2015

Aderemi, Adekoya, Syed, Vivian

LSC1B-Robertson College

7/26/2015

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Table of Contents Executive Summary ....................................................................................................................2

Introduction ................................................................................................................................3

Company Background .............................................................................................................3

Mission ...................................................................................................................................3

Core Values.............................................................................................................................3

Environmental Analysis ..............................................................................................................4

Internal Environment ...............................................................................................................4

Competitive Internal Conditions ..........................................................................................4

Supply Chain .......................................................................................................................5

Seasonality ..........................................................................................................................5

External Environment..............................................................................................................5

Sustainable Sourcing ...........................................................................................................5

Offshore Sourcing ...............................................................................................................6

Food Safety .........................................................................................................................6

Sustainable Sourcing Strategy .............................................................................................7

Emerging Issues ..................................................................................................................7

General Overview of Distribution Operation at WDC .................................................................8

Winnipeg Distribution Centre (WDC) .....................................................................................8

Organizational Analysis ..........................................................................................................8

Inbound Goods or Receiving ...............................................................................................8

Outbound Goods or Delivery ...............................................................................................9

Quality .............................................................................................................................. 10

Inventory ........................................................................................................................... 11

Capacity ............................................................................................................................ 12

Distinctive Competence ..................................................................................................... 12

Problems and Recommendation ................................................................................................ 12

Summary and Conclusion.......................................................................................................... 14

Appendix .................................................................................................................................. 15

Figure 1 – Milestones ............................................................................................................ 15

Figure 2- Loblaw’s banners and Brand names ....................................................................... 17

Figure 3 - Impact ................................................................................................................... 18

Figure 4 - Organization Chat ................................................................................................. 19

Work Cited............................................................................................................................ 20

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Executive Summary

This study was conducted to examine the operation function of Loblaw’s Winnipeg Distribution

Centre (WDC), specifically to investigate, how service is generated and delivered to their

customers. The Winnipeg Distribution Centre supplies products to Real Canadian Superstores,

Extra Foods, No-Frills and Real Canadian Wholesale Club in Manitoba. As supply Chain

consists of flows and transformations from simple raw material to purchase of end products by

consumers, these activities require logistical support like storage of finished goods, consolidation

of orders and transportation. Loblaw’s Winnipeg Distribution Centre plays vital role in

coordinating all these activities.

At corporate level, acquisition of Shoppers Drug Mart has significant impact on supply chain of

the organization. Grocery distribution centre process large multi-temperature store orders of dry

grocery, produce, fresh meat, frozen food, dairy product, general merchandise and health and

beauty product. The majority, eighty percent (80%) of the product shipped in full case format

meaning that the product are shipped in the same cases as it is received from the supplier with

the exception of some general merchandise and health and beauty product which constitute

twenty percent (20%) of the supplies. On the other hand retail drug distribution is exactly the

reverse of grocery distribution, where only twenty percent (20%) of products are shipped in full

cases and the remaining eighty percent (80%) are shipped in split cases.

Loblaw’s plan to standardize operations of its distribution centre is facing few hurdles. Since,

what is good practice for one location or facility is not necessarily the best practice for another

facility, besides local laws and Collective Bargaining Agreements (CBA) are some of the hurdles

in standardization of Distribution Centres.

Furthermore, grocery distribution centres are designed to support high volume multi-temperature

full case product delivery, whereas retail drug store also ship full cases, but they have material

handling systems designed to support split case picking. Though, Shoppers Drug Mart and its

distribution is out of scope of this study but it is taken into consideration because of its

significance on overall supply chain of the organization.

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Introduction

Company Background

Loblaw Companies Limited is formally incorporated in 1956 (See Appendix Figure 1) with the

acquisition of Loblaw Groceterias (Established 1919) in Ontario and Loblaw Inc. (Established

1924) in the United States is Canada’s food and pharmacy leader, Canada’s largest retailer, and

the majority unit holder of Choice Properties Real Estate Investment Trust. Loblaw provides

Canadians with grocery, pharmacy, health and beauty, apparel, general merchandise, banking,

and wireless mobile products and services. With more than 2,300 Corporate, Franchised and

Associate-owned locations, Loblaw, its franchisees and Associate-owners employees

approximately 192,000 full-time and part-time employees, makes it one of Canada’s largest

private sector employers.

Loblaw has more than 1,050 grocery stores that span the value spectrum from discount to

speciality, full-service pharmacies at more than 1,250 Shoppers Drug Mart and Pharmaprix

locations and more than 500 Loblaw locations, no fee banking with PC financial, Joe Fresh

fashion and family apparel, and three of Canada’s top consumer brands in Life Brand, no-name

and President Choice. (See Appendix Figure 2)

Through the PC Plus and Shoppers optimum loyalty programs, one in every three Canadians is

rewarded for shopping with the company.

Mission

Be Canada’s best food, health and home retailer by exceeding customer expectations through

innovative products at great prices. Driven by responsibility to:

Respect the Environment; Source with Integrity; Make a Positive Difference in Our Community;

Reflect Our Nation’s Diversity; Be a Great Place to Work.

Core Values

Company’s Values clarify what is important in organization, and guide its behaviour and

decision making.

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CUSTOMERS matter most

RESPECT each other

Getting BETTER every day

Care for COMMUNITY and environment

Environmental Analysis

The Company employs environmental risk assessments and audits, using internal and external

resources together with effective employee awareness programs throughout its operation

locations.

Internal Environment

Loblaw carries on business in the food distribution industry by operation across Canada through

company owned store (“corporate store”), franchised independent stores (“franchised stores”),

and associated stores and by servicing independent accounts. The Company has developed a

highly successful line of control label products and services which are sold or made available in

corporate stores, franchised stores and associated stores and are available on a limited basis to its

independent account customers.

Competitive Internal Conditions

The food distribution industry in Canada is a changing and competitive market. Consumer needs

drive changes in the industry, which is impacted by changing demographic and economic trends

such as changes in disposable income, increasing ethnic diversity, nutritional awareness and time

availability. In a word, consumers have demanded more quality, value and convenience.

The Company’s focus is on new store growth, expansion of departments and services and the

renewal of the existing store base, while controlling operation costs and through the

rationalization and centralization of certain functions. This allows performing well in an

increasingly competitive market, which is continuously evolving with the addition of warehouse

clubs, the growth of discount food formats and the increasing marketing of food by mass

merchandisers and other specialty retailers. Another competitive advantage is its quality control

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program, which promotes customer loyalty and allows pricing flexibility with respect to national

brands.

Supply Chain

Loblaw’s’ supply chain and distribution group is responsible for the flow of goods and

information between its vendors and suppliers and the warehouses and distribution centres and

ultimately to its stores. In some cases certain goods flow directly to the stores from the vendors

as they delivery directly to the stores rather than to the warehouse, ensuring optimal usages of

the supply chain and distribution network. The DC system allows the Company to response

quickly to changing market conditions in a manner that provides the highest level of service and

optimal inventory levels at the lowest possible cost.

The Company continuously evaluates its methods of distribution including its relationship with

vendors and suppliers, technology, facilities and modes of transportation including its own

trucking fleet and the use of third party common carriers, railway and ship.

Seasonality

Loblaw’s operation, specifically inventory levels, sales volume and product mix, are impacted to

some degree by certain holidays periods in the year especially for food items. As the Company

expands its offerings of non-food items, it increases the number of seasonal products offered,

therefore, its operation is subjected to more seasonal fluctuations.

External Environment

Sustainable Sourcing

Climate change, population growth and human activity are putting enormous strain on land,

water and biodiverstiy resources – in Canada and around the world. By sourcing sustainability,

Loblaw aims to conserve their resources and improve their supply chains. Its strategies and

processes continously evolve with changing consumer expectations, regulatory requirements and

emerging risk and opportunities. Loblaw commitments drive change in the retail industry and it

takes that responsibilty very seriously.

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Offshore Sourcing

Loblaw took strong action in the wake of the 2013 collapse of the Rana Plaza complex in Savar,

Bangladesh, by committing $5 million in relief efforts and increasing the standards of its

building fire and safety assessments for factories producing its products.

It is also the first Canadian signatory to the Bangladesh Accord on Fire and Building Safety in

2013, which legally binds them to factory inspections and improvements. In 2014, it extended its

building fire and safety assessments for factories in Thailand, Cambodia, Sri Lanka, Vietnam and

India. No new factory will be listed as a supplier in these countries unless an assessment is

completed. A major outcome of these assessments has been fire and safety training paid for by

Loblaw, for managers and employees in the factories. The covers fire safety protocols and

processes such as maintaining fire exits evacuation procedures and the proper use of a fire

exitinguisher.

Loblaw continue to monitor and evaluate all offshore suppliers using the internationally

recognized Workplace Conditions Assessment (WCA) standard and its own Supplier Code of

Conduct. The WCA audits assess labour, wages, hours, health and safety, and work environment.

Suppliers that do not conform to both the WCA and Loblaw standards are given a time frame in

which to make neccesary improvements if they fail to comply, they discotinue the relationship.

It also implemented an initiative with its global logistics service provider to ensure products

deliveries are accepted only from Loblaw approved factories. At every port of origin where

Loblaw procures goods from outside of Canada or the United States, its logistics provider

validates the supplier name and specific factory name and addresss against its list of approved

factories, which is updated weekly.

Food Safety

Loblaw want its customer to have every assurance that the food they buy from Loblaw is safe

and meets their expectactions. To this end, it introduced enhanced product testing and nutrition

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verification programs in 2014. The programs are aimed at assuring that Loblaw control brand

food products consistently meet quality, safety and regulatory specifications.

The product testing program requires that all food products be tested at lauch and then annually

by a designated third-party testing lab for compliance with product specifications, labelling and

claims accuracy. The nutrition verification program requires analytical testing at least every two

years to validate the nutrition facts table and label claims.

Sustainable Sourcing Strategy

Loblaw,s strategy is aimed at ensuring the the sustainability of its supply chains and offering

customers product choice that fit their values. This strategy often leads with its control brand

products to drive change.(See Apendix Figure 3)

Emerging Issues

As a large retailer and owner of four of Canada’s biggest control brands (President’s Choice,

Life Brand, no name and Joe Fresh), Loblaw is regularly faced with new and emerging issues

that influence consumers’values and behaviours. To this end it need to evaluate these issues and

ensure its conrol brands are advocating for its customers.

Amongst such emerging issues are

• Genetically modified organisms (GMOs)

Loblaw is dedicated to helping customers feed themselves and their families in ways that meet

their personal standards. As such, it know customers have many questions about food – about

nutrition, production methods, ingredients and more. One area of consideration relates to

genetically modified organisms (GMOs) and genetically engineered (GE) ingredients

• Pollinator Conservation

Loblaw collaborates with external stakeholders to address the issue of pollinator health which is

of considerable importance

• Chemicals of Concerm

In the wake of consumer health and wellness concerns associated with certain chemicals in

health and beauty and household products, Loblaw have begun to develop a plan action for its

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control brand. Two years ago, Shoppers Drug Mart made a commitment to eliminate

dibuylphihalate (DPB) from its comestic and personal care control brand products.

General Overview of Distribution Operation at WDC

Winnipeg Distribution Centre (WDC)

The Loblaw Winnipeg Distribution Centre supplies products to Real Canadian, Superstore, Extra

Foods, No Frills and Real Canadian Wholesale Club in Manitoba. The Centre supplies these

retail partners with grocery products.

There are five main departments in the Distribution Centre, which include: Receiving, Assembly,

Shipping, Inventory Control and Maintenance.

Organizational Analysis

The Winnipeg Distribution centre works according to the flow of work as appended in the

following flow diagram 1 and 2 for Inbound and outbound supplies respectively.

Inbound Goods or Receiving

As the product is ready for delivery to the distribution centre according to the quantity and

specifications specified in the purchase order, product integrity check is being done at the vendor

facility before the departure of goods. When distribution centre received the goods, temperature

check is performed for frozen and perishable products from front, middle and rear before

unloading and also repeated while product is unloaded from the trailer. Temperature check is

based on temperature threshold of that particular product. Items are counted and reconciled and

if found correct then it is taken into Inventory. Pallet is tagged and put away into the designated

location according to the location layout. Different equipment like Crown double or single

hauler, and Crown counter balance forklift or Crown deep reach forklift is used for movement

and placement of goods.

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Inbound Flow Chart

1

Outbound Goods or Delivery

Distribution Centre received Computer Assistance order into its Manhattan software from stores

through SAP and orders are routed through JDA. Order size measures in Cube and loads are built

based on cube and order cube per trailer. The size of single pallet is 72 cubic feet and a trailer

can hold up to 2000 cubic feet of goods. Once work is released to the floor, Assembler begins

pick process receiving orders on Head set and verifying it by repeating the order he picks. Order

picker uses single or double haulers to pick the order. When the pallet reached the maximum

cube setting 72 cubic feet, assembler placed the pallets on the dock for loading. Loader loads the

pallets in the trailer to its maximum capacity to get it ready for delivery. Same inspection process

for perishable and frozen goods are implied during loading of trailer as performed for receiving

goods. All delivery trailers are equipped with ISOTRAK and GPS tracking system, providing

stores and distribution centre visibility into when deliveries are expected and this in addition,

help to monitor the efficient use of the truck with regard to speed, location and stoppage as well

as prompt product delivery to the stores.

Same quality checks is performed on the products received at the stores to ensure conformance

of quality of products which Loblaw stores are known of.

1 a. Product Integrity check is done at the vendor Level.

b. Temperature Checks are done prior to product unload.

c. Temperature Checks are done while product is being unloaded. F, M,R

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Outbound Flow Chart

Quality

Food safety and accuracy of delivery of goods is ensures at the distribution centre all the time.

Distribution centre has set high standards for delivery. The acceptable limit for delivery error is

1.2 per 1000 cases of goods delivered. It has achieved minimum service level of 95 percent.

Audits for quality standard is performed quarterly to maintain service standard.

The Distribution centre carries out quality audits-documentations on every process of the

delivery system to ensure efficiency and effectiveness of delivery system. Routine information

systems on the different process are kept daily, weekly, monthly and yearly to provide basic

service provision data.

Loading process checks: loads and transformations must be scheduled and processed in a

specific order; the process flow of each individual record in the warehouse can be reconstructed

at any point in time.

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Training program

All levels (See Appendix Figure 4) of employee are given on the job training, depending

on the job types

They co- sponsor a full time employee for career advancement at Universities and

Colleges in their respective chosen career

Presently working on a training module for supervisors – “Supervisory Development

Initiative”- Efforts are being made to collate the curriculum to be used for the program

from Harvard University.

o This will enhance efficiency and adequate supervisory roles from their

supervisors

o It will boost their revenue generation drive as well as

o Develop the employee’s potential for growth in their chosen career

Inventory

Winnipeg distribution centre maintains seven (7) days inventory for groceries, three (3) days for

perishable goods, one day for milk, and breads are received and delivered the same day.

Forecasting and replenishment:

Loblaw Winnipeg Distribution Centre recognized the need to improve its demand planning

capabilities and specifically, its ability to accurately forecast product demand and replenish

inventory in a timely and optimal manner.

To this end the Distribution Centre is constantly working to improve the efficiency of its supply

chain in an effort to ensure that the freshest products get to its customers, quickly and at the

lowest cost.

Software

Different types of software are used by the WDC to manage the distribution operation process.

These include; Manhattan, SAP, JDA, and ISOTRAK to maximize efficiencies, effectiveness,

customer satisfaction and profit margins.

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Capacity

The Winnipeg Distribution Centre is 425,000 square feet in size covering several stores across

Manitoba.

It employs 115 Union and 40 Non Union employees of which 25percent are of management

level.

Distinctive Competence

Loblaw distinctive competency lies in their quest to improve on the following attributes which

distinguished them from their competitors:

• Best product

• Best price

• Good customer service

• Clean stores

• PC loyalty and optimum programme in all the stores

• Customized brand name/label

Problems and Recommendation

One main problem observed in the supply chains of Loblaw is the differences between grocery

distribution and retail drug distribution:

Grocery distribution centres process large multi-temperature store orders of dry grocery,

produce, fresh meat, deli meats, dairy, frozen foods, general merchandise and health & beauty

care. For the most part, grocery distribution centres are designed as conventional facilities that

support high volume multi-temperature full case throughput while retail drug distribution centres

also ship full cases, but they tend to have material handling systems designed to support split

case picking.

Of equal importance to understand is the outbound transportation characteristic of retail grocery

versus retail drug. Grocery supermarkets typically receive deliveries from the supporting

distribution centres that are loaded onto 48′ or 53′ full size trailers. On the other hand, retail drug

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stores are often smaller format stores located in urban cities such that there are constraints on the

type and size of truck that can be used to service the store. Thus a mix of smaller delivery trucks

and larger trailers is common within retail drug store distribution.

To solve this problem we suggest:

Developing a common IT infrastructure that reduces the cost and complexity of running

two firms on different systems and platforms.

Secondly, it was observed that the distribution operations of the 22 distribution centres across

Canada are not standardized. Loblaw’s empower its distribution to centres focus more on

regional customer preference and less on unified operating procedures. This to a large extent do

not allow for uniformity in the DCs of Loblaw. Loblaw made effort to standardized operation of

different DCs through learning from each other and meeting among management team.

We think a number of best practices do apply to many warehouses and distribution centers, our

recommendations in this regard are the following:

Implement a vendor compliance program. This way, suppliers help them achieve

maximum throughput and maximum efficiency, in a minimum amount of time.

Having multiple facilities in their distribution network to conduct monthly best practice

conference call between DCs to share and discuss internal best practices.

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Summary and Conclusion

The operation function of Loblaw’s Winnipeg Distribution Centre, specifically ensures products’

quantity and specifications as specified in the purchase order is delivered by the vendor, having

carried out product integrity check (temperature threshold checking, product’s physical damages

and reconciliation) at the vendor facility before the departure of goods and upon the receiving of

the products at the facility into its inventory.

From the inventory, assembler picks the goods with caution avoiding mistake, using single or

double haulers to pick the order into the pallet. When the pallet reaches its maximum cube

setting, the pallets are placed on the dock for loading into the trailer, for onward delivery to the

stores. The stores also perform quality checks on the products received to ensure conformance of

quality of products which Loblaw stores are branded for.

However, Loblaw DCs are faced with challenges of merging with Shoppers which has resulted

into non profitability of some outlets. Hence, the recent decision of Loblaw management to close

down 52 stores over the next 12 months using the cost cuts to shore up profits in a fast-changing

merchandising landscape with more e-commerce and competitors that can pinch margins.

In conclusion, we recommend that efforts should be geared towards developing a common

platform or standardized operation management system that will work for both the grocery and

drugs. This will go long way to increase the performances of the distribution centres.

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Appendix

Figure 1 – Milestones

1919 The first Loblaw Groceterias store opens in Toronto

1924 Loblaw Groceterias expands throughout Ontario and into New York State, forming an

American company headquartered in Buffalo

1928 Loblaw Groceterias expands into Chicago, Illinois

1933 Loblaw introduces its new “market stores,” with full-service meat and produce departments

T. P. Loblaw, dubbed the “Merchant Prince” by the press, dies at age 60

1939 The name Loblaw’s appears on storefronts for the first time, replacing Loblaw Groceterias

Co. Limited

1947 W. Garfield Weston, president of George Weston Limited, acquires 100,000 shares of

Loblaw stock from company co-founder J. Milton Cork

1949 Loblaw leads the way with the introduction of “healthfully-cool equipped air-conditioning”

in its new “super markets”

1956 Loblaw Companies Limited is incorporated and acquires Loblaw Groceterias in Ontario

and Loblaw Inc. in the United States

1959 Loblaw enters the trading-stamp wars with its own “Lucky Green Stamps”

1967 Loblaw celebrates Canada’s Centennial

1978 The no name brand is introduced

1981 The first Loblaw pharmacy opens in Winnipeg

1983 Dave Nichol’s Insider’s Report debuts

President’s Blend Coffee is launched

1984 The debut of President’s Choice products

1985 PC Teddy is born

1988 The Decadent Chocolate Chip Cookie goes on sale for the first time

1989 President’s Choice G.R.E.E.N products make their debut

President’s Choice Children’s Charity is created

1998 Loblaw acquires Quebec-based grocery store chain Provigo

2001 PC Organics is created

2002 The PC Home line is launched

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2005 The PC Blue Menu product line is launched

2005 Loblaw begins offering prepaid long distance and mobile services

2006 Joe Fresh Style arrives in stores

Presidentschoice.ca is one of the first grocery brand websites to incorporate consumer-

generated content

2008 The premier issue of Loblaw’s Corporate Social Responsibility Report is launched

Loblaw opens its environmental flagship Superstore in Scarborough, Ontario

2009 Loblaw installs the first wind turbine at a Canadian grocery store

Loblaw acquires T&T Supermarket

2010 Empty trays at seafood counters highlight “at risk” fish

2011 PC® black label collection is launched

Loblaw’s at Maple Leaf Gardens opens

2013 PC Plus™ loyalty program is launched

2014 Loblaw acquires Shoppers Drug Mart

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Figure 2- Loblaw’s banners and Brand names

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Figure 3 - Impact

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Figure 4 - Organization Chat

Warehouse Operations DC

Inventory Control

General Manager

R O’Connor

Operation Manager

D Todaro

Training & Development

Supervisor

M Zawislak

Maintenance Mgr

M Poloski

Sr. Supervisor

S King

Sr. Supervisor

B Wirth

Maintenance SS/S

G Dankochik

WMS Clerk

S Nazar

Warehouse

Supervisor

R Uminga

Warehouse

Supervisor

M A Henke

Maintenance SS/S

M Maryniuk

General Manager

R O’Connor

I.C.Manager

R Capacete

I.C.Manager

R Levesque

Inventory Analyst

M Norico

(Non-union)

Inventory Analyst

J Ladera

(Non-union)

Level 3

E Oquendo

(Union)

Level 3

J Magnaye

(Union)

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Work Cited

Supply Chain and Distribution. (2011). Retrieved July 27, 2015, from

http://www.loblaw.ca/English/Careers/your-career-opportunities/supply-chain-and-distribution/

Harps, L. (2015, May 1). Best Practices in Today's Distribution Center. Retrieved July 27, 2015,

from http://www.inboundlogistics.com/cms/article/best-practices-in-todays-distribution-center/

Organization Chart & Product Flow Charts provided by Mr. Riley O’Connor, General Manager

of Loblaw Winnipeg DC.