September 2021 | Commentary | Checking In

Dollar Tree—Winning Through Logistics

Tags: Inventory Management, Retail, Logistics

Keith Biondo is the publisher of Inbound Logistics magazine.

What can a great logistics operation do for a company in this economy? Lots more than move boxes around, as it turns out.

Take the logistics team at Dollar Tree as an example. Over the years, the discount variety store has invested in the kind of logistics operations associates who keep the company financially sound while pleasing their customers, even in Virus Times.

To give you an idea of the supply chain mission's scope, here are some Dollar Tree facts. Most importantly, the majority of products the company sells comes from overseas. Dollar Tree imports more containers per $100 million in sales than other large retailers.

"We have an out-sized impact from freight cost increases" on the 90,000+ containers each year, says CEO Michael Witynski. Rising transportation costs set Dollar Tree back an additional $200 million a year.

Pipeline inventory costs have ballooned, too. "Transit times from Shanghai to Chicago more than doubled to 73 days from 35 days," Witynski says. In the past, the company reported that shipping lines would fulfill 85% of its contracts. These days, it hovers around 65%. Diverting to air freight is not an option due to the mercurial increase in airfreight rates, limited capacity in those lanes, and "dollar" products the stores sell.

Despite these challenges, the company is doing quite well in terms of profits, sales, expansion plans, stock price, and earnings performance. What accounts for this shining beacon of supply chain success in tough times? The reason was years in the making.

From the CEO and across the C-suite, management lauds the skill, spirit, and single-minded focus on supply chain and logistics excellence. Given Witnyski's prideful statements and respect he gives to the company's logistics pros, he sounds like a member of the logistics team.

Can a great logistics operation and a great logistics team keep inventory levels at the right size to serve customers? It can. Can a logistics team that's on top of their game keep prices low enough to satisfactorily serve the cost-conscious sector of the buying public? Yes they can. Can a stellar logistics team give you the financial stability to invest in expansion, add more retail outlets, and right-size inventory to sidestep stockouts and supply chain disruption in a pandemic global economy? Yes, yes, and yes. What about pleasing Wall Street and its investors? Yes it can.

If this sounds like a commercial for Dollar Tree, it isn't. It's a commercial for investing in logistics operations and consistently recognizing, respecting, and rewarding the logistics pros who make it all work—before it hits the fan. Dollar Tree stands as an example that companies of any size can follow.






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