Tag: Best Buy

OM in the News: Best Buy’s E-Commerce Fulfillment Drive

The box-making machines at Best Buy’s facilities can cut about 15 cardboard boxes every minute

Tucked away in a fulfillment center near NYC, Best Buy is using dozens of robots to sort through boxes of iPads, HP laptops, DVDs, video games and more to ship to shoppers’ homes. The thousands of bins overflowing with goods have traditionally been picked by hand, requiring the tedious work of warehouse employees. An average worker could track more than 7 miles by foot in a single day just searching for items. But new technology at three facilities in L.A., Chicago and Piscataway, N.J., does the heavy lifting now, reports CNBC.com (Aug. 28, 2019).

There’s much talk about the shipping wars between big-box retailers Walmart and Target and e-commerce giant Amazon. But Best Buy has likewise been chipping away at its delivery strategy for the past few years. It started shipping online orders from stores in 2014. Now its 3 metro e-commerce centers help with the process. These centers differ from the company’s 6 regional distribution centers for store fulfillment as they’re much closer to customers’ homes and are able to service next-day orders. They also help with delivering bulky appliances to shoppers’ houses — something Best Buy is doing on a daily basis with its massive appliance business.

Best Buy’s latest logistics push incorporates ways to get online orders to customers more quickly, reduce out-of-stocks in stores and even cut back on excess cardboard — an issue that’s proliferated in the industry with e-commerce’s ascent. A metro e-commerce center is about 50,000 square feet, compared with 750,000 for regional distribution centers. It keeps about 3,000 of Best Buy’s current best-selling items stocked there. The 3 metro facilities set Best Buy up to reach 50 million people with free next-day delivery, giving customers the ability to make purchases as late as 8 p.m. and have the order shipped out that same day.

Classroom discussion questions:

  1. What is the difference between a “metro e-commerce center” and a regional distribution center?
  2. How does Best Buy’s fulfillment system differ from that of Amazon?

OM in the News: Best Buy’s New Supply Chain Strategy

Best Buy is changing its supply chain, adding more automation and more distribution centers closer to population centers

Best Buy believes it needs to stock more inventory if it wants to sell more electronics, reports The Wall Street Journal (May 25, 2018). The electronics giant reported its inventories rose ahead of even its fast-surging sales in its most recent quarter, as the company sought to drive more sales by having goods in place both online and in its physical stores even at the expense of higher supply-chain costs. Inventories on a per-square-foot basis—an important measure of supply-chain efficiency for retailers—were up 9% from a year ago.

Best Buy says the figures show the company is getting its inventories lined up with an “improved customer experience,” which means having goods available wherever consumers are shopping, even if that increases short-term supply-chain costs. Getting the right amount of goods in the right place has become a growing concern for retailers as online sales have exploded, undercutting longstanding strategies aimed at keeping supply chain costs down by keeping stocks lean.

Many store owners are wrestling with the need to have inventory on hand in stores and at warehouses for online fulfillment, and retailers including Target and Walmart have turned to having their stores do double duty by shipping online orders from the sites or having customers pick up their orders at the sites. Best Buy is undertaking what the company calls a “multiyear transformation” of its supply chain, which will include more automation and more distribution centers closer to population centers.

Classroom discussion questions:
1. What are the advantages of Best Buy’s new inventory strategy?

2. Why are other chains increasing store inventory levels?