One apparel retailer decided to improve its company’s performance by restructuring its supply chain. It established over a half-dozen smaller fulfilment centers across the country. The centers were situated in low-cost real estate areas. This retailer cut online order costs by 15% per order by replicating a model more common in fast-moving, highly predictable consumer goods. The company also reduced working capital by removing seven weeks of inventory. Since it didn’t have to mark down items that were stranded in stores, it was able to sell more goods at full price. When the retailer saw how well its new supply chain network was performing, it realised it had discovered a potential new business. Almost all of its competitors faced the same issue, where supply chain costs outpaced revenue growth.
The retailer then purchased two online logistics companies that had assisted it in establishing the network and found ways to aggregate orders from various businesses to mitigate parcel costs. The net result is a savings of $1 per order, which is significant for mid – market retailers. This retailer applied its new knowledge to a cooperative model that helps scale benefits and inventory balancing that only the largest big-box retailers can achieve. The retailer developed the model further with technology, robotics, and analytics to provide “supply chain as a service” to competitors. Innovative retailers, such as this one, are turning a fixed-cost, high-capital challenge into a technology-based growth opportunity.
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