PriceSmart, a warehouse retailer with stores across Latin America and the Caribbean, saw its supply chain as a key competitive advantage but wanted to ensure it could effectively manage continued growth. PriceSmart worked with LLamasoft to develop a supply chain model to project needs as it expanded. The model helped identify quick wins, such as reducing cycle stock by increasing reorder frequency, and informed a long-term strategy using regional distribution centers. This gave PriceSmart confidence to effectively plan for the future as it continued growing its store network and serving over one million members.

1. © 2016 LLamasoft, Inc. All rights reserved. v.14/08/16
CASE STUDY
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.
Business Drivers Supply Chain KPIs
Sales, Operating Margin, Net Profit Total Logistics Costs as % of Sales
Inventory Investment, Turns, In-Stocks Transit Performance as % of Plan
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
PriceSmart 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.”
“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

2. © 2016 LLamasoft, Inc. All rights reserved. v.14/08/16
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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.