MMD

Trends in supply chain management: Network Design

Land, staffing and access remain priorities


January 12, 2018
by Treena Hein

Distribution centre location and network design have become increasingly important issues for senior management, “and never more than in the current environment of uncertainty over trade relations and agreements,” states a recent report by location consulting firm The Boyd Company of Princeton, New Jersey.

Transportation issues, labour availability, customer service strategy and much more play roles in designing a distribution network that’s going to see a company thrive through the next few years, but cost is obviously an overriding factor. In terms of the least costly location for a DC that would serve the huge Northeastern US megalopolis market – the richest, most highly-concentrated mass marketplace in the United States – The Boyd Company analysis puts Eastern Ontario (communities along the 401 Highway between Toronto and Montreal) on top.

Human resources

Indeed, Cornwall, in that very region, has seen significant growth in supply chain activity. Of all its benefits, Cornwall’s economic development manager Bob Peters believes human resources is perhaps the most important. Cornwall puts a strong emphasis on helping companies with their supply chain networks, he says, by providing lots of help with recruitment. City staff attend job fairs on behalf of companies, for example, and also post jobs on ChooseCornwall.ca.

“We may be only Canadian municipality to run a job board for area companies,” Peters notes. “Cornwall has also heavily invested in the Cornwall Business Park, and currently offers over 300 acres along Highway 401 for immediate development. We have excess capacity in municipal services such as water, electrical rates that are as much as 25 percent below other Ontario communities and a robust fibre optic communications network. We have supported the development of logistics and supply chain studies at St. Lawrence College.”

While both Walmart and Giant Tiger have chosen Eastern Ontario for new DCs, Sleep Country Canada recently chose Brampton in southern Ontario. This will help the firm boost capacity in the Greater Toronto Area to support aggressive growth plans for years to come, which includes new store openings and growth in new categories such as lifestyle accessories, the company said in a statement.

Proximity

Leon’s Furniture chose Delta, British Columbia for its new 430,000-square-foot DC for easy access to import goods. While land prices and the reliability of the builder were also important, the firm says it choose Delta because “it’s becoming the largest seaport in Canada” and because Leon’s receives a very high volume of product from Asia.

John Boyd, principal at The Boyd Company, notes that congestion and delays are becoming increasingly common at major US ports, “creating opportunities for Canadian ports to gain market share in the growing North American container shipping market”. In addition to Delta, these port locations include Saint John, New Brunswick; Prince Rupert, BC; Halifax, Nova Scotia; and Montreal, Quebec.

Indeed, Delta’s port could see the addition of a new terminal in the next few years to take advantage of the growth in trade with Asia-Pacific countries. This terminal would double the port’s shipping container capacity.

In addition to port, rail and highway convenience, “with the extremely limited industrial land inventory remaining in Metro Vancouver, Delta is one of the few municipalities that has industrial-zoned land available for development,” says Delta’s director of corporate services Sean McGill. Delta also has incentives in place to encourage industrial development, a business-friendly atmosphere and safe residential communities, which McGill describes as “ideal for raising families, which means DCs are able to find quality local employees because people want to live, work and play here.”

Omnichannel strategy

DC positioning aside, customer service strategy is also a large factor in network design. In the US Target is undergoing a significant network change in the name of better service as it shifts to more small stores. The firm opened 11 small-format outlets in October this year in New York and four other locations, with more to come in 2018. Target also plans to remodel 1,000 of its 1,800-plus stores by 2020, stating in a press release that they will “serve as hyperlocal distribution centers to fulfill digital orders faster” as the company creates “a networked shopping experience, with stores, digital channels and supply chain working together…” Target adds that it is “transforming the way we replenish our stores.”

When asked for specifics on how remodeled stores will serve as hyperlocal DCs for faster fulfillment of digital orders, Target communications lead Kristy Welker says it’s about mass customization and being locally relevant.

“In the last few months, we’ve expanded ship-from-store capabilities from 1,100 to 1,400 stores in advance of the fourth quarter,” she says. “Today, more than 95 percent of ‘Order Pickup’ orders are ready to be picked up within the hour.” Welker did not comment on how Target is “transforming” the way it is replenishing its stores, other than to say that the firm’s small-format stores receive more frequent product delivery.