Case

Study Retail Supply Chain Optimization

Background An east coast based nutritional retailer with over 400 retail locations throughout the USA is experiencing rapid growth and expansion of its retail locations, primarily in the western states. The legacy warehousing and distribution center is located in northeast and services all of the retail stores throughout the USA. The retailers management operates and manages the distribution center in addition to focusing on their core business: merchandising nutritional products. Opportunity The rapid growth of retail outlets put a strain on the clients internal resources by taking time, energy and focus away from of their core discipline: merchandising nutritional products. As the growth in retail locations shifted to the west, the cost of transportation along with the amount of inventory on-hand to meet demand increased. In addition, lead time for order fulfillment to store replenishment increased. Service to the client as measured by store location and out of stock items was rising. All of these factors had a negative impact on the clients cost of sales and overall profitability. Collaborative Approach A collaborative approach was taken with the client to perform a network optimization study of their supply chain. A comprehensive process, the review began with mapping of the product sourcing, distribution center locations, transportation modes, inventory requirements, replenishment cycles, last mile delivery solutions, quality control, damage, loss, and internal and external service requirements. As a comprehensive view of the current supply chain was developed, we were able to model several scenarios to optimize the network. Recommended Solution The optimization study concluded that the best option was to open a distribution center in Southern California to serve retail locations west of the Mississippi. The solution included reducing overall inventory in the system by 15% (safety stock being held in stores and in the east coast distribution center), replenishment cycles reduced from a 7 day lead time to 2 days, a 35% reduction in transportation costs, a 5% reduction in damage and loss claims (reduced handling and transportation of goods) and improved overall customer satisfaction. The solution provided the ability to scale up operations to match the retailers store expansion (25% year to year for 3 years) while allowing them to focus on their core business: retail sales. Implementation In addition to adopting the recommendations for the optimization study, the client chose to out-source operations of the west coast distribution center to our 3rd Party Logistics organization. This further allowed them to remain focused on retail sales growth while eliminating the need to hire, train and manage a work force 2,000 miles from their corporate location. A comprehensive project plan was developed to implement the recommendations which were then fully executed on a timeline chosen by the client.