CP All, operator of 7-Eleven convenience stores, will spend Bt1.5 billion to build regional distribution centres in Khon Kaen, Surat Thani and Lampang.
The move will bolster a product-distribution network that has been a key strategy in creating Thailand's largest chain of convenience stores.
Although 7-Eleven stores made their first appearance in the Kingdom in 1989, it was not until 1991 that CP All built its first distribution centre, in Nonthaburi's Bang Bua Thong district, turning what was a weak business into a vigorous, expanding operation.
After nearly 20 years, there are now 4,500 7-Eleven branches throughout the country, and the company hopes its new regional distribution centres will allow that number to grow to 7,000.
Assistant vice president Chusin Jirawongsy explained that in the early years, distribution of perishable products that had to be sold before their expiry date represented a big obstacle to expansion of the 7-Eleven chain. In 1991, the company found itself unable to open stores upcountry, especially in remote areas, because of the time needed for transportation and the risk that fresh goods like dairy products, sausages and bread might spoil. Suppliers were expected to deliver their products directly to individual 7-Eleven stores, and some did not have the capacity to serve remote areas.
"If we were unable to distribute products to our upcountry branches, we were unable to expand our business. We decided we had to have our own distribution centre. Finally, in 1991 we rented a cargo warehouse with an area of 1,500 square metres. As a result, we expanded from 28 branches to 127 in 1992," he said.
Even with the warehouse and gradual expansion, CP All soon came up against the same problems of distance and distribution. In 1997, it spent Bt650 million to build its first distribution centre, in Bang Bua Thong. Importantly, it was designed as a chilled-distribution centre for fresh perishable products.
The Bang Bua Thong centre now handles distribution to about 2,300 7-Eleven stores in 50 provinces, including the greater Bangkok area and the western, northern and southern parts of the country. As well as Bang Bua Thong, CP All has opened distribution centres in Bangkok's Lat Krabang district, Khon Kaen and Chiang Mai, to cover 7-Eleven shops nationwide.
The company uses warehouse-management software in a computer system to store goods, load products according to orders and set delivery dates.
Suppliers deliver their products to the distribution centre. Fresh goods like dairy products, chocolate, meat and sausages go to the Bang Bua Thong centre, which provides cold storage to keep them fresh before distribution.
"We closely check the expiry dates on fresh products. If they're close to expiry and we cannot distribute them on time, we reject them," Chusin said.
"Finally, we've turned weakness into strength. Even though we had to invest a huge amount of money to build our own distribution centres - and this curbed our gross profit margin - we can now expand 7-Eleven stores around the country."
The Nation, July 22, 2008