Sheetz has gained more than convenience since building its own distribution center. The new facility has allowed the Mid-Atlantic convenience store chain to gain full control of its distribution while achieving a high level of flexibility. Sheetz has also reduced costs, increased service levels, improved accuracy and provided ample room for future growth.

Altoona, Pa.-based Sheetz currently operates 300 stores in six states that sell the typical convenience fare – gasoline, groceries and household items. Each store also has a large deli area. The new DC in Claysburg, Pa. has zones designed to mirror the store products, including areas to house and process dry goods, refrigerated items and frozen foods.

Prior to building this new DC, Sheetz outsourced its distribution to two other facilities owned and managed by third parties. These service providers did everything from purchasing groceries and other stock to performing complete distribution services. Bringing all of those functions in-house was a learning experience for everyone on the Sheetz distribution team.

'We had no warehouse experience in this company until we started this project,' recalls Ray Ryan, vice president of purchasing and distribution services for Sheetz.

But there was good reason to make the move. The biggest driver for the new DC was to give Sheetz full control over its purchasing and distribution processes. Already this has paid off.

'We have added more than 1% to the company's bottom line because of savings in our distribution costs and changes in our purchasing processes,' says Ryan.

Working with a materials handling consultant and designer (Tompkins Associates), Sheetz created a building with three-climate zones and appropriate materials handling equipment, including radio-frequency data communication, horizontal carousels, reach trucks, and light-directed put stations for consolidating orders.

First-in/first-out processing is performed throughout the building with wireless systems directing picking from flow racks and static racks. Ring scanners are used extensively to keep scanning nearly hands-free.

'We looked for the most ergonomic equipment we could find,' says Darrin Pohar, director of operations. 'That allows me to open my labor pool.'

Most of the equipment selected for the building is easy to operate, which provides flexibility for Pohar to move personnel to areas where labor is most needed at the time.

Workers in the dry goods area perform both full case and split case picks from single and double-deep pallet racks and carton flow racks. A separate area on a mezzanine processes cigarettes, which must be stamped and packed as required by tax authorities. Put-to-light is used to consolidate store orders once cigarette cartons are stamped.

The mezzanine also holds three pods of carousels that hold small-cube medium-to-high movers, such as health and beauty aids, film and batteries.

Separate processing areas on the main floor of the dry goods area choose general food and household items, tobacco products, oil and other hazardous materials, and large gallon jugs of salad dressings for in-store deli use.

Split case picks are made into totes. These are selected from racks using ring scanners directed by the warehouse management system. The totes are then conveyed to consolidation stations where they are placed into flow racks that represent stores. Once fully gathered, the totes are placed onto returnable pallets and taken to the full case area where additional case picks are added to the load before being sent to staging near shipping.

Picks in the cooler and freezer are also made using radio frequency directed ring scanners. In a similar manner, the split case picks are made into totes that are then consolidated in put modules within those areas. Once accumulated, the totes are joined with full case picks and staged within their temperature zones until three-climate trucks are ready to be loaded.

The new building and the materials handling systems now allow Sheetz to stretch beyond its previous limitations. Every area of the building was designed to expand, as Sheetz plans a 10% increase in annual sales and the addition of several new stores each year. In fact, the freezer area has already been increased in size from the original design.

Better control of distribution operations has increased accuracy at Sheetz from about 96.5% before to greater than 99.8% now.

'Every measured category is down now – damage, shortages and miss-picks,' says Pohar.

Before, when the third party was doing delivery, every order had to be checked upon arrival at the store.

'We've been able to eliminate that check now because of the accuracy we have. That saves about four hours per week at each store,' says Ryan.

Sheetz also took an unusual approach in hiring the first 40 or so employees for the distribution facility. These early-hire associates were actually employees that had at one time worked in the stores.

'They knew what the store operations were all about. They already had our culture and would know how to serve the stores in better ways,' says Pohar. 'We also hired someone from the third-party provider that had performed our distribution before.'

The new systems in the facility have also improved visibility of the supply chain, which Sheetz did not have before in the third-party facilities. This allows them to incorporate point-of-purchase data into replenishment.

'We can view inventory on any store from here,' says Pohar. 'That helps us to keep them better stocked now.'

Sheetz owns its own delivery fleet, so it can also leverage transportation to control costs. For instance, a truck might make a delivery to a distant store, then stop at a supplier for pick-up of merchandise that can be brought to the DC during the backhaul trip. Sheetz has also changed the way it manages store deliveries. Stores had been receiving two deliveries a week when distribution was with the third-party warehouses.

'We wanted to move delivery to three times a week, but that would have been cost prohibitive,' says Ryan.

'We have now developed a consistent delivery cycle that replenishes stores more often, adds Pohar. 'Stores now receive three deliveries weekly, either Sunday-Tuesday-Thursday or Monday-Wednesday-Friday. We also switched deliveries to nighttime and have created a streamlined check-in. You probably could not get a third party to be that consistent with deliveries.'

Additionally, more vendor-supplied product is being distributed through the DC than in the past. Soft drink companies, for example, had delivered their soda fountain syrups and other items directly to the stores. Now these first head to the DC and are placed on the Sheetz trucks. This reduces delivery truck traffic at the stores and makes check-in easier.

The new DC has also provided Sheetz with greater flexibility in evaluating and selecting new products to sell.

'We do a lot of research and development and testing of SKUs and sales concepts,' says Ryan. 'To ask a third-party provider to take on a new SKU temporarily would have been expensive. It is much easier to do in-house.'

Pohar adds that the initial goals of the facility, saving costs, improving service and bringing distribution in house, have been met successfully.

'It is still early, but we have met every early expectation and are prepared for the future,' he says. 'Our success will be magnified every year as we grow. We now have a facility that allows us to gain savings as we add to it.'

Click on the icon to read how Grocery Gateway stores and picks from three temperature zones in its Toronto DC. - Grocery Gateway is more than just groceries - May 15, 2002