CHANTILLY, Va. -- Ahold USA, based here, hopes to convert as many of its perishables suppliers as possible to its new Agribuys e-procurement system.
Ahold plans to adopt the Agribuys system for its centralized Perishables Procurement Organization. The PPO, located in Boston, will handle procurement for Ahold's six U.S.-based supermarket chains.
Ahold signed a five-year contract with Agribuys, including an option to renew for an additional five years. Terms were not disclosed.
"We will encourage our vendors to conduct transactions through Agribuys, but we will not demand it," John Mason, Ahold's senior vice president of perishables, told SN. To spur compliance, Ahold is offering to pay half of the monthly $199 fee suppliers pay Agribuys to be on the system (suppliers also pay a $995 setup fee).
Both Ahold and Agribuys will pursue suppliers for the program, with a goal of about 3,000 suppliers, said Laurence Sotsky, vice president of worldwide sales for Agribuys, who expects to sign up about half in the first 60 to 90 days. The presence of a wide range of suppliers is the "key to making the system work," Sotsky acknowledged.
Ahold plans to begin buying its perishables via the Agribuys system over the next 90 days, Mason said. The company will gradually apply the system to perishables departments from its six chains, including Bi-Lo, Stop & Shop, Giant Foods/Landover, Giant Foods/Carlisle, Tops Markets and Bruno's, as those departments make the transition to Ahold's PPO.
In addition, Ahold will take the more extensive step of integrating each chain's legacy systems onto the Agribuys system, using middleware supplied by Agribuys, though that's not necessary to do at the outset to begin the buying process, said Mason. "We consider Agribuys the next natural step we are using to centralize our perishables procurement," he said. Ahold's PPO was established last fall.
No single Ahold chain has yet transitioned all of its perishables departments to the PPO, said Mason. Ahold chains have six perishables departments, including produce, floral, bakery, meat, deli and seafood. Purchasing in all departments will be handled through Agribuys, one of the first examples of a company purchasing multiple perishables areas through a single e-procurement process, said industry observers.
Mason described the Agribuys service, which Ahold accesses on a secure Web site, as "a dashboard to facilitate" demand aggregation, price discovery, RFQs and negotiation, as well as invoice reconciliation and transportation management. According to Agribuys, the system enables transactions between a retail supermarket chain's back-end accounting and warehousing systems and the corresponding systems at its suppliers and transportation carriers.
Mason foresees Ahold achieving cost savings through the Agribuys system as a result of paper reduction and the elimination of discrepancies between purchase orders and invoices, for example. "We should gain efficiencies through the entire system," he said. Agribuys, he added, has the "capability" of replacing EDI (electronic data interchange) communications, but "not in all cases."
Prior to its deal with Ahold, Agribuys, three years old, had signed a contract with Wegmans for produce procurement and has "worked with Safeway, though no contract has been finalized," Sotsky told SN.
Last year, the WorldWide Retail Exchange selected Agribuys as a preferred vendor for perishables procurement. Agribuys has signed up about 1,200 produce suppliers for the Wegmans program, which can also be used in the Ahold program.