TJX CEO says warehouse model helps cope with El Niño
On Aug. 19, TJX CEO Ernie Herrman said the company’s warehouse distribution model equips it to handle El Niño-related weather swings. He explained that by keeping liquidity and shipping in warehouses, TJX can delay store shipments when unusual weather is forecast for a region.
In the hold and flow model, goods remain at distribution centers and are released to stores based on sell-through data, weather forecasts and other factors. Under the flow-through or cross-dock approach, items typically leave the DC within a day or two of arrival from suppliers. Some retailers combine both strategies, using hold and flow for seasonal, high-variety items and flow-through for low‑complexity, predictable goods. TJX’s planning organization, according to Herrman, is skilled at reacting to sudden weather shifts or natural disasters.
“[T]his is a benefit of our model where we stage goods in our warehouses versus goods at most brick-and-mortar retailers come into the warehouse and have to go out,” Ernie Herrman, CEO of TJX Companies said.
“A portion of the inventory, based on predetermined data, stops and sits in the [distribution center] and sits on the racks. And so you don’t send everything right in that moment to the stores,” Dheera Anand, partner at Bain and Co said.
Off-price retailers and classic retailers often use different inventory approaches, though no single model fits every business, according to Bain partner Dheera Anand. Anand said the hold and flow strategy described by TJX’s CEO lets retailers keep goods in distribution centers and release them based on real‑time data.
What we know
TJX Companies is confident in navigating weather-related events such as El Niño due to its warehouse distribution model, CEO Ernie Herrman said in a Q2 earnings call on Aug. 19.
Herrman said since the company keeps its liquidity and shipping out of its warehouses, it has better control than traditional retailers.
Inventory doesn’t need to go straight to the stores if the off-price retailer thinks there’s going to be an unusual weather pattern in a certain region, he added.
In the hold and flow model, items sit at the distribution center and retailers can react based on sell-through data, weather patterns and other factors, Anand said.
Under this type of system, items come into a retailer’s distribution centers from suppliers, with inventory typically leaving in a day or two rather than being held for an extended period of time.