Levi Strauss outsources logistics to third-party providers
CALIFORNIA, UNITED STATES — Clothing company Levi Strauss & Co. (LS&Co.) is making a significant change in its logistics strategy by moving away from its primarily owned-and-operated distribution network in the United States and Europe.
During its Q2 2024 fiscal earnings conference call, Harmit Singh, the company’s Chief Financial and Growth Officer, announced that LS&Co. will now adopt a more balanced approach by integrating leading third-party logistics providers (3PLs) into its operations.
Embracing third-party logistics
Singh explained, “As we continue our pivot to a DTC-first company, our distribution networks need investment, including upgrading existing capacity with omnichannel capabilities.”
“A new strategy allows us to secure these investments in a capital-efficient manner by leveraging third-party capital while freeing up our own resources to invest in growing the direct-to-consumer channel,” he added.
This move is expected to reduce fulfillment costs per unit and provide a cash infusion of over $90 million this year, primarily as reimbursement for the capital spent on a new distribution center in Germany.
Partnership with GXO Logistics
In May, LS&Co. entered a 20-year partnership with GXO Logistics to manage operations at the new Dorsten Distribution Centre in Germany. This fully automated, 750,000-square-foot facility, which began construction in 2022, is expected to create up to 650 jobs by 2026.
Initially, the center will handle 33 million units, with a planned increase to 55 million units by 2026.
Craig Jones, Senior Vice President of Global Distribution and Logistics at LS&Co., stated, “The Dorsten Distribution Centre will support our strategic priority of being a direct-to-consumer led retailer by accelerating our omnichannel capabilities in Europe.”
“With GXO taking over management of the facility, we have full confidence that this goal will be effectively supported by best-in-class operations.”
Financial and environmental impact
The Dorsten facility is noted for its sustainability features, including LEED and WELL Health-Safety certifications, sustainably sourced concrete, rooftop solar panels, and advanced recycling facilities.
Richard Cawston, GXO’s Chief Revenue Officer, highlighted the center’s green credentials, stating, “This fully automated site is among the greenest distribution centers in all of Europe with phenomenal sustainability features that raise the bar in the logistics industry.”
LS&Co. reported Q2 2024 net revenues of $1.4 billion, an 8% increase from the previous year. Despite a slight decline in European revenues, the company’s direct-to-consumer channel showed continued momentum.
Michelle Gass, President and CEO of LS&Co., emphasized the positive impact of the company’s DTC-first strategy, expressing confidence in achieving accelerated, profitable growth.
The transition to a more balanced logistics operation is part of LS&Co.’s Project Fuel, an ongoing global productivity initiative.
The company acknowledged that, in the near term, these changes would temporarily increase distribution costs due to the parallel operation of new and old facilities for the rest of 2024.
