Will pop-up e-commerce fulfillment centers help Walmart manage demand?

Photo: Walmart
Nov 16, 2020
Tom Ryan

Walmart has carved out space in 42 of its U.S. regional distribution centers (RDCs) to create “pop-up e-commerce distribution centers” (eDCs) to support online delivery of fast-sellers this holiday selling season.

“Traditionally, RDCs ship pallets of goods to our stores, which is very different than sending packages directly to customer homes,” said Greg Smith, EVP, supply chain, Walmart U.S., in a blog entry. “Working closely with our technology team, who developed new and enhanced some of our existing supply chain systems, we’ve been able to increase our fulfillment throughput. This means facilities that have traditionally only supplied products to stores are now equipped to also fulfill online orders, just in time for the holidays.”

On LinkedIn, Srini Venkatesan, EVP at Walmart Global Tech, detailed changes to the reconfigured warehouses:

  • Implementing random stow for both sortable and non-sortable items;
  • Improving pick times to avoid congestion in aisles with frequently purchased products;
  • Warehouse management app compatibility on BYOD;
  • Cloud-based integration to manage third-party fulfillment solutions;
  • Enhanced fulfillment visibility to meet delivery dates.

“We anticipate up to 30 percent of our holiday volume being shipped from our pop-up eDCs,” said Mr. Venkatesan. “After the holiday, EDC’s will have the flexibility to scale up and down, and the lessons learned will be applied as we continue to further evolve our network in the future.”

Combining stores and e-commerce fulfillment can reduce transportation costs, Mr. Venkatesan told The Wall Street Journal. Walmart trucks can move online orders from the pop-up sites to stores for last-mile pickup from third-party carriers instead of shipping parcels from central fulfillment centers. “We are getting a much more distributed footprint,” he said.

Retailers continue to experiment with a number of fulfillment models as online growth kicks into a higher gear during the pandemic. Beyond converting distribution centers to ship both direct and retail fulfillment out of one inventory, options include building separate fulfillment centers to solely support online orders, opening smaller e-commerce warehouses near busy urban centers and leveraging stores, whether open or closed (dark), as micro-fulfillment centers.

DISCUSSION QUESTIONS: What benefits do you see in a pop-up changeover approach to distribution centers to handle spikes in online selling? Does fulfillment of online orders from distribution centers promise more efficiencies than shipping from separate online-only warehouses or from stores?

Please practice The RetailWire Golden Rule when submitting your comments.
"Once again, Walmart is innovating at a time when it is so necessary. "
"Smart move in not only anticipating the surge in ecommerce for the holidays but in leveraging RDCs to help optimize logistics to support."
"Pop-up DCs are a great way to increase capacity for brands — whether during peak season, launching a new product, or just reducing strain on other DCs."

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22 Comments on "Will pop-up e-commerce fulfillment centers help Walmart manage demand?"

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Neil Saunders

Online will be very elevated this holiday season and many retailers are concerned about capacity. Walmart’s plans are a sensible way of quickly increasing the volume of orders they can process. I am sure that the fix isn’t as efficient as a dedicated fulfillment center or properly planned picking from stores, however, time is of the essence and this is a sensible reaction. Longer-term, I expect Walmart and others to invest more in automated micro-fulfillment which will allow a lot of flexibility across stores and other parts of the operation.

Suresh Chaganti

Reconfiguring warehouses to support both bulk picks and individual items for e-commerce is very difficult. It has implications on every aspect of a warehouse – physical layout, people training, systems. Kudos to Walmart for the execution. It is a good example of a competitive differentiatior.

Xavier Lederer

Great point indeed. Some of these aspects can rely on existing resources (e.g. training). The new level of complexity implied by this move though, is the decision-making system to allocate individual orders to the right pop-up e-commerce distribution centers (based on inventory, shipping time to final destination, availability of UPS/Fedex shipping trucks at each location…). Implementing this without much time to practice, and without the experience of a peak season with this new network of eDCs, is a real challenge. Kudos for tackling it.

Gary Sankary

This strategy is spot-on. Consumer demand during the pandemic has been volatile. This has resulted in disappointed customers and missed business. I love the idea that Walmart is focused on their key items for holiday, and has introduced flexibility into their supply chain closer to the customers and the actual demand. This is something I believe that every retailers needs to focus on.

Keith Anderson

Reconfiguring existing assets to fulfill demand differently just makes sense. If you already have a network of DCs and can re-purpose and re-train in time, it’s a great way to add flex capacity with minimal disruption to other channels’ operations. For fulfilling national demand, this probably is more efficient than picking from stores.

That said, the perennial tensions around who does what and who gets credit for what are important to consider, and there needs to be an effort to help each part of the business (channels and functions) understand the role they’re playing.

Jason Goldberg

Pop-up e-DCs for Walmart make a lot of sense. Seasonal e-DCs/FCs are not a new idea, Amazon used to rent the 3.8 million square foot parking area under Millennium Park to use as a holiday FC in Chicago. What’s interesting about the Walmart announcement is that they have “productized” the pop-ups into their RDCs. As COVID-19 shifts more shoppers to digital, and digital becomes even more important to Walmart, they are going to need to rapidly expand their e-DC capacity. One of the best ways to do that is to leverage Walmart’s enormous existing RDC network.

Michael La Kier

During a pandemic, we expect to see all-time highs in terms of e-commerce orders over the holidays. Pop-up e-commerce fulfillment will create additional capacity for online orders and streamline operations as long as the staff has been properly trained.

Paula Rosenblum

I think this is a fabulous idea. It’s actually kind of brilliant. Walmart has learned how to leverage its assets, and make for a more efficient (and profit-making) enterprise.

I have written a blog on this that will come out tomorrow, but I just think it’s great.

Gene Detroyer

To a small degree or a huge degree, retail is a seasonal business. What has always hurt the retail business model was that it was based on real estate that was was not flexible — hence “Black Friday,” not the promotion but the bottom line turning from red to black.

I have always been an advocate of fixing this antiquated business model with pop-up stores but, frankly, it did not occur to me that the same answer could be applied to online. Why not? It makes ultimate sense.

Further, it builds a mindset of flexibility into the system (it is not surprising that Walmart is leading the way) that can be adapted throughout the year, as business ebbs and flows.

Jeff Sward

Sounds like a smart move for Walmart. But maybe more importantly, it sounds like a smart move for mall owners with a lot of space that needs to be re-rationalized.

Oliver Guy

I have long been a believer in using different spaces to deal with collection and distribution. It is clear that in the future stores need to be multi-purpose and this is simply an extension of this. I wonder if there is also an opportunity for Walmart to partner with organizations specializing in providing these services for retailers – or indeed attempting to place them at locations that are closest to the forecast peak of demand.

Andrew Blatherwick
This is another great initiative by Walmart. Flexibility is the name of the game in retail supply chains right now. The ability to vary store and home delivery volumes is vital to be able to manage this season. It is an obvious thing to do when stores are seeing lower volumes and online is growing rapidly. But the real advantage here is the learning for the future and the ability to plan and be flexible in your supply chain going forward. Who knows where we are going to be next week never mind in one month’s time when the real seasonal peak is upon us? By using the network of regional distribution centers, they can get closer to the consumer while still utilizing stock in the current network and still have the ability to flex picking volumes at stores. This just provides another level of flexibility for those all-important fastest moving items. The advantage of this approach rather than purpose-built fulfillment sites is the utilization of inventory. You won’t need additional stocking points, forecasts can… Read more »
Karen S. Herman

Once again, Walmart is innovating at a time when it is so necessary. Merging online and offline efficiencies with pop-up e-commerce fulfillment centers for this holiday season, in particular, should benefit the customer with on-time delivery of purchases and benefit the company by keeping fast-moving items in-stock and lowering shipping costs for last-mile delivery. It’s a holiday win-win.

Natalie Walkley

Pop-up DCs are a great way to increase capacity for brands — whether during peak season, launching a new product, or just reducing strain on other DCs. And given that each pick is so different than pallets or cases, a separate center makes sense for Walmart. One challenge I see is that starting an operation from the ground up takes a lot of hiring, training, resources, and time to create the efficiencies that already-operating DCs probably have.

Doug Garnett

I wish Walmart well — it would be good for them if this can be made to work. However I’ve not had a client attempt to mix mass and individual fulfillment and succeed.

The most common point of failure is customer service. It is possible to create systems to get products out the door — the customer service load is far higher from the individual shipments.

For this reason, it’s concerning that Walmart’s list of changes has no entry for customer service. Mass DC’s are not prepared for the tracking and investigation of individual packages.

Lee Peterson

Target now fulfills 80 percent of their e-commerce from their back rooms, saving shipping costs to the tune of millions. This has proven that the closer you get to the customer, the better in terms of cost. So this Walmart idea takes that notion one stop further. It’s a great test that I expect will work. Hats off to Walmart again for moving quickly on unproven ideas that by gut feel and based on what the competition is doing, you just know will work. It isn’t all about data, sometimes it’s about those 10,000 hours.

Ryan Mathews

First of all, this makes sense. Second, it’s easier said than done. It should work in theory. Whether it will work or will not work in practice remains to be seen. Kudos to Walmart for trying to get ahead of an issue that will undeniably present major challenges as we approach the holidays. The real question is whether “pop-ups” are the right approach in the long term, or whether it would be more efficient to set up a permanent network of dedicated smaller commerce fulfillment centers separate from the existing system.

Sterling Hawkins

The more flexibility in the RDCs — the better to keep up with consumer demand changes. Especially if they can “combine inventory” to make sure both stores and individual customers are getting the products they’re looking for. It’s an easy concept that I’m sure is a logistical monster to get right. Good on Walmart for taking the step to figure it out.

Camille P. Schuster, PhD.

Identifying popular selling items is easy when tracking sales. Finding a way to efficiently and quickly get those items through the system makes sense. Is it cost effective to ship these items separately from the rest of the order when other items are requested? Experimenting is necessary to find answers. Good move.

Mark Price

The pop-up approach to e-commerce distribution is an excellent example of the agile planning and execution that is required in today’s quickly changing business environment. The patterns of demand for the holidays and after are difficult to predict this year, and Walmart’s approach permits them to quickly shift capacity as the demand patterns emerge (usually at the last minute). This approach allows Walmart to leverage their greatest strength, which is supply chain, to create a point of differentiation in service and delivery vs. competitors.

Ricardo Belmar

Reflecting the seasonality of customer buying habits into fulfillment certainly sounds like a no-brainer that should have been done long ago if it wasn’t already. What stands out the most to me is how Walmart has cleverly taken something that frankly isn’t a new concept and branded it “pop-up eDCs” such that they get the benefit of Amazon-level media attention.

We all often talk about Walmart’s strength in its distribution capabilities and logistics, but if it can’t leverage that infrastructure to fulfill more e-commerce orders, it’s not being used effectively at all. That makes this a great move by Walmart and given its recent experimental nature. I expect they will learn quite a bit about running customer fulfillment from these RDCs and use those learnings to make this more of a permanent capability in the near future.

Rachelle King

There are few retailers, if any, that can drive efficiencies in supply chain better than Walmart. This is an insider’s peek on how they continue to lead in EDLP: they have one of the most efficient supply chains in the world. Smart move in not only anticipating the surge in ecommerce for the holidays but in leveraging RDCs to help optimize logistics to support. Though probably not a novel concept, for retailers looking for ways to optimize around an ecommerce-driven holiday season, Walmart just gave a masterclass.

"Once again, Walmart is innovating at a time when it is so necessary. "
"Smart move in not only anticipating the surge in ecommerce for the holidays but in leveraging RDCs to help optimize logistics to support."
"Pop-up DCs are a great way to increase capacity for brands — whether during peak season, launching a new product, or just reducing strain on other DCs."

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