Case Dollar Tree Logistics
Dollar Tree Logis-cs and Distribu-on Center Decision
Dollar Tree • Main merchandises: – $1
– Consumable merchandise: candy, food, health and beauty care, house wares (paper, plas-cs, chemicals) – Variety merchandise: toys, durable house wares, giCs, party goods, gree-ng cards – Seasonal goods: Easter baskets, summer toys, lawn and garden equipments, Halloween and Christmas goods 40% imports, 7% closeout items, rest domes-c vendors
Dollar Tree—Opera-ons Competency • What are the opera-onal priori-es? • What does Dollar Tree do to achieve low costs?
Dollar Tree Logis-cs
What are the major categories of cost?
Cost Structure
Inventory Carrying Inbound Total DC Outbound
What are the drivers of the costs?
• Inbound (37%) – Geography, distance from port – Mode of transport (train, truck) – Cost of fuel
• DC facility cost (28%) – Fixed cost • Scale economies • U-liza-on
– Variable cost, regional wages – Process Technology
Effect of More DCs • No Effect? Increase? Decrease?
What are the drivers of the costs?
• Outbound (25%) – Geography, distance to stores – Delivery frequency – Cost of fuel
• Inventory carrying (10%)
Effect of More DCs • No Effect? Increase? Decrease?
The two op-ons and the trade-‐offs • Expand Briar Creek – Economies of scale
• Lower fixed cost • Might retail inventory be higher?
Dollar Tree • Main merchandises: – $1
– Consumable merchandise: candy, food, health and beauty care, house wares (paper, plas-cs, chemicals) – Variety merchandise: toys, durable house wares, giCs, party goods, gree-ng cards – Seasonal goods: Easter baskets, summer toys, lawn and garden equipments, Halloween and Christmas goods 40% imports, 7% closeout items, rest domes-c vendors
Dollar Tree—Opera-ons Competency • What are the opera-onal priori-es? • What does Dollar Tree do to achieve low costs?
Dollar Tree Logis-cs
What are the major categories of cost?
Cost Structure
Inventory Carrying Inbound Total DC Outbound
What are the drivers of the costs?
• Inbound (37%) – Geography, distance from port – Mode of transport (train, truck) – Cost of fuel
• DC facility cost (28%) – Fixed cost • Scale economies • U-liza-on
– Variable cost, regional wages – Process Technology
Effect of More DCs • No Effect? Increase? Decrease?
What are the drivers of the costs?
• Outbound (25%) – Geography, distance to stores – Delivery frequency – Cost of fuel
• Inventory carrying (10%)
Effect of More DCs • No Effect? Increase? Decrease?
The two op-ons and the trade-‐offs • Expand Briar Creek – Economies of scale
• Lower fixed cost • Might retail inventory be higher?