Dive Brief:

• United Natural Foods, Inc. (UNFI) is consolidating its distribution center network in the Pacific Northwest in an effort to optimize food distribution, increase efficiency and optimize route planning.
• The plan calls for the construction of a 1.2 million-square-foot distribution center in Centralia, Wash., and the expansion of its Ridgefield, Wash. facility to nearly 800,000 square feet. Once construction is complete, UNFI will close warehouses in Portland, Ore.; Tacoma, Wash.; and Auburn, Wash. as well as reduce its dependency on outside storage and third-party logistics providers in the region.
• Both the Centralia and Ridgefield facilities are expected to be up and running in the second half of 2019, with the full transition of retail customers completed in early 2020.

Dive Insight:

The decision to consolidate its distribution facilities is part of a larger strategy by UNFI to get a wider range of products to its retail customers, and to make supply processes more efficient across its combined operations with recently acquired Supervalu. UNFI currently operates 60 distribution centers — 27 of which came with the acquisition.   

With the revamp of its Pacific Northwest distribution network, UNFI kicks off a plan to divide the company’s operations among fast- and slow-moving mainstream groceries and fresh foods, with the goal of linking facilities that handle fast-moving goods with larger ones that handle slower-moving products. The expanded Ridgefield, Wash. facility will provide capacity for the company’s growing customer base in the natural, organic and specialty channel. 

By streamlining its various systems along with supplier agreements and its distribution network, UNFI plans to see $185 million in annual cost synergies by 2022.

"The construction of Centralia and expansion of our Ridgefield facility represents the first significant step in our optimization of UNFI's DC network following the acquisition of Supervalu, allowing us to better serve all our customers throughout the Pacific Northwest,” Steve Spinner, UNFI's chairman and CEO, said in a statement. "These are two tremendous facilities that, once complete, will provide a great working environment for our associates, an improved and efficient layout for inventory management, optimized logistics route planning, and an ability to help us deliver on the long-term synergy goals we outlined as a part of the Supervalu acquisition."

In addition, UNFI plans to boost its investments in automation. Facilities in Southern California and Pennsylvania currently use automated picking systems to prepare orders, and Mario Adamy, national vice president of warehousing and automation for UNFI, said during the company's recent analyst day that it aims to spread that technology across its network. The facility in Ridgefield will deploy a warehouse automation solution that supports its slow-moving SKU assortment. 

UNFI’s acquisition of Supervalu has not been without challenges. The company reported earnings well below what analysts predicted for the first fiscal quarter of 2019, citing Supervalu's soft performance as one factor. The company’s stock price has dropped nearly 50% in the past three months and last week, UNFI sued Goldman Sachs, claiming the investment bank put its own interests ahead of its client’s in securing a loan for the acquisition.