SAN ANTONIO -- Supermarkets must still achieve double-digit productivity increases to stay ahead of the curve in distribution efficiency, and are still struggling with inventory levels 50% higher on average than they should be, according to James F. Clingman Jr., chief executive officer of H.E. Butt Grocery Co. here.
In his keynote address at the 1999 Distribution Conference here, Clingman also said that retailers and wholesalers must look outside the supermarket industry, and even outside the United States, for models of distribution efficiency.
H-E-B, for example, looked at JCPenney, Plano, Texas, for a cross-docking model, he said. For reducing inventory and streamlining delivery, on the other hand, supermarkets should look to Japanese companies.
"We have 50% more inventory than we need," he said, adding that there has to be a logistics system that can handle reducing those numbers. H-E-B is working on a sales-forecasting system to better manage its inventory, according to Clingman.
Distribution productivity has to increase by 10% each year to be effective, Clingman told the 235 attendees of the Distribution Conference, held March 7 to 10 and sponsored by the Food Marketing Institute, Washington.
For H-E-B, continuous-replenishment programs contribute strongly to the retailer's distribution efficiency. CRP accounts for 90% of the product coming through H-E-B.
"You can't afford to touch a product four or five times if you're doing high volume," Clingman said, noting that the supermarket industry is a "wasteful industry.
"We damage so much product," he said, adding that some companies may want to consider using a third-party distribution company to handle products. "Ask the tough question, can someone else do it better?" Clingman said.
Other key questions that companies should ask themselves include "Where are we leading our company in distribution, logistics and technology? Would my actions withstand public scrutiny? Have you visited top distribution leaders at their company? and, Do you have a sales-forecasting system?" said Clingman.
His address also included H-E-B's corporate plans for the year 2005. By that time, H-E-B's current annual sales of $7 billion are targeted to have increased to $13 billion. Its store count will jump from the current 257 to 422.
"A sizable number of stores will be located in Mexico," he said, noting that H-E-B's current employee total of 44,000 should almost double to 85,000. The plan also includes the retailer operating manufacturing plants for bread, dairy and ice cream.
"That's without acquisition," he said. "We've chosen to build. It's one store at a time," Clingman said, adding that the company's proposed capital budget will hover at about $605 million to $610 million in 2005.
Other proposals for the new millennium include the construction and use of multiple warehouses, according to Ken Allen, vice president of distribution for H-E-B. The retailer plans to use a variety of geographic distribution centers for fast-moving products, which serve 80% of the retailer's volume, Allen said.
Slow-moving products would be handled through separate facilities. "That's a strategy we're putting together," he said.