Walmart’s Sam’s Club Solves a Huge Problem (Costco Hasn’t)

The warehouse clubs continue to battle for customers and Sam’s Club has a new weapon.

The supply chain mess caused by the covid pandemic forced retailers to get much smarter about how they get items into their stores. 

That’s actually something Walmart’s (WMT) – Get Walmart Inc. Report Sam’s Club and Costco (COST) – Get Costco Wholesale Corporation Report have long made a core part of their operating model.

Both chains have focused on delivering the best possible value for their members. Doing that requires being relentless in finding ways to cut costs and do things more efficiently. Costco and Sam’s Club both use their limited selection and buying power to get vendors to offer lower prices.

The two companies also look regularly at how they can remove cost from their operation. That speaks to their core model of operating no-frills warehouses with the goal of selling to their members at the cheapest price possible.

Covid added another wrinkle to every retailer’s cost structure. Rising gas prices, labor shortages, factory slowdowns, and changing consumer demand pushed the price of getting items delivered higher. Costco and Sam’s Club can’t control increased costs at the manufacturing level (although they have a lot of leverage in negotiating price) but they can continually revise their logistics to take costs out of the equation.

Sam’s Club, however, has a big answer to one of the biggest problems facing retailers right now — a lack of truck drivers.

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Sam’s Club Uses Driverless Trucks

Thirty-four Sam’s Club locations in the Dallas-Fort Worth Area will receive shipments of Northern toilet paper and Dixie products from autonomous 26-foot trucks. The trucks, provided by Gatik, “will automate part of the Georgia-Pacific-KBX on-road transportation network in the Dallas-Fort Worth metroplex, delivering goods round the clock, 7 days a week across a network of 34 Sam’s Club locations.”

It’s a big step forward in Walmart’s efforts to automate last-mile and mid-range deliveries. Gatik explained how it will work in a press release.

 The operations involve moving Georgia-Pacific shipments from point to point on predefined short-haul routes using a dedicated autonomous vehicle fleet with 26-foot boxes, representing the first time that class 6 autonomous box trucks have been deployed to disrupt short-haul logistics networks traditionally involving class 8 trucks. By replacing traditional tractor trailers with autonomous box trucks, Gatik’s operations will establish a more responsive and flexible logistics network, increasing the cadence of delivery runs and the flow of goods, while reducing logistics costs and enabling near real-time inventory fulfillment. The operations will commence in July 2022.

Taking drivers out of the equation solves a huge problem for Walmart/Sam’s Club as- America has a huge shortage of truck drivers. It also frees the company from the rules that impact drivers and allows for 24/7 flexibility.

Costco Has a Logistics Plan Too

While driver-free deliveries are in their early days, Costco has also been investing in its supply chain. The company has been focusing on taking over more of its delivery network when it comes to getting goods to members.

“With logistics, we continue to transition from vendor drop ship to direct ship from our own inventory, particularly in big and bulky items. Overall, this lowers the cost of merchandise and improves delivery times and service levels for our members,” Senior Vice President Bob Nelson shared during the chain’s third-quarter earnings call

This investment has specifically helped the chain with its larger deliveries.

“Costco Logistics continues to drive big and bulky sales for us. We averaged more than 58,000 stops a week in the third quarter. For the full year, we estimate total deliveries will be up 23% and will exceed 3 million,” he added.

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