MM&D MAGAZINE, NOVEMBER/DECEMBER 2010: Our exclusive tour inside the expansive new Quebec DC. Mike Ouellette reports from the inside.
Every supply chain has interplay between technology and manual action. The nuances of how a company successfully manages these interactions often represent a significant competitive advantage, and that certainly holds true with the unique structure found in Canadian Tire Corp Ltd.
The iconic Canadian company with market capitalization of more than $5 billion employs 58,000 people in roughly 480 stores and a number of distribution centres across the country. Its corporate profile boasts “near-universal brand awareness” and that’s no joke—somewhere between 85 and 90 percent of Canada’s population lives within 15 minutes of one of their big, red stores.
And if you’ve been inside one of those stores (let’s face it, if you’re reading this, you likely have been) you would have noted that they sell just about everything. While that product saturation represents the company’s retail mandate, it also means Canadian Tire commands a vast and comprehensive supply chain that spans the globe.
Supply chains of this calibre comprise partners that invariably possess the most sophisticated technological advances available, be it software applications, warehouse automation or the newest, biggest ocean liners, and Canadian Tire’s supply lines are no different.
“Canadian Tire has a flyer that goes out 52 weeks a year. We have those forecasts going out 26 weeks in advance, so everyone in our supply chain from merchandise suppliers, service suppliers, ocean carriers all have 26 weeks of visibility,” says Dan Chan, vice-president of logistics at Canadian Tire.
“Every Thursday night we send out a new forecast. If you are a merchandise supplier, you’re thinking how many of these white cups do I have to make for week 37. Ocean carriers have to convert that same forecast into containers out of a port. Warehouses have to convert that into cubic feet of throughput and then into manpower.”
Largest DC in Canada
On the strength of consumer response to this flyer, Canadian Tire has recently opened the country’s largest distribution centre in Coteau-du-Lac, Quebec, about an hour west of Montreal. Long-time automated material handling partner Intelligrated was on hand to ensure the facility was one of the most advanced DCs in the world.
“Canadian Tire has a longstanding relationship with Intelligrated that goes back to 1989,” says Chan. “Our automated facility in Brampton was handled by Intelligrated (at that time FKI Logistex) and our Calgary facility also has a lot of Intelligrated engineering on the conveyables side.
“This relationship decreases the amount of lead time because they understand us and what we want to accomplish.”
What they accomplished together is spectacular.
The facility itself is about 1.5 million square feet and sits on 167 acres just off the highway in a mainly rural area. The building is separated into four sections, each bisected with a massive dropdown steel fire door.
The building has 57 outbound shipping doors and the same number of inbound—with room to grow. It is operated under contract by Genco, a third-party logistics provider.
Workers operating 85 lift trucks, aisle surfers, pallet trucks and bicycles cruise through the massive structure, passing bay after bay of racking (more than nine million pounds of it), order-picking modules and more than 20 kilometres of conveyors.
The lift trucks even have cameras so operators need not crane their necks to stash product on 35-foot racks.
The company receives about 25 percent of its offshore shipments from the ports of Halifax while the other 75 percent of imports come through Vancouver, which makes the location in rural Quebec ideal—it is very close to a Canadian Pacific rail head, a key consideration when opting for this locale.
“Around 2005 we looked at our point of sale forecasts over the next five years and it was clear we weren’t going to have enough capacity with the three distribution centres we had,” explains Chan. The increase in sales of bulk items such as lawn furniture was devouring floor space.
That timing corresponds with a shift in global sourcing, which meant more product was shipping from China. This shift had a profound impact on Canadian Tire—and many other companies—because the increased lead-time for products from suppliers overseas meant much more storage capacity was required to sell the same amount of product.
“One of the reasons we had to expand our network is that when you buy things from China you have to purchase them about three or four months in advance because there is a long transit lead time and a long manufacturing lead time,” says Chan.
“Everything is pretty much made to order, as opposed to purchasing from a North American vendor, when you buy things from a finished goods inventory.”
Indeed, overseas product brings inventory turns down significantly. In Canadian Tire’s case, that reduction in turnover—calculated as throughput divided by average inventory—was roughly 50 percent.
Room to expand
The company needed more space, fast.
“That, combined with the focus on the bulkier items and the need for as much automation as possible to improve efficiency and labour productivity meant that we needed a building that could handle both bulk and largely automated conveyables,” Chan said, musing: “Not a lot of that just lying around, so we went with this greenfield development near Montreal.”
The company learned from experience with its DC in Calgary that being able to handle the combination of bulk and conveyables with as much automation as possible meant they were able to “minimize the footsteps and fingerprints,” says Chan.
So far, that automated efficiency looks to have taken hold. The facility is capable of operating 20 hours a day with a four-hour maintenance window. Because it processes both bulk and conveyable items, output is measured in cubic feet and, as one could imagine, the output is considerable.
It currently can handle 55 million cubic feet of outbound product in a year—that’s a little more than one million cubic feet a week or more than 22,000 trailers every 12 months.
The company culture is to stuff these trailers to the brim, getting about 2,700 cubic feet of product in each one.
“Our freight costs greatly outweigh our other distribution costs on an annual basis, so getting the most out of every trailer is an obsession,” explains Chan.
That huge amount of output, combined with the size of bulk products and the added storage capacity required to accommodate extended overseas lead times, requires an incredibly sophisticated automation system.
But it gets even more complicated.
Canadian Tire has a unique business structure in which each of its stores is owned and operated independently by a dealer. It’s a big deal because, regardless of the flyer, each store operator is free to order product as he sees fit to satisfy his local market. This means the DC in Coteau-du-Lac must be able to satisfy these orders while storing product for the flyer as well as about 55,000 SKUs to supply the firm’s vast auto repair business.
Taking all of these variables into consideration brings into question how any company can manage efficiency in its operations.
Maintaining the balance
In Canadian Tire’s case, the key is balance.
“The whole building must stay in balance,” says Arnold Cunje, senior sales manager at Intelligrated. “If you have 28 stores being picked in bulk and conveyable, the whole building must finish that cycle at about the same time.”
This balance becomes critical when the trailers are being loaded, because there are so many stores being picked in a day, keeping this balance maximizes the use of the equipment. Once the balance goes awry, the entire operation waits for the slowest area to catch up.
“If you get too many stores in the queue and the conveyors have to figure out where to put the stuff that’s not ready to go, then you get a log jam, someone has to sort through that and all the efficiency gained by your automation goes out the window,” he says.
Cunje is one of the main players from Intelligrated who managed the implementation, and he walks the floor of the Canadian Tire facility pointing to bits of technology as if they were children.
Intimately familiar with both Intelligrated’s automation solutions and how they were installed and tweaked in the Canadian Tire DC, Cunje beams as he tours the facility. At one point, he actually buffs a smudge off a spiral conveyor housing, of which there are 24, each measuring about 30 feet tall. Together, they are capable of processing a minimum of 3,000 totes each per day.
These conveyors bookend massive, 150-foot long, four-storey-tall picking modules bordered by racking filled with product. In these modules, workers manually pick SKUs and boxes from pallets into totes. The totes roll down a roller conveyor line to the spiral conveyor, which hoists them several levels high into a huge conveyor system that sits 30 feet above the floor, spanning the entire facility.
“The design is unique because we collect everything from all of the picking modules and bring them to a high-speed wedge merge,” describes Cunje. “From there, it’s sent through a distribution sorter, which is unique to this facility. It collects at high speed and at high volume and then ships to four distribution sorters at a reduced rate, which travels through 57 lanes of shipping sorting and ends up, ultimately, in the back of a trailer.”
But it’s not that easy. The facility maintains a 48-hour gate-in process, which means product is targeted to be received by the operation within 48 hours of it arriving at the DC—thus, speed is key.
And this conveyor system has speed to burn. It’s capable of running consistently at 550 to 600 feet-per-minute, however Canadian Tire has so far only required running it at 400 feet-per-minute, saving energy and wear.
These conveyors are not only fast, they are smart. Equipped with photo-electric eyes and a slew of other sensing options—including a proprietary shunting system that knows exactly what package is on tap and where it must go—the system builds “slugs” of product and queues them for shipping. It then blasts them down the line to the shipping sorter and along to the trailers.
While it all sounds very complicated, to Chan, it’s simple.
“Canadian Tire does two things. We source top products from around the world and we sell it in our stores. Getting the product from point A to point B is the challenge for our supply chain.”
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