Pepco bets on new Poland hub, long freight deals to build logistics resilience

Pepco Opens Poland Distribution Hub, Signs Long Freight Deals for Logistics Resilience

Pepco's Strategic Moves to Strengthen Supply Chain Amid Global Disruptions

(Corrects 2nd bullet point and paragraph 7 to specify that 35% container ship reliability refers to overall shipments, not Pepco specifically.)

By Marta Maciag and Alicja Surdy

New Distribution Centre Launch in Gdansk

GDANSK, Sept 21 (Reuters) - European discount retailer Pepco is counting on long-term freight contracts and a new Polish distribution hub to soften the blow from higher shipping costs and mounting supply chain disruptions.

Warsaw-listed Pepco, which operates more than 4,000 stores in 19 European countries, on Thursday opened a distribution centre near the Baltic port of Gdansk, Poland, aimed at supporting rapid store expansion and improving the resilience of its supply chain.

Global Shipping Challenges Impacting Retailers

Retailers globally are grappling with elevated freight and fuel costs stemming from the conflicts in the Middle East, with disruptions in the Red Sea and the Strait of Hormuz having snarled global shipping routes.

Pepco’s Approach to Freight Costs

"With quite long-term contracts ... we are able to mitigate the peaks (in costs) right now," CEO Stephan Borchert told Reuters, saying the company had secured container agreements extending beyond next summer.

Competitive Landscape in Discount Retail

Pepco competes in a crowded discount retail market against rivals such as Netherlands-based Action and LPP's budget brand Sinsay, making efficient logistics critical to maintain its low-price advantage.

Supply Chain Disruptions and Logistics Resilience

Industry-Wide Shipping Delays

SUPPLY CHAIN DISRUPTIONS

"I've been in supply chain for 45 years and it's never been like this," Pepco's Logistics Director Martin White said, citing the really challenging combination of disruptions including forced changes in shipping routes and typhoons in China that stranded Pepco freight in Shanghai in August.

Container Ship Reliability Statistics

Because of these disruptions, only about 35% of overall container shipments arrive on time, White said. Supply chain adviser Sea-Intelligence had put global schedule reliability at 56.4% in July, with Shanghai at just 21%.

Role of the Gdansk Site in Logistics Strategy

Part of the Gdansk site will act as a deconsolidation centre that will allow Pepco to unpack containers and decide where to send goods after they arrive—calls that were previously made while stock was still in Asia.

Inventory Management and Cost Control

Borchert said the company was not building up extra inventory buffer, relying instead on better tracking and long-term freight deals to manage the situation.

Customer Impact and Industry Response

He added Pepco would do everything it could to avoid passing higher costs on to customers, but would look at this option 'selectively' if the entire industry was forced to act.

Shipping Cost Transparency

Neither White nor Borchert provided detailed figures on the higher shipping costs.

(Editing by Milla Nissi-Prussak)