India’s thriving middle class is creating vast opportunities beyond the country’s largest cities that smart companies are tapping into to boost profits. One fashion retailer called on Chainalytics to help revamp its distribution network to reach those markets at an accelerated pace with thousands of new retail locations and a B2B plan to distribute product to independent stores.
When a large fashion retailer in India decided to pursue an aggressive growth plan, executives knew success would depend heavily upon big changes to its supply chain distribution strategy. The company’s existing stores were located primarily in tier one cities. Their plan was to grow by a factor of seven, adding thousands of stores in tier two and three cities over the next three years – while simultaneously increasing service levels and maintaining profitability.
With six national distribution centers (NDCs) carrying the entire portfolio of products, the organization was carrying both excess and incorrect inventory. This forced the fashion retailer to frequently initiate costly transfers between stores and NDCs to correct stock-outs and satisfy customer demand. The already-stressed NDC network would not have been able to cater to its growth plans. Further, the current network was capable of supplying just 75 percent of demand within 48 hours – a metric they sought to improve significantly.
Addressing a unique priority set and tremendous scalability requirements
In the fashion retail business, quick turnover of products is vital to keep shoppers returning to retail locations, making efficient distribution paramount to continued success. Our client needed a supply chain network that could not only satisfy this demand, but would also be scalable to serve a new B2B operation intended to distribute apparel to independently-owned, smaller footprint stores.
In the fashion retail business, quick turnover of products is vital to keep shoppers returning to retail locations, making efficient distribution paramount to continued success.
Two-tier distribution, cross-docking, backhauling and milk runs to the rescue
Chainalytics’ supply chain network design team analyzed this complex set of needs and designed an optimized distribution network that includes a combination of consolidation centers which acquire products directly from suppliers and store fulfillment centers. The new design allows the organization to optimize transport times by giving store fulfillment centers the option to either ship directly to stores or through any of its cross-docks.
The recommended vast network of cross-docks was a key design feature because it allows the company’s fleet to fulfill products using milk runs. Instead of waiting for different trucks to replenish specific SKUs, a single truck can be loaded with several different items at different cross-docks and deliver a large variety of SKUs directly to each location in a single trip. Coupled with optimized shipment sizes and frequencies, this model both shortens the time necessary to fulfill demand and reduces inventory. It is also easily scalable to transport items to the e-commerce customers.
The result: Reduced transit times and costs
The supply chain solution designed by Chainalytics gives the fashion retailer the capability to reach 98.4 percent of its customers within 48 hours. Although the company was willing to absorb increased costs to accomplish its growth goal, the new distribution network would actually reduce its supply chain cost by 10%. This cost savings is achieved through optimizing fleet mix and size, warehouse size and staffing levels, and increased backhaul opportunities.
This new supply chain network model also gives the fashion retailer the necessary scalability to keep its stores serviced appropriately across multiple formats. The fulfillment speeds and supply chain cost reductions are expected to give each location the ability to operate at their target margins while growing the business through a quickly growing B2B network of retail customers. To learn more about how Chainalytics can improve the speed of your distribution network while keeping costs in check, Contact Us.
