Managing Inventory Warehousing & Distribution at London ...€¦ · Our Warehousing & Distribution...

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BC Supply Chain Council BreakfastPresentation by

Brian Best, Director Warehousing & Distribution

Managing Inventory Warehousing & Distribution

@ London Drugs Limited

Nobody does it Better May 15, 2008

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AGENDA1. Overview of London Drugs in 20082. Our Warehousing & Distribution Network3. Logistics Challenges of Diversified Retail4. Balancing People, IT Systems & Tools5. Future Considerations6. Questions?



3Nobody does it Better May 15, 2008

Overview of London Drugs in 2008London Drugs operates 68 company-owned retail

stores in western Canada.

BC Interior 6Vancouver Island 8Lower Mainland 31Calgary 8Edmonton 8Alta Regional 3Saskatchewan 3Manitoba 1


Overview of London Drugs in 2008London Drugs has

been a local BC retailer since 1945.

This is a shot of our first store “Store 2” on Main St. in Vancouver.

Today Store 2 is at Granville Mall & offers products & services to support the everyday needs of our customers.


Overview of London Drugs in 2008

The company is privately held and Canadian-owned with Brandt Louie as Chairman & CEO.

Led by a lean Executive team Wynne Powell is President & Chief Operating Officer, Clint Mahlman is Senior Vice President Retail & Distribution, with others in strategic roles to round out the leadership team.

Product mix encompasses Pharmaceuticals, Health & Beauty, Cosmetics, Household Appliances, Food, Candy, Furniture, Hardware, Apparel, Computer Sales & Repairs, Photo-Electronics, Digital Imaging, Insurance Services, Audio Video Systems, Screens, Technical Accessories, and …. NOT YOUR AVERAGE

DRUG STORE!


Overview of London Drugs in 2008

London Drugs has grown an average of 3 new storeseach year to increase market coverage.

In addition to new locations, an average of 3 existingstores are significantly renovated or re-located each year to maintain a fresh look, and offering, in highly competitive markets.

Placement of stores is determined by many factors including municipal growth strategies, proximity of competitors, optimum traffic patterns and strategic property management/lease agreements.


Our Warehousing & Distribution Network

London Drugs’ diverse product mix creates a number of material handling challenges in our distribution centers.

Our main DSC is located in south Richmond. It is almost 450,000 sq. ft. with six-level pallet racking, multi-level platforms for conveyable case picking, special areas for floor stack & double deep storage & case picking, as well as automated carousels & pick-to-light pick systems for broken pack picks.

We operate a 150,000 sq. ft. overflow storage facility on Annacis Island, and use a smaller 3PL location inEdmonton to handle seasonal and bulky products.


Our Warehousing & Distribution Network6 level Conveyor SortationRacking

Carousel Bulk Picking Products


Our Warehousing & Distribution NetworkLondon Drugs has added over the years various automated

systems for material handling within our main DSC. Our diversified mix of products continues to change, which drives us to continuously assess handling requirements and slot optimizing methods to assure effective space utilization & storeserviceability:

1995 – High speed Rapistan RS 200 conveyor sorter1996 – Remstar Carousel System & Univeyor conveyor2000 – Expanded multi-level Split Case platforms2003 – Increased Pick platforms on Mezz for RX & COS2007 – Implemented Vocollect Voice-Directed picking


The bulk of our stores are in the Lower Mainland, Vancouver Island and the Interior.

Transportation is accomplished through use of our private fleet within the Lower Mainland and to the Interior.


To supply Vancouver Island and our stores in Alberta, Saskatchewan and Manitoba we rely on outside contractors, such as: Sokil Transport, H&R Transport, Winnipeg Motor Express & Byers Transport.


Rising transportation costs from fuel surcharges reduces our net margin. We have to find ways to gain back the margin losses through innovative scheduling, order balancing and strict negotiating with outside carriers to maintain service levels, without increasing overall cost.

Additionally, a lot of our effort in the past year has been focused on getting each employee reacquainted with the core basics in their work zones.

Simple guidelines & measurable outcomes are key to saving cents per transaction, and overall dollars.



Consumer concerns about global warming and the environment also drive how we conduct activities in our stores & DCs to create a green operations profile.

Our company continues to be active with extensive recycling of cardboard, plastics, wood, paper, electronics, appliances & computers.

The added costs to store, handle & reclaim these recyclable products is significant; however, green stewardship is very important to ensuring a sustainable community for the benefit of our customers, our partners and our employees.



A strength of London Drugs’retail offering is our wide selection of products, both brand names and house brand, with multiple pack sizes to suit different household needs.

Logistics Challenges of Diversified Retail

The extensive variety puts pressure on having enough forward pickable locations available to select orders each day in our DC facilities. With today’s diversity we are now having to pick & later match parts of store orders from multiple buildings & numerous pick areas of our main facility to consolidate for shipping efficiency.


Good coordination of products between multiple facilities requires daily stock transfers & careful inventory tracking to ensure forward slots are always ready for daily orders.

Inventory can be tracked using system-generated queries that assess velocity of movements, recent outbound transactions, promotional activities & current occupancy.

Of course, your best tool is a knowledgeable employee or Product Manager who scans daily reports to ensure nothing inadvertently falls through the cracks.



London Drugs’ sales figures are private but I can share with you that, all told, we serve over 45 million customers each yearand London Drugs’ stores rank amongst the highest retail sales per sq. ft. in North America.

A store orders from our DCs, on average, 3 times per week, with each order being approximately 1200 to 1600 lines & approximately12 to 16 skids of product. Our busiest store on Broadway orders 20 to 24 skids per day, six days a week.

Our high sales volume generates significant ordering & re-ordering within our distribution network to ensure a positive in-stock position for stores in all markets.



With the ongoing quest to rationalize inventory turns, some auto re-ordering is now generated from ‘point-of-sale’ results to optimize on-hand inventory & customer satisfaction.

Orders are created at each store based on sales that deplete on-hand inventory to a pre-set ‘minimum’ level, which prompts a re-order of that SKU.

The re-orders are compiled and sent electronically each day to our IT Area and become available for the DCs to select and process for each store’s next scheduled order day.

The automatic orders are selected and picked along with store requested orders which are also transmitted electronically each day, according to each store’s cycle.



Overview Warehousing & Distribution

Like many of you in the room today one of our greatest challenges these days is to operate cost-effectively without creating waste or delays in our logistics efforts.

Maintaining a flexible and ‘lean’ infrastructure is critical for success.

Since labor continues to be the largest operating cost in warehousing & distribution, London Drugs has found it essential to create a work environment that encourages ‘value to the next customer’ and a chance for personal employee and management career development within the organization to increase employee contribution and long term retention.



Balancing People, IT Systems and Tools

Our Information Technology is a hybrid mix of proprietary applications along with ‘best-of-breed’ package solutions.

London Drugs has always been unique in how we market ourselves to customers. We aim to provide a superior shopping experience to our customers in all markets.

Our penchant to be unique and nimble has prompted many of our IT decisions & approaches to be self-controlled & self-developed to create a strategic retail advantage.


Our proprietary warehouse management system (WMS) operates on an AS 400 platform. It was designed and built in-house in 1991 and still functions well to support our core warehousing & distribution processes.

In our heavily process-oriented environment technology is often needed to provide visibility to trends that affect cost.

Our AS 400 system when coupled with other database reporting systems & tools creates extensive transaction data that is used to track velocity, high & low activity zones, ordercompletions, location occupancy, picking accuracy, service exceptions, trends, etc….



We have found that a key to operational effectiveness is to set targets for service objectives within each work area that provide specific expectations for employees to fulfill.

Managing daily cost in our process environment is achieved through use of system-generated metrics and old fashioned daily task ‘checklists’.

Targets need to be ‘measurable’ & ‘reasonable’ and ‘consistently monitored’ to stay on track.

Providing regular feedback, both positive and critical, assists everyone in operations to remain focused on their service & cost containment goals.



Maintaining a balance between system-directed controls & people-managed controls is very important to remain functional and cost effective.

We realized back in the ’90s that progressive IT systems upgrades would create constant pressure to maintain current versions of operating systems & services.

Hence, we have relied upon a certain level of core competency in our IT department, but have also relied upon outsourcing some programming related to interfaces between our various applications and systems.



Future Considerations

Our company is progressively approaching a size that constitutes a ‘large enterprise’. We can no longer operate like a smaller, family-run business, as in our early days.

Our continued growth is prompting us to re-evaluate infrastructure for IT systems along with specific requirements to access more warehouse space to effectively support our expanding number of store locations.

We have new stores scheduled to come online in Duncan, Squamish & Westbank in the near future. Other locations in BC and other western provinces will continue to be built.


Future Considerations

Due to privacy I cannot be too specific about future plans for London Drugs.

It is safe to expect that our plans involve continued growth in the western provinces of Canada, particularly while the current business boom is riding high with 2010 fever in BC and the strong economy in Alberta & Saskatchewan.

Our primary challenge is to ensure we attract, groom and retain enough employees & management to carry out our business plans to grow our markets and transfer our successful retail approach & culture to new markets outside of western Canada.

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Questions?



Managing Inventory Warehousing & Distribution at London ...€¦ · Our Warehousing & Distribution...

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