ROBESONIA, Pa. -- In the supply chain, you're only as strong as your weakest link. So when Associated Wholesalers Inc. (AWI) here perceived that receiving times for deliveries at its members' stores were overly extended, it decided to do something about it.
Take, for example, a letter it recently sent to one of its independent supermarket members in eastern Pennsylvania regarding a delivery to a store.
The letter read, in part, "For the delivery on 9/20/04, we show that the driver was detained at your store for one hour, 54 minutes. The amount of time allotted to deliver to your store on this date was one hour, one minute. Since [our demurrage] program is still in the development stages, no charges will be made at this time. However, had charges been made, your assessment would be $50."
AWI's "demurrage" program was established in May to provide an incentive to the roughly 1,000 stores (including about 250 full-line supermarkets) it serves in Pennsylvania and six contiguous states to receive their product deliveries in a prompt and efficient manner. It is based on engineered labor standards, internally developed, for the time it should take to unload products at AWI stores.
The time spent on unloading is measured by means of a Xata onboard computer system AWI installed in its tractors four years ago. Letters like the above that cite potential demurrage -- or fines for detaining a delivery, a term borrowed from the railroad industry -- are sent to stores deemed tardy.
The demurrage program is the brainchild of Robert A. Rippley, AWI's executive vice president, logistics, for the past five years. Though this is Rippley's first logistics position, he is no stranger to food distribution, having served as chief executive officer at two other cooperatives: Affiliated Food Stores, Tulsa, Okla., and Associated Grocers, Denison, Ohio.
Rippley has brought a number of other technological and operational changes to AWI, which operates its main, 750,000-square-foot warehouse at its headquarters in Robesonia, Pa., and a second, 225,000-square-foot warehouse, for GM/HBC products in York, Pa., about 50 miles to the southwest. For example, he is implementing voice-based selection at the Robesonia DC, and mechanized selection and sortation systems in York. He is also managing the expansion of the Robesonia facility and an adjoining transportation depot. AWI did an estimated $1.1 billion in sales in 2003.
The demurrage program helped AWI boost the efficiency of deliveries to its stores, which include supermarkets, small food retailers and convenience stores, in a relatively short period of time. "The first week we put it in place in May, we had about 200 letters go out," Rippley told SN during a recent interview in his office at the Robesonia facility. "Four weeks later, once the stores understood the program and started to control the actions of drivers and their employees, we reduced it to 10 to 20 letters a week. Now the letters are almost non-existent."
The program addressed a key logistical problem AWI was having -- one no doubt shared by other food distribution executives congregating this week in Dallas at Food Marketing Institute's Productivity Convention & Exposition. "Drivers were wasting time at stores, or stores weren't prepared to receive loads," Rippley said. "This tells stores how much time it should take to unload."
Rippley stressed that, as his letter noted, AWI isn't charging stores for receiving delays -- yet. It's just pointing out the amount they could be charged. Still, if there's a notable deviation from the norm, AWI tries to get to the bottom of it.
In one case, a store told Rippley that one of AWI's drivers remained for two hours after making a delivery. The driver, it turned out, was simply taking a break before going to a backhaul location. "All these inefficiencies started coming to light," Rippley said. "With 175 drivers, it's made a big difference and brought our transportation costs down."
Rippley acknowledged that AWI's sales department was concerned about how the cooperative's retailers would react to the demurrage program. Indeed, some retailers asked him, "When your truck's late, can I charge you?" he noted. Yet over time, most of AWI's independents realized the wholesaler was trying to help them become more cost-efficient. Moreover, the savings accrued through the program enabled AWI to avoid passing on the rising cost of fuel to the stores, he added.
"We've seen improvements in deliveries across the board," said Ron Godowski, grocery/dairy/frozen foods supervisor/buyer for Gerrity's, a nine-store AWI retailer in Scranton, Pa.
AWI's board of store owners has also been supportive of Rippley's cost-cutting efforts. "But they remind us they don't want us to do something at the wholesale level that just transfers costs to retailers," he observed. "It's got to be a win-win for both." That philosophy is echoed by AWI's president and chief executive officer, J. Christopher Michael, who is "very retail-oriented," Rippley said.
At the heart of the demurrage program is the Xata dashboard computers, with which all AWI's 105 tractors are equipped. Xata, Burnsville, Minn., wrote the code for AWI that interfaces with its labor standards in the demurrage program, pointing out delivery-window exceptions.
The onboard computers track a trailer's "every movement," using geocodes to determine precise locations, said Rippley. Because it shows when trucks cross state lines, and measures fuel mileage, it can be used for state fuel-tax reporting. It also provides drivers delivery and routing instructions.
Voice for Fresh
Another major technology upgrade AWI has made in its logistics operation has been the implementation of voice selection at its Robesonia facility during the past year. The system, from Vocollect, Pittsburgh, works in tandem with AWI's warehouse management system, from Retalix/OMI, Dallas.
Voice selection -- whereby voice instructions on what to pick are relayed via RF to a terminal worn by a selector and piped into headphones -- has been applied thus far to meat, dairy, produce and, starting this year, frozen foods.
Rippley plans to add the largest part of the facility, grocery, in the fall of 2005, completing the rollout. "We wanted to let retailers cut their teeth on the small areas first," Rippley noted.
Rippley said voice technology has had the greatest impact of any new system installed at AWI. He called the percentage gains in productivity -- cases picked per hour -- in "the teens." He also characterized the improvement in picking accuracy and the reduction in shortages as "dramatic."
Although some selectors were "scared" by the voice technology at first, "once they were trained, they got excited. Now they enjoy it," said Rippley. "It makes them feel as if they're interacting with someone, vs. having a mundane job." Selectors have a choice of receiving instructions from a female or a male voice. To facilitate voice communications from the selectors back into the system, a template of each selector's voice is made and translated so it can be understood, regardless of language or intonation.
At the store level, owners are pleased with the increase in picking accuracy for store orders, Rippley said. However, stores have been asked to receive orders for voice-picked items without the case labels that traditionally have been used by stores in inventory and pricing. Those labels are not required in voice-based selection, though some distributors have retained them to assist stores.
"We went cold turkey on [eliminating] labels," said Rippley. "For two to three weeks, it was a major change for stores used to labels. There was a little resistance, but it has gone away."
While acknowledging that Gerrity's has adjusted to the absence of labels, Joe Fasula, vice president and co-owner, acknowledged that his stores "still miss them -- they were a wonderful tool."
Another AWI retailer, Frank Pasdon, owner, Jim Thorpe Market, Jim Thorpe, Pa., doesn't miss the labels at all. "If I need to know about a product, I look at the UPC," he said.