Delivering across Africa a new frontier for retailers
It’s a trek of almost 7,000km from Shoprite’s main distribution centre in Brackenfell, Cape Town, to a port in Nigeria, the company’s second-largest market in Africa.
Africa’s largest food retailer operates 2,811 stores in 14 African countries.
Distribution is at the heart of the company’s success.
Shoprite’s extended centralised distribution facilitates the delivery of goods, making it one of the most efficiently operated supply chains on the continent.
Last year the company commissioned a 123,000m² distribution centre in Cilmor, Cape Town, described as one of the most technologically advanced facilities on the continent. However, keen interest — and some might say corporate envy — has persisted in how the retailer manages to competitively get its products across the continent.
The Cilmor distribution centre combines the operations of five distribution centres in Cape Town and is separated into ambient, frozen and chilled sections. The ambient section includes a “chocolate box” where temperature-sensitive items, such as chocolates, are stored. These are items that are then sent across the group's stores in SA and ultimately to the rest of the company’s stores across the continent.
The centre consolidates almost 500 suppliers and can store almost 20,000 products.
Shoprite also has a large fleet of trucks and trailers operating 24 hours a day, seven days a week to ensure maximum availability of goods, which are delivered on a time schedule.
This, coupled with Shoprite’s highly advanced distribution centres and supply line infrastructure, gives its managers greater control over inventory across 15 African countries.
“This empowers us to introduce a number of costsaving efficiencies without decreasing margins or compromising on quality,” the company says on its website.
The retailer also has sophisticated route planning and scheduling software, which optimises store deliveries and reduces the number of trucks on the road.
So it is no wonder that when asked to comment on the extensive supply chain given its competitive nature, a Shoprite spokesperson would not open up, saying: “Shoprite group’s supply chain, especially into other African countries, remains a key competitive advantage.”
But not only Shoprite has managed to position its supply chain in other African markets. Spar and Pick n Pay are also exploring options on the continent. Yet many cite difficulty in getting products into certain markets, given the stringent regulations. Mark Godfrey, the chief financial director at Spar Group, says though the company seldom supplies goods to Nigeria, as Spar has no presence in the country, “on rare occasions these have simply been container loaded and shipped”.
He adds: “Similarly, our limited exports to Angola have previously been handled by our Cape Town division and the goods containerised and shipped. Our more regular exports to neighbouring African countries, including Mozambique, Botswana, Namibia and Zambia, have been done by road — goods are palletised, loaded on third-party vehicles [Spar trucks are seldom used cross-border] and transported by road to retailers.”
Godfrey says with SA’s neighbour states there are regular delays at border posts, which can last for hours or sometimes a day. “Containerised freight in Angola could take a week, while road freight into Zambia could similarly take up to a week.”
Thus for the Spar Group, customs delays and borders being closed to certain products without notice have made it difficult for the company to do business on the continent. Godfrey cites the Namibian market as particularly difficult to access, saying the government there has frequently sought to intervene to protect local producers by placing unannounced restrictions on certain goods, such as dairy products.
As a result, many retailers foresee a mass exodus of South African retail businesses on the continent. But Shoprite’s direct competitor, Pick n Pay, has made major inroads. It operates 1,618 stores across the continent.
According to the group's annual financial report for 2017, more products were taken through its distribution centres this year, with the total volume of centralised supply increasing to 68% compared to 60% in 2017 — which is an indication of greater efficiencies.
The percentage of grocery volume centralised has reached 70% across the country, with the centralisation of fresh and perishable produce at 80% and general merchandise at 40%.
Overall centralisation in the Western Cape region, serviced by the group’s Philippi distribution centre, has reached 78%, with centralised grocery volume at 90%.
But when it comes to the rest of the continent, Pick n Pay prefers to work with local suppliers operating in the respective countries.
Dallas Langman, group executive of group enterprises at Pick n Pay, says the retailer’s aim is to procure goods locally, “which obviates the need for transport logistics and costs, and assists in developing local supply chains.
“When we do bring goods in from South Africa we do this by truck, but also by ship and cargo plane. The length of time it takes to move goods varies by country,” Langman says.
Langman says the export permits need to be obtained prior to retailers moving goods across the country.
“The main challenges we experience are regulatory changes, which may occur at short notice or when goods are already en route, variable delays at border entry points especially during busy periods, and road conditions in some areas,” he adds.
When asked about the factors the company considers before deciding to open a business outside SA, Langman says the ease of transport tends to be just one. No doubt logistics can determine success or failure. Just ask Shoprite.
PICK N PAY PREFERS TO WORK WITH LOCAL SUPPLIERS IN THE RESPECTIVE COUNTRIES