Dive Brief:

• Dollar General will open three additional warehouses to support its internal DG Fresh distribution program in 2019, according to executives on the company's first-quarter earnings call. The first of the three facilities will open in a few weeks in Clayton, North Carolina, said CEO Todd Vasos. Executives did not specify the location of the other two warehouses. 
• Vasos said the program is surpassing expectations, and the CEO hopes to reach 5,000 stores by the end of the year. Dollar General will expand its private fleet by 75 tractors this year — largely to support the DG Fresh program. The retailer also has a program in place to help warehouse employees obtain CDLs.
• "In addition to the gross margin and in-stock benefits, DG Fresh will eventually allow us to control our own destiny in these categories," Vasos said. 

Dive Insight:

The decision to not just begin a fresh produce program in stores, but to handle temperature-controlled distribution in-house, was a bold move from the discount retailer.

Though the DG Fresh program is young, Vasos said the benefits are already evident through better in-stock status and lower cost of goods. 

"The great thing is that the plan is rolling out as designed," said Vasos. "We feel very good about those margin gains that should come from this over time. The majority of it should drop to the bottom line which is very exciting." 

Product in the DG Fresh program began shipping from Dollar General's Pottsville, Pennsylvania, warehouse to 800 Northeast stores in January. Of those stores, 45 currently receive fresh produce through the program. The rest receive temperature-controlled snacks and beverages, but the company looks to expand self-distributed produce to 450 stores by the end of 2019. 

New sorting procedures at warehouses and new stocking practices in stores — aimed at minimizing total steps taken to move a product from warehouse shelf to store shelf — have also improved in-stock status. 

"To help you visualize this, our goal is that each rolltainer only contained products for one or two adjacent aisles. While this may sound simple, the improved efficiencies from this change are expected to save a significant amount of store labor that can be redeployed to other customer-facing activities or channeled into labor productivity gains," explained Vasos.

These tactics will reach Dollar General's full warehouse network by the end of 2020.