Pepco Group is looking to expand its manufacturing base into Africa as it seeks to diversify supply chains that have been affected by geopolitical instability, Bloomberg reported.
The reported move follows disruption to global shipping routes after the escalation of the Iran conflict this year, adding to existing pressure linked to Houthi threats in the southern Red Sea.
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Carriers have been diverting ships travelling from Asia to Europe around the Cape of Good Hope, increasing transit times and pushing up freight costs.
In an interview with Bloomberg, Pepco global sourcing and supply chain director Javier Rubio Fueyo said: “Unpredictability is a new normal for the supply chains. It is also a new normal for all the retail area.”
Most of the toys, home accessories and clothing sold through Pepco’s 4,000 stores across around 18 European countries are shipped by sea from Asia, with routes largely passing southern Africa.
Pepco said its reliance on this long and complex supply chain was behind its search for alternative sourcing locations, including in Africa.
The company said its model of sourcing stock with longer lead times had largely protected it from the early effects of the disruption, unlike fast-fashion rivals that rely on rapid seasonal replenishment.
For near-term volatility, Pepco uses a mix of standard sea freight and a premium express shipping service from the Far East to Europe, which cuts delivery times by two to three weeks.
The business made significant use of that faster service in August to manage disruption caused by typhoons in China but expects to depend on it less in September.
Standard freight accounts for 85% of Pepco’s regular shipments while the premium option represents 10% to 15%, depending on market conditions. Air freight represents less than 1% of total shipments.
Pepco secures annual full-year rates for both freight options to avoid what Fueyo described as “crazy spot rates that we see on the market today”.
The retailer is also testing artificial intelligence to improve transit time forecasting. Fueyo said full diversification of the supply chain would take three to five years.
As part of a broader logistics overhaul, Pepco is getting ready to open a distribution centre near the Baltic Sea port city of Gdansk, Poland.
The group is also speeding up its expansion in western Europe and plans to open at least 600 new stores in existing markets between its 2027 and 2030 financial years.
