Multivendor product consolidation offers so many potential benefits -- freeing dock space for receiving, reducing turnaround time and damages, and increasing product freshness -- that it's no wonder the practice is gathering increased attention in the industry.
Hannaford Bros., Scarborough, Maine; Wegmans Food Markets, Rochester, N.Y.; A&P, Montvale, N.J.; Wakefern Food Corp., Elizabeth, N.J.; Albertson's, Boise, Idaho; and American Stores Co., Salt Lake City, all use some type of multivendor product consolidation program. These programs reduce the number of less-than-truckload orders received at the docks and help cut supply-chain costs.
Agora Food Merchants, the retail division of Oshawa Group, Etobicoke, Ontario, is working toward implementing multivendor product consolidation with many products that are presently being shipped in less-than-truckload amounts. Agora has been able to lower its freight costs, and vendors save 5% off their existing cost of transportation by participating in the program.
"We continue to spend a lot of time trying to get the product more efficiently and cost-effectively to the store," said Mike Smith, vice president of logistics initiatives at Agora Food Merchants, which began multivendor consolidation programs with eight national and 35 private-label dry grocery vendors last October.
Agora cited the industry's sweeping Efficient Consumer Response initiative as one of the key features driving product consolidation and turning the concept into a reality.
"Because of ECR opening the door, we're able to discuss with suppliers different opportunities, such as consolidation of their orders," he added.
Multivendor product consolidation particularly ties to the "C," or consumer, in ECR because it helps get products to the store more quickly. "The consumers don't know or care how products get to the store shelf, only that they are there whenever they want them. If not, they'll go elsewhere," Smith said.
On April 1, Agora Food Merchants expanded its multivendor consolidation program to include perishables, specifically with three Montreal-based cheese and deli suppliers shipping products to Alberta. The retailer plans to add more vendors in the future. When this consolidation effort is up and running, Agora plans to implement this process in the bakery area.
While it is still too early to assess whether the program improves product freshness by cutting the time it takes to get products to the store, the process already appears to be more efficient than previous methods, according to Smith.
"We used to have to order deli items 30 days in advance of the required date, so the company could figure out how to get it to us the cheapest way possible," Smith said.
Now Agora sends orders via electronic data interchange to the three suppliers, who ship it to a transport company that serves as the core carrier. The carrier puts the goods on the truck and ships it to Alberta.
Agora's results with multivendor consolidation in dry grocery include reducing turnaround times from an average of 16 to 20 days down to six, which has cut inventory and made forecasting easier.
"In the old days, we would send orders in sporadically to these eight national-brand suppliers," said Smith. "The suppliers would wait until they had a full truck and ship it out, which meant the turnaround time was 16 to 20 days. We were continuously guessing how much inventory we had in the flow.
"By going to the [multivendor consolidation] process, right now we're turning a tractor trailer, on average, in about six days," he said.
There are several methods of consolidating multivendor loads. Wegmans, for example, uses its own trucks to pick up products from multiple vendors' distribution centers that are on the route to Wegmans' distribution center.
"There are a lot of different savings elements [associated with multivendor product consolidation] -- cost of goods, freight and time on the dock," said Marianne Timmons, traffic manager at Wegmans. "We haven't come to [any] firm conclusions but we know it's the right thing to do."
Hy-Vee, West Des Moines, Iowa, is in the early stages of exploring multivendor product consolidation and is looking for a third-party warehouse that could handle loads from multiple vendors. This would help the retailer reduce freight costs, said Jim Moore, director of transportation at Hy-Vee.
"If you have less-than-truckloads, by the time the freight goes through two or three shipping terminals and it gets here, it's expensive," Moore said. Currently, Hy-Vee picks up full truckloads itself, and receives a small quantity of less-than-truckloads at its dock.
At Agora Food Merchants, multivendor product consolidation "lowered our freight rate because we went out and contracted for the freight rate," Smith said. "In the past, suppliers were either holding the goods to ship them full-truckload, or if the product was required, they had to ship them out as a less-than-truckload, which costs a fortune."
Building a full truckload via multivendor consolidation requires combining products with different densities, sources said. For example, with the legal weight for a truck at 44,000 pounds, a possible multivendor combination would be 30,000 pounds of canned goods and 14,000 pounds of potato chips, to use up the weight while maximizing the cube of the vehicle.
Multivendor consolidation can also lead to multi-retailer cooperation. Agora Food Merchants has linked up with other retailers in western Canada, said Smith.
"We have a deal with our third-party provider that if a truck is going to Edmonton and there's half a truck of merchandise for us and half a truck for Overwaitea, we've agreed they can put the [other retailer's] merchandise on the truck," Smith said. Overwaitea Food Group is based in Langley, British Columbia.
More efficient receiving and on-time deliveries, as well as reduced damage, are the key benefits from multivendor product consolidation for Krasdale Foods, Bronx, N.Y., which services 1,500 independent supermarkets.
About 200 of its dry grocery products are handled this way and more products are being added all the time, according to Tom Richmond, director of inbound logistics at Krasdale Foods. Krasdale's consolidation program consists of placing orders either with the third-party consolidator or with the vendor who works with the consolidator. The consolidator combines the orders and delivers them to Krasdale's 400,000-square-foot warehouse.
"We give out appointments for receiving," Richmond said. "So instead of us getting a dozen trucks in, which ties up the dock space, we get one." Krasdale typically receives 85 trucks a day. "This frees up our doors for receiving."
On-time delivery is also increased "because if we were dealing with all the vendors direct, the chance that all of them will be on time isn't that great. If it all comes in together on one truck it comes in on time," Richmond said.
Damage is reduced "because when it comes in a full trailer it has less chance for damage than if it came in on a partial truck, where it's going to move around," he explained.