Retailer's ramp up distribution centres

In its most basic form, the group's supply chain consists of strategically placed DC's linking the flow of product from supplier to store where customer demand ultimately drives the movement of products.

As the biggest retailer in Africa, the company has three major distribution nodes and 26 DC's that total 390,000 square meters of distribution space across six countries.

Rival Pick n Pay (PIK) plans to invest over two billion rand to set up four distribution centres over the next three years in Gauteng, KwaZulu-Natal, Western Cape and Eastern Cape.

The group last year completed its 628 million rand distribution centre in Longmeadow, Gauteng, but came under fire from analysts who said that their move to centralise distribution was way overdue.

DC's cut out the element of high rentals for stores with extra storage space and allow for increased trading space, which in turn increases stock turnover, and impacts positively on cash flow.

Shoprite has already spent 1.5 billion rand in the year to June at its existing centres and will spend a similar amount in the coming year.

It's DC in KwaZulu-Natal is due for completion in 2012, while its Brackenfell DC in Cape Town is currently being extended.

Centurion, in Pretoria, houses its largest DC, which doubled in size this year to 150,000 square meters - that's big enough to park 28 jumbo jets inside and long enough to land a Boeing 737 on the roof.

According to Shoprite, by controlling its supply line, merchandise can be buffered, countering supplier out-of-stocks and volatile trading patterns, while offering an opportunity to buy in against price increases.

Deputy managing director Carel Goosen said the money being spent on distribution centres would be over and above its annual capital expenditure of around 1.2 billion rand.

Upmarket retailer Woolworths Holdings (WHL) says that its centralised model is the core platform for supporting its ongoing growth.

The company spent 500 million rand on their Midrand Gauteng distribution centre, a state of the art warehouse which employs a number of green and environmentally friendly features like recycled water and refrigeration equipment that runs on ammonia, which is harmless to the ozone, instead of damaging CFC gasses.

With 9000 retail units under 69 different banners in 28 countries, Wal-Mart has one of the largest private distribution operations in the world. Its seamless logistics model has earned it the title of "supply-chain leader".

With its entry into SA through a 51% stake in Massmart (MSM), DC's - whose desired result is to consistently allow customers to find the items on their shopping list - thereby keeping customers loyal, is just one of the ways that local retailers are stepping up their game.