Plagued by supply chain woes, Dollar General boosts its capacity

Dollar General, which has previously struggled with supply chain issues, on Tuesday announced a major boost to its distribution channels, with the opening of several facilities around the country that add millions of square feet in storage capacity.

The Goodlettsville, Tennessee-based discounter opened an 800,000-square-foot facility in Blair, Nebraska that stores both dry goods and refrigerated items. It’s the retailer’s first ground-up, dual distribution center. Construction began on the warehouse in late 2020.

Dollar General also said it has boosted distribution center storage capacity by more than 2 million square feet through new regional facilities in Newnan, Georgia, and Fort Worth, Texas.

The fast-growing retailer, which now operates more than 19,000 stores, also said it invested $45 million in an expansion of its Jonesville, South Carolina, distribution center, which debuted in 2005. A 250,000 square-foot addition to the warehouse was finished this spring.

Dollar General also said it plans to build a 170,000-square-foot fresh foods facility in Amsterdam, New York, near an existing distribution center that opened in 2019. Construction on that project is slated to start next year.

Construction is currently underway on three previously announced Dollar General distribution centers in North Little Rock, Arkansas; Aurora, Colorado; and Salem, Oregon.

“The recent additions to our supply chain network aim to provide greater efficiencies, create additional jobs and drive positive economic impact,” Tony Zuazo, Dollar General’s EVP of global supply chain, said in a statement. “We’re excited to continue growing our distribution center network to further support store growth and to better serve our customers and local communities.”

The supply chain investments are designed to boost capacity by about 20%, the retailer previously said.

In December, Dollar General reported more than $40 million in unexpected supply chain costs due to inefficiencies in returning shipping containers and costs associated with moving freight within its distribution centers.

“While these issues have resulted in a gross margin headwind in the back half of this year, the team has worked hard to move past these delays with the opening of additional storage and warehouse facilities, which have already begun to relieve some of the capacity pressures,” CEO Jeff Owen told analysts at the time, according to a transcript from financial services site Sentieo. “With the opening of both the temporary and permanent facilities, we believe we are well positioned to drive continued improvement as we move ahead, as we better optimize store alignment with distribution centers, lower capacity utilization within our existing footprint and improve the overall flow of goods.”

Dollar General executives have said a surge in demand for the retailer’s goods during the early days of the pandemic over-taxed its supply chain.

Also impacting its supply chain is the growing complexity of Dollar General’s offering.

In 2019, Dollar General announced that it would begin to self-distribute fresh and frozen foods, which the retailer dubbed its DG Fresh initiative. Previously, those items had been supplied by regional distributors.

In March, Dollar General said it now self-distributes perishable products to all its stores and that it sells fresh produce at more than 3,200 of them, with plans to expand sales to more than 5,000 locations by the end of the year.

“We continue to be pleased with the cost savings from this initiative and, importantly, the significantly enhanced profitability of our perishables offering,” Owen said at the time. “In addition to capturing cost savings, DG Fresh also aims to increase sales in frozen and refrigerated categories. We are pleased with the performance on this front, including enhanced product offerings in stores and strong performance from our perishables department, which had our strongest rate of comp sales growth during 2022.”