Topic: Supply Networking CASE 1: A new distribution centre site for Pick n Pay in Johannesburg In 2010, Pick n Pay launched its major R628 million distribution centre in Longmeadow, Gauteng, and planned for another four around the country within the next three years. Longmeadow, the company's blueprint centralised distribution centre (CDC), currently services 284 stores. Building on this success, a second inland grocery distribution centre was planned, as well as facilities in the Western Cape, KZN and Eastern Cape regions. In addition, a perishables inland distribution centre was scheduled. This total investment comes at a cost of over R2 billion. According to CEO Nick Badminton: 'Pick n Pay's move to centralised distribution is pivotal to the group-wide transformation programme, which was launched three years ago as part of a fundamental review of the way we do business. The purpose of this project was to improve the efficiency of our core retail business, reduce the cost of doing business, simplify our organisational structures and enhance the way we use information technology. Our decision to move to centralised distribution was motivated by changes in South Africa's retail landscape, which had seen us fall behind our competitors who were investing significantly in their supply chains and in improved service to their stores through centralised distribution systems. Throughout the world, the most successful retail groups have unlocked massive value from their supply chains and most of them have moved away from direct-to-store delivery distribution. We were also driven by the realisation that our current distribution operations are running over capacity and have become inefficient, resulting in stores being overstocked with a deterioration in customer service levels as a result.' Badminton said that Pick n Pay was the last of the major supermarket groups to commit to a streamlined supply chain. 'While this inevitably compromised our efficiency in the short term, it has enabled us to learn from the experience of others and to build a world class distribution centre, deploying the most up-to-date and state- of-the-art warehouse management software solutions. It was no light decision, as required considerable capital investment and represents a significant change in the way we've done business for more than four decades, with the investment in Longmeadow to date totalling R628 million.' Badminton said that beyond technological advances and logistical achievements, it is the benefit to its customers that remains top of our minds. 'For the hundreds of thousands of shoppers who pass through our doors every day, the most significant benefits of centralised distribution have included the improved availability of stock, lower prices and a streamlined ordering process. This has freed up our store staff to spend more of their time concentrating on shopper engagement. All the latest independent surveys confirm that over a basket of goods, Pick n Pay is quite clearly cheapest of all the major retail chains. The above was eight years ago. Today, Pick n Pay in Gauteng alone has seen the number of stores serviced by the Longmeadow CDC increase from 284 to 540. This has created serious stress to the distribution centre. As a result, Pick n Pay decided to open a new CDC to service the 262 stores found in Johannesburg only. The company's chief operations officer, Miss Naomi Morero has identified a couple of potential areas in Johannesburg that she believes to be suitable for the new CDC, however, she would like a more accurate site selection based on scientific data. She has contracted your services and has requested you to assist her in determining the location of the CDC. The CDC will service the following stores: Pick n Pay Bryanston, Pick n Pay Rivonia Square, Pick n Pay Benmore, Pick n Pay Bright Water Commons, Pick n Pay Ferndale, Pick n Pay Cresta, Pick n Pay Northcliff, Pick n Pay Campus Square, Pick n Pay Braamfontein, Pick n Pay Darras, Pick n Pay Louis Botha, Pick n Pay Bramley, Pick n Pay Greenstone, Pick n Pay Meadowdale, and Pick n Pay Primrose. The current CDC will service the remaining stores. The following map shows the stores to be serviced by the new CDC. JUICIO MY 12 ! Esther Park y CD Witcoppen square enig sa 20 Red And Pick n Pay Lonehill Downs Pick n Pay O.. Clothing Store 19 Ratin Ridge O Pick 'N PAY Esange Pick n Pay Wateryal 5-11 18 land Pashol Com Mook Douglagale 14- 17 Pick n Pay Rivonia Klanten Choor op Bryanston Woodmead Juk VW View 16 hrding Pick n Pay Birch olvedal Bryanston Country Bryanston Pick 'n Pay 15 Chloor Rivonia Square (6.1, 15.6) (10.4, 15,3) Shop Vanda Grove 14 Songs O Pick n Pay Frankenwald Noten Histo Kensington sotto www 13 Strydompak Pick n Pay Benrnore TV Tyne Park Lethabong 12 Ferndale BOX (10.1, 12.5) Liboak dla Gardens Randburg Mahal Melboro MES 11 Pick n Pay Bright Water Compions (3.5, 10.5) Alexandra 10 Fontable Pick n Pay Sandton Hind Wynberg Pick n Pay Pharmacy Wierda Valley Greenstone Ball gowrie Windsor Kew Pick n Pay (17.9, 8.4) 8 Cresta Pick n Pay ilydomy Plok n Pay Greenstone Sobenda- Pick n Pay Cresta Park Centre Eastleigh Crestwold Bramiey Dodo 7 Black |(2,7.3) Dukeld West (13.5, 7.9) Parktown Melrose Highlands Pick n Pay Meadowdale 6 North North Pick n Pay. Nous Sindh Houghton Kloppet Northcliff Neglen 5 Estate (2.9, 5.6) Ketute (19.1, 5.6) dowle Mortymer Pick n Pay Louis Dunia Fietoti andle Orange Bothacia 3. Emmarentia MI llarney (12.6, 4.5) FITT SRK 3 102 Wies evlande Melville Cyrildene 56 ENEO 2 Pick n Pay Campus Square (4.7, 2) Ban Bedfordview Westbury U Library Yeoville Pick n Pay Primrose (7.6, 0.6) Beunderhot Hillbrow Bedford Liquor Store ndustria West Valley (13, 0.7) idem Pick 'n Pay Braamfontein (19.9, 1.9) Doomfontein Pick n Pay barras 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (4.5, 9.9) Ferndale 9 . . AM 4 Hindi 1 X She has also provided you with the forecasted quantities of cases of goods to be shipped to each store for the year 2018. The following table shows these forecasted figures (in thousands) Forecasted Forecasted Store name Store name quantities (*) quantities (*) 560 PnP Rivonia 786.5 PnP Bryanston Square PnP Bright Water 213 201.0 PnP Ferndale Commons 332 456.1 PnP Northcliff PnP Campus Square 321 562.1 PnP Darras PnP Louis Botha 621 452.1 PnP Greenstone PnP Meadowdale PnP Benmore 350 PnP Bramley 321.0 PnP Primrose 236.5 PnP Cresta 452 PnP Braamfontein 451 (1) Note that the above quantities are in thousands (not necessary to multiply by 1 000) Use the information provided in the above problem to answer the case-related questions. Question 1 (37 marks) (a) Employ the center-of-gravity method in order to suggest where Pick n Pay should locate its new CDC. (35) (b) Indicate the suggested location determined in question a above in the map. (Use a red marker to locate the spot on the map) (2) Question 2 (4 marks) Examine and explain the capacity strategies are available for Pick n Pay to use as they introduce their new facility? (4) Question 3 (4 marks) If you were to advise Pick n Pay where to locate its CDC, what would you suggest (without considering the data provided to use with the centre-of-gravity)? (Hint: Understand figure P5.1 concerning supply-side and demand-side influences) (4) Question 4 (6 marks) Examine how the main three objectives of supply chain management can be of good use to Pick n Pay. (6) Topic: Supply Networking CASE 1: A new distribution centre site for Pick n Pay in Johannesburg In 2010, Pick n Pay launched its major R628 million distribution centre in Longmeadow, Gauteng, and planned for another four around the country within the next three years. Longmeadow, the company's blueprint centralised distribution centre (CDC), currently services 284 stores. Building on this success, a second inland grocery distribution centre was planned, as well as facilities in the Western Cape, KZN and Eastern Cape regions. In addition, a perishables inland distribution centre was scheduled. This total investment comes at a cost of over R2 billion. According to CEO Nick Badminton: 'Pick n Pay's move to centralised distribution is pivotal to the group-wide transformation programme, which was launched three years ago as part of a fundamental review of the way we do business. The purpose of this project was to improve the efficiency of our core retail business, reduce the cost of doing business, simplify our organisational structures and enhance the way we use information technology. Our decision to move to centralised distribution was motivated by changes in South Africa's retail landscape, which had seen us fall behind our competitors who were investing significantly in their supply chains and in improved service to their stores through centralised distribution systems. Throughout the world, the most successful retail groups have unlocked massive value from their supply chains and most of them have moved away from direct-to-store delivery distribution. We were also driven by the realisation that our current distribution operations are running over capacity and have become inefficient, resulting in stores being overstocked with a deterioration in customer service levels as a result.' Badminton said that Pick n Pay was the last of the major supermarket groups to commit to a streamlined supply chain. 'While this inevitably compromised our efficiency in the short term, it has enabled us to learn from the experience of others and to build a world class distribution centre, deploying the most up-to-date and state- of-the-art warehouse management software solutions. It was no light decision, as required considerable capital investment and represents a significant change in the way we've done business for more than four decades, with the investment in Longmeadow to date totalling R628 million.' Badminton said that beyond technological advances and logistical achievements, it is the benefit to its customers that remains top of our minds. 'For the hundreds of thousands of shoppers who pass through our doors every day, the most significant benefits of centralised distribution have included the improved availability of stock, lower prices and a streamlined ordering process. This has freed up our store staff to spend more of their time concentrating on shopper engagement. All the latest independent surveys confirm that over a basket of goods, Pick n Pay is quite clearly cheapest of all the major retail chains. The above was eight years ago. Today, Pick n Pay in Gauteng alone has seen the number of stores serviced by the Longmeadow CDC increase from 284 to 540. This has created serious stress to the distribution centre. As a result, Pick n Pay decided to open a new CDC to service the 262 stores found in Johannesburg only. The company's chief operations officer, Miss Naomi Morero has identified a couple of potential areas in Johannesburg that she believes to be suitable for the new CDC, however, she would like a more accurate site selection based on scientific data. She has contracted your services and has requested you to assist her in determining the location of the CDC. The CDC will service the following stores: Pick n Pay Bryanston, Pick n Pay Rivonia Square, Pick n Pay Benmore, Pick n Pay Bright Water Commons, Pick n Pay Ferndale, Pick n Pay Cresta, Pick n Pay Northcliff, Pick n Pay Campus Square, Pick n Pay Braamfontein, Pick n Pay Darras, Pick n Pay Louis Botha, Pick n Pay Bramley, Pick n Pay Greenstone, Pick n Pay Meadowdale, and Pick n Pay Primrose. The current CDC will service the remaining stores. The following map shows the stores to be serviced by the new CDC. JUICIO MY 12 ! Esther Park y CD Witcoppen square enig sa 20 Red And Pick n Pay Lonehill Downs Pick n Pay O.. Clothing Store 19 Ratin Ridge O Pick 'N PAY Esange Pick n Pay Wateryal 5-11 18 land Pashol Com Mook Douglagale 14- 17 Pick n Pay Rivonia Klanten Choor op Bryanston Woodmead Juk VW View 16 hrding Pick n Pay Birch olvedal Bryanston Country Bryanston Pick 'n Pay 15 Chloor Rivonia Square (6.1, 15.6) (10.4, 15,3) Shop Vanda Grove 14 Songs O Pick n Pay Frankenwald Noten Histo Kensington sotto www 13 Strydompak Pick n Pay Benrnore TV Tyne Park Lethabong 12 Ferndale BOX (10.1, 12.5) Liboak dla Gardens Randburg Mahal Melboro MES 11 Pick n Pay Bright Water Compions (3.5, 10.5) Alexandra 10 Fontable Pick n Pay Sandton Hind Wynberg Pick n Pay Pharmacy Wierda Valley Greenstone Ball gowrie Windsor Kew Pick n Pay (17.9, 8.4) 8 Cresta Pick n Pay ilydomy Plok n Pay Greenstone Sobenda- Pick n Pay Cresta Park Centre Eastleigh Crestwold Bramiey Dodo 7 Black |(2,7.3) Dukeld West (13.5, 7.9) Parktown Melrose Highlands Pick n Pay Meadowdale 6 North North Pick n Pay. Nous Sindh Houghton Kloppet Northcliff Neglen 5 Estate (2.9, 5.6) Ketute (19.1, 5.6) dowle Mortymer Pick n Pay Louis Dunia Fietoti andle Orange Bothacia 3. Emmarentia MI llarney (12.6, 4.5) FITT SRK 3 102 Wies evlande Melville Cyrildene 56 ENEO 2 Pick n Pay Campus Square (4.7, 2) Ban Bedfordview Westbury U Library Yeoville Pick n Pay Primrose (7.6, 0.6) Beunderhot Hillbrow Bedford Liquor Store ndustria West Valley (13, 0.7) idem Pick 'n Pay Braamfontein (19.9, 1.9) Doomfontein Pick n Pay barras 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (4.5, 9.9) Ferndale 9 . . AM 4 Hindi 1 X She has also provided you with the forecasted quantities of cases of goods to be shipped to each store for the year 2018. The following table shows these forecasted figures (in thousands) Forecasted Forecasted Store name Store name quantities (*) quantities (*) 560 PnP Rivonia 786.5 PnP Bryanston Square PnP Bright Water 213 201.0 PnP Ferndale Commons 332 456.1 PnP Northcliff PnP Campus Square 321 562.1 PnP Darras PnP Louis Botha 621 452.1 PnP Greenstone PnP Meadowdale PnP Benmore 350 PnP Bramley 321.0 PnP Primrose 236.5 PnP Cresta 452 PnP Braamfontein 451 (1) Note that the above quantities are in thousands (not necessary to multiply by 1 000) Use the information provided in the above problem to answer the case-related questions. Question 1 (37 marks) (a) Employ the center-of-gravity method in order to suggest where Pick n Pay should locate its new CDC. (35) (b) Indicate the suggested location determined in question a above in the map. (Use a red marker to locate the spot on the map) (2) Question 2 (4 marks) Examine and explain the capacity strategies are available for Pick n Pay to use as they introduce their new facility? (4) Question 3 (4 marks) If you were to advise Pick n Pay where to locate its CDC, what would you suggest (without considering the data provided to use with the centre-of-gravity)? (Hint: Understand figure P5.1 concerning supply-side and demand-side influences) (4) Question 4 (6 marks) Examine how the main three objectives of supply chain management can be of good use to Pick n Pay. (6)