As its name implies, the Dollar Tree sells everything for a buck.That's true for all of the nearly 3,000 different items the retailer carries, which run the gamut from New Years Eve party hats to cleaning supplies.
That deceptively simple strategy has proved to be a winner for the Chesapeake, Va.-based retail chain. Over the past two decades, the company has built an empire of nearly 3,400 stores. Dollar Tree is now the nation's largest dollar-per-item retailer; last year, it reported sales of over $4 billion.
But the $1 price cap also means the company must maintain tight control over its operating costs. A key part of Dollar Tree's success in that regard has been its distribution system, a network of nine sophisticated DCs that collectively handled more than 4 billion items last year.
"Logistics is considered a core competency of the organization," says Steve White, Dollar Tree's chief logistics officer. "With the majority of our business focused on the $1 price point, cost control and productivity improvement is essential.We are always looking to raise the bar in all of our metrics to continue to leverage down costs while continuing to raise service levels. We are in the position where we cannot pass along operating cost increases to the consumer. Our quest to improve never ends."
Right now, the Dollar Tree is in the midst of an ambitious expansion campaign. The retailer opened 240 new stores last year and expects to open a similar number this year. It eventually plans to bring the total number of stores up to 4,000.
To accommodate the rising demand, the company's newest DC—a facility located in Joliet, Ill.— underwent an overhaul last year. But the 1.2 million-square-foot facility didn't require an expansion. All that was needed was some tweaking of the DC's software and conveyor system. Specifically, the company installed UniSort MXT software from FKI Logistex, a sortation subsystem that increases sorter throughput and material handling capacity without the need to expand the facili-ty's square footage or add personnel. As a result, the DC's throughput capacity has increased by more than a third.
Sorting it out
The Joliet DC is set up to enable product flow from various parts of building— full-case pick lines from pallets or carts to conveyors, cross dock lines, and pick module lines all feed products to a central merge point near the shipping doors. Twelve different conveyor lines merge into a single line of product that feeds the sorter; the sorter then diverts product to the correct lanes for the intended stores. The central merge and sorter system uses FKI high-speed Unisort XV line shoe sorter technology.
The various conveyor lines do not move at uniform speeds, however. Products fed to the central merge from the pick module move at a slower rate than products fed from the cross dock lines. By applying MXT technology at the merge, gapping, and sorter subsystem, Dollar Tree is able to balance out the flow of product moving through the facility and create a stream of high-density product leaving the merge and entering the sorter. MXT technology allows Dollar Tree to quickly scale up to meet peak product demand on a daily or seasonal basis by optimizing merging, induction, and sortation functions, enabling rates well in excess of 300 cartons per minute when demand exists (although Dollar Tree currently doesn't run at those speeds).
"We're able to balance this flow and create this high-density stream of product into the sorter and successfully divert products to their down lanes," says Jerry Koch, FKI's product director for software and controls, warehouse and distribution in North America. "We're getting 36 percent more capacity out of the existing equipment at the same conveyor speeds and still maintaining the high level of product diverting accuracy that we already had. So we're able to increase throughput without increasing speed."
That's done by simply changing settings at the control station that programs the gap optimizer, a crucial component of the system that determines the spacing between products traveling on the conveyors.
The MXT software also allows Dollar Tree's DC personnel to increase (or decrease) the flow of products on a daily basis, if desired. They're able to do that by simply adjusting the spacing between products on the conveyor—there's no need to change conveyor speed. That capability is crucial during peak demand season or at times when the DC has to boost throughput to get products out to new stores in time for the store openings.
"The beauty was we didn't increase system speed," says White. "It was all just additional throughput, and it's accomplished by reducing the gap between products. You've got to be right on top of your game when you run those small gaps."
Pump up the volume
Based on its success with the MXT technology at Joliet, the company decided to install the technology at its DC in Briar Creek, Pa., which was recently expanded from 600,000 square feet to 1 million square feet. Dollar Tree is experiencing similar throughput gains at the new facility after rolling out FKI's MXT technology in three phases over three weekends.
"That facility serves over 600 stores, and a lot of the daily demand is driven by sales and new store openings, so we need to make sure we have the capacity built into the system so we can handle those volume swings from week to week," says White. "It's easy for us to make adjustments as far as changing the gap on a day-to-day basis if we want to. It's a simple keystroke to change the parameters."
White notes that the ability to boost throughput by adjusting the gap between products—as opposed to speeding up the conveyor—helps extend the sorter's life and reduces maintenance and energy costs. But the real payoff has come in productivity gains. "It creates a big-time savings in that we don't need to stop and pump up the speed of the conveyor," he says. "Think about it; you don't increase the speed of the sortation system, yet you get an additional 30 percent throughput capacity. That's huge.
"The beauty of our business is we sell everything for a dollar, and 95 percent of it rides on the conveyor. It's crucial to our business plan."