Imagine pet owners anxiously waiting for food and toys they ordered for their beloved companions, only to face delays due to supply chain bottlenecks. This frustration is exactly what Chewy aims to resolve as the pet e-commerce giant accelerates its automated warehouse strategy amid growing labor shortages, transportation pressures, and inflation.
Core Drivers Behind Chewy's Automation Push
Chewy CEO Sumit Singh revealed during the Q2 earnings call that the company will open three automated fulfillment centers (FCs) within the next 14 months. This initiative seeks to boost operational efficiency while mitigating the impact of labor shortages. Singh emphasized that optimizing the FC network has become increasingly crucial given persistent labor market constraints, transportation capacity limits, and rising freight costs.
The automation strategy is driven by several key factors:
- Addressing labor shortages: Automated systems reduce reliance on manual labor, decreasing risks of order delays from staffing gaps.
- Enhancing operational efficiency: Automated processes optimize picking, packing, and shipping to accelerate order fulfillment.
- Reducing operational costs: Automation lowers labor expenses and material waste, improving cost efficiency.
- Improving customer service: Faster processing and greater accuracy enhance satisfaction and loyalty among Chewy's 19 million active customers.
Automated FC Network Expansion
The new automated FCs in Nashville (Tennessee), Reno (Nevada), and Kansas City (Missouri) will bring Chewy's total automated facilities to four out of its 14 FCs nationwide. The first automated FC launched in Archbald, Pennsylvania in October 2020.
Pete Krillies, Chewy's VP of Real Estate, Facilities, and Procurement, noted these locations will strengthen fulfillment capabilities across key regions:
- Nashville: Scheduled to open fall 2022 with 1,200 employees, expanding coverage in the Southeast.
- Reno and Kansas City: Will bolster fulfillment capacity in the West and Midwest, though opening dates remain unspecified.
Automation Upgrades and Expected Benefits
Beyond new facilities, Chewy is retrofitting existing FCs with automation. Mike Gilbert, VP of Operations, highlighted the "goods-to-person" system that uses conveyors and rollers to deliver items to workers, minimizing movement and heavy lifting.
Anticipated improvements include:
- 50% faster picking through automated systems
- Reduced packaging waste via customized box sizing
- Lower freight costs through optimized shipping routes
- Enhanced accuracy with reduced human error
- Improved worker conditions by minimizing strenuous tasks
Addressing Labor Market Challenges
CFO Mario Marte acknowledged that sustained labor shortages could cause delays similar to Q2 2021's backlog. Alongside automation, Chewy is implementing competitive wages, comprehensive benefits, career development programs, and positive work environments to attract and retain employees.
Innovative Packaging Solutions
Chewy has implemented automated packaging systems that create custom-sized boxes, reducing material usage by 15-20% per order. Singh noted this approach accelerates processing while benefiting sustainability efforts through decreased cardboard waste.
Industry-Wide Automation Trend
Chewy joins retailers like Walmart and United Natural Foods in adopting warehouse automation. Walmart's partnership with Symbiotic aims to automate 25 distribution centers, while UNFI expects to double picking speeds through its upgrades.
As e-commerce demand grows and labor markets remain tight, automation investments are becoming essential for maintaining competitive fulfillment operations across retail sectors.