Cape Town - Pick ‘n Pay Stores said last week that the high capital outlay deterred it from setting up its own centralised distribution system despite efficiency gains related to the system.
Pick ‘n Pay chief executive Sean Summers estimated that it would cost more than R2 billion to set up a centralised distribution system and despite the benefits, he did not believe the return on this investment would be worthwhile.
Pick ‘n Pay chairman Raymond Ackerman said ever since he had set up Pick ‘n Pay in 1967 he had been tempted to centralise distribution because of the administrative efficiency gains associated with receiving one or two store deliveries a day, as opposed to a host of them.
He added that he believed he would have been able to secure buying discounts from suppliers through offering a few centralised delivery points but that none had been forthcoming.
However, both Summers and Ackerman made it clear that the company would continue to debate introducing centralised distribution.
In theory, centralised distribution centres offer efficiency and cost benefits to retailers, but the savings are not immediately dramatic but rather experienced over a long period of time.
In a growing retail market such as South Africa, a supermarket chain such as Pick ‘n Pay is far more likely to get an immediate, as well as higher, return from spending R2 billion on opening new stores than on a distribution system that only pays for itself over years.
Despite this, the company now has experience of setting up an internal distribution system as it has just done at its Franklins Australia chain.
No comments yet.