20
billion to its profit before interest and taxes by fiscal 2029,
thanks to its efforts in automation and artificial intelligence.
Arun Sundaram of CFRA Research added: "Expect more and larger
deals in the future."
As one example, Walmart announced a deal in 2022 with the
robotics vendor Symbotic SYM.O to implement automation in 42
distribution centers. Walmart owned more than 13% of Symbotic
stock as of a January securities filing.
Now, Walmart has taken a stake in Fox Robotics and has
warrants to invest more, the people familiar with the matter
told Reuters.
The Fox and Symbotic deals are similar in that they restrict
use of their technology by Walmart's biggest competitors, the
sources said. Exclusive deals with suppliers are not uncommon in
retail.
The Symbotic agreement states that key employees would be
bound by non-competes and receive competitive pay, while
Symbotic would be barred from selling its technology in certain
non-Walmart warehouses. Details were redacted in a securities
filing.
Walmart declined to comment on its contractual agreements
with the robotics vendors. Symbotic said it does not comment on
its customers' business strategies.
STEMMING TURNOVER
Tested for more than a year, the FoxBots unload pallets and
help put them into Symbotic's automated system, which catalogues
and stores goods, Walmart has said in press releases.
A single human operator can manage up to six of the
autonomous forklifts at a time, saving as much as 40% on labor
costs, Fox Robotics said on its website. A worker is still
needed to open warehouse doors for instance, but the goal is for
Walmart to depend less on labor in the long run, the sources
said.
Dunn said, "People will always be part of our warehouse
operations."
Finding workers to staff warehouse and other blue-collar
jobs can be challenging, two of the sources said. Employers
might pay little for onerous work, and sometimes staffers do not
show up, one of them said. "There's a younger generation of
people that just don't want to do these jobs," the source said.
At Walmart, a freight handler at its Coldwater, Michigan
distribution center might "lift up to 40 to 60 pounds
repetitively for extended periods of time," according to a job
posting on Glassdoor. Another ad asked if a candidate had
proficiency in operating equipment such as a forklift and would
work 12-hour or overnight shifts, for $19.30 to $24.80 an hour.
For David Guggina, executive vice president of supply chain
operations at Walmart U.S., automation has meant new technical
roles for associates and other employment opportunities, not job
cuts. It reduces physically demanding work, giving Walmart
"substantially low turnover," he said.
"A reduction in turnover absolutely drives savings," Guggina
told Reuters. "You improve your productivity because you have
less folks that are sitting in what I call (the) learning
curve."
Asked how much Walmart was spending on automation overall,
Guggina said Walmart was investing billions of dollars into its
supply chain network.
In spite of their promise, robotics have not always paid off
for the company, which pulled the plug on shelf-scanning units
in its stores years ago.
Their long-term feasibility can be uncertain, depending on
significant adjustments and a controlled environment, whereas
humans can adapt faster, said Katie Driggs-Campbell, a professor
the University of Illinois’ Grainger College of Engineering.
"We are still far away from the robotics replacing humans in
the retail industry," she said.
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(Reporting by Siddharth Cavale in New York and Jeffrey Dastin
in San Francisco; Editing by Richard Chang and Christopher
Cushing and Miral Fahmy)
((siddharth.cavale@thomsonreuters.com; Cell: +1 646-288-4330))