CrossDock | March 2023

Warehouse automation market heats up, Walmart layoffs, and Amazon closes facilities

Welcome to the March issue of CrossDock, our monthly newsletter that provides you with the most recent stories and insights on the warehousing, logistics, and e-commerce sectors.

The future of warehousing has never looked more interesting. With newer advanced robotics and AI technologies being introduced rapidly, warehouses are transforming at a rate never seen before.

We are in the week following ProMat 2023, one of the largest trade shows in logistics, material handling, and warehousing, and as the dust settles, one thing is becoming clear – our warehouses in the future would be nothing like as we presently know them.

Companies are betting big on robotic capabilities and automation, and the providers of such technology aren’t slowing down either. ProMat 2023 saw announcements from most of the major warehousing hardware companies that include the likes of Zebra, Packsize, Swisslog, and more.

While we see companies launch and adopt better technologies every single day, the general economic slowdown continues to impact the warehousing and fulfillment industry. Layoffs, cost-cutting measures, and project delays continue to be rampant, as seen with Amazon, Walmart, and other companies alike.

In this newsletter:

  • Walmart lays off workers at fulfillment centers
  • Amazon down-sizes its fulfillment network
  • Riding the warehouse automation and robotics wave
  • Shopify’s big bet on Deliverr
  • Gap finally alleviates some of its inventory woes

Walmart lays off “hundreds of workers” at its e-commerce fulfilment centers

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In a fresh round of cuts, Walmart has laid off hundreds of workers at many of its e-commerce fulfillment centers across the country.

At a minimum, the retail giant is laying off 201 workers at a facility in Pedricktown, New Jersey, according to a WARN notice filed with the state. Other facilities part of this layoff round includes Fort Worth, Texas; Chino, California; Davenport, Florida, and more.

“We're working closely with affected associates to help them understand what career options may be available at other Walmart locations," the spokesperson said in a statement.

Slowing sales

In the upcoming fiscal year, Walmart expects weaker sales growth and reduced earnings. The company stated last month that it anticipates same-store sales growth for its US division, excluding fuel, to range between 2-2.5 percent.

Internet sales have increased, but more slowly than they were at the height of the pandemic; due to the customers themselves coming back to physical stores and the mounting inflationary pressure.

Walmart experienced great revenue growth in the fourth quarter of 2022 thanks to its strength in both stores and online sales. The total revenue increased by 7.3% to $164 billion.

Amazon cancels, closes, and delays 99 fulfillment facilities

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Amazon continues cutting its fulfillment network in 2023 in a larger effort to cut costs and retain some of its margins.

What’s happening

After a spur of facility openings to keep up with the pandemic-fuelled e-commerce boom, Amazon has reportedly further culled its many fulfillment centers.

As per the consulting firm MWPVL International, Amazon has canceled, closed, or delayed 99 facilities, impacting nearly 32.3 million square feet of active or planned ground-level space in 30 states. This comes after Amazon canceled and delayed 66 facilities in September of last year. The giant also shut down 21 of its fulfillment centers outside of the United States recently.

In an earnings call in February, Andy Jassy, CEO of Amazon, mentioned reducing the cost to serve customers within the company’s operations as the top priority. “To figure out how to be really efficient across all those links and have them be highly utilized and to get the flows in those facilities working the right way, it takes time,” Jassy said.

What lies ahead

Amazon spokesperson Steve Kelly said, “We may close or delay facilities, enhance existing facilities, or open new facilities, and we weigh a variety of factors when deciding where to develop future sites or maintain a presence.”

Despite the closures and delays, Amazon still has ambitions to open 231 new facilities spanning 82 million square feet. The upcoming months will determine the resilience of the plans and the associated timelines.

On a side note, we have put together a comprehensive guide on choosing and implementing a Warehouse Management System (WMS) for your e-commerce fulfillment business. Make sure to check it out here!

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ProMat 2023 recap: Warehouse automation wins big

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The massive retail and logistics trade show that concluded on March 23, 2023, saw a series of announcements that will shape the logistics and warehousing industry in the coming future.

The clear winner at the event was the warehouse robotics industry. We witnessed announcements from almost all major players including the likes of Zebra, Packsize, and CoEvolution.

CoEvolution enters the United States

Robotic automation software major, CoEvolution, headquartered in Hangzhou, China, announced the US launch of its multi-robot orchestration platform. It allows warehouses to deploy bots from any number of different vendors using a global warehouse control system (WCS) and robotic control system (RCS).

Packsize and Walmart join hands

Walmart and Packsize, a packaging technology company, announced that they are working together on a right-sized on-demand box machine designed particularly for Walmart.

The machine, called Ultra5, has already been deployed in one of Walmart’s four next-generation fulfillment centers. The new technology is expected to produce north of 600 boxes per hour and by right-sizing the boxes, will help Walmart increase the number of boxes in each truck – by as much as 33%.

What else

French robotics firm, Exotec, announced the production of its 5000th robot, just three weeks after hitting 4000. The company also mentioned its growth in the US market, which could make up for 40% of its global business in the coming years.

Several other companies such as Tompkin Robotics, Otto Motors, Swisslog, and Agility Robots announced additions to their warehouse robotics catalogs, making the space more interesting to keep an eye on in the coming months.

Shopify’s big bet on Deliverr

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At Morgan Stanley’s Technology, Media, and Telecom Conference, Shopify's CFO, discussed how the integration of Deliverr will help Shopify build its fulfillment capabilities and potentially take on Amazon.

What Deliverr brings to the table

With Deliverr, and its expansive fulfillment capabilities, Shopify aims to procure an asset-light warehouse network, along with carriers and last-mile providers. This further helps Shopify strengthen its logistics offerings, something it seems to be doubling down on.

Deliverr’s acquisition is expected to help Shopify alleviate many challenges that come with building a fulfillment network that serves to meet merchants’ needs and consumers’ expectations.

As per various leaders at Shopify, the acquisition of Deliverr is accelerating the progress that Shopify is making in its fulfillment and supply chain offerings.

With Deliverr, what they’re bringing is a network and fulfillment management software layer, which helps to predict demand and place inventory at a point that is closest to that demand. And by doing that, we believe that we can decrease the time to which we can get a product to the end customer.”, said Senior Manager of Investor Relations Ana Raman.

A bet against Amazon

While the size and impact of Amazon’s fulfillment network remains unmatched in the e-commerce space, even Amazon has struggled to keep up with its growth in 2022 with recent closures, delays, and cancellations in its fulfillment network.

Shopify’s fulfillment model is different than that of Amazon, President Harley Finkelstein noted. He pointed to Amazon operating a single network with millions of SKUs within it as a model Shopify isn’t interested in following.

“Part of the opportunity for us is once we do have Deliverr fully integrated to ramp that and get more and more of our merchants using Deliverr,” Hoffmeister said.

Gap relieves some of its inventory pains

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Inventory problems have plagued Gap, much like most of its peers in the apparel industry, since the beginning of 2022 given the steep decline in demand and forecast mismatches that resulted in piling up of inventory.

Gap ended 2022 with its inventory down 21% (amounting to $2.4B). As per the company executives, Gap ended the year exceeding its inventory goals relating to stock levels.

What it means for Gap

Gap found itself in a situation of desperation, as its net sales fell by 6% in 2022, triggering the rush to clear out its stock.

While clearing the inventory, Gap did have to depend on discounts and markdowns, leading to the company losing 5% in its merchandise margins.

However, Gap alongside its subsidiaries such as Old Navy, Banana Republic, and more, felt relief when its inventory hit one of the lowest levels, “making room for newness and the right seasonal assortment”.

What lies ahead

Going forward, Gap Inc. expects a better stock-to-sales ratio than in 2022, during which the company was frequently working to unload marked-down inventory on the market.

The company’s executives added that they plan to reach a better balance between supply and demand by chasing inventory and being proactive with customer signals and trends.

The company’s leadership also noted that it will be integrating inventory that it packed away and held in 2022 to weather the demand downturn, which should mean fewer purchasing receipts and more working capital in 2023.

Thank you for joining us at ProMat 2023!

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Exhibiting at ProMat 2023 was indeed an enriching experience for the Hopstack team. We got to witness exciting new technology that is reshaping the supply chain and logistics space. We also got to interact, learn from many industry leaders, and engage in meaningful conversations.

We thank you for visiting our booth and making the event highly memorable for us.

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