The Couche-Tard distribution center: Quebec success story

Since its establishment in 1980, Alimentation Couche-Tard became a true leader in the North American convenience store industry. With a sales turnover of approximately 4.3 billion dollars in their last fiscal year, the company has been ranked second in its industry in North America. Currently, the chain includes over 4,600 convenience stores on the entire continent.

In 1999, Alimentation Couche-Tard selected the consulting firm of KOM International to assist and advise in the definition of an optimal distribution infrastructure for its Quebec network. The choice of KOM, as a partner in this project, was based mainly on its expertise which is recognized world wide in the area of food distribution.

"Throughout the years, KOM has proven its enormous ability for executing this type of project", stated Mr. Yvan Bussières, Vice-President of Distribution at Alimentation Couche-Tard. "Also, its multidisciplinary and extremely qualified team, directed by Jim MacRae, President and C.E.O. of KOM, quickly detected the principal issues which enabled them to identify the best logistics model for our medium and long-term objectives."

As a result of this study and the recommendations, Couche-Tard decided in August 2000 to begin the project of building and operating its own distribution center in order to serve the 540 stores in its Quebec network.

"This decision was made following analyses carried out in collaboration with logistics and distribution experts. It appeared to us the most appropriate solution to improve the productivity and efficiency of our network and to reduce the costs of distribution including storage, handling and delivery of merchandise. We will be able to serve our stores with a top-of-the-line integrated service which will contribute to increasing sales, profitability and competitiveness, while enabling them to dedicate themselves fully to customer service," commented Mr. Alain Bouchard, President and C.E.O. of Alimentation Couche-Tard, at the official launching of this project.

Alimentation Couche-Tard's distribution operations at the time were mainly carried out by Provigo and Métro. The solution to maintain distribution services by subcontracting them was also considered, but it was more logical for Couche-Tard to use its own distribution center, considering its high shipping volume and its increasingly growing presence in Quebec.

Consequently, the company sought a strategically located site in the Greater Montreal area for the construction of its distribution center.

"From a logistics point of view, Laval offered exceptional characteristics, in particular, thanks to its strategic location and its expressway network," declared Mr. Bussières. "Moreover, the company has always had deep roots there. In addition to our main office, we have more than 40 stores on the island of Laval".

Following this decision, Couche-Tard, on the advice of KOM International, proceeded with the design of the distribution center, with a thorough evaluation of costs, selection of suppliers, analysis of the transportation network, and a more precise identification of in-store opportunities. The two partners also selected the necessary handling systems, established the starting dates, and precisely defined the warehousing needs for the implementation of the center.

"KOM is one of the rare consulting firms that does not hesitate to seek information and advice from the experts as to the feasibility of certain projects. By acting in this manner, it is us, the customer, who benefits the most, which is particularly interesting," commented Guy Champagne, Director of the Distribution Center.

A building expressly designed for distribution.

An investment of $13.5 million was budgeted for this project which included the building, equipment and all systems. The distribution center has a surface of 100,000 sq. ft. on the ground. In addition to one dry area of approximately 60,000 sq. ft., it has a section for storing refrigerated and frozen products. Approximately 1,300 different products are presently stored in the dry area; with maturity of approximately 18 months, nearly 2,500 products will be stored there.

Conceived and realized by Technirack, the picking unit is spread out over three levels, and has a total usable surface of 25,000 sq. ft. Within this structure, the picking is facilitated thanks to a curving conveyor system inside the module.

Couche-Tard and KOM International carried out the analysis of each product handled by the distribution center in order to determine its optimal location in the operating warehouse, as well as its velocity, its category and its cubage. The distribution center supplies its stores with products for resale, and also with accessories, products for maintenance, and office supplies.

Construction of the center started in June 2001 and by February 2002, the dry section of the warehouse was finished. The entire work was done very quickly, thanks to the enthusiastic work of the Distribution Center management team. Couche-Tard prepared and shipped its first orders from its new center on February 13, 2002. This date met the objectives that the management team had set for the start of operations when Couche-Tard decided to go ahead with the project in July 2000.

The building was specifically designed for distribution purposes, which is very rare, particularly here in Quebec. Everything was initially conceived and built according to optimal use of the handling systems (storage systems and mezzanines, conveyors, etc.) "In other words, Couche-Tard did not transform its building into a distribution center. The building is only an envelope on the handling systems within", specified Stephane Lauzon, Project Director at KOM.

"For this purpose, KOM International's and Technirack's expertise were of great recourse in order to position the essential elements like columns, roof drains, ventilation, etc", continued Mr. Bussières.

"This aspect can seem trivial, but the incorrect positioning of building columns can easily result in a loss of 5% to 8% of storage space. In addition, it was crucial for Couche-Tard to carry out a detailed study relating to the ground capacity in order to proceed with an adequate design of the concrete slab to support the storage systems. The picking module, only, represents nearly 200 columns supporting a concentrated load of 17,000 lbs. each," indicated Gilles Ducharme, President of Technirack

In all, there were only about thirty revisions after the acceptance of the final plans. Communication was certainly the key here. Obviously it required much effort and coordination, but today Couche-Tard greatly benefits from the repercussions of these efforts.

"When we selected the various suppliers, they were expected not only to deliver the merchandise within the required time frame and at a reasonable cost, but also to supply their expertise. We did not buy the products only, but knowledge as well. Each supplier therefore had his say on the solution privileged to be the most effective possible. There was no question that Couche-Tard was a guinea pig in this adventure ", added Mr. Lauzon.

According to Mr. Champagne, the secret of this success was to limit the number of decision makers in the chain of command. "During construction, several discussions had taken place between our engineering firm, Dessau Soprin, our logistics consultants, KOM and the equipment and services suppliers in order to find fast and advantageous solutions for all. Our greatest challenge was to successfully optimize our logistic effectiveness while maintaining reasonable construction costs"

Following KOM International's and Technirack's recommendations, Couche-Tard, among other points, requested a space of 80 feet without columns to be freed up in the loading dock area. This represents about a quarter of the total surface of the distribution center which is equivalent to 23,000 sq. ft. in dock space. "Because of the stock on our docks created by certain seasonal fast moving products under the concept of just-in-time, it was important for us to include a lot of space for receiving/shipping. Thus, we guaranteed ourselves a greater flexibility and an increased effectiveness in total safety.
Well structured operations

The Couche-Tard distribution center is in operation practically 24 hours per day. The reception of merchandise, storage as well as restocking of the picking cells are carried out during the day whereas the gathering of the customer orders and the loading of the trucks are done during the evening and night respectively

"During the day, we make sure that all necessary merchandise is available in the picking cells", Mr. Champagne affirms. - We also benefit by making recurring accounts allowing us to exactly verify our inventory and proceed with the handling of returned merchandise "

Couche-Tard uses a company system (WDS) adapted specifically for this type of operation. The system includes financial management, supply management, management and gathering of the orders.

"Each product is identified by a code linked to the store's directory. The method of handling the orders determines the priority during the picking operation by taking into account weight, its dimensions and its category. It provides all necessary information on each product, that is to say, its description, its price, as well as its packing. The system will even manage our inventory of containers to bring back to the stores".

Currently, Couche-Tard ensures a weekly delivery to its stores. Each store places an order with the distribution center the day before its delivery. First, the orders are downloaded from a portable Symbol-type terminal and then they are forwarded to the distribution center by a telephone line. The manager only has to indicate the product code number, as well as the desired quantity.

On average, an order is made up of 125 lines and 60 pieces (plastic cases and containers). Approximately 50% of the lines represent picking by unit which are placed in plastic containers, the remainder are sent by full case. The entire order is dispatched on pallets and unloaded by the drivers by case at the points of sale.
"Everything was considered to facilitate the work in the chain. The orders are assembled in such a way to support the load stability and to avoid putting non-compatible products inside the same container," affirms Mr. Lauzon.

The preparation of orders and the loading of trucks is carried out according to the delivery schedule. The departure time for trucks is determined according to destination. Normally, the trucks leave very early in the morning, that is to say, as soon as their loading is finished.

For deliveries to stores, Couche-Tard uses two dedicated carriers Transport Hervé Lemieux for stores situated in the west end of Quebec, and Groupe RBR for the deliveries to stores in the east end of the province.

"Our system of transportation was analyzed and developed in collaboration with Trans-Tek, an expert in the field. Thus, all the routes are fixed with a predetermined number of stores. Depending on volumes and season, we can modify our routes."

Currently, certain products, like milk, candy, chips, bread and soft drinks are delivered directly to the stores by the manufacturers or the distributors to ensure an optimal level of inventory on the shelves.

"About two-thirds of our line of goods is delivered directly to our stores. With time, we will gradually send them back to the distribution center, if it is profitable, of course. The distribution center is a tool for us. For this reason we dispatch many articles in units. That makes it possible to reduce stocks in the stores," mentions Champagne.

Future projects

In a few months, Couche-Tard is preparing to implement a permanent inventory system in its stores. Currently, almost all products sold in-store are already scanned by a barcode scanner at the cash. Consequently, the store managers will no longer have to place orders at the distribution center to restock their shelves.
"Thanks to permanent inventory, orders will be suggested to the manager by taking into account actual sales, the seasonality and promotions to come. The manager will only have to confirm the suggested order and adjust it where necessary. The information from this same system will be useful in determining the needs of the distribution center and will greatly facilitate purchases from our suppliers. "

In addition, the company intends to continue its analysis work and continued improvement of its process. The strong growth of the company as well as its many acquisitions make for a promising future at the logistics level for Couche-Tard.

"We wish to remain avant-garde with regards to supply chain management, so as to always be ahead of our closest competitors", concludes Mr. Bussières