Retail Supply Chains Selected Best Practices. Scotia Capital Inc. Transportation and Logistics Conference May 6, 2008
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1 Retail Supply Chains Selected Best Practices Scotia Capital Inc. Transportation and Logistics Conference May 6, 2008 Patrick Sinnott Senior Vice President, Supply Chain Canadian Tire Corporation, Ltd. 1 Our Role in the Canadian Retail Space Retail Sales Revenues Receivables Sales Growth Retail Sales $7.3 billion $1.6 billion $3.4 billion (1) Double-digit $975 million Canadian Tire participates directly in a commercial marketplace valued at close to $140 Billion. With leadership positions in our businesses, we have considerable space ahead of us to grow. (1) Gross average receivables. CTC numbers as of December 29,
2 Canadian Tire Retail Some Background 473 Associate Stores More than $7.3 billion in sales in 2007 Approximately 2,400 suppliers 5 Distribution Centers - 65,000 SKUs 3 Automotive Depots - 35,000 SKUs each 542 million units shipped in The Supply Chain s Role at CTC Support Canadian Tire Corporation s growth Manage the flow of information from the stores to more than 2,400 suppliers and supply chain partners so that we can flow product to the stores in a timely, cost-effective manner Achieve the highest level of service at the lowest possible cost 4
3 2007 Throughput was 166 Million Cubic Feet Direct to Store = 32.7mm cu. ft. 473 CTR Stores, 71 Part Source Stores Montreal DC mm cu. ft. Vancouver Transload 55.0 mm cu. ft. Calgary DC 17.4 mm cu. ft. Toronto DCs 6.9 mm cu. ft. Port of Halifax 11.0 mm cu. ft. 5 Selected Supply Chain Best Practices Time-phased forecasting and replenishment provides a foundation Operations planning and collaboration enables superior execution Use ports on both coasts to balance nation-wide movement Transload on each coast to deliver a three-way win Measure performance to enable continuous improvement 6
4 Best Practice: Time Phased Forecasting & Replenishment Forecast TIME PHASED REPLENISHMENT PLAN Supplier Schedule (Planned Order Forecast): 26 Week Forecast transmitted weekly via EDI/WebEC Forecasted weekly demand for all products Time Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 25 Week 26 Demand Planned Arrival Projected On Hand Planned Order Safety Stock Ship Date Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 25 Week 26 Quantity Transmitted Thursday to Offshore suppliers, Friday to Domestic Supplier visibility on Friday for Offshore, Monday for Domestic 7 Best Practice: Leverage Planned Order Information to Align All Partners Operations Planning & Execution Distribution Centres Common Carriers Ocean Carriers Sort and Consolidate by Source/Destination Railways Stores Forecasting Information Generate Time Phased Replenishment Send Planned Orders by Item to all Merchandise Suppliers Forecast by Item 8
5 40 Ft. Containers Inbound via Port of Vancouver Actual Cube Actual Cube Forecasted Cube Forecasted Cube Containers Week 9 DC Staffing Requirements - Cube to Process Cube Part-Time Employees Full Time Employees
6 Best Practice: Use Ports on Both Coasts to Balance Nation-wide Movement Since 2003, there has not been enough product sourced in Canada and destined to Western Canada to fill containers arriving from the West Coast for a return trip Ocean carriers and the railways have the best visibility to container movement and do their best to manage imbalances It is not enough to think about delivering product to the customer once We need to find a better way to manage the empties to an exporter or back to the vessel so that we can repeat the cycle For a retailer, using both coasts minimizes empty moves and total cost 11 If We Don t Use Both Coasts, the Imbalance is Significant Distribute 200 mm cube: u u 0 mm sourced domestically and 0 mm sourced in Asia via British Columbia 60 Domestic sourced Asia-sourced Red, orange via B.C. blue, green from Ontario West 30 East East West (60 30) = 30 + ( + ) = imbalance; or 25%
7 Using the Port of Halifax Mitigates Most of the Imbalance Distribute 200 mm cube: u 0 mm sourced domestically, u 0 mm sourced in Asia; u 80 mm via B.C., and u 20 mm via Halifax 50 Domestic sourced Asia-sourced Red, orange via B.C., N.S. green, blue via Ontario West 30 East East 30 West 60 (50 30) = 20 + ( ) = 0 20 imbalance; or % Best Practice: Transload to Deliver a Three-way Win inbound to DC 53 inbound to DC Port Transload Intermodal Railhead Vancouver Intermodal Railhead Toronto CTR DC Empty 40 ocean containers sent back to ocean carrier within 48 hours Store 53 MT 53 outbound to store 53 outbound to store CTR transloads ocean freight near the Port CTR double stacks 53 domestic containers on 53 rail wells 53 container holds 33% to 50% more cube than a 40 container Ocean carriers get 40 ocean containers back 26 to 33 days sooner Railway maximizes throughput per car CTR minimizes cost per cube Every effort by CTR and the Railways to create full containers round trip 14
8 Best Practice: Measure Performance to Enable Continuous Improvement Measure forecast error to provide feedback, adjust parameters and improve judgement Use alert-driven software to measure milestones for Asiasourced product Scan to measure arrivals and departures at all distribution centres and stores Use measurement data to adjust standards on load building, routing and scheduling technologies Use measurement data to provide valuable feedback to the CTC Team, the suppliers and the supply chain partners Leverage Lean Methodology and Five S programmes to drive continuous improvement and productivity in the distribution centres 15 Questions Thank you! 16
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