LA HABRA, Calif. -- An ongoing cross-docking program involving multiple stockkeeping units of holiday merchandise is said to be yielding a substantial cost savings for Food 4 Less Supermarkets here.
The program's success may result in further cross-docking opportunities for other holidays, including Memorial Day and the Fourth of July, said John Hans, group vice president of sales at Crown Inc., a Cerritos, Calif.-based broker that partnered with the retailer for the program. High-volume periods like the back-to-school season are other possible candidates for cross-docking, he said.
Food 4 Less and Crown arranged for holiday products from 10 manufacturers to be shipped to a third-party distribution center, where the items were palletized and put directly on Food 4 Less trucks.
About 170 stores received pallets containing multiple stockkeeping units, including stuffing, nuts, plastic wrap and baking cups.
The pallets were not placed in store inventory and were handled primarily by Crown employees, who unloaded items from the pallets and built aisle displays.
Elimination of labor and storage costs resulted in a 6% cost savings for Food 4 Less, Hans said. Food 4 Less declined to be interviewed for this article.
The program is considered to be particularly innovative because the pallets were packed with multiple SKUs, unlike most cross-docking programs, which involve large volumes of a single product on each pallet.
Among the 10 manufacturers participating in the program are
Borden, Columbus, Ohio; Nabisco Brands, East Hanover, N.J.; Mauna Loa Macadamia Nut Co., Hilo, Hawaii; Reynolds Metals Co., Richmond, Va., and Charms Co., Chicago.
Hans said multiple-SKU pallets made sense because sometimes a store's order of seasonal merchandise could not fill a complete pallet.
"With baking nuts it's a relatively low cube, and we were able to put other things on top of it, like shippers of macadamia nuts or dog treats," he said. "Some pallets were pure modules of a given company's product, however. There's enough stuffing that you don't need to add anything to it" to fill a pallet.
Careful planning is critical to the program, Hans said.
"We had to get the items set up, get the orders standardized so you don't have 170 different orders, and really develop the pickup and delivery schedule," Hans said. Future programs could be enhanced with the use of automated direct-store-delivery technology, Hans added, with pallets being sent directly to each store. Hans said Food 4 Less was an ideal candidate for a holiday cross-docking program.
"We have certain items that are SKU-ed to sell for Thanksgiving and Christmas, such as stuffing, baking nuts, Reynolds Wrap and lemon juice," he said. Food 4 Less would traditionally order such products, store them in its warehouse and replenish each store as the need arose.
"In an effort to do things more efficiently, we proposed shipping all of these goods into a centralized distribution company, consolidating the products into customized modules for Food 4 Less and cross-docking those into the stores, following them up and building the displays," Hans said.
Pallets were assembled at ServiceCraft, a public distribution center in Buena Park, Calif., and were picked up by Food 4 Less trucks en route to each store. "[Each truck] picked up five to six pallets of merchandise and dropped them into the stores without the pallets ever going into inventory."
When each pallet load arrived at a store, Food 4 Less contacted Crown, which dispatched employees to unload the pallets and build aisle displays.
"It was a labor savings for the retailer, and the savings for us were that we were able to do this at one time and not have to make three or four trips," he noted.
Hans said the potential for expanding the cross-docking program is very strong. "Any time you can take a group of products that have a related consumption usage, it makes sense," Hans said. "But there obviously needs to be critical mass to afford the development of this program."