This project evaluates a network redesign opportunity for a global retailer operating approximately 1,000 U.S. stores supported by eight Regional Distribution Centers (RDCs). The current push-based allocation model limits flexibility, contributing to excess markdowns, missed sales, and capacity constraints. To improve responsiveness, the analysis proposes introducing Chain Distribution Centers (CDCs) as an intermediate layer to enable delayed allocation and better match inventory to demand. A two-stage approach is used: Geographic Information Systems (GIS)-based screening to identify high-potential locations, followed by optimization modeling to determine the optimal number, placement, and capacity of CDCs across multiple demand planning scenarios. The proposed network redesign is projected to yield markdown savings of approximately 22%, offsetting the investment cost, while network operating efficiencies contribute an estimated 2% in cost savings. These benefits are weighed against a capital and operating investment of approximately $20 million annually in Years 1–5, rising to $60 million annually thereafter. The result is a scalable, data-driven framework for evaluating distribution capacity expansion while improving alignment between inventory allocation and demand growth plans.
