+ | AV Read aloud | Draw SUPPLYCHAINDIVE BRIEF Dollar General to curb logistics costs by expanding private truck fleet Published March 23, 2021 By S.L. Fuller Dive Brief: Dollar General is contending with continued high carrier rates and fuel costs, CFO John Garratt said during the company's earnings call Thursday. Increased costs are also stemming from discretionary bonuses for trucking employees, as well as for workers in distribution centers, Garratt said. To help mitigate transport costs, the company plans to further expand its private truck fleet, Garratt said. The private fleet accounted for more than 20% of outbound logistics at the end of last year, COO Jeff Owen said on the call. The retailer said the recent opening of its dry distribution center The retailer said the recent opening of its dry distribution center in Walton, Kentucky, is expected to help it reduce stem miles and, therefore, costs. It also plans to open two DG Fresh facilities this year, including a combination DG Fresh and dry distribution center in Nebraska, which Owen said should reduce stem miles over time. Dive Insight: Pandemic-driven volume increases were responsible for a portion of the increases in transportation and distribution costs, Dollar General said. And buyers aren't expected to let up on spending any time soon. "With another round of stimulus checks being mailed right now, we expect another large boost in consumer spending over the next with another round or sumulus checks being mailea right now, we expect another large boost in consumer spending over the next few months," National Retail Federation Chief Economist Jack Kleinhenz said in a statement last week. But high logistics costs can offset gains in sales. In a recent McKinsey survey of CPG companies, 80% said they did not expect transportation costs to decrease this year from 2020's elevated levels. "We feel great about what we did this year, delivering 77 basis points of gross margin expansion," said Garratt. "But we also, as I mentioned, are seeing in the near term higher distribution and transportation costs. So ... these will weigh in the near term." Increased volume, mixed with a shortage of trucks and people to drive them, have pushed up truckload rates. Volatility in the trucking market has prompted shippers to focus on procuring reliable carrier capacity. For some shippers, that means diversification. For others, it means becoming a shipper of choice and leaning on dedicated services, or signing their fleets over to specialists in a conversion to manage capacity. ily For some shippers, that means diversification. For others, it m becoming a shipper of choice and leaning on dedicated services signing their fleets over to specialists in a conversion to manage capacity Dollar General's fleet-bulking strategy would allow it to more frequently skip the third-party pool. Demand surges have kept sp prices elevated. The pandemic has also put pressure on efficient distribution, though large retailers have been reexamining their networks since before the coronavirus. Surging e-commerce volumes reinforced the need for more capacity. Read case study 1 posted under Week 1. Page 12 Answer the following questions once you have finished reading Case Study 1. CASE QUESTIONS 1. What is the difference between Dry Distribution and Fresh Facilities? 2. What are STEM miles? What impact do they have on an organization? 3. How has the pandemic contributed to transportation and distribution costs? 4. How will automation help Dollar General reduce cost and improve customer satisfaction