The Pick n Pay distribution system was in crisis and the company needed a solution fast.
Pick n Pay started as a small chain of retail stores, but over the years, it expanded to become a key player in South Africa’s retail market. However, with this growth came a distribution system spread across multiple smaller warehouses. The problem was that these warehouses were often located far from each other, leading to delays in restocking stores, higher transportation costs, and inconsistent inventory levels.
The company’s supply chain could not keep up with the growing demand, which was impacting its operations’ cost and efficiency.
Pick n Pay Realized that Something Needed to Change.
The company had outgrown its current distribution system, which meant it desperately needed a more efficient way to get products from suppliers to its stores.
That’s when the idea of a centralized distribution model came into play. Pick n Pay’s distribution department convinced the leadership to build a new, state-of-the-art distribution center in Johannesburg. The move was brilliant because it was strategically placed to serve their network of stores more effectively.
The new facility was designed and built to handle large volumes of goods but integrated with modern technology to streamline operations.
Tech solutions in the distribution center included automation systems for faster processing and better inventory management tools that would help reduce human error. However, transitioning from a decentralized to a centralized model wasn’t without challenges. The Pick n Pay distribution team had to rework its entire supply chain, from relationships with suppliers to transportation systems.
Lessons from Pick n Pay’s Distribution Pivot Experience
Although difficult, the move was necessary to ensure that stores received products promptly and without interruptions. It was a big leap, but the new centralized system promised major benefits.
Here are some of the Lessons from the move
1. Centralized Distribution Can Cut Costs
One of the main reasons Pick n Pay moved to a centralized system was to reduce costs.
Having multiple warehouses meant the company spent a lot on transportation and storage. However, centralizing their distribution in one location allowed them to reduce the number of trucks needed for deliveries and optimize storage space. According to a Journal of Business Logistics report, companies that centralize their distribution can reduce transportation costs by up to 15%.
Pick n Pay made this cost-saving move by reducing the number of deliveries and improving inventory management.
2. Streamlining Operations Makes Everything More Efficient
By centralizing its operations, Pick n Pay could ensure its inventory was handled more efficiently.
In the old decentralized model, stock often sat in warehouses too long, or some stores received products late. Now, with a single point of distribution, the company could manage inventory better, ensuring that products were available when needed without overstocking. A Supply Chain Management Review study found that centralizing a distribution network can improve order fulfillment rates by 20-25%.
This was the case for Pick n Pay, as they could keep shelves stocked without delays.
3. Technology Is Crucial for Smooth Operations
Centralizing Pick n Pay’s distribution meant they had to adopt new technology.
The company integrated advanced warehouse management and automated picking systems to speed up order fulfillment. This investment in technology helped reduce human error and sped up the entire supply chain process. Using real-time tracking, Pick n Pay could monitor inventory more effectively and quickly respond to issues.
4. Change Management Is Key to a Successful Transition
Transitioning from a decentralized to a centralized system wasn’t easy.
Pick n Pay had to train employees on the new systems and ensure everyone was on board with the changes. Successful change management meant the company could smoothly transition and keep things running without major disruptions. Pick n Pay’s leadership worked closely with staff to ensure seamless transition, from truck drivers to warehouse employees.
How African Supply Chains Can Apply These Lessons
Pick n Pay’s success in centralizing its distribution offers valuable lessons for other retail businesses and supply chains, especially in Africa, where logistics can be challenging.
Many African countries face problems like unreliable infrastructure, high transportation costs, and fragmented supply chains. However, businesses can learn from Pick n Pay’s example of centralizing distribution to tackle some of these issues.
Centralizing distribution can help reduce costs, increase efficiency, and improve customer satisfaction for businesses operating in African markets.
With careful planning and investment in technology, businesses can build distribution centers that serve multiple locations, allowing them to operate more effectively. However, it’s not always simple. In many African countries, the lack of reliable roads, power shortages, and political instability can make implementing a centralized model difficult.
Businesses can start small by centralizing parts of their distribution network and gradually expanding as their operations grow.
Technology solutions like cloud-based inventory management systems, mobile tracking apps, and GPS can also help overcome infrastructure challenges. These tools can ensure real-time inventory monitoring and help businesses respond to disruptions quickly, similar to how Pick n Pay uses technology in its distribution center.
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
