Analyzing the Cogs in Foot Locker’s Supply Chain

Foot Locker (FL) operates five distribution centers around the world. It owns two of them and leases three. Three of these are located in the United States (IWR), with the company having one distribution center in Germany and one in Holland.

The retailer recently consolidated two of its distribution centers in Germany in a bid to better serve the growing European market. In addition, Foot Locker relies on distribution centers operated by third parties in countries such as Australia and New Zealand.

Foot Locker sources its products from several vendors, including global brands such as Nike (NKE), Adidas (ADDYY), VF Corporation (VFC), Under Armour (UA), and Puma (PMMAF). However, the company has a high dependence on suppliers. Its top five suppliers account for about 90% of the company’s purchases, with the top two accounting for 83% of them.

Foot Locker’s sales have risen over the years, but so has the company’s dependence on major suppliers. The top five suppliers accounted for 77% of the retailer’s purchases in fiscal 2008. That increased to 90% last year.

Nike, the world’s largest sports brand,[1. Forbes Fab 40 2015] is Foot Locker’s largest supplier. It accounted for 72% of FL’s purchases in fiscal 2016. Finish Line (FINL) sourced 73% of its products from Nike last year.

In contrast, the degree of dependence on vendors is less for rival sporting goods chain Dick’s Sporting Goods (DKS). Nike and Under Armour accounted for 20% and 12%, respectively, of DKS’s purchases in fiscal 2016.