Or at least it seems that way when you need to optimize locations and layout to drive customer satisfaction.
Are you leaking money to service customers and markets?
Have you ever wondered how retail stores have what you need—regardless of how obscure it may be? A Fortune 100 company learned a valuable lesson when it switched from a distribution model to a direct-to-retail supplier.
The Problem
The company faced extended lead times that led to empty retail shelf space—and lost sales. Their customer base was loyal (the kind who would settle for a Coke even if they wanted a Pepsi), but loyalty only goes so far when the product isn’t available.
As a global manufacturer with distribution centered in the middle of the United States, they needed a better approach.
The Solution: A Global Pull System
What they did wasn’t unique or groundbreaking—but it required discipline and data mining.
The company developed a global “Pull System” based on the grocery store model. Here’s how it worked:
Demand-Driven Inventory
- Used actual demand data and product management (not forecasts alone)
- Created inventory levels based on demand, rounded up to the nearest packaging size
- Positioned inventory at three levels: customer locations, distribution centers, and manufacturing plants
Triggered Replenishment
- As inventory moved at the retail store, it triggered upstream locations to ship
- Replenishment signals flowed based on lead time requirements
- Classic Lean pull system—customer-focused and efficient
The Discipline Required
Sounds easy, right? That’s where discipline comes into play.
All the way through the supply chain, daily management was essential to avoid air freight or other expediting costs:
| Location | Required Discipline |
|---|---|
| Manufacturer | Create internal orders immediately when inventory drops to trigger levels—sometimes requiring overtime |
| Distribution Centers | Move shipments in a timely manner to send proper signals to overseas manufacturers |
| Import & Receiving | Run like clockwork within correct timeframes |
| Data Management | Handle quarter-to-quarter shipping variation and adjust accordingly |
The Results
The data-driven pull system delivered across 600 U.S. retail locations:
- 98% delivery performance at each customer location
- Eliminated stockouts that were causing lost sales
- 25% growth in sales from improved customer loyalty
- More efficient process with reduced expediting costs
In the end, customers were able to buy what they wanted from a much more efficient process—resulting in improved loyalty and significant revenue growth.
Could Your Supply Chain Benefit?
If you’re experiencing stockouts, excessive expediting costs, or customer frustration from long lead times, a demand-driven pull system might be the answer.
Contact us to discuss how OpExecs can help you optimize your supply chain operations.