Logistics costs reduced by 30%! Chewy launches exclusive logistics plan

Chewy executives said during an earnings call late last month that the platform plans to increase automation in its logistics network over the next two years through new warehouse locations and renovations of existing facilities .

The pet products-related e-commerce company plans to open a second automated fulfillment center in the second quarter and a "limited cataloging facility" in the third quarter .

Last year, Chewy opened its first limited-SKU warehouse in the Kansas City, Missouri, metro area to handle a surge in product inventory and avoid expedited delivery costs and partial shipments .

In addition to this, Chewy has also realized its logistics expansion plans after opening its first automated fulfillment center in Archbald, Pennsylvania .

“In addition, we will also begin automation transformation at selected logistics centers in 2022,” said CEO Sumit Singh. The upgrade of distribution locations means that the cycle time (from the time a customer places an order to the box being shipped to the truck) will be estimated to be reduced by 45% , and logistics costs are expected to be reduced by 30% .

Chewy automated facilities have transformed its logistics operations from locations where workers picked items on foot to goods-to-person facilities where inventory has been clustered based on its speed.

In recent weeks, several North American retailers have announced plans to expand their distribution and logistics networks, noting the importance of optimizing them as demand grows . United Natural Foods expects its new automated distribution center to double its picking speed and improve ordering accuracy.

“In the distribution business, the more traffic you can get through a single DC, the more EBITDA that seller is going to create ,” said Steve Spinner, CEO of UNFI .

Williams-Sonoma plans to increase its manufacturing and distribution capacity by 20% to 30% over the next year as e-commerce sales grew 48% year over year in the most recent quarter . Big Lots said it is adding distribution capacity specifically for larger items .

Chewy's sales increased 47% year-over-year to $7.15 billion in 2020. In addition to the sales growth over the year , it also expanded its inventory capacity and is now shifting its focus to the platform's own logistics centers .

" In 2020, we invested significantly in inventory capacity to protect our supply chain and ensure we can meet customer demand, especially during the peak holiday season , " said Mario Matte, head of retail at Walt Disney World .

As inventory capacity and sales increase , Chewy will begin looking to invest in its fulfillment centers to begin generating profits later this year .

"By 2021, we expect to see accelerated productivity growth through its full-year operations, " Singh said .

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