Family Dollar 2011 Annual Report Download - page 13

negotiate vendors’ trade payment terms to help finance the cost of carrying this inventory. We balance the value
of maintaining high inventory levels required to meet customer demand with the potential risk of having
inventories at levels that exceed such demand and that may need to be marked down in price in order to sell.
We maintain by-item inventories for all stores and employ a demand forecasting system for replenishment
from our distribution centers. We also utilize software applications for centralized store replenishment of basic
merchandise and for allocation of non-basic merchandise. We have centralized merchandise financial planning,
assortment optimization, price optimization, and space management applications and processes. These systems
aid the planning and forecasting of sales, cost of sales and inventory metrics by product category as well as allow
us to optimize merchandise in-stock positions in stores, reduce markdowns and improve inventory turnover.
Store Operations
We operate more than 7,000 stores in 44 states. All of our stores are managed and operated by us. A store
manager manages each store and is responsible for hiring and training store employees, managing the financial
performance of the store, and providing quality customer service. The store manager reports to a district manager
or area operations manager. A district manager or area operations manager is typically responsible for 15 to 25
stores. During fiscal 2011, no single store accounted for more than one-tenth of one percent of sales.
We utilize an online hiring system designed to provide consistent pre-employment assessments and
interviews for prospective team members in all of our stores. To improve our customer service and drive
productivity, we also utilize an online training system in our stores.
Distribution and Logistics
During fiscal 2011, manufacturers or distributors shipped approximately 8% of our merchandise purchases
directly to stores. The balance of the merchandise was shipped to one of our nine distribution centers listed
below. To provide consistent, cost-effective service, we enlist the services of several national transportation
companies throughout the U.S. as well as our own private fleet of trucks to deliver merchandise to stores from
our distribution centers. During fiscal 2011, approximately 93% of the merchandise sent from our distribution
centers to our stores was delivered by common or contract carriers.
To minimize transportation costs and maximize our efficiency, we rely on a web-enabled transportation
management system to track shipments, maximize trailer loads and routes, and secure low rates from our
trucking partners. To maximize the productivity of our distribution centers, we utilize voice-recognition software,
radio-frequency technology and high-speed sortation systems in each of our nine distribution centers.
At the end of fiscal 2011, the number of stores served by each of our distribution centers was as follows:
Distribution Center
Number of Stores
Served
Matthews, NC ........................................................ 724
West Memphis, AR .................................................... 606
Front Royal, VA ...................................................... 852
Duncan, OK .......................................................... 748
Morehead, KY ........................................................ 946
Maquoketa, IA........................................................ 720
Odessa, TX .......................................................... 677
Marianna, FL ......................................................... 878
Rome, NY ........................................................... 872
Total ........................................................... 7,023
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