Inventory Planning/ Optimization

APQC’s consortium best-practice study and report, Inventory Optimization: Balancing the Asset versus Service Tradeoff, discusses how leading organizations deal with the conflicting pressures to reduce inventory investments, become more cost effective, and provide top-notch customer service at the same time.

The study focused on:

1.  designing an inventory optimization strategy and establishing a continuous strategy enhancement process,
2.  implementing inventory processes and procedures,
3.  using technology as an enabler of inventory optimization, and
4.  measuring the success of the strategy and providing for continuous improvement.

Office Depot Inc., founded in 1986, was one of the best-practice organizations studied in this research project. They hosted a site visit, and completed screening and detailed questionnaires. Office Depot is one of the world's largest sellers of office products and an industry leader in many distribution channels, including stores, direct mail, contract delivery, the Internet, and business-to-business electronic commerce.

Office Depot sells office supplies at more than 1,000 company-owned and licensed stores worldwide, as well as through its catalog and call centers, the Internet site, and a contract sales force. In addition to typical office supplies, stores offer computer hardware and software, furniture, art and school supplies, and printing and copying services. The stores, mostly warehouse-styled, sell to consumers and small- and medium-sized businesses. Nearly a third of the company's sales are generated by its business services group, which sells to medium and large companies through contract sales and catalogs.

Office Depot participated in this inventory optimization benchmarking study from the perspective of domestic (United States) supply chain operations. International supply chain operations use similar practices but operate separately from domestic at the time of this case study.

Currently, the $15 billion company is a diversified, global company across retail, contract, catalog, and Internet sales in the office supply segment. “Although most [people] think of us as a retailer, we are a diversified company with a very diverse customer segment,” said the director of supply chain vendor integration. The company’s diversification has driven a varied supply chain, which required a change in supply chain optimization strategy. Different customers and service needs drove Office Depot’s creation of crossdock distribution for retail stores and customer service center (CSC) distribution for the business segment. Although Office Depot’s international and domestic supply chain groups utilize similar practices and leverage purchasing with common vendors, the international supply chain acts autonomously from the domestic supply chain at the time of the case study.

To read this entire case study from APQC, please click here.