Tractor Supply Co.: Supply Chain Optimization for “Life Out Here”

The NRF Supply Chain 360 Conference and Expo explores the ways and methods needed to build a stronger, more sustainable supply chain and ensure resilience in these challenging times. Learn more about the conference, held June 20-21, 2022 in Cleveland, here.

Who would have thought, just a few years ago, that the supply chain would become the “cool and hip topic?”

Hal Lawton, President and CEO of Tractor Supply Co., greeted the audience at the inaugural NRF Supply Chain 360 conference with a quip, a laugh, and a truckload of ideas about the company. He sat down with Lori Ann LaRocco, Guest Editor, CNBC, for the keynote, discussing how TSC is accelerating investments and working towards end-to-end supply chain optimization. He also spoke about reducing emissions from operations with the aim of achieving net zero emissions in all operations by 2040.

The session included a welcome from Jon Gold, NRF Vice President, Supply Chain and Customs Policy, and a video greeting from Ohio Governor Mike DeWine. One in four Ohios is employed directly or indirectly in retail, Gov. DeWine said, accounting for nearly 2 million jobs at some 139,000 establishments.

Lawton began by talking about the challenges retailers face in getting products from China. Particularly in the past few months, he said, China has been like the Whac-A-Mole game, with its strict zero-COVID policy, lockdowns, supply congestion at various ports, l inability of truck drivers to get manufacturers’ items to ports and other challenges. The United States has its own problems, but right now China is “a huge barrier to getting products here.”

As a result, the TSC team can no longer plan months in advance, he said. “Now the team is literally working every hour, every border, every container.” There could be changes and new prioritization with ports, shipping methods, manufacturers, products, contracts and categories.

TSC was able to move about 10% of its Chinese business to other locations, some even in the United States. More generally, there is also US inventory build above demand levels, Lawton said, particularly in seasonal goods, apparel and discretionary products. elements. This means an overall reduction in retail orders. And yet, there are these long downtimes in American ports, related to rail and trucks.

Lawton shared a color-coded month-by-month 2022 supply chain heatmap that showed decreasing to increasing pressure from US and Chinese materials, logistics and labor, detailing the percentage changes in areas such as logistics labor supply and ocean freight cost. The “demand” side listed information about TSC’s customers, including behaviors such as increasing search for discounts or promotions, cutting spending, and buying from retailers/websites with delivery/free delivery.

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TSC has taken an integrated approach to challenges, with unified planning and execution activities. This includes setting clear product priorities; align future orders with sales; ensure that financial plans take into account costs and availability; and align marketing and store tasks with product availability.

The company has stopped pre-printing pricing and now does it in-store, for example, and line reviews start earlier in the process. Overall, Lawton said, sales were up 52% ​​for TSC, driven by trends like rural revitalization. Heatmaps are built around these macro tailwinds – along with several other factors – to improve understanding and the ability to adapt accordingly in real time.

Setting clear product priorities is key, Lawton said. “Where do we want to place our bets? What inventory do we want to stay on long, and what inventory do we want to reduce risk? TSC is a big seller of gun safes, for example, which saw big sales last year due to stimulus and other factors. “We had expected these to moderate at the start of this year. It is also an expensive item. There are a lot of import costs associated with it and the margins are low. So we said to ourselves: “Let’s reduce the risks there”. We can still hunt it if we want to with a near shore product from Mexico. »

In contrast, TSC sells the most pet food nationally, a restockable category made in the United States; more of the sales plan goes there.

Lawton also shared his thoughts on his recent phone conversation with President Joe Biden. They talked about the importance of getting the Ocean Shipping Reform Act passed, but also about inflation – especially related to food and energy: TSC sells more bagged corn than anyone else in the United States, qu whether it is used for animal feed or wildlife. Two years ago, Lawton said, a 50-pound bag cost $8. Now it’s over $14. Making the decision to reduce the ethanol content of fuel could help fix the price of fuel. But it also imposes constraints on maize producers, who had not planted with this change in mind.

When it comes to reducing emissions, Lawton noted that TSC customers tend to think of themselves as stewards of their land rather than owners. As a result, “They have always adopted good agricultural hygiene, how to cultivate, how to maintain your land and your property. And we are kind of the same way.

The company has committed to spending more than $100 million in capital to reduce emissions, including building LEED Gold-certified fulfillment centers, retrofitting other properties and using electric elevators and trucks, the solar power and skylights. “As our supply chain team reminds us,” he said, “the best carbon footprint is the one that’s never created because you’re optimizing your flows.”

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