Dick's Sporting Goods, Chapter 6: Cost Leadership

Cost leadership is defined as gaining advantages by reducing a business' economic costs below all of its competitors. For a company to be successful, a company must develop a system that is beneficial in a way that allows them to maintain and control their costs in competition with their competitors. The first step that DSG took to lower costs was to build distribution centers. DSG currently has four distribution centers across the US. They are located in Smithton, PA, Plainfield, IN, Atlanta, GA, and Goodyear, AZ. Having multiple distribution centers strategically located allows for DSG to have its merchandise readily available while not incurring extra costs of another middle man when ordering and receiving the goods from the multiple brands they sell.

Another way DSG remains atop the cost leadership pyramid in the sporting goods world is through having the latest inventory control systems. PDTs, otherwise known as portable data terminals, can be found in every store that Dick's calls home. These aren't large machines, like the name might suggest. These are handheld devices that keep up with inventory in each store. These devices scan for prices, print labels, have a history of every type of item that DSG has ever sold, and can give an employee access to other store's inventories. Having all of this information readily available at the click of a button allows DSG's upper management to control inventory flow to more profitable stores of certain items. In this industry, and most every business today, the quicker you can get market information, the more money you are going to make, allowing cost leadership to set in.

In an excerpt from business week…

"Year over year, Dick's Sporting Goods Inc. has been able to grow revenues from $5.2B USD to $5.8B USD. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 69.40% to 68.52%. This was a driver that led to a bottom line growth from $263.9M USD to $290.7M USD."

This reduction of cost of goods sold is evidence that DSG has helped differentiate itself from the sporting retail pack as a cost leader. 

http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=DKS

http://www.dickssportinggoods.jobs/distribution-center-jobs