Desperate To Cut Costs And Increase Efficiency, WalMart Turns To Drones

Ever since WalMart decided to increase its minimum wage and then give all employees a 2% pay raise, it has been forced to slash guidance and move forward with mass layoffs in order to cut costs (it had to offset the multi-billion dollar short-term PR investment somehow). The next phase of the cost cutting efforts will now be to replace workers with drones.

At a recent demonstration of how a drone will be utilized in WalMart distribution centers, it was noted that the drones could help catalog in as little as a day what it now takes employees about a month to accomplish.

From the NYT

Walmart, the country’s largest retailer, is testing the use of flying drones to handle inventory at its large warehouses, which supply the thousands of Walmart stores throughout the nation. In six to nine months, the company said, the machines may be used in one or more of its distribution centers.


At a demonstration on Thursday at a dry goods distribution center here, a drone moved up and down an aisle packed nearly to the ceiling with boxes, taking 30 images per second. Shekar Natarajan, the vice president of last mile and emerging science, explained that the machines could help catalog in as little as a day what now takes employees about a month.


Walmart applied to the Federal Aviation Administration for permission to begin testing drones last year.


Walmart workers now manually scan pallets of goods with hand-held scanning devices. The drone’s methodical, vertical movements would essentially mimic the path of a person in a forklift who might be inspecting labels and inventory.


While a Walmart employee may handle the drone, the technology could “potentially” mean fewer workers would be needed to take stock or replace missing items, Lorenzo Lopez, a spokesman, said. Mr. Lopez emphasized that those workers could be deployed in other areas of the warehouse.

Deployed to "other areas" meaning the unemployment office.

As we noted above, the drive to cut costs, despite what the company line may be on it, is driving WalMart to find more efficient ways to do things in order to stay competitive in an already difficult space.

The test is occurring as Walmart is under intense pressure to grow amid an onslaught of low-cost competition, particularly from Amazon, the online shopping giant. Walmart has committed to spending $2.7 billion on labor, technology and other investments, including improving its website and e-commerce business. Last quarter, Walmart beat expectations with $115.9 billion in revenue, but even Doug McMillon, its president and chief executive, acknowledged that the 7 percent growth of Walmart’s e-commerce business was “too slow.”

WalMart operates 190 distribution centers in the United States, and each one services 100 to 150 stores according to the NYT - that's a lot of future cost savings to be had after the drone systems are firmly in place.

As a reminder, if keeping up with Amazon is one of the strategic goals that WalMart has for itself, the company is nearly 3 years behind on the drones.