Sephora’s early investments in flexibility have paid off.
Sephora, like most retailers, had to close its stores during the pandemic. Whereas many others struggled to build or shore up an online presence, Sephora shifted gears with little effort. It relied on its inventory system linking brick-and-mortar retail and e-fulfillment facilities as well as on a distribution network with rapid access to most zip codes. Not only did the company meet customers’ expectations, but it also increased market share.
Video Spotlight: Sephora Promotes its Safety Guidelines as Stores Reopen
This post is based on the Supply Chain Dive article, How Sephora Flexed its Warehouse Network to Prep for an E-Commerce Onslaught, by E. Cosgrove, August 25, 2020, and the YouTube video, Sephora to Take a Measured and Supportive Approach to Reopening Select Retail Locations in the US, by BusinessWire, May 26, 2020. Image source: Africa Studio / Shutterstock.
1. Explain how Sephora’s network design enabled the company to meet demand during the pandemic.
Guidance: Sephora had already built flexibility in its distribution network. Its five warehouses are located in four states (Maryland, Mississippi, Nevada, and Utah) to ensure coverage of and delivery to most zip codes within two days. Rather than managing inventories for brick-and-mortar facilities and e-commerce separately, Sephora “commingles” its retail and e-fulfillment facilities by moving inventory between those locations as needed to meet consumer demand.
2. Describe Sephora’s inventory management system. Should all retailers adopt this system?
Guidance: Sephora’s inventory management system prioritizes throughput over budget. It means that it builds inventory according to sales forecasts to prevent stockouts and maximize revenue. This system requires highly integrated systems as well as safety stock. Safety stock is not always an option for perishable products or those with a short life cycle.
3. Why is automation central to the success of their operations?
Guidance: To move products fast and reliably between retail outlets and fulfillment centers, Sephora must have accurate and up-to-date information on purchasing, store and online sales, forecasts, and inventory in stores and warehouses. This information must be highly integrated to reflect transactions in real time. For example, higher than anticipated online orders in a given week may trigger a rapid revision of the forecast, movement of products from retail outlets to fulfillment centers, and rush orders to suppliers.