SCARBOROUGH, Maine -- Hannaford Bros. here is testing a distribution approach that consolidates orders and shipments from multiple vendors.
The pilot program, which involves five manufacturers, a third-party distribution center and a broker, is ongoing but has already resulted in reduced order lead times for less-than-trailer-load shipments.
Consolidated orders, or "clusters" of products, from different vendors are placed by Hannaford via electronic data interchange.
Order lead time, which ranged from three days to two weeks among the individual vendors, has been reduced to as short as three days, according to preliminary test results. The pilot was launched in January and will conclude next month.
The arrangement involves DCW Plus, a Foxboro, Mass., third-party distribution center that accepts LTL shipments from manufacturers and assembles them into full truckloads. Manufacturer participants include Nabisco Foods Group, Parsippany, N.J., and four other, unnamed companies. Merkert Enterprises, Canton, Mass., a food broker, is also involved in the project.
"[Order lead time] depends on the clusters you create and the manufacturers involved in that cluster," said Gary Watson, Hannaford's director of logistics.
The chain hopes to shorten the lead time to one day, he added. "We're working toward that. We want to make sure the system works right the first time. We'd like to be able to do it within hours. I think some day we'll get there."
Watson discussed third-party logistical issues during the Food
Marketing Institute's show in Chicago last month as part of a panel with other participants in the test.
Although he did not address specific results of the consolidated ordering and shipping pilot, Watson said the strategy is a viable one for some, but not all, companies looking to streamline distribution through Efficient Consumer Response initiatives.
"We see that third-party consolidation has a place in the ECR world," he said. "The key is we need more companies and more manufacturers to step up to the plate and get the process started." A broker can take on a value-added role, he noted, by bringing together the various players for such a project.
"Working with third-party providers creates an opportunity to ship multiple vendors' [products] from one truck, from one facility, at one time," Watson said.
"This will improve inventory turns and service levels, assist in streamlining truck loading and unloading and gain much better control of delivery times," he said.
Inventory turns of products included in the test have doubled and, in some cases, tripled, according to Stuart Sprague, corporate vice president of Merkert Enterprises, which helped coordinate the pilot project.
"It's still early but the test resulted in a substantial increase in turns for the receiver, along with a reduction in shipping costs for the vendor participants, 100% on-time delivery vs. the track record of [less-than-trailer-load] deliveries and a significant decrease, believe it or not, in receiving time," he said during the panel presentation.
Receiving and handling time at Hannaford was reduced by at least 10%, he told SN, due in large part to the manner in which trucks are loaded at DCW Plus and in the retailer's formalized receiving process.
Nabisco Foods Group said the company's focus on customer service led it to get involved with the pilot.
Internal consolidation programs initiated over the years have allowed Nabisco to remain cost-neutral while reducing warehousing and transportation costs, said Tom Rice, director of customer service.
The new pilot program with Hannaford has enabled the company to pass on some of those benefits to the distributor, he said.
"It's allowed us to improve customer service, improve on-time delivery, provide more effective delivery by coming in with truckloads rather than multiple LTLs and jamming up their [receiving] docks, and to focus more on the customer and get away from being so operationally driven," he said during the FMI panel presentation.
Companies involved in the pilot indicated they were satisfied with early results, but cautioned against jumping into such a program too hastily.
"It's important to note that consolidation is not for everybody and it's not an answer in itself," Hannaford's Watson said. "It is a component, that, if used and implemented correctly and efficiently, will wring out duplicated costs, making us stronger and stable while maintaining competitiveness."
Merkert's Sprague agreed that consolidated product ordering is not an appropriate strategy for all companies and pointed out some potential challenges and obstacles.
"For one, consolidation is constrained by inventory locations, variations that exist throughout the industry. It is also heavily dependent upon third-party distribution center capability, whether it's in the physical handling process or in the systems areas," Sprague said.
