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TractorSupply Company Invests $2.5 Billion to Accelerate Supply Chain Investments

Tractor Supply Company (TSC), a leading U.S. country living and supplies retailer, plans to add three new distribution centers to its supply chain network over the next five years, bringing its total distribution to 11, executives said during the company's second-quarter earnings call, as it accelerates investments in its supply chain.

TSC currently has eight distribution centers throughout the United States (blue).

TSC has already broken ground on its ninth distribution center, a $70 million facility to be located in Navarre, Ohio, scheduled for completion in the fall of 2022. The locations of the next two facilities have not yet been determined.

TSC laid out its five-year plan to investors in October, and the new distribution center is a key aspect. These facilities are part of TSC's $2.5 billion in capital expenditures planned for the next five years.

During an earnings call in July, TSC CFO Kurt Barton said, "We are looking to accelerate and will see a shift in some of our supply chain investments over the next few years."

"Our goal is to provide same-day delivery to 99 percent of our customers while improving our profitability," said Robert Mills, chief technology, digital commerce and strategy officer at TSC, "but achieving there is no one-size-fits-all solution."

TSC has a wide variety of products, from lawn mowers to pet supplies, and same-day and next-day delivery services are only possible if a variety of logistics and warehousing conditions are met.

As a result, Mills said, TSC needed to be able to ship from stores as well as directly from distribution centers, and offer curbside pickup and online order and pickup in stores to meet a variety of customer needs.

A key component of the strategy is how we use our order management system to optimize and choose to schedule the delivery of orders with different fulfillment channels so that we can deliver orders to customers quickly and economically," Mills said.

Another key component is the location of its distribution centers.

Mary Winn Pilkington, TSC's senior vice president of investor relations and public relations, said in an email that TSC chose Navarre, Ohio, as the location of its next facility "based on access to The company chose Navarre, Ohio, as its next facility "based on the advantages of access to workforce talent and the efficiency of logistics.

The facility is expected to serve more than 250 stores when operating at full capacity.

This new distribution center in Navarre, Ohio, will allow us to more efficiently serve our growing store base and online sales while we continue to invest in our business for future success," said Colin Yankee, chief supply chain officer at TSC. "

At the National Retail Federation's (NRF) "Retail Convergence" conference, many executives discussed how they are adapting to the recent impact on their business due to the Newcastle pneumonia outbreak.

Colin Yankey said that flexibility in a retailer's supply chain can be seen in the options and services the retailer can offer and how those options can better serve customers.

In addition to distribution centers, TSC has been investing since 2018 to increase in-store traffic while expanding more in-store pickup options.

That year, TSC opened 80 new stores and grew net sales by 9 percent.

In its second quarter 2019 earnings call, TSC said more than 70% of e-commerce orders are fulfilled at the store level due to store pickup services and warehouse direct store delivery services.

Kurt Barton reminded investors that TSC sees investments in its supply chain as structural and forward-looking, especially after the New Crown Pneumonia outbreak.

During the second quarter 2021 earnings call, Kurt Barton said, "Over the past several quarters, we have been emphasizing the importance of investing in our supply chain.

Importantly, we recognize the structural impact that supply chain investments have on the company, and as a result, the timing of investments in the supply chain becomes very important, so TSC will continue to accelerate its investments and build-out of the supply chain over the next few years."

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