Question

How will Walmart's use of robots change its break even point?

Walmart (WMT) is robotic janitors in some of its stores. Walmart has purchased several Autonomous Cleaner (Auto-C) robots from Brain Corporation. An Auto-C robot looks like a Zamboni, the machine used to clean ice rinks. The robots scrub floors and clean store aisles. Sensors in the robots allow them to navigate around customers and other objects, so the robots can be used during store operating hours.

Management at Walmart has stated that the robots are to be used to free up employee time. Management reasons that if the robots do the repetitive tasks, employees will be better able to help shoppers and do other tasks. Management estimates that an employee at each store with the Auto- C robot would have spent two hours per day doing the cleaning that the Auto-C will perform.

Walmart is also using Auto-S robots in its stores, which scan shelves in the stores to help keep track of inventory that is out of stock, mislabeled, or priced incorrectly. The Auto-S robots are three times as fast as humans and twice as accurate.

In addition, Walmart is using conveyor belt robots that sort products from trucks as they are unloaded. The conveyer belts cut the number of employees needed in the unloading process in half.

Approximately 50% of Walmart’s workforce is part time, up from 20% in 2017 (Reuters.) Walmart raised the minimum wage in its stores to $11 in 2018. Walmart employs more than 2 million people worldwide.

Questions

1. Do you think that the costs of robots are mostly variable or fixed? Explain.

2. Would the cost of full-time hourly employees behave mainly as a variable cost or a fixed cost?

Does your answer change if you consider part-time hourly employees rather than full-time

employees? Explain.

3. How would Walmart’s break even point change by using robots rather than hourly

employees?

4. What are some of the advantages to Walmart of using employees rather than robots?

5. What are some of the advantages to Walmart of using robots rather than employees?

Answer 1

1. The cost of robots is FIXED according to me. As once the expenditure is done to purchase the robots, there is no other expenditure (Except maybe their maintenance and upkeep expenditure.) So, there is no variable portion in this expenditure.

2. The cost of full time hourly employees behave mainly as fixed cost as the salary expense will remain same irrespective of their working hours. They will be paid full salary.
However, in the case of part-time hourly employees, wages will only be paid on the basis of hours wored. Thus, it is variable expense.

3. Robots is considered as fixed cost. Break even point is calculated by dividing the total fixed costs of production by the price per unit less the variable costs to produce the product. Thus, increase in fixed cost will lead to change in BEP.

4. Advantages of using employees are

- Employees have feelings which create more connection with customers.

- Major incentves can be given to the employees on the basis of efficiency.

5 Advantages of using robots are

They dont get tired.

They do not create arguments