Economic Efficiency Analysis of The Dollar Tree Transportation - Case Study Example

Instructions: DOLLAR TREE STORES INCORPORATED Dollar Tree Stores Incorporated is a value driven; oriented variety store that operates at a one dollar price point. Dollar Tree Inc. was established in 1986 at Dalton GA. The headquarters of the stores is in Chesapeake, VA. Dollar Tree transportation logistics comprise of import, management of inbound, distribution centers, management of outbound transportation and domestic transportation. The company is committed to providing exceptional service to its customers through continual improvements in quality, operating costs and safety (Derdak & Simley, 1988).

Through provision of superior execution processes, solid leadership, demonstrating team work in all its undertaking, acting with integrity in everything it does, Dollar Tree Inc mission will be accomplished through its associates. The company is categorized in the Discount Variety Industry. There were 3219 Dollar stores in 48 states by the year 2007. The stores direct competitors include; 99 cent only, Dollar General and Family Dollar. In this industry, the main competition tool is cost rather than quality.

Dollar Tree Inc. key success factors comprise of low cost distribution, economies of scale and tight cost control. In regard to these factors, Dollar Tree Inc. is in the process of growing their customer base and that will see them become the leading force in the Discount Varity Industry (Derdak & Simley, 1988). One way to ensure that this becomes a reality is through acquisition of other stores, opening new stores, and be selling perishable items in the stores so as to make the company a one-stop shop for their customers.

This study will try to analyze the economic efficiency of The Dollar Tree’s Transportation. a) Economic efficiency impacts Economic efficiency relates to how well the firm allocates its scarce resources so as to meet the need and the wants of its customers. Economic efficiency is therefore the non-interest expenses divided by the revenue. It is expressed as a ratio. As per January 2013, the earnings were $462.97 million and the non-interest expenses were $2281.52 million. Therefore, the economic efficiency is: (2281.52/462.97)=4.928. An increasing efficiency ratio is not good as it shows that the firm is spending too much on expenses.

Therefore as per the efficiency ratio calculated, there was need for Dollar Tree Inc. to check on its expenses and design ways to increase its revenue to enhance efficiency in transportation. Considering the overwhelming transportation systems, communications among its suppliers and numerous distribution centers; many faxes and emails made the selecting the most appropriate carrier a cumbersome, manual process. This prompted the officials to identify the most appropriate method for carrier selection in a particular lane.

That is, the most suitable technological application that could increase data visibility, streamline internal processes and reduce operating costs. Therefore to ensure economic efficiency, Dollar Tree opted for MIQ Logistics to develop the front end of an inbound TMS (transportation management system) (Dollar Tree Stores Inc, 2006). b) Analysis period for the study The data for the study was collected from Dollar Tree Inc. website and data page. The data was for the period 2001 to date. c) Appropriate impact for the evaluation The main challenge facing Dollar Tree Inc.

was how reduce the chain costs and increase its efficiency in transportation and management operations. The management proposed solution to this challenge was to: analyze the customer’s business and reflect on an enhanced transportation management system that best solves the problem. What follows was an inbound transportation management system characterized by advanced technological process that ensured more streamlined processes, increased visibility and less operating costs. The result was a bottom-line saving for a period of 90 days (Dollar Tree Stores Inc, 2007). d) Characteristics of the transportation system under various alternative scenarios According to MIQ, an improved transportation management system would improve the Dollar Tree Inc.

transportation efficiency in relation to transportation costs, carrier management, and carrier selection and employee productivity. In order to automate its front end inbound TMS, Dollar Tree Inc. employed PowerTMS™ (Dollar Tree Stores Inc, 2007). This new transportation system is characterized by: transportation optimization, purchase order coordination, shipment tracking, shipment documentation, shipment lifecycle analysis, online guides and manuals for the clients’ remaining supplier base, transportation invoice reconciliation for payment and training for key suppliers.

This alternative transportation system started delivering results after three months. The company was able to: experience shorter turnaround times as compared to earlier times, save time with less wasted communications, choose the most appropriate carrier automatically based on the cost and performance. In addition, this system enabled the carriers and the suppliers to fulfill purchases orders online hence increased management efficiency (Dollar Tree Stores Inc, 2005). References Derdak, T., & Simley, J. (1988). International directory of company histories.

London: St. James Press. Dollar Tree Stores Inc. 10-K – 2007, 2006, 2005, 2004, 2003, 2000 missionstatement.dollartree.com