Background

A leading U.S.-based retailer approached the Summit Advisory Team to conduct a network feasibility assessment. The company, a multi-channel retailer with over 80 stores and more than 500 wholesalers, has annual revenues of $400 million. They needed a group of experts to help investigate the necessity of opening a distribution center on the West Coast.

Objective

The primary goal of the engagement was to automate the retailer’s B2B quoting process. With Salesforce Sales Cloud already in place, the retailer wanted to improve data visibility, automate processes, and become more efficient as bids came in from their franchises. The Summit team guided them through the process and also created Looker dashboards to provide detailed analytics that helped bid analysts make data-backed decisions.

Methods

Step 1: Discovery Workshops

Summit held discovery workshops with cross-functional teams across the entire company. The team needed to fully understand the client’s situation and gain alignment on what they were trying to solve for. It was important to understand product demand across the country, delivery speed expectations, and why a West Coast presence was being considered.

Step 2: Data Gathering

With a better understanding of the situation, the team began gathering data, including financial information, growth reports, and operational KPIs. It was important to understand how the current facility was operating in servicing the client’s eCommerce business, wholesale business, and retail stores. A robust data analysis would show whether adding a West Coast facility would be a cost-effective move.

Step 3: Network Modeling

The Summit team built a baseline network model using the collected data to identify how the client’s network was performing in terms of cost, speed, and productivity. They also analyzed how demand was distributed across the United States, allowing the data to illustrate where the client’s customers were located and whether a West Coast presence would be the best solution.

From the baseline network model, the team built alternative scenarios using EasyPost Analytics, their data modeling tool. These scenarios showed what the network would look like with a West Coast fulfillment center in terms of demand, operating expenses, profitability, and speed. The team also created additional scenarios that considered using large stores, 3PLs, and greenfield locations for fulfillment to provide the client with optionality.

Results

The network model scenarios made it clear that adding a West Coast node was not a financially viable solution for the client:

• The client’s current merchandising systems could not support a multi-node network
• Inventory management systems were not set up to support two nodes
• Only 23% of demand was present in the Western United States

Instead, the Summit team presented the following final outcomes and recommendations:

• Advise against opening an additional node as it would triple fulfillment costs and result in a $1.6 million negative impact to EBITA
• Recommend improving inventory assortment and upgrading packages in geographic sales growth areas
• Recommend moving to parity with competitors in offering free shipping options to improve customer experience