Retailers are focusing on efficient product packaging and in-store fixtures to significantly reduce stores' handling costs. Such improvements could represent significant savings industrywide, sources said.
Fixtures that use gravity to feed products forward, for example, cut detailing time for employees in the store. These fixtures are being used for products such as soft drinks.
Manufacturers are providing more efficient packaging and merchandising options. Multipacks of products, prepackaged perishables such as presliced deli meats, ready-to-display pallets and easier-to-handle case pack sizes can help cut handling costs.
"When we talk about Efficient Consumer Response, case pack size is the type of thing that manufacturers should take a look at on the retail level," said Tom Roesener, vice president of store operations at Clemens Markets, Kulpsville, Pa. "The old mentality was, the manufacturer would give us as many cans as they could in a case and force us to give them more shelf space.
"Now that manufacturers have lowered the case quantities from 96 to 24 and 18, the cases are easier for our employees to handle," he added. "This cuts down on damage" from cans getting dropped and dented.
Milton Merl, president of Milton Merl & Associates, New York, said the supermarket itself presents by far the largest opportunity for savings, because that is where the majority of labor costs occur.
Store labor represents $36.6 billion annually or 11.9% of store sales, according to "Store-Level: Efficient Store Practices," a study prepared by Milton Merl & Associates and Deloitte & Touche Consulting Group, New York, for the Joint Industry Commission on Efficient Consumer Response.
With labor costs such a big factor for stores, retailers said finding efficiencies is a major priority.
"We pay on average 35 to 37 cents a minute for clerks to handle our product," said Art Patch, vice president of operations at Save Mart Supermarkets, Modesto, Calif. "So we're always looking for ways to reduce handling costs."
Pathmark Stores, Carteret, N.J., also considers reducing store handling, which can cut labor costs, an ongoing process. The retailer has an internal group of people focused on store layouts and fixtures to improve customer flow and product placement.
The group "spends a lot of time speaking to store personnel on the front lines and getting feedback from them," said Harvey Gutman, senior vice president of retail development.
Seaway Food Town, Maumee, Ohio, has an ECRCommittee and is just getting involved in store-level ECR.
"We began this process doing a lot of cross docking and shipping full pallets and rainbow pallets to the store," said David Walrod, executive vice president for Seaway. Rainbow pallets, or mixed pallets, hold different products on the same pallet. The products are typically prepicked by the manufacturer and shipped to the retailer.
The time to identify potential savings is when the store is being designed. Save Mart tries to minimize the distance between a supermarket's back door and its meat and produce cooler, Patch said.
"Getting back to that 37 cents a minute, if it takes you a minute longer to get the product under refrigeration, then it not only impacts the quality of the product, you spend more money doing it," Patch explained.
Re-engineering of the total store environment to reduce operating costs is the new layer in store optimization, Merl said.
"Only a handful of companies are jumping all over this," Merl said. "Many of the smaller organizations have internal resources to lay out stores, but don't understand there are ways of saving labor with fixtures on a broad base."
However, retailers are taking advantage of certain opportunities, such as gravity feed fixtures in the soft drinks area. Gravity feed fixtures slide products forward on a smooth surface and automatically face them front.
"Implementing gravity feed fixtures, where appropriate, can be worth $30,000 to $40,000 in savings for an average store per year," Merl said. If the high number is multiplied by 30,000 stores, there is the potential to save $1.2 billion industrywide in detailing time, he explained.
Some Save Mart stores are testing gravity-feed fixtures for refrigerated cases such as dairy. They also are testing rack systems that roll the rack into the case. The retailer estimates these efforts could reduce store handling costs by 3% to 5% annually, Patch said.
Farm Fresh, Norfolk, Va., is using some gravity-feed fixtures for soft drinks, "but there are some places such as ice cream where we don't use it because it negatively affected pack outs," said Jeff Thomas, senior vice president of merchandising.
"The design of the shelving, which is on a slant, and the actual metal in the shelving, reduces the amount of product you can put on the shelf," Thomas explained.
However, other retailers, such as Clemens Markets, are using gravity-feed fixturing for ice cream in remodeled stores, for the convenience of consumers. "The ice cream is on a 45-degree angle, so instead of pulling the product off a flat shelf, consumers can see the flavor they want," Roesener said.
Another area where retailers are making progress in reducing handling costs is by filling products from the back of the case. The milk area, for example, came under review when Clemens remodeled a store and had to expand the dairy section from 80 to 120 linear feet. So far, three stores have the new milk display.
"A lot of retailers have bulk wagons that push into the milk case," Roesener said. "It's efficient, but from an appearance standpoint, it's not neat when you shop the stores.
"So we put doors on the front of the dairy case and fill it from the back, which is easier to do," he added. "We also save electricity and refrigeration because of the doors. By having the doors on, we have a nicer appearance."
Tilted shelving can help cut stores' handling costs. Seaway Food Town is resetting a limited number of stores during September to experiment with tilted shelving in its health and beauty care department.
Tilted shelving "shows off the package well and reduces inventory substantially," Walrod said. "We want to see if we can reduce inventory, not incur out-of-stocks and improve appearance. The shelving has a self-feeding aspect that we believe will improve appearance."
To cut costs of shelf stocking, Farm Fresh began using tray packing in canned vegetables, soups, meats and dog foods earlier this year. With this method, the cardboard tray is cut open and placed on the shelf instead of individual cans.
Besides providing more efficient ways to stock shelves, packaging can have a big impact on stores' handling costs. Farm Fresh, for example, recently introduced prepackaged cheeses and deli meats, which require less handling at the store. "It costs a lot to hand-slice meat," Merl said.
Big cube items like cat litter, dog food and toilet paper that can be handled on full pallets or partial pallets and that don't have to be touched several times are a big opportunity for savings too, Merl said.
And multipacks can reduce costs. Save Mart is offering more and more large sizes, Patch said. Multipacks of toilet paper, particularly 12-pack rolls, have significant sales because of the value they offer, he added.
"We're seeing more multipacking, which fits into ECR because the manufacturer is working with the retailer to take cost out of the system," Pathmark's Gutman said. "We're seeing an increasing amount of cooperation" between trading partners.