Strategy for a segmented supply chain for a leading NA discount retailer
As the country’s economic conditions worsened, a leading North American discount retailer fell further behind its competitors in operating performance. Much of the gap stemmed from inefficiencies in inventory and product flow management.
To improve their supply chain efficiency and reduce expenses, the retailer brought in A.T. Kearney to work with them on an innovative solution.
Challenge
The retailer wanted to develop a means for differentiated replenishment and logistics treatments across its complex supply chain. Much of the challenge came from the tens of thousands of SKUs and many hundreds of stores.
Approach
The answer started with a framework to segment the SKUs and stores into 8 segments based on criticality (customer experience and margin), selling cycle, and rate of sales. For each segment, the team baselined store and distribution center costs and identified drivers of inefficiencies.
Next the team developed a decision-framework that would enable distinct approaches by the different segments - for merchandising, replenishment, distribution, and store treatments. Additionally, they identified and developed business cases for four key improvement initiatives.
Results
The productivity program identified over $100 million in expense reduction across the distribution centers and stores’ backroom labor. The retailer also is set for ongoing improvements with a "Path to Benefit" plan, which includes the design for pilots and diagnostics, plus system and process change requirements.
Contact
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Dean Hillier is a partner in A.T. Kearney's Toronto office. 
Kumar Venkataraman is a principal in A.T. Kearney's Chicago office. 
