planning new facilities for maximum ...ageconsearch.umn.edu/bitstream/27354/1/07010028.pdfthe...

PLANNING NEW FACILITIES FOR MAXIMUM

PRODUCTIVITY IN SERVICING CONVENIENCE STORESby

Barry W. WrightWawa Food MarketsWawa, Pennsylvania

Examines the question of ware-housing merchandise that Wawa sells inits stores and presents the results ofan in-depth study on this subject.

Wawa Food Markets is a chain of141 convenience grocery stores inPennsylvania,Delaware, Maryland, NewJersey and Connecticut. The corporateheadquarters is in Wawa, Pennsylvania,about 16 miles west of Philadelphia onU.S. Route 1. “Wawa” is the Lenni-Lenape word for the call of theCanadian Wild Goose. In addition tothe Food Markets, Wawa has a dairydivision, which was primarily retailuntil our first convenience store openedin 1964. Wawa also has three smallwarehouses for delicatessen, produce,candy and tobacco.

The average convenience storedoes $4,971 per week; Wawa’s volume ishigher. Therefore, Wawa Stores arebuilt slightly larger-than the 2,400square feet which is the standard forconvenience stores. New stores rangefrom 2,600 to 3,000 square feet. Allconvenience stores serve neighborhoods.Wawa is mainly suburban; at least fornow.

Hours of operation are basicallythe same as other convenience storechains: stores are open 7 days a weekfrom 7 AM to 11 PM. However, somebusy stores are open as much as 18 hoursa day.

The product mix of conveniencestores is typically characterizedbyheavy sales of tobacco, candy and beer.Wawa sells a neglible amount of beer,because of restrictive regulations inthe area where the stores are located.Tobacco and candy do represent a largeportion of Wawa’s sales. Dairy prod-ucts, probably because of Wawa’sidentificationwith an old and respecteddairy, are quite important. The saleof fresh-sliced delicatessen is in-ordinately high in comparison with mostother convenience stores.

An analysis of the campany’sspecific product mix is the essentialfirst step in deciding what and how towarehouse. The top ten productcategories by sales are:

1.2.3.4.5.6.7.8.9.10.

NATIONAL

Tobacco ProductsGrocery ItemsMilkBeerSoft DrinksBread/CakesHABACandyMagazines, Books, NewspapersDelicatessen Items

WAWA

1. M.lk2. Tobacco Products

February 76/page 28 Journal of Food Distribution Research

3.4.5.6.7.8.9.10.

DelicatessenBread/CakesGrocery ItemsSoft DrinksIce CreamCandyMagazines, Books, NewspapersHABA

The advantages of a complete ware-house operation are much greater thanthe mere saving of the middleman markup.They include the benefits of controllinginventory at store level so that al-though lower stock value is maintained,fewer stock-outs are experienced. Thus,not only is there a saving in moneytied up in inventory, but also thereshould be improved sales by havinggreater consistency of product in stock.There are also advantages in combiningshipment of product to individual storesso that supplier vehicles make fewertrips, thus saving considerablemileageand driver time.

Approximately a year ago we formeda committee to consider, from a verybroad viewpoint, the qubstion of ware-housing merchandise that goes into ourstores. Because of Southland’s successwith distribution centers, we considereda similar course. (SouthlandCo.operates the 7-11 stores and others.)

The choice to warehouse and deliverto our stores was made before the open-ing of our first store, as we alreadyoperated a dairy which continues as asemi-separate operation and servesother customers as well. Over our firstten years, for various reasons, we foundourselves opening three more warehousesfor delicatessen, produce and tobaccoand candy. We made ingenious,.if un-organized use of existing dairy facil-ities. TWO refrigerated trailers becameour delicatessen warehouse; a calf barnbecame our tobacco and candy warehouse;and our old truck repair shop sufficed

for produce. Improvements have beenmade along the line but mostly just tobuy time for further study. Our need,therefore, was to get organized whatwe already had, starting with the mostcritical: Tobacco and Candy. At thesame time we had to consider possibili-ties of future opportunities.

The items we warehouse and otherproduct categories within our top tenare in Table 1.

Our next considerationwas loca-tion. Fortunately, we own an 80 plusacre tract surrounding our dairy, muchof which is zoned for our plannedactivities. This plot is centrallylocated in our market area and the roadsystem is more than adequate for servic-ing of current and planned stores. Italso gives us enough room to create awarehouse complex and to take advantageof our existing dairy nearby.

Once having decided generallywhat and where to warehouse, we neededto find ideas on how to do so, Themost helpful sources available indesigning of warehouses are: tradeand equipment journals; professionalseminars such as the FDRS; friends inthe trade and their warehouses; workor observation in existing warehouses;and consultant services.

Of these sources, the most reveal-ing was our own existing warehouse.Theory is no substitute for personalexperience. On paper, a hundred-poundbag of roasted peanuts and a pack ofgum are just line items; they areequally easy to keypunch orders for.But, try picking the peanuts! Each ofthe other sources has value; in ourcase, the consultant service was mosthelpful as a review.

Table 2 shows that we are primarilya less than case lot warehouse with

urnal of Food Distribution Research February 76/page 29

Table 1. Internal Supplies and the Use of Outside Vendors

Wawa Supplies Outside VendorsPercent Deliveries Percent Deliveries

Category of Mix per Week Category of Mix Vendors per Week

Dairy 16.0 3 Groceries 8.5 1 1

Delicatessen 16.1 1 Bakery Prod. 11.8 10 41

Candy 5.1 1/2 Ice Cream & FF 5.7 2 3

Tobacco 16.4 1/2 Sodas 5.0 6 6

Produce 3.4 2 HAM 2.2 1“ 1/2

57.0 7 Mags., Books &Newspapers 4.3 5 27—

most of our candy items having a pickingfrequency of less than ten times perday. It is also significant that almostone-fourth of the demand is throughallocated distribution.

Table 3 shows sales by vendor andthe amount of inventory on hand byvendor. We are sure we can improve thisturnover with our new system. To deter-mine candy equipment requirements andcapacity, it is necessary to combineTables 2 and 3 with a knowledge of theproducts gained, in our case, from workand employee contacts. The result isshown in Table 4, candy equipment require-ments and capacity.

We anticipated growth in pickingand reserve requirements and suppliedadequate capacity for a minimum of fiveyears and a maximum of ten years if noadditional product lines are added.

Sources disagree as to when to useflow racks (especiallyfor case goods),but because of the number of items car-ried and the relationship of picking toall other activities, the most importantconsideration in our design was picking

exposure. Restocking cycle will beapproximately every five picking dayswith second lanes for faster items.

Table 5 shows the same processapplied to cigars and pipe tobacco.Since demand for all but two items wasless than one case per week and casesare so bulky, bins are adequate forpicking all but the two fastest movingitems.

Table 6 shows cigarette require-ment and capacity. The real challengein organizing a warehouse for tobaccoand candy was handling cigarettes. Onthe surface it seems quite simple--only75 items and an average volume ofaround 450 cartons per week per brand.Consider, however, that we tax-stampfor five states and that there are fivedifferent sizes of cigarette packages,four of which require special settingson the stamping machine and one whichis too large for our machine and mustbe hand stamped. Furthermore, twotypes of stamping machines are neces-sitated by the specific requirements ofthe various states we serve: heattransfer and ink transfer. Also,


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‘Eabla30 Relat$onshlp of 1nvento2y to Demand for Major Vendors - Gandy

WeleikaNumber Total TOtfill on

Vendor Items Demawl Skwm&ow Hand

2020Am, Chi@hI 60 2,7%9 7,811 2,9

2132 LAfel$LwMl!l 38 1,%55 3,876 3*4

6938$erailft 2!! 260 1,546 5,9

3$042@w3 Gum 22 %,6U3 794 ,5

3575Read Candy 14 382 912 2,4

2665WH3hy Pood8 12 209 843 4,0

29$0 L!udlanlllUV3. 8 M 147 1,7

3062M&M- Mar@ 8 275 1,627 5,9

2230 chlaxco, 6 2$ 161 5,8

67 V@ndo%ll1-4 ztwMl 121 1,466 8,765 6,0— * - —

TCYEAL 366 .9,742 28,061 2,9

February 76/page 32

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Table 6. Cigarette Requirement and Capacity - Demand Stratificationby State(Cartons/Week)

Number ofBrands Pennsylvania New Jersey Connecticut Delaware Maryland

3000+

1500-2999

1000-1499

900-999

800-899

700-799

600-699

500-599

400-499

300-399

200-299

100-199

50-99

0-49

Total

1

1

2

1

1

1 1

2 1 1

3 1

15 2

17 14 3 1 1

15 20 2 1

17 35 69 73 74

75 75 75 75 75

NOTES:Requirements and Capacity Specification

Pennsylvania: 60 Flow

New Jersey: 60 Flow

Other States:

Additional Capacity:

Future Growth: Double

Rack Lanes and 20 Bins

Rack Lanes and 20 Bins

240 Bins

8 Bins

Capacity with Mezzanine


consider the demand stratificationbystate as shown on Table 6.

One brand in the top state actuallyhas more activity than all 75 brands inthe smallest state. That same brandalso accounted for almost 75% as manyunits through the system as did all 397candy items and accounted for 22% of allcigarette volume. We now ship thisbrand in half case lots only, by passingthe normal pick line to go directly toshipping. No other brand can currentlybe shipped to all stores in half caselots because of the impact on storeinventory levels, but high volume storesare encouraged, when possible, to orderin lots of 30 (1/2 case).

The rest of the brands for the twohighest volume states are handled onflow racks and bins. The slowest threestates are now handled in bins. Asactivity increases in these states,picking will go to the combination offlow racks and bins used in the twotop states.

So far we have considered prin-cipally order picking. There are, ofcourse, other handling functions:receiving, storage, checking, packingand shipping. In our present warehouseof 5,600 square feet with a maximumclearance of 10 feet, we have not hadthe luxury of even considering thesefunctions as separate; they all blendtogether at a tremendous cost in ef-ficiency.

Receiving and shipping will be onpallets as much as possible with palletmules being used throughout the receiv-ing area. There is no need to use alift truck for low level lateral move-ment. Approximately 2,1OO square feethas been set aside for these two activ-ities. This amount may seem excessivebut it allows for efficient consolida-tion of deliveries as our complex grows.

Goods will be stored in standardpallet racks, serviced by lift trucks.Retrieval from storage to pick line isconvenient.

Packing is combined with picking;cigaretteswill remain in half caseunits, candy will be either in casesor in tote boxes for less than case lotitems. Since the value of small candyitems is relatively low, checking willbe left at a case count for candy.Cigarettes will be double checked bya carton count method before shipping.

Show Layout by Function

This layout by function is theoutcome of the first phase of our study,Figure 1. We tried to keep all func-tions free from crossing patterns andto avoid dead-heading as much as pos-sible. Picking for an individual storewill be on a continuous cafeteria-style conveyor line, with two routeoptions for cigarettes. Replenishmentof the picking lines will be from therear to avoid interference with pickingactivities.

There are other important considera-tions in designing and building itself.To provide comfortable working condi-tions, we set aside a 1,600 square footmezzanine for offices, locker rooms andlunch room which will allow employeesto get away from their jobs to pleasantsurroundings on breaks.

Constructionwill be standard, al-lowing for other uses should we get outof the warehousing business. Moreimportantly, the construction will al-low for modular expansion to 50,000square feet and will allow flexibilityfor the inclusion of other productlines.

Permits are now pending with thetownship fathers for construction and


Figure 1. Planned Warehouse

—

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EQUIPMENT CHARGING & RETURNS AREA

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‘A”-7

ALLOCATED DISTRIBUTIONFULL CASE I

STORE”ORDER ACCUMULATIONSHIPPING &

EL_EL

lrnal of Food Distribution Research

I CIGARS & TOBACCO

I.ILELL.. 4

February 76/page 37

hopefully a successful application ofour theories. There was a time whenproper zoning was all that concernedthe township; the building inspectorbeing the only one concerned with theactual plans. Now, however, we are facedwith a delay over the winter becausethere are so many agencies which feel theneed to review the plans.

We are investigatingupgrading theother existing warehouses and includingthem in the new complex. ThiS wouldmake possible a more sophisticated andefficient consolidated delivery system.Limits on consolidation are now imposedby space limitationswithin the stores,but store plans are being revised toinclude more receiving space.

Future warehousing plans must beguided by our product mix. The mostlikely candidates for warehousing areice cream and frozen food because theygo together well for storage and hand-ling and account for almost 6 percent ofsales. They are also compatible inseasonality. Stores are currentlydesigned with adequate freezer capacityto allow for this consolidation in de-liveries, and consolidationwould bewelcome because check-in is time con-suming and difficult since deliveriesare now handled one handtruck at a time.

For us to get into frozen storageand delivery would require a large in-vestment in facilities and deliveryequipment (both trucks and dollies).With the more pressing need to upgradeand consolidate current operations, thiswill have to wait or be done by currentsuppliers. Preliminary talks have beenheld with both ice cream and frozen foodsuppliers to see if we can work out asolution which would be beneficial toall parties, but no decisions have yetbeen made.

As shown in Figure 1, we have toomany deliveries of bakery products.There are two possible solutions now:minimize the number of suppliers, min-imizing the variety we can offer; orstock longer shelf-life items, minimiz-ing the number of deliveries per vendorand losing profitable sales of ourfresh Italian bread and rolls.

Logically, we could ask our sup-pliers to consolidate deliveries. Butthe major bakers and their unions can-not come to an agreement allowingdelivery to a central warehouse. Untilthey do, we will have to continue payingfor six deliverymen and six truckswhere one of each would do. Many ofthe supermarket chains bake and deliverto their own stores, placing us in anoncompetitive position. This musteventually be changed.

Drastic changes in our product mixare unlikely unless it becomes legalfor us to sell beer and wine in manymore stores. Changes in types of loca-tions are much more likely. We mayfind ourselves moving increasinglyinto inner cities: suburban planningand zoning boards are becoming morerestrictive, existing near-city storeneighborhoods are becoming increasinglyurbanized, and more opportunity existsfor small stores in urban areas aslarger stores are moving out.

We have not yet had the problemsof many in the industry, but there aresecurity and safety consideration inserving inner cities and implicationsfor warehousing as a result of deliveryproblems. Consolidating deliveries willbecome more important as will means ofmaking a rapid delivery at the store.Thus, we would have to find a containersystem suitable at all levels: ware-houses, trucks and stores.


An external force leading to changeis the possibility of our grocery whole-saler’s converting to automated ware-housing. Automation is increasinglypopular among wholesalers. However,automated warehousing is designed tosupply stores in case lots. How willautomation affect our chain of smallstores? We may become less desirablecustomers and be required to pay pre-mimums. We may need to buy in largerlots, thereby hurting our cash flow andcreating storage problems. We may needto become sub-stationwarehousers.

It may be that Wawa would be betteroff giving all business to one whole-saler and getting out of the whole-saling business. However, no suchsatisfactory exists in our area.

We must evaluate what present orfuture services the warehouses couldprovide to customers other than Wawa.Our dairy has other customers, primarilyinstitutional and home delivery. Bylaw, in order to qualify as a cigarettewholesaler in the Commonwealth ofPennsylvania, we must serve outside

customers. Weexpand to supptrading area.would have thevolume alone.hedge against ~

do, but few. We mighty other outlets in ourIf nothing else, weadvantage with ourAlso, we would have aailing short of antici-

pated growth in stores. This certainlymerits further study on our part.

We have now begun constructing notjust a warehouse, but a warehousesystem adaptable to consolidate hip-ping. We have designed the system withenough flexibility to allow consolida-tion without precluding the possibilitythat it may be more economical forothers to do it for us.

We have avoided expensive over-specialization in the physical designof our plant so that we have flexibilityto expand or change our emphasis asmarket conditions change.

Whereas the solutions I have givenare specific to our needs, the principleis that warehouse systems must betailor-made to avoid waste and rigidity.The process used in our design istransferable to the needs of others,although the particulars may differ.

unal of Food Distribution Research February 76/page 39

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