Kiyomi French

Analysis of Distribution Centre Locations for a Major Retailer in Canada ©2015

This paper explores the spatial distribution and market penetration of fiscal year 2014’s online orders for a major retailer in Canada. The intention of the analysis was to identify locations that would be ideal candidate sites for a third distribution centre. The efficiency of the current and potential distribution network is explored using a location allocation model that measures the catchment and total delivery distance associated with each network. A distributional analysis reveals an uneven distribution of online customers across the country and several patterns for online buying habits such as: high counts and high online order values in areas local to physical stores and low counts of high valued online orders where delivery prices are the highest. A kernel density analysis also identifies specific areas that possessed relatively high densities of online orders, with the most intense hot spots being located in the Greater Toronto Area and Montreal: where distribution centres already exist. However throughout the spatial and kernel density analyses, several areas of high patronage that required long distance deliveries are highlighted and the potential of a third distribution centre to better service them is measured using several location allocation models available in ArcGIS. Calgary, Alberta is ultimately identified as the optimal location to minimize the overall travel distance for deliveries. However, because areas of high patronage are more spread out in western Canada than southern Ontario and Québec (where distribution centres are located), the potential of a ‘Pick Up Location’ alternative (where customers can collect online orders for a reduced delivery price) is explored.