Best Buy's distribution centers work around the clock for holiday sprint

Best Buy has sent out special delivery trucks of nothing but TVs — hundreds of thousands of TVs — to its stores in recent days to be ready for Black Friday crowds.

At the same time, its distribution centers are packed full of thousands more TVs stacked high, ready for the crush of online orders expected to come flying in Thanksgiving morning. Employees are getting a head start by double-boxing the TVs in Best Buy's Black Friday ad, an extra step the company put in place last year to reduce cracked screens.

"We get such under siege come Thanksgiving that we have to get out in front and start overboxing them so our customers don't have to wait," said Rob Bass, Best Buy's head of supply chain, during a rare glimpse inside Best Buy's distribution center in Bloomington earlier this week.

It's show time for U.S. retailers. And after months — well, years — of preparation and investments, this holiday season will once again test whether their supply chains are ready to handle the increasing demands of online shopping to more quickly and efficiently move products to customers' doorsteps.

Online sales have been growing much faster than in-store sales, and retailers whose online operations have been lagging are increasingly closing stores. Online sales now make up 13 percent of Best Buy's revenue.

One of the first big trials will come on Thanksgiving Day, which is expected to see a 15 percent increase in online sales, as Black Friday continues to be diluted over several days and between stores and online. It will be followed soon after by Cyber Monday.

In the last week or so, Best Buy's 23 distribution centers have switched to operating 24 hours a day as they send out trucks to replenish store shelves and online orders directly to customers. They will remain in hyperdrive, a change from 10- to 14-hour days the rest of the year, from now until Christmas and possibly a few weeks longer given the second wave of shopping that gift cards often bring in January.

As it has been trying to catch up with Amazon's speed, Best Buy can now get most online orders to customers within two days. It has reached that milestone, rivaling the two-day or sooner delivery promised by Amazon's Prime loyalty program, by leaning on its stores to also ship items and by expanding its carrier network beyond UPS to also include the U.S. Postal Service and FedEx.

When an online order comes in, Best Buy has software that uses algorithms to weigh factors such as ZIP code and weight of the product to decide whether it should come from a store or distribution center and which carrier to use.

"Many of our customers will see it tomorrow," Bass said as he stood by a packing station where a worker boxed up online orders that came in that day. If online orders come in by 1 p.m., they will mostly likely that same day make it onto a trailer that is picked up by a carrier partner around 5 p.m.

This year, Best Buy has also been stepping on the gas with same-day delivery, a service it expanded to 40 markets this fall through partnerships with third-party delivery firms Deliv and Geodis. It also dropped the price for the service to $5.99 from $14.99.

The capability means that many customers will be able to get deliveries up until 6 p.m. Christmas Eve for orders placed on Bestbuy.com by noon that day. The option also makes Best Buy more competitive with Amazon Prime Now's service, which offers deliveries within two hours for select items.

Carol Spieckerman, a retail consultant, said faster delivery is not just about meeting changing customer expectations. It's also about grabbing an extra day's worth of sales during a very competitive time of year.

"It really becomes an economic proposition — are you going to get those sales or is someone else who can do that in a day?" she said. "It's a race to Christmas Day."

The bigger focus on supply chain is a shift for Best Buy and other big-box retailers, which have historically been more focused on sales in stores.

"Certainly, in the last five years, supply chain is no longer a forgotten child," Best Buy CEO Hubert Joly said in an interview. "Now it's really become a strategic weapon for us."

In the next couple of years, Best Buy plans to step up investments in this space even further in areas such as automation.

About four years ago, Joly recruited Bass from the Twin Cities' other locally based retail powerhouse, Target Corp. Bass had worked there for more than a decade. One of his first tasks at Best Buy was turning its stores into shipping hubs to get orders to customers faster — and also to reduce the likelihood of having out-of-stock problems online.

In more recent years, he has overseen other changes such as using softer clamps on loaders that make it less likely that TVs will get crushed, to adding more e-commerce packing stations with upgraded equipment and software so individual orders can be more quickly sorted and packed.

Inside the 581,000-square-foot distribution center in Bloomington, employees beep horns as they maneuver pallet loaders around to move big-screen TVs and appliances. In the aisles where smaller items are kept, workers with handheld devices strapped to their wrists and scanners on their fingers pick items that are placed into black totes en route to a conveyor. On the loading dock, employees tightly pack trailers to the top with packages in what looks like a game of Tetris.

"We don't want to waste any space," Bass said. "When you're putting thousands and thousands of trucks on the road each week, filling every square foot is key to keep our costs down."

Some of Best Buy's distribution centers focus on large products such as appliances and big-screen TVs that are too big to go on a conveyor and are earmarked for home delivery. Others move smaller products — such as iPhones, laptops and printer ink — on a conveyor system. The Bloomington center does both.

As they ramp up for the holiday shopping spree, Best Buy's distribution centers have been transitioning from mostly bringing goods in to sending products out.

Its delivery partners leave more empty trailers this time of year to be filled up. And stores, which normally get three deliveries a week, now get at least four or sometimes five or six a week.

While TVs are a big focus at this time of year, Best Buy will also sell a whole lot of appliances in the coming weeks.

"Our biggest home delivery weeks of the year are right after Black Friday and the first week of December," said Bass. "And I know it's not because everybody's refrigerator broke. It's because we have great deals. So we're moving a lot of product."

Kavita Kumar • 612-673-4113