LAS VEGAS -- A call to action centered on closely integrating the wholesale and independent-store components of the wholesaler-supplied distribution system -- and aimed at significantly enhancing the profitability of the sector -- was issued here last week.
The call came during the presentation of the final component -- the how-to-implement phase -- of the much-aired In-Store Implementation study that highlights the relative lack of efficiency in the wholesale-supplied sector when it comes to speed to shelf of new products, and the relative lack of adherence to shelf schematics. The presentation was made during a general assembly of the Food Distributors International Midyear Executive Conference.
As has been reported previously, the study shows that independent stores tend to lag other retailing styles when it comes to getting new products on their gondolas. Independents take 7.1 weeks to land new products on their shelves against 4.1 weeks for mass merchants, 4 weeks for drug stores and 3.6 weeks for chain supermarkets. The study postulates that if independents were to reduce that time to just 5 weeks, additional annual sales of $115,000 and gross profits of $30,000, per store, could be realized.
The study further postulates that independents could also increase sales by as much as 12% by more strictly adhering to shelf-schematic plans.
"The case for action here is that these improvements in sales and profitability can be delivered without significant additional investment," said Brian Harris, chairman, Partnering Group, Playa del Rey, Calif., the organization that worked with a FDI committee to draft the report.
John R. Block, FDI president and chief executive officer, made a similar point during his address to the session. "The study points out that supermarkets still have significant potential for increased sales and profit if they can get it right," he said.
According to the final version of the study, there are nine elements of action that must be taken to realize the potential the study holds out. They involve concepts concerning wholesalers, retailers, suppliers and sales agents. In summary, they are:
Business practices must be integrated. This involves a combination of all trading partners in generating better decisions.
Implementation must be recognized as a strategic necessity. This involves redesigning store practices with strategic underpinnings in mind.
Principals for a cooperative relationship must be developed. This concept envisions trading partners working together to eliminate practices that delay decision making and the implementation of decisions.
Wholesalers must upgrade category business plans and recommendations. This idea is a call for all trading partners to develop integrated strategies to replace generic or tactical thinking.
Programs to upgrade skills are necessary. This recognizes that the knowledge of what to implement and how to implement must be spread. In-company programs must be developed. Additionally, FDI plans to sponsor trading programs intended to spread information about the study.
New ways to communicate must be developed. Current means of communication between trading partners tend to be cumbersome. The process could be improved through better use of Internet and intranet systems.
Standards for return on assets must be deployed. This represents a call to execute the right work at the right time, with that being guided by maximizing return.
New performance measurements are needed. This acknowledges that unless performance aimed at creating change is measured and rewarded, nothing will change.
Retailer adoption is key. This recognizes that unless change is desired at retail level and driven from there, other elements in the trading-partner chain may find little incentive to change.
The formal presentation of the study's findings was followed by remarks from a panel drawn from the FDI committee that guided the formation of the study. They were: Sandy Brawley, director, customer development, Clorox Sales Co., Oakland, Calif.; Leland Dake, vice president of merchandising, distribution food companies, Supervalu, Minneapolis; Dale Instefjord, general manager, Blue Goose Super Markets, St. Charles, Ill., and Paul Renzenbrink, president, strategic client teams, Advantage Sales & Marketing, Cincinnati.
Each remarked about the study, and its possible effect on distribution chain:
Clorox' Brawley: "Unlike chains, members of our channels are separate companies accustomed to operating independently. All trading partners must learn to align their business processes more effectively."
Supervalu's Dake: "If we make independents more effective, they will increase their sales and profitability. That will back up in the channel and wholesalers and everyone else in the channel will realize better profitability."
Blue Goose's Instefjord: "Independents are more agile than chains, but we are without as much information and without integrated management of the supply chain."
Advantage's Renzenbrink: "We have an enormous investment in retail performance and we are looking for ways to better deploy our resources. But that won't happen without better integration of all trading partners."
Last week's presentation of the study represents the culmination of a three-year process. The study was sponsored by 20 companies and trade associations. It involved surveys of 120 executives from various trade channels. Improved processes were designed by 51 executives who met for a six-day period.