The grocery distribution center of the future has arrived—and you can find it just north of Toronto.
Sobeys Inc.’s new highly automated distribution center, in Vaughan, Ontario, is the first of its kind in Canada. The facility can handle an amazing 320,000 cases per day—three times the number of Sobeys’ conventional DCs—and can ship more than 1.4 million cases per week.
The size of eight football fields at 500,000 square feet, the Vaughan facility services the dry grocery needs of Sobeys Ontario network of food stores operating under the Sobeys, Foodland, FreshCo and Price Chopper banners. The DC is the largest of its 23 distribution centers, featuring a ceiling height of 65 feet and 30 receiving bays and 41 shipping bays. The centerpiece is an automated case-picking system that builds mixed SKU pallets in a store-friendly and aisle-ready fashion.
Founded in 1907, the company is more than 100 years old, but that doesn’t stop Sobeys from being among the most forward-thinking retailers in Canada. “Retail is rapidly changing and very competitive and we need to keep up with the times. We wanted to be able to improve service levels at the lowest possible cost,” says Francois Vimard, chief financial officer. “The only way to do that was with an automated DC.”
A multi-million dollar investment, the DC reflects Sobeys’ ongoing commitment to innovation. The retailer decided to build the DC in Ontario because that is where it has the largest concentration of stores. “With an automated DC, you need sufficient volume to justify the investment in automation, and Ontario offered us that,” says Vimard.
Vimard, a 15-year veteran of Sobeys, oversaw the design and construction of the facility, which began in 2007. The building was completed in October 2008. “Once the building was finished, it took about a year to install and test the automation technology,” says Vimard. “We began shipping product in July 2009.”
The company consolidated grocery from its Milton and Whibty distribution centers into the Vaughan facility, leaving those two DCs to focus on fresh products including meat, produce and dairy.
“Prior to opening the Vaughan facility, we had some capacity issues in terms of assortment and volume, and we were integrating more and more DSD in our network to improve the service levels to our stores as well as to provide a better assortment,” says Vimard. “That was bringing our cost per case up, so we wanted to get more products into the network with less cost. We also needed to better control our inbound flow from our vendors.”
Employee retention and a shrinking labor pool were also concerns. “Like most grocery distributors, we have high turnover in our DCs, and the Canadian Centre for Occupational Health and Safety [Canada’s version of OSHA] may pass regulations that restrict the amount of weight an employee can move in one day,” says Vimard. “In addition, the population is aging and we realized that if we didn’t find a solution, in 15 years we were going to have a serious labor problem.”
Searching For A Solution
Just like in the United States, competition in the grocery arena in Canada is fierce. With more than $15.2 billion in annual sales, Nova Scotia-based Sobeys is the second largest supermarket retailer in Canada, trailing behind Loblow Cos. Ltd., which posted $27 billion in sales last year. And Wal-Mart Canada Corp. continues to expand, with plans to open 35 to 40 more supercenters this year, adding to the 85 it already operates. The supercenters combine general merchandise with a full supermarket.
Sobeys, like many of its U.S. counterparts, grew through acquisition. At one point, the company was operating 17 separate POS systems under four different legacy systems across Canada. “It was a great challenge for the organization just to get basic information,” says Vimard. “To get to the next level, we had to invest in both technology and logistics and we had to integrate them coast-to-coast so we could have a full view of the business.”