Case Study
London Drugs
A Prescription for a Healthier Logistics Network
London Drugs is 100% Canadian owned and operated, with retail stores throughout British Columbia, Alberta, Saskatchewan and Manitoba. Having experienced steady and significant growth, London Drugs was approaching maximum utilization of their current facility and site and utilizing public warehousing to cover peak volume, putting additional strain on resources to maintain their required customer service levels. TranSystems | ESYNC was engaged to design a distribution network that would maximize London Drugs' ability to accommodate projected growth while minimizing capital investment requirements, labor, transportation costs and risk.
Project challenges included a product mix trending towards larger cube items (impacting storage capacity and physical distribution costs), facility storage capacity exceeded, fixed costs for facility increasing due to insurance requirements, majority of inbound product sourced from Eastern Canada and retail service territory expanding eastward from Richmond, BC.
Savings opportunities and final network structure were identified through the use of Supply Chain Network Optimization (SCNO) software, creating optimized distribution models that retain or improve customer service levels while lowering overall supply chain network costs.
The opportunities identified as a result of the analysis include:
- Substantially lower facility costs per year
- Improved service levels and product availability for the AB, SK and MB retail markets
- Increased yearly inbound replenishment costs offset by significant outbound storage savings
- Potential absorption of an outsourced business unit into the new logistics network producing a sizeable yearly savings
- Considerable savings in overall logistics network achieved per year upon implementation
- Storage capacity to accommodate expected SKU proliferation and throughput growth through the year 2010
Projects underway related to the above opportunities include:
- Lease on a warehouse for overflow storage
- Comparison of development of a facility in Alberta versus hiring a 3PL in that area
- Costing estimates for redesign and expansion of main DC
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