Case Study

Supply Chain Modeling Helps PriceSmart Prepare for Growth

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“The model we developed allows us to answer new questions as they arise, and gives us the confidence and conviction to know what we’re getting into before we take the first step.”

Frank Diaz, Senior Vice President of Distribution and Logistics, PriceSmart

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Supply Chain Modeling Helps PriceSmart Prepare for Growth

Challenge

Managing a large, growing supply chain that spans multiple countries is never easy. Just ask San Diego-based PriceSmart. This warehouse retailer currently has 37 stores in 12 countries across Latin America and the Caribbean, and their network continues to grow. PriceSmart’s compounded annual growth rate for the last five years was just under 17 percent.

But, in these challenges, PriceSmart also sees opportunity. “We recognize that our supply chain is a key differentiator for us in the marketplace, and it’s a value proposition we bring to our members,” says Frank Diaz, PriceSmart’s Senior Vice President of Distribution and Logistics. “We supply our over one million active members with quality products at a lower price that they just can’t get elsewhere.”

Part of PriceSmart’s strategic supply chain agenda is to manage its growth effectively. To
that end, the metrics used to measure supply chain performance are tied directly to the goals of the business.

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The company understands the importance of agility and responsiveness and is committed to leveraging technologies that help them improve supply chain planning and execution.

Solution

TPriceSmart called on LLamasoft to evaluate the impact of future growth and answer
questions such as:

  • When and where will more capacity be needed?
  • How much capacity will be needed?
  • What is the best way to meet the new requirements?
  • How can we improve visibility and anticipate these requirements?

According to Diaz, “LLamasoft tools such as Supply Chain Guru helped us take baseline information, learn from what we know today, and project it out into the future to gain visibility into how we need to organize our supply chain well in advance of the need.”

Results

The team identified a number of quick wins that could be achieved right away. For example, by modeling and then testing different scenarios, they discovered that by increasing their frequency of reorder they could reduce their overall cycle stock, reduce the probability of stock-outs, and improve their decision-making abilities.

To reach PriceSmart’s long-term objectives, they implemented a number of additional changes including developing a hybrid model that made greater use of regional distribution centers. This approach allowed PriceSmart to maintain its current inventory philosophies, yet increase responsiveness by implementing pull techniques at critical
points in the network.

Diaz is also pleased with what he sees for the future. “The model we developed allows
us to answer new questions as they arise, and gives us the confidence and conviction to
know what we’re getting into before we take the first step.”

To learn how LLamasoft can help you optimize your supply chain for a better tomorrow,
visit www.llamasoft.com or call 866-598-8931.

Ready to learn more? Click to request a live demo with the LLamasoft team.

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