Woolworths to splash AU$780 million on two new automated distribution centres

Flagging that it will lead to the closure of some existing facilities and redundancies.

Woolworths has signalled it will invest between AU$700 million and AU$780 million in technology and fitouts over the next four years as part of plans to build an automated regional and distribution centre and a semi-automated national distribution centre at Moorebank Logistics Park in Sydney.

"The planned sites, which are subject to NSW government planning approval, will materially increase our capacity for growth, improve efficiency, advance localised ranging efforts, and deliver better and safer experiences for Woolworths stores, team, and customers," Woolworths group chairman Gordon Cairns said.

The new facilities at Moorebank will build on the automated technology deployed at the group's Melbourne south regional distribution centre (MSRDC).

"Moorebank will transform the way we serve our NSW grocery customers. The new facilities will advance our localised ranging efforts, with the ability to hold over 30% more products than existing facilities," Woolworths CEO Brad Banducci said.

"Automation will allow the creation of aisle-specific pallets by store, and in doing so, reduce the time to restock shelves and result in better on-shelf availability for customers.

"We have learnt a lot from our MSRDC development, which is delivering against its business case and this gives us the confidence that now is the right time to invest in our NSW network."

See also: Robots are changing the face of retail in 2020 (TechRepublic)  

Once established, the regional distribution centre will be a 34,600-square metre automated site, which is expected to receive and dispatch more than 6,000 products from over 800 suppliers to more than 266 stores.

Meanwhile, the national distribution centre will be a 40,700-square metre semi-automated site that will receive and dispatch more than 9,000 products from over 900 suppliers to more than 1,020 stores.

The new facilities at Moorebank will replace the current grocery operations at Woolworths' Sydney regional distribution centre at Minchinbury and national distribution centre at Yennora, and Melbourne's national distribution centre at Mulgrave. Temperature controlled fresh food distribution will continue to be serviced out of the Minchinbury centre, however.

Woolworths said the new facilities will "regrettably" impact a number of roles at its Minchinbury, Yennora, and Mulgrave. The estimated one-off pre-tax cost of redundancies for impacted team members is expected to be AU$176 million. The company said this will be recorded as a significant item in FY20.

On Tuesday, the grocery giant also took the opportunity to provide a trading update where it estimates group earnings before interest and tax for FY20 will come in between AU$3.2 billion and AU$3.25 billion.

The company also revealed that the cost of underpaying staff has now blown out to AU$390 million after it identified its salaried team members at ALH Hotels were not paid in full according to the general hospitality industry award during FY18 and FY19.

Woolworth's decision to build its automated and semi-automated warehouses comes days after e-commerce fulfilment provider eStore Logistics announced it investing AU$40 million over several years into developing two fulfilment centres and the rollout of over 200 AI-enabled robots between both centres.

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