Tractor Supply to cut in-store safety stock with just-in-time replenishment centers

Live Brief:

  • Tractor Supply Company plans to add more facilities over the next several years that provide its stores with just-in-time replenishment of some of its fastest-turning items over the next several years, Colin Yankee, executive vice president and chief supply chain officer, said on the company’s Q4 earnings call in January.
  • The retailer operates a dozen of these facilities, called mixing centers, throughout the US The mixing centers focus on delivering the 100 highest-velocity consumable, usable and edible (CUE) products in full-pallet quantities, and they have the added advantage of removing 400 square feet of safety stock inside stores, per an investor presentation.
  • “Over the last several years, our mixing centers have proven to reduce the days of inventory coverage required in stores to support sales, relieving pressure on our store backrooms while increasing in-stocks,” Yankee said.

Tractor Supply to trim climbing store stock with mixing centers

Average inventory per store in dollars, since 2008

Live Insight:

Tractor Supply’s recent slate of supply chain investments have focused on how to more efficiently handle growing demand, including for CUE products. The average store moved 18% more CUE units — which include livestock feed, pet food and fertilizer — in 2020 compared to 2019, Yankee said.

More mixing centers will help tackle the rising demand. Tractor Supply also plans to have its current mixing centers bring products to a larger portion of stores in the future — they currently cover about half the stores in the chain, according to Yankee. Executives didn’t specify on the call how many more mixing centers the company would add.

Other companies are also investing in their supply chains to meet demand for specific product categories growing in popularity. Big Lots plans to add two more forward distribution centers, which will handle bulk products and furniture, to its network this year. On the CPG front, JM Smucker will build a new manufacturing facility and distribution center in Alabama to produce Smucker’s Uncrustables sandwiches, one of its fastest-growing brands.

Tractor Supply’s investments go beyond expanding its physical footprint. To create more accurate vendor orders for fast-turning products like those in CUE, the company is deploying a new inventory forecasting and replenishment system this year. This will allow the company to create a clearer picture of future demand and respond quickly when demand shifts, Yankee said.

“This new system takes in more data on demand patterns like seasonality and day of the week variations, business decisions like promotions, price changes and changes in display and space and external factors like weather, traffic and local events,” Yankee said.

The platform will also allow Tractor Supply to share information directly to its vendors’ production planning processes. Initial test and use cases lowered total inventory and increased in-stock rates, Yankee said.

Within its distribution centers, Tractor Supply is deploying “new replenishment logic” that will help certain products get picked, loaded and routed to stores faster and more frequently, Yankee said. The company currently has eight distribution centers, with future facilities planned in Ohio, Arkansas and the Pacific Northwest, according to the investor presentation.

“While this new replenishment logic is geared towards our CUE items, we will also strategically apply it to big ticket items, like gun safes and riding lawnmowers, helping us get the right product in the right stores at the right time to optimally use inventory and the store’s capacity,” Yankee said.

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