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Japan's Nitori spends $1.9bn to build own logistics chain

Furniture retailer to streamline inventory management and shipments

Nitori is one of Japan's best-known furniture chains, offering a wide range of products at affordable price points. (Photo by Satoshi Hishida)

TOKYO -- Japanese furniture retailer Nitori Holdings will invest up to 200 billion yen ($1.92 billion) over the next five years to build a fully in-house logistics chain that is managed online, looking to cut shipping times to customers.

Nitori operates 12 logistics hubs nationwide, eight of which are rented from outside partners like GLP Japan. The company plans to build its own facilities on a similar scale so it can phase out the rented hubs -- which together take up roughly 500,000 sq. meters -- in order to reduce rent and commissions.

The change will let the furniture retailer track inventory at its stores, transportation hubs and production facilities all from one place, so it can better manage product quality and avoid selling out of popular items. The company has faced difficulties tracking information from its outside hubs under the current framework, especially as its product lineup expanded.

The one-stop inventory management system will calculate the best routes from logistics hubs to individual branches, cutting delivery times to customers. It also could mitigate opportunity costs when production cannot keep up with demand. Nitori aims to boost online orders to about 20% of total revenue from the current 10%.

Nitori wants to streamline operations inside warehouses as well. The company uses robots to unload and sort about 20,000 products at its own facilities. Uniform layouts at all sites will amplify the effect of automation. 

Moving more logistics operations in-house is a global trend. Zara operator Inditex will finish merging inventory data from its apparel stores and logistics centers under a unified system by the end of the year. Fast Retailing, which operates Uniqlo, is building warehouses dedicated to online orders in Japan, China, the U.S. and Southeast Asia.

Nitori is conducting a tender offer for compatriot Shimachu, with plans to turn the rival furniture retailer into a wholly owned subsidiary. If the acquisition succeeds, Nitori will apply its new logistics framework to Shimachu's products as well, taking advantage of economies of scale and gathering more purchase data from customers.

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