Dollar Tree and Zara Case Studies Dollar

Dollar Tree and Zara Case Studies

Dollar Tree

According to the case study, over 40% of Dollar Tree's inventory comes from imports entering into the U.S. from various countries like China. In fact, "import volume had grown from 5,000 FEUs (Forty-Foot Equivalent Unites) in 1998 to almost 20,000 FEUs in 2004, with China accounting for around 80% of all imports" (Wu, 2005). These imports are brought into the major ports of New York, Norfolk, Savannah, Los Angeles, Huston, and San Francisco. From there, freight is transferred via truck to the distribution centers further inland as well as to retail stores directly. The average distance from the distribution center to the store ranged from 144 miles from the New York port to 350 miles from the inland distribution center of Salt Lake City, Utah.

Many of the shipping containers are brought directly to distribution centers in New York, Norfolk, and Savannah on the East coast and Huston, Los Angeles, and San Francisco on the West coast, with the rest being shipped directly to the distribution centers closer to the ports of entry. These port locations then push shipments further inland. In 2005, there was a total of 21,047 FEUs shipped out of the distribution centers in port areas. As such, there are two costs associated with imports. The first is the cost of shipping from overseas, and then transferring onto domestic ground shipping trucks. The other involves extended shipping, so that a third party is responsible for getting imports to the distribution centers. Once products are shipped to distribution centers, they are then reorganized and shipped out to the retail stores

The trucks shipping freight to the various store locations from distribution centers try to make the most efficient trips, leading to an attempt at reaching full truck ultimization. The lowest number of stores hit per trip was in Salt Lake City, where only 2.1 stores were visited in a single truck trip. The highest was 4.9 stores visited in Olive Branch, MS. As such, it is clear that some distribution centers see greater truck optimization than others.

Question 2

According to the case study, Dollar Tree shows an inventory carrying cost of 10% of the entire pending in the logistics system. Additionally, Dollar Tree relies on safety stock as a way to give insurance against issues occurring in the distribution channel and to help increase overall lead time. Still, most of the suppliers used by Dollar Tree are quite reliable, and so this is just an additional precaution taken. Dollar Tree also has a level of cycle stock in regards to their transport system and production quantity. The company saw 20,000 FEUs shipped in 2004 alone. The highest trucking cost was at the Briar Creek, PA distribution center at $5,985,537, while the lowest was at Ridgefield, WA which was at $1,615,556 (Wu, 2005).