Case
Case Study:
Study:
PDQ
PDQ Office
Office Products
Products
U.S.
U.S.Distribution
DistributionStrategy
Strategy
Peach State Integrated Technologies
www.peachstate.com
1
Contact information
For any questions about this case study or other
Peach State capabilities please feel free to contact us.
Peach State Integrated Technologies
3005 Business Park Drive
Norcross, GA 30071
(678) 327-2000
2
Table of Contents
ÿ
ÿ
ÿ
ÿ
ÿ
ÿ
ÿ
Project Overview
Demand Analysis
Customer Locations
Network Model and Baseline
Scenario Evaluation
Summary and Recommendation
Appendix
3
Project Overview
4
Project Background
PDQ Corporation is seeking a Distribution Network plan that
will deliver high service levels during a period of growth.
ÿ Existing Facilities - PDQ currently has a single distribution center (DC)
located in central NJ. All customers in the United States receive their
shipments directly from this DC.
ÿ Expansion - PDQ initially targeted the New York metro area and the
northeastern states. A large untapped market exists in the rest of the
country, and PDQ must consider how to serve these customers.
ÿ Service Levels - TPDQ’s promise of quick delivery is central to the
philosophy of the company. In Europe, most customers can expect 24 hour
delivery. The goal of this study is to explore several service level scenarios
for the US market and show the type of distribution network that would be
required to achieve each target.
5
Project Objectives
Peach State and PDQ agreed on the following project goals and
objectives to ensure success.
ÿ Examine the historical demand: Build profiles of typical customer orders to understand the
current network.
ÿ Project future demand: Identify key markets that will be served in the future.
ÿ Rate the current network: Detail the service levels that can be achieved with the existing
facility.
ÿ Design a network for the following scenarios:
ÿ Baseline – Central NJ only
ÿ How many DC’s to reach 100% of the US in 24 hours?
ÿ Best 1, 2, and 3 DC networks (3 scenarios)
ÿ Best Central NJ + 1 DC network
ÿ Best Central NJ + 2 DC network
ÿ Identify service levels: With each scenario, calculate how many customers can be served in
1 day, 2 days, or more.
ÿ Review existing warehouse: Make recommendations around space efficiency and process
improvements.
6
Project Approach & Methodology
Peach State used historical shipment data and information about
target markets to build a model of PDQ’s network.
ÿ Input Data: PDQ provided detailed information about products, order activity, and shipment
methods. The sample data provided covered June 2001 to June 2002.
ÿ Demand Analysis: Peach State examined the data and built profiles of the typical customer
order, daily order activity, and shipment method. This data was also used to do a product
velocity study which identified the fastest moving products.
ÿ Customer Location: PDQ provided the BPIA buying power index which describes the
population of office workers in each U.S. county. This data was used to identify the largest
metropolitan areas in the U.S. which are important strategic targets for PDQ.
ÿ Network Modeling: A detailed model of the network was built using the data profiles.
Using this model, Peach State located facilities to meet customer demand. This approach
minimizes distance to the customer base and meets service level targets.
ÿ Scenario Analysis: A baseline scenario was compared with several other alternatives.
Detailed maps and service levels are provided for each scenario. These will provide PDQ
with a strong foundation for strategic expansion.
7
Demand Analysis
“What does the typical order look like?”
8
Demand Analysis
Peach State used historical data to build profiles of PDQ’s
shipping activity and customer demand.
Data was used to answer key questions:
ÿ How many orders are received each day?
ÿ Are sales levels increasing over time?
ÿ How many shipments are sent via LTL carrier? Parcel carrier?
ÿ What does the average order look like? How many products?
Average sizes? Total weight?
ÿ Which products are the fastest moving? What percentage of activity
do they represent?
9
Orders per Day
The number of orders processed per day fluctuates, but it is most
common to ship 55 to 65 orders per day.
10
Shipment Volumes
January 2002 marked a step increase in shipment volumes.
11
Activity Levels Per Day
Though total volumes
have increased, the
spread of daily orders
has remained constant.
12
Shipment Mode
Parcel shipments constitute the majority of all shipments - more
than 60%.
13
Lines Per Order Profile
More than 50% of all orders were a single line only. Order
picking can be designed to leverage this for increased efficiency.
Lines Per Order Distribution
89%
93%
95%
96%
97%
98%
98%
99%
100%
84%
90%
6000
74%
80%
Number of Orders
5000
70%
4000
60%
53%
50%
3000
40%
84% of all
orders have 3
lines or less.
2000
30%
20%
Cumulative Percent of Orders
7000
1000
10%
0
0%
1
2
3
4
5
6
7
8
9
10
11
Lines
14
Units and Weight Per Order
Line, weight, and unit per order profiles can be examined to
define the most suitable order fulfillment methodologies.
15
Product Movement Profile
Order activity was analyzed for each product to distinguish
fastest moving items from the slower moving ones.
Velocity Profile
100%
% Orders
80%
60%
40%
20%
0%
1
192 383 574 765 956 1147 1338 1529 1720 1911 2102 2293 2484
# Products
Product Movement
Fastest Movers
Medium Movers
Slow Movers
Total
# SKU's
869
870
930
2,669
Picks
% SKU's % Picks
17,712
33%
80%
3,324
33%
15%
1,109
35%
5%
22,145
100%
100%
16
Product Movement Profile
Using the product velocity profile, Peach State was able to
identify operational improvements PDQ should consider.
A
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1616
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1017
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1102
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1002
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1508
1407
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1302
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1307
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1202
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0803
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0603
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1509
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B B
B
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1010
1011
1012
0908
0909
0910
0911
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B C A
A C
A
B B B B
B C
C A C C A
B C
B B C B
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B
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B B B
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B A A
B A
B B
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0808
0809
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0812
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B
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0607
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B
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0708
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B B C A
C B
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0608
0609
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B A
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A
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0610
0301
0201
0302
0202
0711
0712
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0611
0612
0503
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B
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A A
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B A
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0303
0203
0107
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0102
0103
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= Current
1512
1513
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B B C
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A A A
B B A
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B A
B C A B
B B
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1413
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A A
B
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A C
A
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0807
B
A
C
C
OFFICE
Total
Facings
987
604
422
B
A
A
B
A
A
A
B
A
1310
1311
1312
A
A B B C C
A
C B
C B
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B C
B C
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B B C
A A
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1210
1211
1212
0501
0502
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A C
A
A
B
A A
B
A A
A A A A A
A
A
C
A
A A B A C
A
0401
0402
= Future Addition
A A
A
A B
A
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A
B
A A
A B A B
A
A C A
A B A
A A C A A A A A A A A
A A A A A
A A B A
1612
1613
1614
1615
A
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B
A
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A
1514
B
C
B C
C
B
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A
1414
1313
1314
C
B B
B C A
B C C
A
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B
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A
B B
C
A B
B
A B
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B B
B A
A C
B
C
A B B
B B A B
1213
1214
1113
B
B C
C
A B
B
A
A
A
C
C C
A A
B
A
1013
1114
C B
B
A B
C
A
A B
A
C C
A C
A
C B B
B C
B C
A
1014
0913
B B
A
B B
C
B
A B
A
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B B
C
A
A B
A
A
0813
0914
B B
C
C B
B B
C
C B
A C
A
A
B
A C
A
B A
A A
A A
B
B
0814
C
C
C
B
B
C
A
C
0713
0714
A
A B
B B A
A A
A
A
C
C
A
A B
A A A
A A
B
A C
A B B
A C
C
A
A B C A A
B
B
B
C
A
A
B B C C A A
0613
0614
C
C
C
0504
0505
A A A
A A
B
A
A A
A
B
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A B
A B
B B C
A B C
B
A C
A
A A A A A
A
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A A A A
C A
0404
0405
0304
0204
A
B
B
B
A
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C
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0205
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0506
A
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C
A
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0406
C
B
B
C
C
B
C
B
B
C
C
A
A
C
B
A
A
A
B
A
B
B
A
A
B
0306
0206
Receiving, Packing, Shipping Area
ÿ An overview map of the
warehouse was developed
which shows where
products are stored.
ÿ Fastest moving items are
shown in red, and are
evenly distributed in the
warehouse.
ÿ A revised approach to
product storage could
decrease labor costs and
shorten order cycle times.
0104
0105
0106
A A
A A
A A
A A
B A
B A
A A
A A
B
A
A A A
A A
A A
A A
A A
A B
A C
A
A
A A
B A A
A
A
A
A A
A
A A
A B
A
A = Fastest Moving Items
B = Medium Moving Items
C = Slowest Moving Items
17
Space and Process Improvements
Peach State recommended the following enhancements for the
existing warehouse, based on a one day site assessment:
ÿ
Slotting -
ÿ
Zone the warehouse by velocity—“A”, fast moving items = front, “B” movers = middle, “C” & “Dogs” = back.
ÿ Keep fastest moving items toward the dock & on the floor; opportunity exists to re-slot the warehouse.
ÿ Putaway – store and putaway receipts of product by velocity zone; use first part of shift to replenish floor/forward slots from reserve.
ÿ
ÿ
ÿ
Operations -
ÿ
ÿ
ÿ
Allocate the right amount of product to a forward location; i.e., don’t tie up 3 floor slots with same product if slots
would be better served with other, fast moving SKU’s.
Continue to store items that ship together close to one another.
Adjust workstation layout for packing to minimize travel time between work table, terminal, printers & UPS manifest.
Evaluate increasing the size of the UPS waves to create more efficient picking tours; update system parameters as
needed.
Storage -
ÿ
ÿ
ÿ
ÿ
ÿ
ÿ
ÿ
Rack out remaining floor space with selective pallet rack, minus space required for staging.
Creating deeper bays for longer products will only offer marginal space improvements.
Use dense storage for small cube items (e.g., more half pallet locations, bin shelving, &/or case rack).
Put mezzanine over shipping docks; returns or small cube items could be processed on mezzanine.
Rack out over dock doors to store packing materials and empty pallets.
Consolidate dead items on pallet, inventory, ID, and put in back of warehouse.
Possibly use floor storage for high cube, stackable items.
Detailed slotting will yield the greatest operational
benefits to PDQ.
18
Summary of Demand
The observations of the demand analysis were used to model
PDQ’s U.S. distribution network.
ÿ For the purposes of the network study, we assume that customers behave the same no matter
where they live in the U.S. The order size, order value, frequency, and return rates all follow
the typical customer profile.
ÿ The number of daily orders can fluctuate over a wide range. The distribution network must be
flexible to allow for this variability.
ÿ Sales have been steadily increasing in the U.S. and this trend should continue as PDQ enters
new markets. The distribution network must be able to handle this future growth.
ÿ Parcel shipments account for over 60% of the customer orders. This has been consistent over
time, and is dependent on product type. PDQ must be equally capable of meeting service
targets with both parcel and LTL shipments.
ÿ More than half of the orders are for a single product only, and 80% of the volume is driven by
the “fastest” one third of products. PDQ should examine its shipping operations to build in
efficiency. For example, single line orders could be batch picked to reduce travel time. Even
small improvements in order fulfillment methodology could yield significant results.
19
Customer Locations
“Where are the largest markets?”
20
Geographic Analysis of Demand
PDQ provided BPIA data which shows the population of office
workers in the United States, divided into 3,109 counties.
ÿ Office workers
are PDQ’s target
customers.
ÿ The data includes
workers in large,
small, and home
offices.
ÿ Alaska and
Hawaii were
excluded from
the study: this
was only 0.12%
of the total
population.
21
Demand Aggregation
To speed calculations, Peach State grouped demand into large
metro areas made up of several counties.
ÿ 302 Metro areas are
defined by the U.S.
Census Bureau.
ÿ 86 percent of U.S.
office workers live
in these areas.
ÿ Style conscious
consumers tend to
live in these metro
areas also.
ÿ Marketing can be
easily focused on
these dense areas.
22
Analysis of Demand
The largest 50 metro areas are used in the network study. These
areas represent 58 percent of U.S. office workers.
ÿ The network model
will focus on the
largest cities first.
ÿ This level of
aggregation allows
faster modeling
results but does not
affect validity.
ÿ Final results will be
reported using the
full 3,109 county
list and 100% of the
population.
23
Analysis of Demand
Customer orders and returns should follow the same geographic
distribution as the population of office workers in the U.S.
ÿCalifornia, New York, and Texas have the largest concentration of office workers.
ÿThe central area of the U.S. is sparsely populated compared to the coasts.
24
Network Model and Baseline
“What service can PDQ provide with its existing distribution
center in central NJ?”
25
Network Model
Peach State built a model of PDQ’s network based on the
following assumptions.
ÿ The network model calculates actual road distances between distribution
centers and customers.
ÿ All customers are assigned to the closest DC.
ÿ LTL shipments travel 500 miles per day on average.
ÿ Parcel delivery times are based on UPS Ground service and are quoted in
business days.
ÿ The model locates each distribution center to minimize average distance to
the customers.
ÿ Return shipments follow the same pattern as outbound shipments. We
assume there is a fixed percentage of all orders that will be returned.
26
Baseline Network
With just one distribution center located in New Jersey, PDQ will
not be able to meet its service targets nationwide.
27
Baseline Network
The first
scenario
includes only
the existing
facility in
central NJ.
This scenario
was used as
the index to
rate all other
scenarios.
28
Baseline Network
PDQ uses both LTL and Parcel shipments. With the existing
network, some customers can expect to wait a week for delivery.
Percent of
of Customers
Customers
Percent
LTL
LTL Service
Service Levels
Levels
Within
Within 11 Day
Day
77
Within
Within 22 Days
Days
Within
Within 44 Days
Days
Within
Within 33 Days
Days
66
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
85%
85%
82%
82%
73%
73%
55
99.7%
Within
Within 66 Days
Days 99.7% 100%
Within
Within 55 Days
Days
56%
56%
44
33
29%
29%
22
11
00
11
33
55
77
99
11
11 13
13
15
15
17
17
19
19 21
21
23
23
25
25
27
27 29
29
31
31
33
33
35
35
37
37 39
39
41
41
43
43
45
45 47
47
49
49
51
51
53
53 55
55
57
57
59
59
61
61
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
If PDQ starts marketing to
the entire United States,
only 29% of LTL volume
and 20% of parcel volume
will be within a one day
service area from the
existing facility.
100%
100%
35
35
30
30
25
25
15
15
10
10
55
20%
20%
35%
35%
20%
20%
100%
100%
60%
60%
31%
31%
22%
22%
15%
15%
This chart shows
how long Parcel
shipments can
take to reach the
customer. The
source data
assumes UPS
Ground shipment.
80%
80%
78%
78%
66%
66%
20
20
This chart
shows how long
LTL shipments
take to reach
the customer.
All calculations
are based on 10
hours at 50
miles per hour,
for 500 miles
per day.
40%
40%
20%
20%
12%
12%
00
0%
0%
11Days
Days
22Days
Days
33Days
Days
44Days
Days
55Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
29
Scenario Evaluation
“How many distribution centers does PDQ need?”
“Where should they be located?”
30
Scenario Overview
Several different scenarios were considered using the model.
Each was compared to the baseline to rank its performance.
ÿ One day service nationwide: How many distribution centers are needed
to reach 100% of the United States in 24 hours?
ÿ Best 1 DC network: If PDQ only has one DC, where should it be?
ÿ Best 2 DC network: Where should 2 DC’s be located? How is service
improved?
ÿ Best network with Central NJ + 1 other DC: If PDQ added one new DC
to its existing facility, where should it be placed?
ÿ Best 3 DC network: Where should 3 DC’s be located? What are the
additional benefits?
ÿ Best network with Central NJ + 2 other DCs: In addition to the existing
facility, where should two new DCs be located?
31
Scenario: One Day Service
When 10 DCs are placed to minimize cost, one day service
nationwide is still not possible.
32
Scenario: One Day Service
Distribution
centers are
located near
major
metropolitan
areas to
reduce the
overall cost of
the network.
33
Scenario: One Day Service
With 10 facilities nationwide, service levels would be very high.
The operating costs would also be extremely high.
LTL
LTL Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
Within
Within One
One Day
Day
25
25
95%
95%
Within
Within Two
Two Days
Days
100%
100%
Within
100%
Within Three
Three Days
Days 100%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
20
20
15
15
10
10
55
00
Most of the country
receives 1 day service.
Large geographic areas
of the country receive 2
day service, but the
number of customers in
these areas is very small.
11 22 33 44 55 66 77 88 99 10
10 11
11 12
12 13
13 14
14 15
15 16
16 17
17 18
18 19
19 20
20 21
21 22
22 23
23 24
24 25
25 26
26 27
27 28
28 29
29 30
30
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
Most parcel shipments will
reach customers in one
business day.
99.5%
99.5%
80
80
70
70
100%
100%
80%
80%
60
60
50
50
40
40
30
30
100%
100%
70%
70%
60%
60%
69%
69%
40%
40%
20
20
10
10
00
30%
30%
11Days
Days
22Days
Days
20%
20%
0.5%
0.5%
0%
0%
33Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
34
Scenario: Best 1 DC
Because most of the population lives in the eastern half of the
country, a single facility would be located centrally.
35
Scenario: Best 1 DC
Distribution
activities are
roughly 16-20%
more efficient than
the baseline
scenario. This
location was
chosen to reduce
the total network
cost, but some
customers will
have slower
service.
36
Scenario: Best 1 DC
This scenario cannot reach either of the largest markets in one
day, but achieves higher overall service than the baseline.
Percent of
of Customers
Customers
Percent
LTL
LTL Service
Service Levels
Levels
Within
Within 11 Day
Day
88
Within
Within 22 Days
Days
Within
Within 33 Days
Days
Within
Within 44 Days
Days
82%
82%
77
Within
Within 55 Days
Days
100%
100%
100%
100%
90%
90%
86%
86%
73%
73%
80%
80%
70%
70%
60%
60%
66
55
44
50%
50%
40%
40%
31%
31%
33
30%
30%
20%
20%
22
11
10%
10%
0%
0%
00
11
33
55
77
99
11
11
13
13
15
15
17
17
19
19
21
21
23
23
25
25
27
27
29
29
31
31
33
33
35
35
37
37
39
39
41
41
43
43
45
45
47
47
49
49
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
The UPS parcel network
usually follows the same
behavior as the LTL road
network.
100%
100%
50
50
40
40
58%
58%
60%
60%
47%
47%
20
20
10
10
80%
80%
78%
78%
30
30
12%
12% 12%
12%
100%
100%
40%
40%
20%
20%
22%
22%
33Days
Days
44Days
Days
00
20%
20%
0%
0%
11Days
Days
22Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
37
Scenario: Best 2 DCs
By adding a second DC, the network is able to serve both coasts
with one day service, and reach most of the country within 3 days.
38
Scenario: Best 2 DCs
Distribution
activities are
more efficient
than with a single
DC. Based on
customer
percentages, the
eastern facility is
much larger than
the second center.
39
Scenario: Best 2 DCs
Virtually all of the country can be reached in 3 days from the two
locations in this scenario.
LTL
LTL Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
Within
Within One
One Day
Day
Within
Within Two
Two Days
Days
14
14
Within
Within Three
Three Days
Days 100%
100%
83%
83%
12
12
10
10
88
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
49%
49%
50%
50%
40%
40%
30%
30%
66
44
Although there is a small
area of southern Texas
that receives 4 day
service, the population
there is minimal.
20%
20%
10%
10%
0%
0%
22
00
11 22 33 44 55 66 77 88 99 10
10 11
11 12
12 13
13 14
14 15
15 16
16 17
17 18
18 19
19 20
20 21
21 22
22 23
23 24
24 25
25 26
26 27
27 28
28 29
29 30
30
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
92% of the nation would
receive a parcel shipment
within 3 business days.
60
60
92%
92%
50
50
100%
100%
80%
80%
67%
67%
40
40
30
30
60%
60%
56%
56%
40%
40%
20
20
10
10
00
100%
100%
25%
25%
11%
11%
11% 11%
11Days
Days
20%
20%
8%
8%
22Days
Days
33Days
Days
0%
0%
44Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
40
Scenario: Central NJ + 1 DC
Adding a second DC to the current network has very similar
results compared with the “Best 2 DC” scenario.
41
Scenario: Central NJ + 1 DC
The existing
site is not the
optimal
location for a
DC, but the
efficiency of
the network is
not reduced
significantly.
Relocating
the original
DC should be
done only if
other needs
arise.
42
Scenario: Central NJ + 1 DC
A small section (3%) of the country receives only 4 day service in
this scenario. Houston is the only metro area in this region.
Percent of
of Customers
Customers
Percent
LTL
LTL Service
Service Levels
Levels
99
88
Within
Within One
One Day
Day
Within
Within Four
Four Days
Days
100%
100%
73%
73%
77
66
55
44
97%
Within
Within Three
Three Days
Days 97%
Within
Within Two
Two Days
Days
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
42%
42%
50%
50%
40%
40%
30%
30%
33
22
20%
20%
10%
10%
11
00
0%
0%
11 22 33 44 55 66 77 88 99 10
10 11
11 12
12 13
13 14
14 15
15 16
16 17
17 18
18 19
19 20
20 21
21 22
22 23
23 24
24 25
25 26
26 27
27 28
28 29
29 30
30 31
31 32
32 33
33 34
34 35
35 36
36 37
37 38
38 39
39 40
40
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
Overall, service is only
slightly lower than the
scenario with the Best 2
DC network.
99.8%
99.8%
40
40
35
35
100%
100%
86%
86%
80%
80%
30
30
25
25
20
20
15
15
10
10
49%
49%
26%
26%
27%
27%
60%
60%
37%
37%
40%
40%
23%
23%
13%
13%
55
00
11Days
Days
22Days
Days
100%
100%
33Days
Days
44Days
Days
20%
20%
0.2%
0.2%
0%
0%
55Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
43
Scenario: Best 3 DCs
Adding a third DC brings the national service level even higher.
44
Scenario: Best 3 DCs
This may be
a good long
term plan for
growing
PDQ’s
distribution
network. A
more
detailed
second study
could
identify the
expected
costs of this
scenario.
45
Scenario: Best 3 DCs
Most of the nation could receive 2 day service with a 3 DC
network. Shipments can reach the largest markets in only 1 day.
Percent of
of Customers
Customers
Percent
LTL
LTL Service
Service Levels
Levels
10
10
99
88
77
66
55
44
Within
Within One
One Day
Day
Within
Within Two
Two Days
Days
94%
94%
Within
Within Three
Three Days
Days100%
100%
65%
65%
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
33
22
11
00
20%
20%
10%
10%
0%
0%
Of the 50 largest U.S.
metro areas only Seattle,
Miami, and Fort
Lauderdale would not
receive at least 2 day
service.
11 22 33 44 55 66 77 88 99 10
10 11
11 12
12 13
13 14
14 15
15 16
16 17
17 18
18 19
19 20
20 21
21 22
22 23
23 24
24 25
25 26
26 27
27 28
28 29
29 30
30
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Parcel
Parcel Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
All customers could receive
parcel shipments within 3
business days.
100%
100%
60
60
84%
84%
50
50
80%
80%
40
40
60%
60%
30
30
20
20
10
10
100%
100%
55%
55%
29%
29%
40%
40%
30%
30%
15%
15%
20%
20%
0%
0%
00
11Days
Days
22Days
Days
33Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
46
Scenario: Central NJ + 2 DCs
This scenario is almost identical to the “Best 3 DC” scenario since the existing DC is
within 50 miles of the optimal location.
47
Scenario: Central NJ + 2 DCs
The
performance of
this scenario is
statistically
identical to the
“Best 3 DC”
solution.
48
Scenario: Central NJ + 2 DCs
Again, this solution provides the the same service as the
“Best 3 DC” scenario.
LTL
LTL Service
Service Levels
Levels
Percent of
of Customers
Customers
Percent
Within
Within One
One Day
Day
Within
Within Two
Two Days
Days
12
12
93%
93%
Within
Within Three
Three Days
Days 100%
100%
10
10
66%
66%
88
66
44
22
00
100%
100%
90%
90%
80%
80%
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
The 2 day service level is
only 1% less than the
previous scenario.
11 22 33 44 55 66 77 88 99 10
10 11
11 12
12 13
13 14
14 15
15 16
16 17
17 18
18 19
19 20
20 21
21 22
22 23
23 24
24 25
25 26
26 27
27 28
28 29
29 30
30
Hours
Hours from
from DC
DC to
to Customer
Customer
Drivers travel 500 miles per day, based on a 10 hour shift at 50 mph.
Percent of
of Customers
Customers
Percent
Parcel
Parcel Service
Service Levels
Levels
100%
100%
60
60
89%
89%
50
50
80%
80%
40
40
60%
60%
30
30
20
20
100%
100%
57%
57%
32%
32%
40%
40%
32%
32%
20%
20%
10
10
10%
10%
00
11Days
Days
22Days
Days
0%
0%
33Days
Days
Business
BusinessDays
Daysin
inTransit
Transit
Based on quoted duration of UPS Ground service.
49
Summary and Recommendation
50
Scenario Summary - LTL
This chart shows the performance of the LTL distribution network
under each scenario in the study.
51
Scenario Summary - Parcel
This chart shows the performance of the parcel distribution
network under each scenario in the study.
52
Recommendations
Peach State recommends the following implementation plan for
PDQ during their period of growth in the U.S. market.
ÿ Existing Facilities: The existing facility was placed in an important strategic location. It is
not necessary to relocate this facility to increase customer service. However, relocation may
be necessary for operational reasons, such as outgrowing the current facility.
ÿ New Facilities: Adding a second distribution center near Los Angeles would achieve three
day service levels for 97% of the target customers. Based on the population, shipments from
this facility would only represent 25-30% of total U.S. sales volume.
ÿ Additional Expansion: If higher service levels are required or if sales volumes increase, a
third facility could be added to the network. With a third facility, PDQ could provide 2 day
service to 93% of the country.
ÿ Detailed Cost Analysis: A more in depth study would provide a view of PDQ’s actual
distribution costs. This analysis should consider the transportation, inventory, and operating
costs of PDQ’s distribution network. PDQ should consider all relevant costs to determine
whether a new facility can be justified economically.
ÿ Inbound Shipments: Without actual cost data, it is not possible to identify the best ports to
bring products into the U.S. Peach State can provide a framework for these decision for PDQ
to use in the future.
53
Recommendations
Appendix
ÿ Scenario: Central NJ & Reno
ÿ Scneario: Central NJ & Las Vegas
ÿ BPIA Data: 50 Top Metro Areas
54
Scenario: Central NJ & Reno
Instead of placing a second DC in California, PDQ could locate
in Reno, NV to share space with its sister company.
55
Scenario: Central NJ & Reno
This network is
less efficient than
other scenarios
with 2 distribution
centers. However,
it is still a
significant
improvement over
the baseline
network.
56
Scenario: Central NJ & Las Vegas
Based on distribution alone, Las Vegas is not the best city for a
second DC. However, other factors may outweigh transportation.
57
Scenario: Central NJ & Las Vegas
PDQ’s facility
costs may be
less expensive
in Las Vegas
than in the Los
Angeles area.
Residents of
California
would not have
to pay sale tax,
possibly
providin an
increase in
sales.
58
Scenario: Central NJ & Las Vegas
Service levels in this scenario are similar to other options.
59
BPIA Data: Top 50 Metro Areas
Peach State used the top 50 metro areas to design the U.S. network.
60
BPIA Data: Top 50 Metro Areas
Peach State used the top 50 metro areas to design the U.S. network.
61