The shadow of supply chain disruptions continues to loom over retailers, forcing them to rethink traditional inventory strategies. Where "Just-in-Time" lean inventory management once reigned supreme, a more conservative yet potentially more effective approach—"Pack and Hold"—is quietly gaining traction. The story of Nordstrom offers valuable insights into the logic and value behind this emerging strategy.
Nordstrom's Data-Driven Inventory Strategy
During Nordstrom's third-quarter earnings call, CEO Erik Nordstrom revealed that the company's discount division, Nordstrom Rack, has significantly expanded its use of "Pack and Hold" inventory—increasing it by "two to three times." This strategic move stems from the company's anticipation that macroeconomic supply chain disruptions will persist through 2022. Specifically, Nordstrom Rack will purchase large quantities of available merchandise and store portions of it for deployment during periods of "high demand, tight supply, or system constraints."
This stockpiling approach isn't arbitrary but rooted in data-driven decision-making. Nordstrom carefully analyzes historical sales data, market trends, and supplier production capacity to identify which products might face future shortages, enabling strategic preemptive purchasing.
Strategic Inventory Adjustments
Nordstrom expects elevated inventory levels throughout the remainder of the fiscal year due to its "Pack and Hold" investments at Rack and early holiday season shipments. CFO Anne Bramman noted the company will also advance purchases for spring merchandise over the next two quarters. This represents a deliberate structural adjustment to inventory management rather than simple volume increases.
The company focuses particularly on securing supply for core categories like women's apparel and footwear to prevent lost sales opportunities from stockouts. Simultaneously, Nordstrom is diversifying its supplier base to enhance supply chain resilience.
Historical Precedent and Current Necessity
The "Pack and Hold" concept isn't novel—Nordstrom previously employed it during store expansions. The strategy's revival aims to maintain sales capacity amid ongoing disruptions. Company data reveals Nordstrom Rack has been "meaningfully below inventory plan all year," with its top 50 brands accounting for just 42% of year-to-date sales compared to 50% in 2019, highlighting significant product availability gaps.
As President and Chief Brand Officer Pete Nordstrom observed: "We have to take the learnings from this and we have to plan better and make sure we take a more balanced approach to bringing inventory in. You heard about 'Pack and Hold,' which is a mitigation strategy, and that's been good for us."
Industry-Wide Shift From Lean to Redundant
The COVID-19 pandemic's supply chain impacts have prompted widespread inventory strategy reassessments. Early in the pandemic, PVH Corp (owner of Calvin Klein and Tommy Hilfiger) considered "Pack and Hold" for portions of its spring/summer collections to preserve full-price selling capability. More recently, Gap has evaluated holding delayed Vietnamese shipments for future seasons, while Urban Outfitters has adjusted ordering timelines to accommodate extended lead times.
Urban Outfitters COO Frank Conforti explained the paradigm shift: "For the last six, seven years, we've been talking about keeping inventories as lean as possible. Now, we have no choice because the supply chain is four to six weeks longer than it was two years ago."
Balancing Risks and Rewards
While valuable, "Pack and Hold" carries inherent challenges—including capital and storage space requirements, potential obsolescence risks, and broader supply chain strain. Successful implementation requires:
- Precise demand forecasting using historical data and market analysis
- Comprehensive supply chain risk assessment
- Strategic inventory planning by product category and quantity
- Flexible inventory management systems responsive to market changes
The Data Analyst's Role in Optimization
From an analytical perspective, "Pack and Hold" effectiveness hinges on robust data capabilities. Advanced analytics can enhance strategy execution through:
- Demand prediction models incorporating time-series analysis and machine learning
- Inventory optimization models using linear programming techniques
- Risk assessment models evaluating disruption probabilities and impacts
- Real-time monitoring systems detecting emerging risks and opportunities
As supply chain uncertainty becomes the new normal, retailers must embrace more resilient, data-informed inventory strategies. Nordstrom's approach illustrates how traditional retailers can adapt, with "Pack and Hold" representing just one component of the evolving supply chain management toolkit.