Pepco Opens Poland Hub to Strengthen Supply Chain Against Rising Costs

Post by : Saif

Pepco is turning to a new distribution center in northern Poland and long-term freight agreements to protect its low-cost retail model as shipping expenses and supply chain disruptions continue to increase.

The European discount retailer opened its new distribution center near Gdansk on Thursday. The facility is designed to support the company's expansion across Europe while making its supply network more flexible during periods of disruption.

Pepco operates more than 4,000 stores across 19 European countries, making reliable and affordable logistics important to keeping products available across its network.

Long-term freight contracts help control costs

Rising fuel and shipping costs have created challenges for retailers around the world. Conflicts in the Middle East have disrupted major shipping routes, including the Red Sea and the Strait of Hormuz.

Pepco CEO Stephan Borchert said long-term freight contracts have helped the company reduce the impact of sudden increases in transportation costs. The company has secured container agreements extending beyond next summer.

These agreements give Pepco greater visibility over future shipping expenses at a time when freight markets remain volatile.

The strategy is particularly important because Pepco competes with other discount retailers where low prices are a central part of the business model.

Supply chain disruptions hit deliveries

Pepco's logistics operations have faced significant disruptions in recent months.

Logistics Director Martin White said changes in shipping routes and severe weather conditions in China have affected the movement of goods. Some Pepco shipments were stranded in Shanghai during August after typhoons disrupted operations.

Only around 35% of Pepco's shipments currently arrive on time, according to White.

The figure highlights the pressure faced by retailers that depend heavily on international shipping. Sea-Intelligence estimated global schedule reliability at 56.4% in July, while reliability for shipments involving Shanghai was much lower at 21%.

New Gdansk center adds flexibility

The new facility near Gdansk is expected to give Pepco greater control over how imported goods are distributed after reaching Europe.

Part of the center will operate as a deconsolidation facility. This will allow the company to unload containers and decide where products should be sent after they arrive in Poland.

Previously, some of these distribution decisions were made while goods were still in Asia.

The new system could give Pepco more flexibility when demand changes or shipping schedules are disrupted.

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Pepco avoids large inventory buildup

Despite the supply chain problems, Pepco does not plan to create a large additional inventory buffer.

Instead, the company is relying on improved shipment tracking, greater control over distribution and long-term freight agreements to manage uncertainty.

Borchert said Pepco would try to avoid passing higher transportation costs on to customers. However, he indicated that selective price increases could be considered if rising costs affected the wider retail industry.

For Pepco, maintaining low prices while protecting product availability will remain a key challenge as global shipping conditions continue to change.

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