Advance Auto Parts nears finish line on its distribution center consolidation strategy that aims to drive supply chain productivity, President and CEO Shane O’Kelly told analysts during a May 21 earnings call.
Dive Brief
- Advance Auto Parts is nearing completion on its distribution center consolidation strategy that aims to drive supply chain productivity, President and CEO Shane O’Kelly told analysts during a May 21 earnings call.
- The auto parts retailer is also on track to open 10 to 15 market hubs this year to enhance same-day hard parts coverage across its store network, O’Kelly said.
- Advance Auto Parts currently operates 35 market hubs and plans to open 60 locations by 2027, the CEO told analysts.
Dive Insight
Advance Auto Parts has been working to streamline its supply chain network over the past few years, including consolidating its distribution footprint into a single operation to drive efficiency. Up until its consolidation efforts, Advance Auto Parts had two distinct distribution networks — its own and one from its Carquest acquisition.
Since year-end 2023, Advance Auto Parts cut back its footprint from 38 U.S. distribution centers to 16 currently, an Advance Auto Parts spokesperson told Supply Chain Dive in an email.
Now, the retailer’s network includes distribution centers which act as replenishment nodes that feed into Advance Auto Parts’ market hubs, the spokesperson said. Market hubs are located closer to stores to hold parts locally that help drive same-day availability for stores. The spokesperson added that several of its smaller distribution centers have been turned into market hubs.
“The market hubs are designed to increase our speed of service by placing approximately 75,000 – 85,000 SKUs closer to the customer, which increases same-day parts availability,” the spokesperson said. “A market hub typically supports 60 to 90 stores within its radius.”
With its network consolidation strategy nearing the finish line, Advance Auto Parts is now focused on standardizing its distribution operations, O’Kelly told analysts. Following a review of its distribution center workflows, O’Kelly noted that the retailer has identified key process improvements which will be rolled out throughout the year.
“These enhancements are designed to improve how product flows into our DCs through the facilities and out to hubs and stores,” O’Kelly said. “We expect these actions to raise operational efficiency and support our productivity goals for both our supply chain and our stores.”
Achieving “near perfect shipment accuracy” to its stores is one of the auto parts retailer’s critical objectives. O’Kelly noted that achieving this goal will remove the need for store teams to manually scan each product upon receipt, saving on labor hours. The CEO added that Advance Auto Parts has also launched tools to provide greater clarity into parts movement between its hubs and stores, which can free up even more employee time.
The retailer also aims to optimize its vendor ordering practices, O’Kelly said. Eliminating the currently fragmented order volumes will help reduce higher handling costs for both the retailer and its vendors.
Besides reducing redundancy on product lines, the company aims to streamline transportation costs and alleviate congestion in the backrooms of its stores, O’Kelly said. “We expect these operational changes to lower the cost per unit shipped from our distribution centers while improving consistency for store teams and service levels for customers.”
Car parts retailer AutoZone has also been rethinking its distribution strategy, and has prioritized building out its “mega hub” network. The hubs, which aim to speed up store fulfillment, are key to the retailer’s plan to improve inventory placement and parts availability. Last week, CFO Jamere Jackson said during a Q3 earnings call that AutoZone is targeting nearly 300 mega hubs in the near term.
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Source: Supply Chain Dive
Compiled from international media by the SCI.AI editorial team.
