The Logistics of Wholesale

PriceSmart, Latin America’s warehouse club offering goods for sale in bulk, counts on Frank Diaz to help keep costs down for customers and growth up for expansion

FDiaz
Frank Diaz, Senior VP of Distribution and Logistics, PriceSmart

When Frank Diaz walked into a UPS in New Jersey in 1988, he was just looking for a way to make some extra money. He was a full-time college student at the New Jersey Institute of Technology and got a job working the overnight shift as a package handler. Diaz became fascinated with the processes at UPS, so much so that he decided to change his college major to industrial engineering, which provided entry into a long and successful career in distribution and logistics.

“I was excited by the fast pace, the environment, and being able to bring some science to my work. It was intriguing to me,” says Diaz, who is now the senior vice president of distribution and logistics for PriceSmart, the primary membership-based retailer in Latin America and the Caribbean.

PriceSmart operates similarly to Costco or Sam’s Club; members pay an annual fee to shop, but in turn receive quality merchandise at lower prices. Diaz presently leads an international distribution network with 250 logistics professionals across 13 countries to package, transport, and deliver approximately 20,000 container shipments a year to PriceSmart’s 36 stores.

Already this year, the company has added three more retail locations and is continuing to grow at an accelerated pace. With so many moving pieces on the playing board at the same time, Diaz’s job never bores him. “We’re like chefs in the kitchen,” he says. “A new challenge is presented each day. But that keeps you going, it keeps you interested and engaged. There’s constant learning that emerges from that,” says Diaz.

PriceSmart By the Numbers

Headquartered:
San Diego, CA

Founded:
1976 as part of Price Club and 1994 as PriceSmart

Global Reach:
36 stores in 13 countries

Number of Employees:
7,500 worldwide

2014 Revenue:
$2.5 billion

PriceSmart’s history began in 1976 when Price Club opened as the first of the warehouse club stores in the US. That pioneered an industry. After merging with Costco in the mid 1990s and later splitting off, the Price family started a similar business on the global level with one of its first PriceSmart stores in Panama in 1996.

“We have to put our money where our mouth is and deliver the highest possible value to our members,” Diaz says. To ensure customers are getting the lowest prices, costs have to be contained through increasing efficiencies in all parts of the operation. “In most organizations, logistics is principally viewed as a cost. One of biggest lessons is to understand where logistics adds value within the
organization.”

For PriceSmart, that means understanding and aligning themselves across the board to the goals and objectives of the company: to improve the member-shopping experience and drive sales. Diaz’s team is continuously working on improving the flow of the merchandise they import to get it to stores quickly and cost-effectively. They accomplish that through regional distribution centers—both temporary and permanent—to bring the goods closer to the point of consumption and add value to its supply chain along the way.

Of course, technology is also playing a role. New software, wireless scanners, and the use of tablets help keep track of the large volume and rapid turnover that happens in distribution centers. “Things move very fast,” Diaz says of the increased tech, which also helps managers see kinks in the system and respond much faster. “With good visibility we can react quickly and make it seamless to the members so our challenges become a non-event for them.”

PriceSmart opened in Colombia for the first time in August 2011 and already has six stores in the country. After unprecedented success in Central America, Diaz says Colombia is the company’s first foray into South America, and that they could continue to expand in that direction. But logistics complexities are compounded when working in so many countries at once.

“Keeping a continuous focus on results and efficiency while at the same time dealing with a dynamic set of international regulatory and trade compliance requirements makes it tough. It’s a bit of a moving target at times,” Diaz says. “But at the same time, operating in as many countries brings so much diversity and makes this role more exciting.”

No matter the country, Diaz expects members to have the same high-quality experience. The company does tailor the mix of products it carries to each individual country. In each store, approximately 50 percent of the products are locally sourced, and the other half are imported through his distribution centers.

Diaz himself is based in Miami but travels frequently to the countries where PriceSmart has a presence. As a leader, he tries to stay approachable and as reachable as possible for his employees.

Though Diaz was raised in New York with bilingual Cuban parents, his grandmother made sure only one language was spoken in her house. Because he had to speak Spanish with his grandmother growing up, he is able to communicate across boarders without any logistics getting lost in translation. “That was probably the best gift she ever gave me, and it continued through my entire life.”