Stanley Black & Decker is retiring nearly 50,000 SKUs as part of its transformation plan

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diving letter:

  • Stanley Black & Decker has cut nearly 50,000 SKUs as part of a supply chain transformation plan expected to generate $500 million in savings by the end of next year, President and CEO Don Allan commented on the results on a conference call Oct. 27.
  • The company has cut about half of its intended target, with the remaining SKU reductions to come by the end of 2023.
  • The toolmaker also plans to consolidate facilities and optimize its distribution network, with implementation expected to begin in 2023.

Dive insight:

Stanley Black & Decker is on track to restructure its supply chain to reduce sourcing and operational costs, Allan said. The toolmaker expects to generate $1.5 billion in cost savings over the next three years by reducing SKUs, standardizing components, and fostering stronger relationships with suppliers.

The company also has a goal of reducing its operational footprint by at least 30%, with a focus on increasing efficiencies across all facilities, Allan said in the second quarter. A feasibility study has been completed and plans are being finalized, the CEO said on the recent conference call.

“We need a world-class and more agile supply chain that brings us closer to our customers, increases our flexibility in responding to demand, and improves our customer service to drive growth for us and our customers,” he said.

The tool manufacturer is also chasing savings with falling raw material prices. Allan noted that some commodity prices have fallen as much as 50% since April.

Despite its progress in transforming its supply chain, Stanley Black & Decker still struggles with excess inventory, and Allan noted that about $1.5 billion worth of product still needs to be liquidated. The company ended the quarter with $6.3 billion in inventory, down $290 million from the second quarter, according to the earnings report.

The toolmaker has extended production cuts as it plans to further reduce inventories in the fourth quarter.

“We believe our focus on inventory destocking, cash generation and balance sheet health is wise as we work in parallel on structural supply chain savings to improve our gross margin in 2023 and beyond,” said interim CFO Corbin Walburger.

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