Ahold Delhaize USA bullish on potential of self-distribution network

Ahold Delhaize USA is reaping the benefits of its near-complete transition to integrated self-distribution.

Sanja Krajnovic, executive vice president of distribution and transportation for ADUSA Supply Chain, called the shift “tremendously beneficial” during a tour this week of the company’s 1.2 million-square-foot automated distribution center in York, Pennsylvania.

Under a $480 million, multiyear supply chain transformation plan unveiled in December 2019, Zaandam, Netherlands-based parent Ahold Delhaize aimed to have more than 85% of its U.S. distribution network—integrating brick-and-mortar and e-commerce—be self-managed by the end of 2022. The company has surpassed that target, with 23 DCs now transitioned, and now has just two facilities left to make the switch: automated frozen warehouses in Plainville, Connecticut, and Mountville, Pennsylvania, both developed by cold storage provider Americold under a partnership announced in mid-2020.

Sanja Krajnovic, EVP of distribution and transportation for ADUSA Supply Chain, at the York distribution center. / Photo by Russell Redman

“I believe it’s our competitive advantage to have our own internal supply chain, which means that we control end-to-end everything from manufacturing, procurement, how the product comes in and all the way to our customer,” Krajnovic told WGB and other media at the York DC tour on Tuesday. “Think about a tremendous control we have of entire supply chain. That’s where you get a lot of benefit. And once you have that, then you can really start thinking about optimization and make it even more efficient, because now it is all in-house.”

Related:Q&A: Ahold Delhaize CEO Frans Muller eyes seamless ‘customer journeys’

Most recently, in late July, ADUSA transitioned its 600,000-square-foot DC in Chester, New York, to the self-managed supply chain network. Acquired from C&S Wholesale Grocers, the facility serves Stop & Shop and Hannaford supermarkets in the Northeast. The Chester location became the 23rd DC on the integrated network.

No. 22 was the York DC, a former C&S facility that joined the network in May 2022. The automated York site—the largest in the network—supplies non-perishable products to nearly 400 Giant Food and Giant/Martin’s (The Giant Company) stores.

A palletization robot inside the York automated distribution center. / Photo by Russell Redman

“You might think about, well, what’s next? Now we’re really about leveraging our size and our scale, because we’re very large,” said Krajnovic, who joined ADUSA in August 2022 after nearly two years at Dollar General and 24 years at Target Corp. “Before, it was kind of like we had [facilities] here, there and everywhere. Now, that you look holistically, you have a tremendous opportunity to increase your value, to think about automation, digital capabilities and how you advance that one large network to really support the customer at the end of the day.”

Related:Ahold Delhaize USA takes another step toward self-distribution

The York DC is taller than 10 stories, a height needed to accommodate 110-foot cranes that are part of selection automation. ADUSA has said this technology is part of a robust stack that also includes palletizing automation and a proprietary workforce management system.

During the tour of the facility, staff highlighted the palletization robots and pointed out the ability to automate the creation of mixed pallets. Its ACP storage capabilities include 89,000 tray storage locations, an 800,000-case capacity, 36 automated tray shuttles, 54 vertical reciprocating lifts and over 2,000 motors.

Automation also is used at the York facility to assemble mixed product pallets. / Photo by Russell Redman

Overall, the 300-acre York campus employs about 1,000 associates—many of whom are charged with enabling and maintaining its technology—and encompasses 1.8 million square feet of facilities, with space for 1,350 trailer parking spots. Procurement at the DC is managed by ADUSA Procurement, while C&S continues to provide third-party labor services.

Related:Q&A: Ahold Delhaize USA CEO JJ Fleeman touts growth potential of omnichannel shoppers

“We have a distribution centers that, for the most part, have all temperature zones. So you can send frozen, meat, dairy, regular dry grocery like cereal, and we just talked about diapers. We have a very wide assortment for our customers,” Krajnovic noted. “The vast majority of our DCs actually have all temperatures on stock. Why is that advantageous for us? It’s closer to the customer. So when you think about that, you can provide the right assortment into that distribution center and utilize your transportation distance to optimize your cost center to the stores, which are now omnichannel. Customers can buy stuff online or in-store, but we are the ones providing all that product to our stores.”

Krajnovic explained how ADUSA’s integrated, self-managed supply chain reflects Ahold Delhaize’s omnichannel brand strategy. Under that game plan, recently expounded by Ahold Delhaize CEO Frans Muller and ADUSA CEO JJ Fleeman, online services and operations work seamlessly with the company’s brick-and-mortar supermarkets, which in the United States include roughly 2,050 stores under the Stop & Stop, Giant Food, Giant/Martin’s (The Giant Company), Food Lion and Hannaford banners.

ACP storage capabilities in the York DC include 89,000 tray storage locations, an 800,000-case capacity and 36 automated tray shuttles. / Photo by Russell Redman

“It certainly comes back to controlling our own destiny, if you will, because we view all of our brands as omnichannel retailer locations. So we are essential for them to be able to fulfill the needs of the customers, whether they’re coming into the store or shopping online. We're a key enabler in omnichannel as we know that is the future of our growth for the company,” she said. “Again, it gives us a tremendous amount of control and visibility into our supply chain.”

Stores have evolved into critical distribution points in the integrated network by not just providing added reach, but also more flexibility and efficiency, Krajnovic agreed.

“What we understand is the population density with our stores is really what makes the biggest difference. We serve communities where we have a lot of dense locations, and our customers are really loyal to the local brands in the U.S., as you already know. I think that’s part of the secret sauce for us, that connection with our customers because we want to make a very easy experience for them,” she said.

“We do see that our customers like to shop all platforms," Krajnovic noted. "The stores are still really important as physical locations, but the digital utilization is also as important. A lot of times, they start on digital, they go to the store and vice versa. So wherever and whenever they’re ready to shop, we want to be there for them.”

The York warehouse is over 10 stories high to house 110-foot cranes that are part of selection automation. The 300-acre campus also includes space for 1,350 trailer parking spots. / Photo by Russell Redman

According to ADUSA, the Mountville frozen facility is operating with initial test volume, and the Plainville site is slated to open in 2024. That automated warehouse will serve Stop & Shop and Hannaford stores in the Northeast and New England, while the Mountville facility will serve the Giant Food, The Giant Company and Food Lion chains in the Mid-Atlantic.

Together, the frozen DCs will expand ADUSA’s cold storage space by 24 million cubic feet, or 500,000 square feet, delivering a combined 59,000 pallet positions. They also stand to provide local product expansion, better product freshness and faster delivery because of their proximity to the company’s local supermarket brands.

“Once we get the two frozen facilities [fully operational], we kind of complete our initial plan to get all the facilities into our network that’s fully controlled, that we fully run. Again, that gives us wonderful control and an advantage in total supply chain, end to end,” Krajnovic said. “Our next step is really utilizing our size and scale to continue to lower the cost and provide a great value for our customers.”