Dollar Tree Stores, Inc.

1017 Words5 Pages
Dollar Tree Stores, Inc. was founded in 1986 by Macon Brock Jr., H. Ray Compton, and Douglas Perry. This company was the latest addition to a chain of stores specializing in “1$” sales of Consumable merchandise, Variety merchandise and seasonal goods. Initially targeting the middle-class, Dollar Tree now has a huge customer base across the U.S. The growth of Dollar Tree has been quite phenomenal thanks to their efficient business strategy and loyal customers. It generates a compound annual growth rate (CAGR) of 19% in sales and 14% in earnings per share (EPS) and has over 2,600 stores (as of 2004) in the US. This was mainly due to organic expansion and buying out local competition. By the end of 2004, Dollar Tree operated nine distribution…show more content…
In 2004, the management of the DC had to rent expensive off-site, short-term space to handle peak flow. The report proposed two possible options for expanding the logistics network capacity: 1. Expand the current Briar Creek distribution center by another 400,000-square foot. 2. Built a new distribution center with 600,000 square foot in Hartford, Connecticut. Both of these options cater to the same purpose; i.e. they will serve the same territory which is currently assigned to Briar Creek, currently Briar Creek DC has size of 603,000 square feet. As a logistics manager our goal would to perform a qualitative and quantitative analysis to see which option will be beneficial to the company in the long and short term. Analysis Three important factors are to be considered for making our decision whether to construct a new facility or not • DC Operating Costs • Transportation Costs • Land, Labor and Administrative Costs DC Operating Costs The Fixed and Variable costs need to be considered to calculate the total DC Operating costs. Since both distribution centers are in the same region, we assume the variable costs remain the same. Now the fixed costs are hard to determine with the information given, so let us apply data from a different DC similar to the square foot capacity of the expanded Briar creek facility (in this instance the Joliet DC). Quantitative Analysis OPTION 1- EXPANSION Fixed Costs Applying data from Joliet DC (nearest
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