BY MARK B. SOLOMON, SENIOR EDITOR NETWORK PLANNING
specialreport
A tool for
tomorrow
The challenge Caribou Coffee faced
wasn’t just designing a distribution
network. It was designing one that
would serve it into 2015.
IN TODAY’S WORLD OF
instant gratification, four years is
not just a long time. It is an eternity.
The same holds true in the world of physical
distribution. Planning one year out is difficult enough. Going
out four years, with all the variables that entails, is a crapshoot.
“It is an ‘as best as you can’ process,” says Paul Turek, vice
president, supply chain for Caribou Coffee Co. Inc., the
nation’s second-largest retail coffeehouse operator.
Nevertheless, it is a process that Turek and Caribou felt
compelled to undertake. Nearly two decades of growth had
put severe strain on the company’s distribution operations,
and management didn’t see things changing anytime soon.
It was clear the company would have to build out its distribution network, but Caribou didn’t want just a short-term
fix. It wanted a long-range strategy that would serve it well
into the future. And for that, it would need some serious
modeling and planning tools.
IDENTIFYING THE PAIN POINTS
With 412 owned stores and 97 domestic and international
franchise locations, Minneapolis-based Caribou may be
best known as a retailer,
but it also has a thriving commercial business. In fact, it was
growth in the commercial channel that
prompted the company to go down this road. Five years
ago, the commercial business, which includes sales to grocery stores, office coffee services, and hotel, sports, and
entertainment venues, accounted for just 2 percent of
Caribou’s business. Today, that number has risen to about
10 percent of Caribou’s $262 million in annual sales.
The growth, while relatively modest in total dollar terms,
has nonetheless stretched the capacity of Caribou’s sole distribution center, a 46,000-square-foot facility in
Minneapolis. DC space became so tight, in fact, that the
company had to rent off-site public warehouse space to
handle the overflow during peak periods.
In an effort to assess how future expansion in the commercial segment would affect its space needs, Caribou decided to seek outside help. In 2007, the company hired Long
Grove, Ill.-based supply chain consultancy TZA to develop a
network modeling program that evaluates various sales and
inventory scenarios and determines the most efficient and
