Reinventing retail at Macy’s through inventory productivity and sustainability

Editor’s Note: This is the first of two columns on the reinvention of Macy’s retail supply chain. In this one, we look at the department store leader’s focus on inventory productivity. In the second, we’ll look at the role sustainability plays at Macy’s.

Can a 165-year-old department store chain evolve to meet today’s retail shopper and compete with fast fashion, off-price and pure e-tailers? And, if so, what is the role of supply chain in that transformation? Those are questions that Macy’s, Inc., the department store leader with more than $24 billion in annual net sales in fiscal year 2022, began to answer before COVID. That’s when it launched the reinvention of the supply chain that largely supports the Macy’s brands. A major focus is a measure that Dennis Mullahy, Macy’s chief supply chain officer, refers to as “inventory productivity.” Or, Mullahy explains, “If I can generate the same amount of sales with the least number of inventory receipts and fewer moves, I can maximize inventory productivity.”

The strategy is delivering results in a way that demonstrates that supply chain can have a positive impact on an organization’s bottom line: In its financial report for Q4 2022, Adrian Mitchell, Macy’s, Inc. CFO and COO, noted that inventory declined 3% compared to 2021 and 18% compared to 2019, and that inventory turnovers had likewise improved compared to 2019. “We made significant progress in leveraging data and analytics to better forecast sales demand, receipt timing and flow across the supply chain,” he told analysts, adding that “inventory productivity” will continue to be a focus through initiatives such as improved automation and more flexible inventory allocation both of which are designed to drive higher sell-throughs and more sales. Forecasting, timing of inventory receipts and flow through the network – that’s supply chain management.

In many ways, Macy’s supply chain reinvention is designed to support the inventory productivity strategy of selling more with less, and at higher margins. It also enables Macy’s to make good on its promise to “help our customers express their unique style and celebrate special moments both big and small, wherever and however they shop.” From a supply chain perspective, the most important part of that phrase just may be wherever and however they shop.

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