Macy’s sets up mini-distribution centers in 35 stores

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diving letter:

  • Macy’s is using space in 35 of its stores to function as mini-distribution centers as the retailer positions its e-commerce network to handle an expected influx of shipments ahead of the holiday season.
  • About 1 million square feet of store space was converted for fulfillment services, CFO Adrian Mitchell said on a earnings call. The move gives Macy’s distribution network a presence closer to customers, allowing the retailer to better serve demand.
  • The mini distribution centers are semi-automated and are designed to save on shipping costs, speed up deliveries and reduce the need for split shipments. “They’re relatively inexpensive additions to our existing fulfillment network,” Mitchell said.

Dive insight:

Macy’s is adding retail space not only to prepare for the busy holiday season, but also to make room at other facilities for future new products.

Dennis Mullahy, chief supply chain officer, told Supply Chain Dive last month that using stores to distribute gives Macy’s breathing room during peak season and “will provide more capacity and space for upstream fulfillment.”

The retailer has maintained strict inventory discipline and is now able to buy even more when demand demands it.

“Effective inventory management gives us the necessary flexibility and liquidity [respond to] what consumers are buying at each customer touchpoint,” Mitchell said.

Macy’s reported third-quarter inventories were 12% lower than 2019, though they were 4% higher year-over-year. While The Gap and other retailers have decided to bag and store certain excess stock to sell at a later date, Macy’s is working to clear its flooding now to avoid being stuck with out-of-season products .

“We plan to go into next year with a clean inventory position because the packaway just isn’t a good thing for us as a fashion retailer,” Mitchell said.

Macy’s has invested heavily in automation and data analytics as part of its supply chain transformation plan announced in early 2020. The plan, dubbed Polaris, includes a laser-like focus on monitoring consumer demand to make informed sourcing and operations decisions.

“The investments we’ve made in data and analytics from demand forecasting to inventory allocation to price tags have laid the foundation for continuous inventory control now and into the future,” said Mitchell.

Kate Magill contributed to this story.

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