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Dive Brief:
- La-Z-Boy expects to largely complete the Midwest and Eastern hubs of a multiyear distribution overhaul this year. The project will consolidate 15 regional centers into three centralized hubs, SVP and CFO Taylor Luebke said on a June 17 earnings call.
- The furniture maker is in year two of the four-year revamp, which included completing the Western leg last year with the opening of an Arizona facility, Luebke said.
- While Luebke noted some “friction costs” from the network redesign, the executive projects it to eventually lift margins by cutting warehouse square footage 30% and heavy-furniture delivery mileage 20%.
Dive Insight:
La-Z-Boy expects its distribution revamp to help grow margins long term and expand revenue at double the market’s pace, both goals of the company’s five-year Century Vision initiative launched in 2022. The centralized hubs will support that effort by lowering costs through features such as small-format cross docks designed to quickly transfer goods from inbound to outbound trucks with minimal or no storage.
As of April 25, La-Z-Boy’s supply chain operations included four major manufacturing locations, nine U.S. distribution centers and three facilities in Mexico, according to a securities filing.
Along with restructuring distribution, La-Z-Boy plans to consolidate manufacturing for Joybird, which it acquired in 2018into two La-Z-Boy plants during fiscal 2027, President and CEO Melinda Whittington told investors on the call. Whittington said “ample capacity within our existing U.S. manufacturing operations” will enable the move.
Manufacturing aside, La-Z-Boy’s distribution push mirrors efforts by other brand manufacturers looking to cut costs. For example, For example, Hasbro opened a 600,000-square-foot facility in Georgia earlier this year that will reduce its U.S. distribution nodes from five to three.
Other examples include Procter & Gamble’s multi-year project connecting 50 distribution centers in Europe to a single warehousing center, while PepsiCo is testing consolidating warehouses for its snacks and beverages business units in North America. The latter is part of PepsiCo’s initiative to improve its cost structure over the next several years.