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    Dollar Tree Case Study

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    Brittany E. Frownfelter
    Dollar Tree operates over 4,000 stores across the US and Canada selling all items for $1. Their distribution center in Briar Creek, PA has reached 92% utilization and needs more capacity. They can either expand the Briar Creek center by 400,000 sq ft or build a new 600,000 sq ft center in Hartford, CT. Expanding the existing center is recommended as it will have a higher inventory turnover rate of 14 versus 13 for the new center, and avoid startup costs of purchasing land, construction, and hiring/training new employees for the new center.

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    Dollar Tree Case Study

    Uploaded by

    Brittany E. Frownfelter
    3K views3 pages
    Dollar Tree operates over 4,000 stores across the US and Canada selling all items for $1. Their distribution center in Briar Creek, PA has reached 92% utilization and needs more capacity. They can either expand the Briar Creek center by 400,000 sq ft or build a new 600,000 sq ft center in Hartford, CT. Expanding the existing center is recommended as it will have a higher inventory turnover rate of 14 versus 13 for the new center, and avoid startup costs of purchasing land, construction, and hiring/training new employees for the new center.

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    Dollar Tree operates over 4,000 stores across the US and Canada selling all items for $1. Their distribution center in Briar Creek, PA has reached 92% utilization and needs more capacity. They can either expand the Briar Creek center by 400,000 sq ft or build a new 600,000 sq ft center in Hartford, CT. Expanding the existing center is recommended as it will have a higher inventory turnover rate of 14 versus 13 for the new center, and avoid startup costs of purchasing land, construction, and hiring/training new employees for the new center.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    3K views3 pages

    Dollar Tree Case Study

    Uploaded by

    Brittany E. Frownfelter
    Dollar Tree operates over 4,000 stores across the US and Canada selling all items for $1. Their distribution center in Briar Creek, PA has reached 92% utilization and needs more capacity. They can either expand the Briar Creek center by 400,000 sq ft or build a new 600,000 sq ft center in Hartford, CT. Expanding the existing center is recommended as it will have a higher inventory turnover rate of 14 versus 13 for the new center, and avoid startup costs of purchasing land, construction, and hiring/training new employees for the new center.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Brittany Frownfelter

    BMGT372
    Case Study #2

    Dollar Tree Logistics


    Company Overview

    In 1986, Dollar Tree (then called Only $1.00) opened as an extension of a successful toy store,

    K&K Toys. During that year, Macon Brock Jr., H. Ray Compton, and Douglas Perry opened five

    additional stores. Dollar Tree, Inc. progressed to going public in 1995, earning a place in Fortune

    500, and crossing the $4 billion threshold in 2010. Dollar Tree, Inc. now operates over 4,000

    stores throughout the United States and Canada.

    Unlike its main competitors, Dollar General and Family Dollar, Dollar Tree keeps all of its

    merchandise priced at or below one dollar. The merchandise found in the stores includes

    consumable products, variety items, and seasonal goods. These categories include such items as

    candy, food, health and beauty products, toys, gifts, party goods, and house ware items. In order

    to offer more merchandise to customers, Dollar Tree stores continue to expand. The stores began

    primarily in indoor malls at a size between 1,500 and 2,500 sq. ft. However, Dollar Tree stores as

    large as 15,000 sq. ft. can now be found in strip malls.

    In order to maintain a profit when the merchandise is sold for only a dollar, Dollar Tree, Inc.

    relies heavily on a high inventory turnover rate. Chief Logistics Officer, Steve White, states this

    is possible through strategically located, large scale, efficient distribution centers. Dollar Tree’s

    first distribution center opened in 1997 in Chesapeake, VA. The company grew to operate nine

    distribution centers throughout the country by 2004. In order to keep costs under control, there is

    an emphasis on scale, utilization, and continuous operational improvement within each


    distribution center. When a distribution center approaches 75% utilization, White and the

    logistics team begin considering adding a new distribution center.

    Challenge

    The distribution center in Briar Creek, PA stores and ships inventory to Dollar Tree stores across

    the northeast. This distribution center has reached a utilization of 92% with a peak utilization of

    124%. This over-utilization forced management to rent an expensive, off-site, short term space in

    2004 to handle the peak flow. Therefore, Steve White and Dollar Tree’s logistics team

    considered the following two options:

    1. Expand the current Briar Creek, PA distribution center by 400,000 sq. ft. to increase

    the facility by two-thirds.

    2. Build a new distribution center with 600,000 sq. ft. in Hartford, CT. The two facilities

    would serve the territory currently assigned to the Briar Creek, PA distribution center.

    Solution

    Dollar Tree, Inc. should expand its current Briar Creek, PA distribution center by 400,000 sq. ft.

    to increase the facility by two-thirds. As stated previously, Dollar Tree, Inc. relies heavily on a

    high inventory turnover rate. Expanding the current distribution center will produce a turnover

    rate of 14. Meanwhile, building a new distribution center in Hartford, CT will produce a lower

    turnover rate of 13. In addition, building a new distribution center will incur start-up and labor

    costs. Rather than simply expanding an already existing distribution center, a new distribution

    center will need time and money invested into searching and purchasing new land and also the

    construction costs involved in building a new distribution center. A new distribution center of

    600,000 sq. ft. would require more employees overall than an expansion of 400,000 sq. ft. Both
    recruiting and training costs are necessary for hiring new employees. Also, a completely new

    management team would be needed for the new distribution center. Overall, the labor costs

    associated with building a new distribution center are greater overall than expanding an already

    existing distribution center. Considering Steve White focuses on a three year time frame when

    planning a new capacity, the additional costs associated with building a new distribution center

    are unnecessary. Therefore, the expansion of the current Briar Creek, PA distribution center

    would be a more cost efficient decision.

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