Walmart

Wal-Mart adds distribution hub for website sales

1 million-square-foot center in Indianapolis will be third

By Chris Bahn

Posted: June 6, 2014 at 2:57 a.m.

By Ben Goff
Credit: NWA MediaNeil Ashe, president and CEO of Global E-Commerce for Wal-Mart, said Thursday that the retail giant will add a third 1 million-square-foot fulfillment center by the end of the year.

Wal-Mart will have 3 million square feet of fulfillment center space available by the end of the year as it continues to invest in its growing e-commerce business.

President and CEO of Global E-Commerce Neil Ashe said Wal-Mart will add a third 1 million-square-foot center in Indianapolis this year to complement similar facilities in Texas and Pennsylvania. Wal-Mart's online business is expected to grow 30 percent over last year's $10 billion in annual sales and investing in the fulfillment centers will be an important part of the growth strategy, Ashe said. Once all three centers are online, Wal-Mart will be able to fill orders to as many as 2 million Americans in two days or less via ground transportation.

Wal-Mart's 4,000 stores and 500 Sam's Clubs will continue to play a key role in satisfying online purchases. Those existing stores serve as fulfillment centers on a much smaller scale but provide Wal-Mart with additional resources in its fight for online dollars.

"You can see we have a next-generation supply chain that comes together with buildings and transportation networks and stores and clubs in a way that no enterprise can do," Ashe said. "We're really excited about what that can be."

Expanding the fulfillment centers is a critical piece of Wal-Mart's competition with online-only retailer Amazon.com. Currently, Amazon lists 37 fulfillment centers in the United States and two more in Canada.

Indiana, Kentucky and Pennsylvania each have four Amazon fulfillment centers. Texas, California, Washington, Virginia and Tennessee have three each.

Ashe said Wal-Mart would likely add "a handful" of additional fulfillment centers. The company is analyzing data from online orders to aid its decision-making process on where to locate facilities and how big to build them.

Amazon reportedly is exploring the possibility of launching its own private fleet to help fill customers' orders. Wal-Mart operates its own private fleet with 6,000 tractors. Last year, the fleet recorded more than 700 million miles delivering products to stores and finding ways to streamline delivery and identifying efficient ways to get goods to customers in markets like Denver, where the company is doing grocery delivery.

Tracy Rosser, senior vice president of transportation, said the company is continually re-evaluating its distribution network. Last year, Wal-Mart shaved 16 million miles off its total for the year through network consolidation efforts involving smaller orders.

Technology upgrades centering on "material handling" within distribution centers are being tested in some facilities. Rosser said the upgrades could increase distribution-center capacity by about 15 percent.

"The customer is changing and that causes dramatic changes in how we think about the supply chain," Rosser said. "When you think about the tests we're running, those are a window of how things are changing."

While Amazon has the much bigger and more established fulfillment operation in place, Ashe said Wal-Mart remains the only option for customers looking for a blend of online and in-person shopping. Wal-Mart is testing pilots across the country that involve online orders and in-store or location-specific pick-up by customers.

"Only we can marry e-commerce with the assets of the world's largest retail," Ashe said. "We serve the 100 percent, not the 10 percent. That's where we are really focused."

Wal-Mart's U.S. CEO Bill Simon said figuring out how to thrive in the competitive online space has been good for the world's largest retailer. Competition is bringing out the best in the company, he said, as it fights Amazon and its $74.5 billion in sales last year.

"We do better in markets that are competitive than we do in markets that are less competitive," Simon said during a question-and-answer session with reporters. "Our teams are more focused. They know they have to be sharper. Amazon is formidable. It's making WalMart.com better. It's making Wal-Mart better in general. We like competition. It's good."