Discount retailer Dollar General streamlines its supply chain to gain better control over its inventory in more than 20,000 US stores. The nation's largest dollar store operator by revenue plans to shrink the assortment and reduce the quantities of products reaching its shelves as part of a comprehensive plan to increase efficiency and reduce theft and shrinkage.

The company based in Goodlettsville, Tennessee, is restructuring its distribution network and changing its warehousing processes to accelerate the flow of goods to the stores. CEO Todd Vasos stated during a conference call on May 30 that the retailer's goal is to ensure that stocks "immediately hit the shelves and get to the customer as quickly as possible.

Inventory management has been a primary focus for retailers since the pandemic, as stock levels fluctuated from shortages to surpluses. Tom Goldsby, a logistics professor at the University of Tennessee, said that trimming inventory and reducing product ranges could help retailers free up cash and simplify supply chain operations.

Offering a broader product range 'means more complexity and greater difficulty in reaching the moment and the consumer,' added Goldsby.

Dollar General plans to remove 1,000 products from its range this year, many of which are classified as "high-shrink" items—a term for lost inventory and stolen or damaged goods. The company reported that the inventory per store for the quarter ending on May 3rd had decreased by 9.5% compared to the same period last year.

This tactic is one way Dollar General is combating shoplifting, which, according to the company, has increased since the pandemic and reduced profit margins. "Too much inventory or surplus in some cases always leads to additional shrinkage," said Vasos.

Dollar store operators have benefited from a mid-range retail economy in the past two years, as lower-income buyers, their main customers, feel the impact of high inflation. Dollar General's same-store sales rose by 2.4% in the last quarter compared to the previous year, driven by increased customer traffic, though partially offset by lower spending per transaction.

Despite this, the company reported that the gross profit as a percentage of net sales fell to 30.2% in the last quarter, compared to 31.6% in the previous year, due in part to an increase in shrinkage and product write-offs.

Dollar General tightens its requirements for on-time inventory delivery to ensure that customers find the products they want at the right time and place. These efforts led to more on-time and complete deliveries in the last quarter compared to the same period last year, said Vasos.

The company recently closed seven warehouses and plans to close five more this year to reduce costs and improve the flow of goods. It plans to open two distribution centers in Arkansas and Colorado, which, according to Vasos, "will reduce transportation costs over time.

The changes also extend to the internal warehouse processes, with distribution centers revising their sorting processes for shipping goods to stores, so that store employees can "restock shelves more quickly, ultimately leading to higher product availability for our customers and increased sales," according to Vasos.