Consolidation for Competence
Advance Auto Parts, a leading auto parts retailer, is in the process of consolidating its two separate distribution center networks into a single, cohesive operation. This strategic move, announced by President and CEO Shane O’Kelly during a recent earnings call, aims to elevate operational efficiency and optimize customer service.
For years, the company has operated dual networks for store inventory replenishment, a legacy of its acquisition of Carquest. The integration of Advance Auto Parts and Carquest’s 38 distribution centers is set to transform smaller, outdated facilities into market hubs. These hubs will position inventory closer to the point of demand, thereby enhancing service levels.
Efficiency and Inventory Synergy
The decision to consolidate comes in the wake of a nearly 12% drop in gross profits in Q4, attributed in part to heightened supply chain expenses. The company is actively converting its first market hub, signaling the commencement of its consolidation efforts.
O’Kelly acknowledged the inefficiencies in the current network, emphasizing the necessity for improvement in cost structure and inventory availability. The transition from using all 38 distribution centers as full replenishment nodes to a more streamlined model is expected to boost inventory productivity.
A Multiyear Initiative
The supply chain overhaul, which may continue until 2026, is being expedited by Advance Auto Parts. O’Kelly, with prior experience in supply chain integration at companies like The Home Depot’s HD Supply, PetroChoice, and AH Harris, is well-versed in the complexities of such endeavors. He expressed a desire for swift progress but recognized the multiyear nature of the project.
