ATLANTA -- By implementing a continuous replenishment program in tandem with activity-based costing practices, Giant Food, Landover, Md., has quantified and saved nearly $1 million in inventory costs in six months' time.
Tom Schmitt, senior manager of ECR measurements, said CRP vendors' products at Giant were reduced from 20.4 days of inventory to 15.2 days of inventory, a 25.5% reduction, during the period from March to September.
Those 20 vendors working on CRP with Giant represented 22.5% of all the case volume in the retailer's grocery, frozens and health and beauty care warehouses, according to Schmitt, who spoke at the Annual ECR Conference here this month.
At the same time, service levels were unaffected and remained high, he noted. Giant Food has a 98.5% fill rate of all the store orders that come into its distribution center.
Based on these results, Schmitt said, Giant Food will emphasize using continuous replenishment in frozens as well as dry grocery.
"Frozens represent expensive warehouse space," he said. "And we're bursting at the seams in our frozens warehouse. Seeing what a good tool CRP has been, we'd like to pursue more frozens vendors so we can keep control of our frozens distribution center."
He noted that inventory levels in perishables are lean already and don't lend themselves to CRP at this time.
Schmitt said Giant Food is also implementing Uniform Communications Standard II transaction sets via electronic data interchange, including price information, item maintenance and promotion announcements with many vendors. Previously it received this information solely by mail or fax.
Giant Food is currently working with four brokers representing some 50 vendors and 100 product categories in grocery, deli and health and beauty care.
Schmitt said Giant Food participated in the EDI/UCSII Transaction Sets broker pilot study sponsored by the EDI Work Group Best Practices Operating Committee.
A follow-up to the pilot, based on current production results, was shared with the industry at the UCSII Orientation Seminar and Meeting held in Baltimore last week.
Schmitt said the biggest challenge in this area is the seamless integration of these transaction sets into internal systems, from the vendor to the broker to the retailer, to avoid rekeying of information and opportunities for errors.
"The way we're going to be measuring success in this area is by following our eventual error rate for invoice payment and purchase order matching, because if this really is working right, what we expect so see is a decline in the mismatch rate of the purchase order to the invoice on the retailer side and a decline in the deductions experienced by the vendors," Schmitt said.
"Obviously, if there is a lot of rekeying, the error rate will not improve significantly, which would cause one to question why we are doing this."