CVS Health is restructuring its distribution network as the pharmacy chain seeks to speed up the flow of goods to its stores and online customers.

The Woonsocket, R$.$I.$-$based company has closed three of $33$ warehouses, automated one of its largest distribution centers and plans to open a building dedicated to bulky items this fall, part of what it says is a multimillion$-$dollar plan to upgrade its supply chain to cut costs and improve profit margins.

The chain's efforts in distribution operations that handle goods from general merchandise to pharmaceuticals are meant to help restock its stores faster and free workers to help customers in stores and fill online orders for pickup and delivery.

CVS operates more than $9,000$ retail locations nationwide, and $85\%$ of the U$.$S$.$ population lives within $10$ miles of a store. The company wants to use that proximity to shoppers to its advantage, said Mario Rivera, chief supply chain and logistics officer.

"How are we leveraging that strength, that competitive advantage?" Rivera said. "How do we build that network to position the inventory to support that?"

CVS has been squeezed by rising drug costs and lower foot traffic while sales of Covid vaccines and test kits have waned. The chain operates $1,000$ walk$-$in clinics as well as one of the country's biggest health insurers and the nation's largest pharmacy$-$benefit manager.

The company late last year cut thousands of jobs $,$ mostly corporate positions, as part of a cost$-$cutting drive meant to refocus on providing healthcare services.

Same$-$store sales for items such as general merchandise fell about $2\%$ for the quarter ended March $31$ from a year earlier, but rose $1\%$ excluding over$-$the$-$counter Covid$-19$ test kits. CVS reports second$-$quarter earnings Wednesday.

CVS joins other retailers, including Target, Walmart and Walgreens, that have focused on fulfilling more online orders from stores to speed up shipments $,$ streamline inventory and make more use of bricks$-$and$-$mortar sites.

Tom Enright, an analyst at research firm Gartner, said retailers using stores as fulfillment hubs must restock inventory faster and more frequently to avoid having too little$$or too much$$merchandise in any given store.

$"$If I$\text{'}$m delivering three times a week, I$\text{'}$m basically giving them two days' worth of inventory every day, which they struggle to hold," Enright said. Instead, he said, retailers are bringing in smaller allotments more frequently.

CVS said it recently spent millions of dollars to automate a $1\mathrm{.}2$ million$-$square$-$foot warehouse in Lumberton, N$.$J$.,$ serving stores in the Northeast.

An automated storage and retrieval system from Norwegian warehouse$-$automation company AutoStore brings items bound for stores directly to workers, who no longer must walk warehouse aisles to retrieve merchandise. Workers then hand the products to an automated system from Orlando, Fla.$-$based Tompkins Robotics that sorts items into bins based on destination.

CVS previously would send half$-$empty bins to stores throughout the day, taking up space in stores as well as workers' time as they unpacked multiple shipments. The company now waits until bins are full and then groups them by store. CVS said the change has reduced bins it ships containing beauty products by $42\%,$ for example.

The tactic has also trimmed the time it takes to replenish a store down to a single day rather than several days, Rivera said. Moving merchandise faster allowed CVS to cut $$2\mathrm{.}5$ billion worth of inventory since $2022$ and close three warehouses last year.

"Instead of the store having to take multiple deliveries for the same amount of product, we can get the product that they need much faster," Rivera said.

CVS plans to double the size and volume of the AutoStore system next year and potentially roll the technology out across other warehouses.

The chain, which carries household goods from paper towels to eyeliner, plans to open a warehouse this fall in Jersey City, N$.$J$.,$ to stow bulky items such as toilet paper, laundry detergent and water bottles bound for New York City stores. That would "allow our other distribution centers to work on the other, non$-$bulk product, and therefore be more efficient," Rivera said.

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