DALLAS -- The annual convention geared to the nation's wholesalers became a forum for all levels of the supply chain to discuss and document how partnering is yielding concrete results.
In areas ranging from promotions to distribution logistics to electronic data interchange, more effective partnering is slashing costs and raising profitability for wholesalers, retailers and manufacturers, according to executives gathered earlier this month for the National-American Wholesale Grocers' Association annual convention here. Some recent gains were laid out in a seminar that included executives from Fleming Cos., Oklahoma City; Roundy's, Pewaukee, Wis.; Nestle Food Co., Glendale, Calif., and Campbell Sales Co., Camden, N.J.
Fleming's executive vice president of operations, Jerry Austin, said the company has completed three years of an advertising and promotion program in its Oklahoma City division that involved close relationships with independents and vendors and has led to a startling increase in average case movement of over 3,000% for that period.
Called "The Buy of the Week," the program was able to take off because independents and vendors agreed to pool resources. The effort started with 65 stores -- including 54 IGAs -- that sought to improve their competitive pricing image. It has grown to more than 90 stores.
The program focuses television and print ads on one special
item per week. Retailers are required to prebook products, prominently advertise items in print ads and fund statewide television advertising. Vendors are responsible for promotional funds, off-invoice allowances, performance allowances and street monies. The program provides retailers with advantages including low cost of goods, statewide television advertising and high customer awareness. After one year consumer research showed statewide awareness of the program to be 54%. Vendors benefited from factors including automatic prebooking and the participation of a big block of stores.
Austin lauded the partnering that led to the program's success.
"I can't remember a time when we were able to get a group of independents together, who weren't in a voluntary group, for one type of advertising/promotion program like this," Austin said. "That tells me people are ready to change."
The performance of some items was particularly noteworthy: Average weekly case movement of spray starch soared almost 7,000% for the group to 7,297 full cases from 105, while 12-pack soda pop rocketed 10,000% to 20,516 cases from 200. Another Fleming effort, dubbed "Blue Ribbon Grand Prix," has attempted to increase sell-throughs through an internal sales contest among Fleming divisions.
The competition focused on recognizable brands with above-average gross margins for retailers. The "race" consisted of four "heats," representing each fiscal quarter, and featured three new items for each heat. The contest was further divided into classes according to division size, with winners in each heat and each class and a Grand Prize award at year-end.
The competition achieved its goal with the jump in sales of individual items in 1993-94. Coffee sales jumped 98.5%, condiments rose 51.3% and soup 41%.
Partnering was also a key aspect of a cross-docking presentation by Marion Sullivan, corporate vice president of marketing for Roundy's. That wholesaler has been operating a cross-dock program for packaging supplies and store sanitation products (none for resale at retail) that has led to increased efficiencies and substantial savings.
The partnering among retailers, wholesaler and vendor created a just-in-time flow of merchandise that freed warehouse slots for other items. Stores use bar coded order guides and transmit orders to the Roundy's Data Center, where they are then transmitted to the supplier. Suppliers make products available for pickup at midnight the same day, with clearly marked pallets. Roundy's generates a cross-dock label for each pallet that will be received that morning. The label provides identification numbers for the center, warehouse, slot, route, stop and customer.
The program has resulted in reduced warehouse expenses from labor and inventory. It has also enabled stores to receive orders palletized by department with invoices billed to specific departments and even customized by store. The dollar results were impressive: Some $2,953,000 a year in sales are no longer handled by the distribution center; total net savings to the retailer on fees of 20% reach to more than $300,000 a year, net savings on warehouse handling costs are $40,600 annually. In yet another example of partnering, C. Winston Taylor, president of Campbell Sales Co., said a continuous replenishment program with customers has produced very important gains.
Faced with a supply chain system featuring forward buying, diverting and a plethora of inefficiencies, Campbell began testing the waters of a new way of doing business through a strategic alliance with H-E-B Grocery Co., San Antonio.
"The idea was to form a pilot project around the idea of continuous replenishment," he said. "Our ultimate goal was consumer satisfaction."
The program with H-E-B led to similar alliances with several other customers, all of them focusing on continuous replenishment. The program was able to accommodate both everyday-low-price and high-low customers.
"Among four of our largest customers, turns nearly tripled, inventory dropped by two-thirds, cash flow improved and carrying costs decreased," Taylor said.
Another presentation stressed that trade promotions executed through wholesalers can be a very effective means of building sales and lowering costs.
Don Sokolnicki, vice president of national accounts for Nestle Food Co., provided examples of successful programs using wholesalers.
The company, in working with Associated Grocers in Salt Lake City, disclosed 100% of promotional funds for a pet food brand program. "Our past practice would have been to split the allowance with a significant percent of the deal executed at the retail level with street money," Sokolnicki said. Instead, Nestle and Associated developed a more efficient plan.
"The openness and trust developed allowed us to reduce our ad costs by 30%," he said. "This was accomplished by participating in A.G.'s merchandising overlay vs. our past practice of purchasing ads in the major retail stores or groups, a practice that is not totally effective since we do not contact all retail outlets."