Dive Brief:
- Autozone launched a new California-based direct import facility earlier this month to more efficiently move direct import products, CEO Bill Rhodes announced on the company's Q4 earnings call.
- The site will receive imported products from the auto supply retailer's foreign production sites and send them as needed to AutoZone's distribution network.
- The direct import facility is the second announced in recent months, and aims to cut down on AutoZone's safety stock through the postponement of inventory allocation by approximately 45 days.
Dive Insight:
AutoZone joins the leagues of retailers tackling how to efficiently flow inventory throughout their distribution and retail networks with the use of specialized distribution sites.
Earlier this year, Tractor Supply launched plans for just-in-time replenishment centers to restock some of its fastest turning products. Lowes, meanwhile, has taken a similar approach as AutoZone with the use of coastal holding facilities to secure imported products from suppliers earlier and deliver them to distribution centers and stores as needed.
The addition of AutoZone’s direct import facility in California, as well as one planned for New Kent, Virginia, will allow the company to better manage product costs over time and create a more efficient supply chain, Rhodes said.
"Our supply chain strategy is focused on carrying more product closer and closer to the customer, and we believe it has been a significant contributor to our recent success," he said.
As part of that strategy, the company is aggressively building out its mega hub network to help fulfill inventory at nearby stores. The retailer plans to bring 200 of the sites online, 25 of them in FY2023. The hope is that the sites, of which there are currently 78, help bring customers greater product assortments and a bump in sales.
"We know intelligently placing more inventory in local markets will lead to our ability to continue to say yes to our customers more frequently and in turn, drive our sales," Rhodes said.
AutoZone is hoping that the use of the expanded distribution network, together with the import facilities, will ease supply chain snags and keep inventory levels steady. Still, Rhodes admitted challenges remain.
"Our overall in-stock rate that we had before the pandemic. It's been very stubborn, frankly," he said. "We're looking to push through it. But every time we think we've got it solved another category rears its ugly head.”
