• Services retail stores throughout Western Canadian Provinces
• One Centralized 430,000 sq. ft. distribution center.
• Logistics Network Optimization Study results in considerable operating and logistics cost savings
• SCE Group Network Design Solutions Provider: ESYNC

Project Background London Drugs had experienced steady and significant growth and was approaching maximum utilization of their current facility and site. Established in 1945, London Drugs is 100% Canadian owned and operated, with retail stores throughout British Columbia, Alberta, Saskatchewan and Manitoba. Their stores employ more than 7,000 staff dedicated to providing their customers with a superior shopping experience.The use of public warehousing to cover peak volume had put additional strain on resources to maintain their required customer service levels.

London Drugs wanted to design a distribution network that would maximize their ability to accommodate projected growth while minimizing capital investment requirements, labor, transportation costs and risk. London Drugs wanted to determine location, facility mission, size and timing of expanding current or bringing new facilities on-line to support the optimized model over the next 5 years. In addition, they needed to project the investment and operating costs (fixed and variable) required for the recommended network solution and the overall network savings to be realized upon implementation. Finally, they needed to determine if any additional facilities should be outsourced or operated by London Drugs.

Project Challenges
London Drugs' product mix was trending towards larger cube items, impacting storage capacity and physical distribution costs. The current facility storage capacity had been exceeded and fixed costs for the current facility site were increasing due to insurance requirements. The majority of inbound product was sourced from Eastern Canada, while retail service territory was expanding eastward from Richmond, BC.

Project Solution and Results
Savings opportunities and the final network structure were identified through the use of Logistics Network Optimization (LNO) software. As a result of this analysis, London Drugs substantially lowered facility costs per year and improved service levels and product availability for the Alberta, Saskatchewan, and Manitoba retail markets. Although the company experienced increased yearly inbound replenishment costs, those costs were offset by significant outbound storage savings. A potentially sizeable yearly savings was uncovered by identifying opportunities to absorb an outsourced business unit into the new logistics network. Storage capacities projected to accommodate expected SKU proliferation and throughput growth through the year 2010. In total, a considerable yearly savings was identified for their overall logistics network.

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