The Calgary Economic Development agency invited a number of reporters and editors, including MM&D‘s Carolyn Gruske, to visit some of the businesses that form the backbone of the city’s warehousing and logistics hub. Articles resulting from that trip will also appear in the January-February issue, and videos will continue to be posted to www.mmdonline.com.
CALGARY, Alberta—Like all department and big box stores, Sears Canada Inc, is adapting to a challenging Canadian retail environment. Increasing consumer expectations, more competition from US companies entering the market, and a recovering economy are all exerting pressures.
David Ritch, manager, logistics support, at the company’s Calgary National Logistics Centre (NLC), says Sears is changing how it operates. (Click here for MM&D video from the NLC.)
“The company right now is undergoing the second year of a three-year transition, so we’re finding our slot in the market,” he said.
As part of Sears’s business improvement, all of the company’s departments, including warehousing and logistics operations, must evaluate how they perform their jobs and figure out how to help their organization meet the demands of the new retail climate.
David Cooper, general manager of the Calgary NLC, says it’s up to him to figure out how to position the warehouse to provide Sears with the greatest advantage.
“I have to be conscious of speed to market. But as long as I can achieve speed to market—and this is a big, big drive for Sears during the next twelve months, to improve our speed to market—I have to get the right mix of the product in this building. Do I fill up a full storage holding or do I keep it flexible so I can respond best to the customer?”
The Calgary NLC is the company’s main western warehouse. Located at the CP intermodal facility in Calgary, Alberta, the DC has been in operation since July 2000, when operations from Vancouver and Regina were consolidated in one location.
At over 620,000sqf, the Calgary NLC has 130 dock doors and rack storage for 31,370 pallet positions (based on a 4×4 pallet). It supplies 730 stores in British Columbia, Alberta, Saskatchewan, Manitoba, Western Ontario, Nunavut, Yukon and the Northwest Territories.
When asked about the business challenges Sears is facing, Cooper answered honestly and bluntly.
“Are we still going to be here in 12 months time? It’s a very fair question. Dave [Ritch] is a lifer, but I’m six months in. When I was leaving my last job to come to Sears, that’s exactly the question I had to ask. I had to be sure I wasn’t joining an organization that was dying on its feet,” he said.
“On the logistics side, we have a lot of new faces at the top end of the organization, and we know there is stuff to do.
“The facility probably looks the way it did eight or ten years ago. That’s not a bad thing because logistics and supply chain are what they are, but there are things we can do behind the scenes in terms of making the operation more efficient in the way freight flows through, in the way we conduct our freight into the building and in the way we move freight out. So the focus of my attention is to make this building work more efficiently.”
According to Ritch, some changes have already taken place in the DC to correspond to the business restructuring.
“We’re obviously cost-cutting. But as our volumes go down, that enables us to cut back a little bit. When the facility opened we had about 500 employees. Now we’re about 300-325. It fluctuates with the seasons. We’re very comfortable with what we have for the volumes we’re currently handling,” said Ritch.
Cooper added that the NLC typically runs at about 75 percent capacity.
Most of what’s handled at Sears is dealt with manually, due to the over-sized nature of the inventory. Smaller goods tend to be warehoused in a catalogue-focused warehouse in Regina, Saskatchewan.
“Automation is very small. We have a small sorter with two inbound lanes and 12 outbound lanes and a hospital lane. The reason it’s small is this is typically a big ticket facility so we’re racked,” said Ritch. “We’re currently sitting on about $33.5 million of inventory at cost. That’s merchandise Sears has purchased and is paying interest on.”
While that may seem like a large outlay of money for inventory, it tends not to sit in the warehouse for long. The general rule of thumb is that the warehouse maintains three-days worth of inventory, in case circumstances (such as inclement weather or border troubles) delay shipments, but generally turnover is pretty fast.
“We also cross-dock merchandise from quick response (QR) sources, so we’ll probably cross-dock 30 to 50 trailers a day of QR sources, depending on the season.”
“Two generic types of products come through here,” said Cooper. “Just-in-time product is used to get product quickly to the stores. The other type is quick response. That is where we are flowing that product directly from the vendor, directly through our supply network to the store.”
One advantage to being located in Calgary is that many mattress, white goods and electronics companies do their manufacturing or final assembly in the local area, so they deliver on a daily basis, and the products just flow through the warehouse into the supply chain.
Like other retailers, Sears needs to address the growing demands for multi-channel distribution, but Cooper says Sears has an advantage many other retailers don’t have: a history of catalogue sales.
“Sears has just opened up a new direct channel, but Sears has always been known for having that third channel. It was Internet shopping pre-Internet, through the catalogue. That’s part of the business that is really core to Sears’ operation, so as we look at new channels coming on, in a paper-and-pen way, Sears has already been there.”