Macy's accelerates fulfillment network consolidation as focus shifts to omnichannel

Dive Brief:

Macy's is moving up the timeline for parts of its planned supply chain transformation that will facilitate faster and more profitable omnichannel fulfillment, executives said on a Wednesday earnings call. Digital sales were up 53% year over year (YoY) in the second quarter.
"Everything on the digital agenda has been accelerated," CEO Jeff Gennette said, adding the channel shift from stores to digital brought on by the pandemic has made smart inventory management a top priority. "We're optimizing inventory placement to meet customer demand wherever and however they shop in our store." Inventory was down 29% YoY in Q2, raising the stakes for inventory positioning as stores reopen and digital maintains an ahistorical share of sales.
In addition to centralizing fulfillment, Macy's has also centralized planning. "We have restructured our planning team where we combined it into one team all under the supply chain, and, really, that gives us an opportunity to really make decisions about our inventory planning, about the placement in the partner channel," Gennette said. The CEO said the move has already improved sell-through.

Dive Insight:

Macy's presented a far-reaching supply chain plan at an investor conference in February. At the heart of the plan was the conjoining of its two disparate fulfillment networks — one serving stores and the other e-commerce. And the shift to digital made that centralization all the more urgent. Six weeks later, it closed all of its stores and wouldn't begin a staggered reopening process until April.

"For today's customer, a strong omni experience is a baseline expectation," Gennette said. Part of delivering that experience is in the fulfillment (he listed buy online, pickup in store; ship from store; vendor drop; curbside pickup; and same-day delivery). Another part is in the planning — especially when it comes to inventory, Gennette explained. Bringing supply chain planning and merchandising together under one team has increased the organization's agility.

"That's really facilitating faster decision-making about the placement of our inventory, ensuring that we get it in the right place," said interim CFO Williams. Store-level pricing is an end goal of this deeper coordination between inventory management and inventory allocation and testing will begin in October, Williams said.

With Macy's store revitalization plan on hold, the company is leaning on supply chain transformation to improve profitability. Though net sales and profitability tumbled compared to last year, the retailer reported an 18% increase in net sales and greatly reduced net loss f rom the first quarter to the second.