NEW ORLEANS -- Schnuck Markets, St. Louis, pared back inventory by 75% and saw product turns increase eightfold in one category after moving to continuous replenishment.
Those are among the latest results of what Craig Schnuck, chairman and chief executive officer, called the retailer's most successful CRP program. He outlined other recent results during a presentation here Sept. 28 at the Replenishment Excellence conference sponsored by the Food Marketing Institute and Grocery Manufacturers Association, both based in Washington.
Product turns increased to 66 last month from 7.6 in March 1994, when Schnuck Markets launched a continuous replenishment program with cat litter manufacturer Golden Cat, South Bend, Ind. Inventory levels have been reduced from 6,127 to 1,777 cases and the number of days product is on hand was cut from 76 days to eight days.
The retailer is engaged in continuous replenishment with more than 30 vendors and while all programs have not been as successful as the Golden Cat partnership, Schnuck said, "Even our poorest performing CRP vendors have had increased product turns of 20%."
Schnuck Markets intends to expand CRP partnerships in the coming year. However, vendors' insistence that the retailer refrain from diverting product remains a sticking point.
"We don't think we should be penalized [for diverting] just because we are in a CRP program," Schnuck said. "We have an obligation to buy product at the lowest possible price and if we can get it any way other than CRP, we'll continue to do it."
Schnuck said the Golden Cat CRP initiative has proven to be a model program -- the most successful to date.
"Many manufacturers overstate the benefits of CRP to us," Schnuck said. "Golden Cat is the very notable exception. They understated the potential and really delivered the results."
Open dialogue between Schnuck's category manager and the vendor's logistics staff enabled the chain to recover service levels that dropped from 100% to 95% in the initial months of the program. Last month, the chain recorded service levels at 99%.
"Continuous replenishment is the most rational method of improving supply chain efficiency," said Franklin Krum, president and CEO of Golden Cat, during the same presentation. "It is the first step. There will be others and we can only get better."
Schnuck said the CRP program's success can be credited in part to the uncomplicated nature of Golden Cat's product category, including 28 stockkeeping units of cat litter, and the proximity of the manufacturer to Schnuck's distribution center.
Golden Cat is also a prime CRP partner because its merchandise is not frequently promoted, Schnuck said, adding that poorly managed promotional programs can derail CRP because excess inventory often remains after the promotion has ended.
"Promotional movement is very difficult to forecast," he said. "Some vendors are very slow to adjust following the promotion and some have tried to push us to [every day low pricing] as a solution to their inability to respond to promotional movement.
"The majority of the food industry is promotion-driven. CRP solutions have to be found. The entire industry is not going to shift to EDLP," he added.
Reduced inventory resulting from all CRP programs has enabled Schnuck to free up a substantial amount of warehouse space. The retailer no longer needs to rent out additional storage facilities, even after its June acquisition of the National Tea Co. from Loblaws, Toronto, Canada.
"We were able to buy National Stores, increase our [sales] volume by over 50% and do it all within the confines of our original warehouse," Schnuck said.
