Big Lots: Delivering Value Through Strategic Procurement

Big Lots, headquartered in Columbus, is a US-based discount retailer living by its mission statement: to help people live BIG and save LOTS. The store offers a wide range of products, allowing customers to buy everything from a new mattress to home décor under the same roof. This commitment to providing a diverse array of goods at competitive prices underscores its dedication to delivering exceptional value to customers. Central to achieving this is Big Lots' robust procurement strategy, which plays a vital role in ensuring the efficient operation of its supply chain.

Juan Guerrero – Senior Vice President, Chief Supply Chain Officer, Big Lots and Kevin Kuehl – Senior Vice President, Head of Merchandising, Asia Global Sourcing Offices spoke to us about its procurement strategy.

Delivering customer value: The role of procurement at Big Lots

Big Lots' procurement strategy is anchored in a dedication to building and maintaining strong relationships with suppliers, ensuring a seamless supply chain and a continuous flow of high-quality merchandise. 

Big Lots operates five distribution centres in the US, each with more than 1 million square feet strategically situated in proximity to other big CPG distribution centres and manufacturers. This approach guarantees value for customers while maintaining incredibly competitive pricing. Through strategic sourcing initiatives, Big Lots meticulously evaluates potential partners, considering factors such as quality, reliability, sustainability practices and cost-effectiveness. This thorough evaluation optimises its product assortment and bolsters its market position.

Procurement and sourcing play pivotal roles in delivering value to Big Lots’ customers through sourcing a diverse range of products – providing a one-stop-shop approach that includes distribution of excess and closeout inventory for furniture, décor and pantry items. 

Big Lots is modernising the supply chain to support more closeout and bargain deal flow to ensure customers always find new assortments at unmistakable values across the country. We’re also making big moves with its sourcing strategy with new sourcing offices overseas in Shanghai and Ho Chi Minh City to work directly with major suppliers. Altogether, these moves ensure Big Lots continues to provide customers with quality products at unbeatable prices through our innovative approach and commitment to responsible sourcing.

Overcoming procurement challenges: Strategies for success

One of the biggest opportunities Big Lots is solving for is speed. 

“At the end of the day if you cannot quickly and efficiently move the product from point A to point B, then it's going to be a missed opportunity to delight the customer,” Juan says. “When we solve this challenge via deep category expertise, deal modelling and relationship building, we facilitate a successful shopping experience that keeps customers coming back to find more bargains.”

The company is also making big moves with its sourcing strategy with the introduction of new sourcing offices in Shanghai and Ho Chi Minh City to work directly with major suppliers. Altogether, these moves ensure Big Lots continues to provide customers with quality products at unbeatable prices through our innovative approach and commitment to responsible sourcing. Kevin continued to say that 

“Executing an extreme bargain model requires multiple sourcing strategies,” Kevin explains. Big Lots international procurement offices work directly with factories to deliver the most efficient cost model of developed, closeout, or engineered assortments of product. “Domestically, our team of Big Lots merchants is focused on driving down costs to deliver extreme value assortments to the Big Lots customers,” he says. “We also continue to use third party sourcing agents who are an important part of our sourcing strategy, including for key categories from Europe and India.”

Asia-based buying offices: Strategy behind the move

Under the leadership of Senior Vice President Kevin Kuehl, the international buying offices strategically tap into significant manufacturing facilities and vendor partners in the Asian region. 

The focus is on expanding the sourcing network for key categories like furniture, seasonal items and soft home goods. Strategic acquisitions, such as the Hearthsong brand of children's toys, underscore Big Lots' dedication to sourcing innovative products at unmatched prices, driving customer loyalty and satisfaction. 

Kevin said the process was taking place through an intermediary, and while there were some advantages, one area it needed to solve was around sourcing at the speed and with the variety of “extreme bargains that our customers expect today.” He added that: “Bringing international buyers in-house is a game changer. Based in Asia, associates have been integrated into our culture and communication and have been trained with tactical negotiation skills, which is a huge advantage. 

“Because the team is internal, incentives are based on business performance that directly translates into a lower cost of goods. This team is also more easily positioned for international travel to uncover opportunities and expand our network for critical categories such as furniture, seasonal items, and soft home goods in developing markets in markets in Thailand, Malaysia, Indonesia, Central and South America, and beyond.”

Cultivating supplier relationships

Kevin continued by explaining how the business development mindset results in creating supplier relationships that are now deeper than ever. 

In some instances, Big Lots are talking with manufacturers at the outset of their production planning.  “As a strategic partner, we can help suppliers maximise their process and profits--if they need to produce a run of products at a quantity higher than an order from a big box store, we’ll buy the overage at a discount, and we both win,” he adds.

“For closeout deals, we can evaluate and write orders within days, not weeks. And we always aim to source from responsible suppliers that meet our quality and value standards. That in turn helps to attract customers who appreciate sustainability and good values.”

 Kevin goes on to say that executing an extreme bargain model does require multiple sourcing strategies. With its international procurement offices work directly with factories to deliver the most efficient cost model of developed, closeout, or engineered assortments of product. Domestically, the team of Big Lots merchants is focused on driving down costs to deliver extreme value assortments to the customers.

Big Lots also continues to use third party sourcing agents who are an important part of our sourcing strategy, including for key categories from Europe and India.

Tech-enabled procurement: Maximising efficiency and effectiveness

Technology plays a crucial role in enhancing Big Lots' procurement operations. By leveraging advanced procurement technologies, the company maximises efficiency and effectiveness in its supply chain management, ensuring that it can deliver exceptional value to customers consistently. “We have a proprietary model that evaluates deals based on aspects such as price and inventory position,” Juan says. “Technology also plays a central role in efficiently routing products from production to our distribution centres.”

Procurement strategies: Finding high-value solutions

With such an emphasis on offering its customers the best bargains, it is down to bIG lOTS’ procurement team to find a deals with suppliers to pass savings on to the customer. Kevin explains that Big Lots is getting back to its roots as America’s Discount Home Store. 

“In terms of sourcing and supply, we’re the total solution when CPG companies, manufacturers and small businesses are looking for controlled distribution of excess, obsolete products, over produced inventory, cancelled orders, label and packaging changes, discontinued items, and end of life inventory. 

“These are typically furniture, décor, and pantry items. Big Lots’ buyers are trained in procuring and valuing a diverse assortment of products below competitors’ retails. This allows Big Lots to offer more choices, keeping our customers coming back for their home essentials at unmistakable value.”

At the heart of its deals is sourcing effort, which Kevin described as ‘essential’, and it is core to the business strategy to provide bargains and closeouts. “Effective procurement means we source in-demand products for the home at the best possible price and pass that unmistakable value directly to our customers,” Kevin says. 

“We’re also modernising our supply chain to support more closeouts and bargain deal flow. This helps improve our ability to cycle inventory and continuously bring value and newness to our Big Lots customers,” adds Juan.

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