How Big-Box Retailers Use Local Distribution Centers to Cut Costs

When it comes to distribution, taking a lesson from the big-box retailers can streamline your logistics and boost business, too.

When leading big-box chains like Amazon, Staples and Nordstrom leverage an army of distribution centers and storage facilities, it’s not just good business for them. It’s also a great learning opportunity for small-business owners.

You don’t have to build a massive warehouse or go national to emulate big-box retailers. By applying a few of their strategies on a modest scale, you can see big gains. Continuous Investment in Its Supply Chain

Although Amazon has many fulfillment centers worldwide, the company recently announced the addition of 18 more distribution centers. This move will lower short-term profits but likely create long-term advantages.

Tactic to Borrow: Budget for Expansion

Amazon is successful largely because it created an extensive distribution network and kept adding to that supply chain. The lesson here: you should see logistics as an area of continual growth, done on a consistent schedule, instead of a goal with an endpoint.

If you have only a few distribution partners now, analyze the changes to your business if you added one annually, or even per quarter. Like Amazon, you may find it affects profits now. But consider whether it might make your business stronger in the years ahead.

Staples: Focus on Sustainability

In an initiative called “Race to The Top,” Staples challenged its product manufacturers and distribution centers to develop stronger sustainability practices. The company aimed to streamline environmental and economic factors to remove waste and inefficiency. For example, bulk shipments helped to reduce packaging costs and make shipping more efficient.

Tactic to Borrow: Think “Sustainability”

Every business wants to be more efficient, and if distribution is viewed through a lens of sustainability, it’s easier to streamline those changes. Staples created supplier scorecards that track attributes like shipping frequency and packaging costs. Creating a similar tool will help you to compare distribution centers and see where efficiencies might be realized.

Nordstrom: Improve Multichannel Capabilities

Many retailers were experiencing sales decreases at brick-and-mortar stores in 2011, but Nordstrom saw growth. The president of Nordstrom Direct attributed the company’s success to changes in its multichannel functionality. For example, inventory systems were tightened so that an online shopper could see products in retail stores.

Tactic to Borrow: Strengthen Links Between Inventory and Ordering Systems

When it comes to distribution, many software applications could be working simultaneously. A company may employ an order management system, for example, while its local distribution center could be running a warehouse management system.

Unfortunately, these applications sometimes don’t play well together, particularly if others are in the mix, such as fulfillment software and mobile apps for package tracking. Streamline and improve the process by creating a multichannel strategy that relies on just one or two order-management systems.

By borrowing strategies like these from the big-box retailers, you can create a distribution network that’s more efficient and ready for growth. Better logistics might even make you into a big player, too.

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