Canadian-based apparel maker lululemon athletica inc. is opening a second distribution center in Columbus, Ohio, which together with its first distribution center located in Washington, DC, will serve its nearly 200 stores in North America. Once the new distribution center is operational, the company will assign stores to the two distribution centers. That is, currently one distribution center is serving all stores, but when the new distribution center is operational, it will serve some of the stores.
When determining how best to divide service, the company’s supply chain analysts will have to consider account transportation costs. First, analysts will need to determine the transportation product classification from the National Motor Freight Classification (NMFC). Then, they will have to determine the distances from each distribution center to each store, which will result in more than 400 different transportation rates.
To help them, however, the analysts can summarize all the rates into one or two equations called transportation rate estimating curves (TRECs). TRECs would simplify network design and supply chain analytics for lululemon athletica inc. by mapping hundreds of rates into one or two equations. TRECs can be used for many different types of supply chain analyses and provide insights for supply chain managers.
In a highly competitive business environment, managing transportation costs and network design well is critical to success. For many companies, transportation costs are one of the top overall expenses that greatly affect profitability.
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Forte, Daniela. “Lululemon Athletica to Open Distribution Center in Columbus, Ohio.” Multichannel Merchant, referenced September 15, 2013, www.multichannelmerchant.com