Caribou Coffee Addresses
Growth with Updated Strategic
Network Planning Model
The Customer
Caribou Coffee Company, Inc., founded in 1992 and
headquartered in Minneapolis, MN, is the second largest companyowned gourmet coffeehouse operator in the United States, based
on the number of coffeehouses in operation. Caribou Coffee offers
its customers high-quality gourmet coffee and espresso-based
beverages, as well as specialty teas, baked goods, whole bean
coffees, branded merchandise and related products.
THE BUSINESS CHALLENGE
With sales on the rise, and representing an
increasingly more significant portion of distribution
capacity, Caribou Coffee needed a way to estimate
future inventory needs.
THE SOLUTION
TZA, which had previously developed a strategic
network plan for Caribou Coffee, provided an
updated plan which reflected the company’s
anticipated growth.
THE RESULTS
Caribou Coffee has more than 500 company-owned store
locations. Caribou Coffee also sells its products to club stores,
grocery stores, mass merchandisers, office coffee providers,
airlines, hotels, sports and entertainment venues, college
campuses and other commercial customers. In addition, Caribou
Coffee licenses third parties to use the Caribou Coffee brand on
quality food and merchandise items.
 Approximately $262 million in annual sales
 6,000 employees, including 24 full-time warehouse employees
 One primary distribution center
 More than 740 products stocked
The Business Challenge
The coffee business was changing for Caribou Coffee as the
company experienced rapid sales growth in the commercial
customer segment. This growth stretched Caribou Coffee’s
inventory capacity at its current distribution center and prompted
management to rent additional off-site facilities to meet its growing
inventory needs. As Caribou Coffee management anticipated
continued growth in commercial customer sales, it realized the
need for a strategic planning tool that would suggest appropriate
inventory levels to support the company’s growth objectives.
Based on thorough analysis of Caribou Coffee’s
transportation and distribution processes, and taking
into account Caribou Coffee’s current and
anticipated growth, TZA recommended a one-DC
network in the Minneapolis area.
“
TZA made sure the scope, financial
and timeline deliverables were
understood and adhered to
throughout the process. Caribou
will continue to rely on TZA as an
informed and capable resource in
addressing our future distribution
and logistics opportunities required
to support the growth of our distinct
business channels.
”
Paul Turek
Vice President/GM Supply Chain
Caribou Coffee
TZA Customer Case Study: Caribou Coffee
Caribou Coffee wanted to create a flexible network modeling
tool that could be used on an ongoing basis to analyze
changes in their business, incorporate sales forecasts across
all business channels, and demonstrate how these changes
affected the choice of a preferred distribution network.
Management also needed to determine the lifespan of the
current DC and develop an the optimal distribution network
plan for a five-year planning horizon. Caribou Coffee wanted
to optimize the relationships between service levels and
costs to support all of its business channels.
The Solution
conducted computer modeling, based on anticipated
inventory needs, to determine space requirements and the
overall size of a new distribution facility.
Network Planning Model Update
Caribou Coffee requested that TZA update the modeling tool
to reflect new sales growth assumptions and added business
units. The primary objectives of the assignment were to
determine the life span of the current distribution facility and
the required size of a potential new facility based on growth
assumptions for the next five years.
Caribou Coffee asked TZA to update the Strategic Network
Planning model it had developed three years earlier for the
company. TZA has a strong reputation in Strategic Network
Planning based on more than 28 years’ experience assisting
companies of all sizes to rationalize their distribution network
and achieve the required level of customer service while
successfully meeting corporate profitability objectives.
TZA consultants updated Caribou Coffee’s original Strategic
Network Planning Template with minimal effort. They
validated the inventory requirements based on updated sales
forecasts and met with the senior management team to
review the five-year plans for each business unit. The
consultants created models that determined space
requirements for a new distribution center based on several
alternative scenarios.
Original Strategic Network Planning Model Project
The Results
Three years earlier, TZA conducted a network analysis study
to determine the lifespan of the existing facility and the
optimal distribution network for the next five years. The
analysis was comprised of the following six-step approach:
1.
Business Assessment, Operational Profile and Initial
Visioning
TZA recommended a one-DC network in the Minneapolis
area based on calculations that it would generate the lowest
total operating cost for Caribou Coffee. TZA estimated that a
7% increase in rack locations would extend the life of the
current facility and increase capacity to meet the growth
requirements of each business channel.
2.
Data Collection, Aggregation and Analysis
 The updated plan recommends that Caribou Coffee track
3.
Building and Validation of Baseline Model
4.
Determination of Alternative Strategy Scenarios
and record all inventory by product type (including offsite
storage).
5.
Analysis of Alternative Scenarios
6.
Formulation of Strategy and Process for Ongoing
Modeling
 Ultimately, dimensions (cube) by item should be tracked to
allow for more detailed analysis of space requirements.
 To increase utilization and capacity, TZA recommends a
During this process, TZA consultants conducted analyses in
the following areas:
macroslot analysis to determine the type and quantity of
fixtures required for a new facility.
 Transportation Analysis: TZA consultants examined the
flow of trucks in and out of the facility as well as where
goods were being shipped to and delivered from.
 Location Analysis: TZA determined the optimal zip code
location for the new center as determined by the lowest
transportation costs.
 Inventory Analysis/Facility Sizing Requirements: TZA
3880 Salem Lake Drive, Long Grove, IL 60047
800.229.3450 | www.tza.com
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201406