Best Buy’s Holiday Sprint

December 20, 2017
Best Buy’s Holiday Sprint

Article Title: Best Buy’s Distribution Centers Work Around The Clock For Holiday Sprint: Best Buy’s Logistics Will Soon Be Tested By a Crush of Shoppers

Author of Article: Kavita Kumar

Date of article: November 21, 2017

Source URL: http://www.startribune.com/best-buy-s-distribution-centers-work-around-the-clock-for-holiday-sprint/459221513/#1

This article looks at preparations that Best Buy is making to handle the rush of Black Friday and Cyber Monday sales. Best Buy is anticipating a 15% increase in online sales for Thanksgiving Day. Online sales currently represent about 13% of Best Buy sales, with the percentage increasing. Best Buy is also facing added stress to their distribution systems as they compete with Amazon. They are working to match Amazon’s two-day shipping, and in 40 marketplaces are offering same day delivery, again in response to Amazon. They are accomplishing this through three-party delivery firms.

Best Buy is using several tactics to meet this increased demand on distribution centers. The article mentions increased inventory, pre-packaging items for shipment, increasing capacity by operating 24 hours a day versus normal 10-12 hours a day, and the use of software to determine from where the items are shipped.

Discussion Questions
1. Should Best Buy be competing against Amazon by offering 2-day delivery, and in certain markets—same day delivery?
Guidance: There is no right or wrong answer. However, Amazon is setting the expectation on fast delivery and good-prices for online orders. The trend is for more of the retail sales to move online. It would appear that if you want to operate in the retail online sales that you will need fast delivery and good (low) prices. If someone suggests that it isn’t a good idea to compete with Amazon on delivery and price, then they should provide the dimension(s) that will differentiate Best Buy from Amazon.

2. What are some of the different tactics that Best Buy is employing in anticipation of increased demand during the Thanksgiving Holiday?
Guidance: The article specifically mentions increasing inventory, prepackaging items (TV was mentioned) so that they don’t need to be packaged, increasing capacity by operating 24 hours a day (an increase from their normal 10-12 hours a day), and using software to determine the best distribution to ship the item from. Although not mentioned in the article, forecasting will play a role. How accurately can they estimate their sales for this time period? Good forecasting obviously impacts the above tactics. The article mentions that Best Buy intends to improve their supply chain, possibly using automation.

3. How do Best Buy’s Stores fit into the online distribution system?
Guidance: In most cases, you would think that online orders would be filled from one of Best Buy’s 23 distribution centers. However, their stores offer an additional place to have inventory, and in many cases it is closer to the customer. If their stores are setup to quickly ship online orders, this could provide them with a cost and speed advantage compared to an Amazon that has limited store fronts at this time. The key will be the ability to understand how to effectively and efficiently use the stores as part of their online delivery system. Additionally, the stores offer tremendous potential for same-day delivery that might be limited if only distribution centers were part of the online delivery system

4. Should Best Buy be reducing prices for appliances during the Thanksgiving time period?
Guidance: The article mentions that because they have “great deals” on appliances, sales are up substantially during this time period. You generally think that increased sales are good, but they put a strain on the supply chain. If you could level out sales, performance of the supply chain would tend to improve. Would “everyday low prices” be a better approach? An interesting question, from a supply chain approach, you could reduce supply chain cost, but it might cost you sales as your competitors are offering “great deals” as well during this time period?

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Harper Christopher
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Great article!