How one buyer turned to ‘alternative sourcing’ after the collapse of key supplier

Retailer Big Lots faced significant disruption in 2022 after one of its primary suppliers went bankrupt – but buying from overstocked competitors helped to alleviate pressure.

United Furniture Industries (UFI), Big Lots’ largest supplier for its Broyhill furniture brand, ceased operations in November “unexpectedly and without advance notice”, CEO Bruce Thorn said in an investors call, leaving it without recourse.

The company then turned to “alternative sourcing strategies” following the collapse of its key supplier, including buying excess inventory off its competitors and buying stock from firms that had gone bust. 

Furniture makes up half of Big Lots’ e-commerce sales, and initially the retailer turned to its other, smaller suppliers to make up the difference from UFI’s closure.

Thorn said the company had “expanded its strategic relationship with existing partners and brought on new ones, which set us up with better product quality” at the time.

However, Thorn explained Big Lots has found “significant opportunities to enhance the newness and value” of its inventory by “procuring from over-inventoried mass retailers, distressed retailers and vendors”.

In addition, it has started buying Broyhill furniture at a “significant discount” out of the bankruptcy of its former vendor – savings which it would pass on to the customer, Thorn added. This furniture will start being phased in this month.

Although Big Lots was unable to access any products after the supplier’s closure, banks subsequently “work[ed] things out to the point where we could access some of that Broyhill product that was made exclusively for Big Lots,” the CEO said.

The firm is also exploring its options for different partners overseas, including buying from India and Vietnam. 

As a result of these strategies, the company said it has begun to see stabilisation in its furniture business, and predicts full mitigation of the impact of UFI’s closure by the second quarter of 2023.

Big Lots reported net sales for the first quarter of fiscal 2023 at $1.1bn, but suffered a net loss of $206.1m. This compared to net sales of $1.4bn for 2022's first quarter, and a net loss of $11.1m.

Businesses globally suffered from significant overstock levels after disruption pushed some buyers to seek extra security of supply. In the UK, manufacturers revealed earlier this year they were “dangerously overstocked” and holding more than £100k of additional stock after attempts to mitigate disruption.

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