Pep stores' supply chain
Most retailers in Africa believe that ultra-low pricing leads to low margins. Unfortunately, that thinking trickles down to poor investment in the supply chain, making operations such as logistics unreliable. That idea has held many back from investing. However, Pep Stores’ supply chain broke that belief.
Today, the retailer delivers to thousands of stores across Africa and sells to price-sensitive consumers without giving up profit or efficiency. Pep store sells basic goods to the lowest-income shoppers, and the company is turning a profit. The retail supply chain was able to achieve this by running one of the most cost-optimized supply chains in African retail.
This article will unpack how Pep Stores built a cost-optimized supply chain. The model shows African retail supply chains, professionals, and business owners a working example of how to reduce costs, maintain availability, and scale with consistency.
The Pep Stores’ Supply Chain Playbook.
When Pep Stores began in 1965, the goal was simple. Give low-income families access to basic goods at affordable prices. Unsurprising, the mission was a success and the company grew fast. It expanded into South Africa’s small towns and rural areas. Over time, Pep became Africa’s biggest single-brand retailer with over 3,200 stores across 10+ countries.
However, the success of Pep Store wasn’t without its fair share of challenges. Yes, the company wanted to serve the lowest-income groups while keeping prices stable. But the reality wasn’t so friendly. Most stores were far from large cities. Transportation costs were high. The infrastructure was weak, and customers were more interested in buying essentials, not luxury.
Any waste, delay, or cost overrun meant higher prices. That was a no-no because it would drive customers away. In the late 1990s, Pep’s success created problems. Their logistics operations became disorganized. Stores overflowed with old stock. Some outlets received too much and others too little. More than 30% of the inventory sat for over 12 months.
Many stores were old and slow, sales dropped, and profits shrank. The supply chain was a mess.
The Pep Stores’ Supply Chain Needed An Upgrade
Despite the problems, Pep Stores’ profits rebounded and customer trust returned. By 2002, they had cut excess stock, increased market share, and lifted brand confidence by over 20%.
Here is how the company did it:
1. Centralized Distribution and Logistics
Pep redesigned its logistics operations around regional hubs. It built new warehouses in Cape Town, Johannesburg, Bloemfontein, and later Hammarsdale. These distribution centers (DCs) received bulk stock from local and international suppliers. Then, they picked, packed, and sent tailored shipments to stores. This model lowered transportation costs and shortened delivery times.
The latest mega-distribution center in Hammarsdale spans 140,000 square meters. It processes over 60,000 cartons a day. Its conveyor systems, barcode scanners, and automated sorters allow fast, accurate picking. It uses the Manhattan warehouse management system to direct flows. Staff pick by voice, boosting speed and reducing errors. The DC’s location near Durban’s port cuts import time and cost.
2. Strategic Sourcing
Pep sourced from China, India, Bangladesh, and South Africa. Its buyers focused on volume and gave suppliers predictable, long-term orders. This way, the company was able to reduce the unit prices for ach item and continue to offer customer the lowest possible prices. It also allowed Pep to build partnerships with factories that tailored products to Pep’s needs.
For key lines, Pep went further. It launched PepClo, its own clothing factory. PepClo makes school wear and footwear. The company also built a flip-flop line after studying factories in Asia. That line now makes over 3 million pairs per year. Pep also partnered with local SMEs. One shoe supplier in Swartland received funding, tooling, and a five-year supply agreement. These deals support small manufacturers while giving Pep cost certainty and secure supply.
3. Cost Discipline
Pep’s supply chain follows an everyday low-price strategy. The company avoids flashy discounts. No frills. Stores use basic layouts, and operations run lean. Wasted stock is cleared quickly, routes are optimized, and staff multitask. Every cent saved lowers shelf prices. Another cost saving strategy is to maximize the use of every tool and infrastructure.
For example, Pep’s trucks don’t just deliver. They carry PAXI parcels on return trips. Stores serve shoppers but also act as parcel depots. This expands reach without extra cost.
4. Smart Tech
Pep stores’ supply chain also leveraged technology at a time when most businesses across the continent were skeptical about the cost and lack of technical know how. In the early 2000s, Pep installed Retek to match store demand with delivery. It helped reduce overstock. In recent years, Pep has only doubled down on its investment in technology.
The company has transitioned to the Manhattan WMS. Trucks use route optimization tools, all movement is tracked, and nd parcel service PAXI uses return trips to earn extra revenue.
Read more: Why Nike’s supply chain failed during the pandemic.
Lessons from Pep Stores’ Supply Chain Strategy
The success of the African retail giant and its supply chain provides a proven template for other companies already operating or considering opening operations across the continent.
Here are some of the key lessons:
1. Centralization Works
Sending stock from factories straight to stores wastes time and money. Centralized distribution allows bulk shipping, better routing, and accurate delivery. Pep’s regional hubs made deliveries faster, cheaper, and more accurate. DCs let Pep cross-dock fast sellers and pick slower lines with care.
2. Demand Drives Supply
Inventory is money sitting still. For Pep stores, the goal is to sell through quickly and replenish only what moves. With data systems like Retek and Manhattan WMS, Pep sends stock based on real sales. That keeps inventory fresh. It also avoids markdowns.
3. Own What Matters Most
Pep did not try to make every product. It focused internal production on items where scale and control made a big impact. Flip-flops, school wear, and underwear are basic needs. PepClo produces those at cost and scale. Dangote Cement also adapted this strategy and is enjoying similar results, in keeping quality steady and costs low.
4. Invest in Supplier Relationships
Pep has invested time and resources in building stable supplier relationships that ensures there are no surprises in their operations. One of the ways it did is through active communication. By giving suppliers stable orders and sharing forecasts, Pep stores’ supply chain works with them to cut waste. This creates loyalty and scale, which ultimately brings lower prices.
5. Focus on Price, Then Work Backward
Start with a price the customer can afford. Then design the product, supply chain, and sourcing around that number. This keeps the business grounded in real demand. Every tech system Pep adopts must earn back its cost. WMS, inventory software, and routing tools all reduce waste or speed up fulfillment. No shiny apps. Only what helps save money or boost volume.
Read more: How TradeDepot digitized the distribution of FMCG products in Africa.
How African Supply Chains Can Apply These Lessons
Applying these lessons across African retail businesses and supply chains will demand adaptation to unique operations, but generally speaking, here is how to apply the lessons from Pep Stores’ supply chain success.
1. Redesign Distribution
Start by mapping your current routes and finding overlaps. Group stores into regions. Set up basic hubs. Use shared trucks. Cross-dock where possible.
2. Blend Local and Global Supply
Diversify sourcing. For example, importing high-volume basics from cheaper markets and building ties with local manufacturers is possible. Offer guaranteed volume and co-create quality standards. Where volume justifies it, explore partial vertical integration.
3. Use Inventory Data to Act
Install stock tracking, even on basic tools. This way you know what sells by store. Ensure auto-alert on slow stock, cut orders on weak items, and promote fast movers. Let store sales drive replenishment.
4. Audit Costs Often
Make a list of recurring costs. Cut where you can. For example, renegotiate rent and track route fuel use. Standardize packing. Remove slow processes and create a routine to review every cost point each month.
5. Train for Ownership
Teach staff that every decision affects cost. Empower them to spot waste. Build pride in saving. Reward ideas that cut cost. Let workers act like owners, not just employees.
Read more: How Barilla’s supply chain optimized distribution across Europe and Africa.
Final Thoughts
Pep Stores’ supply chain success is not magic. It comes from control, discipline, and focus. Its model proves that cost-optimized supply chains can thrive even in low-income markets. It proves that African supply chains can win. If you build for control, design for simplicity, and focus on speed, your operation will cut costs and scale profits.
That’s the Pep Supply Chain Playbook. Learn it. Adapt it. Apply it.
Obinabo Tochukwu Tabansi is a supply chain digital writer & ghostwriter helping professionals and business owners across Africa explore various strategies that work and learn from the success and failures of various supply chains across the globe. He also ghostwrites social content for logistics & supply chain businesses
