COLORADO SPRINGS, Colo. -- Spartan Stores, which has been recognized as a leader among wholesalers in re-engineering, is moving to the next level.
Last week Pat Quinn, Spartan's president and chief executive officer, outlined how the company is making strides in continuous replenishment, in-store systems and activity-based costing -- and he urged the industry to move faster in achieving distribution efficiencies. Quinn, addressing the 1994 Midyear Executive Conference of the National-American Wholesale Grocers' Association here, said his Grand Rapids, Mich.-based company is using better communications with partners, test programs and eventually large-scale rollouts to make its program work.
He addressed a gathering of executives concerned about how wholesalers will fare under widespread re-engineering programs and new forms of distribution. Quinn, who has warned that third-party distributors threaten conventional wholesalers, stressed the urgency of the industry's efforts.
"If we don't remain state-of-the-art in distribution, if we don't ensure the lowest net landed costs to the retailers we serve, then we will be in a position where distribution dominance is ours to lose," he warned.
Quinn said Spartan's latest efforts include: · A launch last week of a continuous replenishment test program with Quaker; there are plans to bring on six additional manufacturers by the end of the fall. · A planned introduction next April of a store technology test program, following a recent five-month joint research effort. The test could lead to widespread implementation the following year. · The jump into the next phase of Spartan's activity-based costing effort, taking it from data gathering closer to full execution. Quinn stressed that efforts by Spartan and the rest of the industry to improve efficiencies would be hurt without commitment by all players in the supply chain.
"The question is, will [Efficient Consumer Response] be a toolbox of good ideas that sits on everyone's shelf or will we use it?" Quinn asked.
"Efficiencies will not be realized for all trading partners and working partners without trust, information sharing, dialogue and win-win objectives."
Quinn said Spartan's efforts in corporate re-engineering include programs with its retail customers and with manufacturers. One of the manufacturer programs just starting is the continuous replenishment. Spartan launched the CRP program with Quaker last week with about 50 stockkeeping units, the result of a search for a vendor partner that began last October.
Spartan and Quaker will use electronic data interchange to share product information, Quinn noted.
"At the close of each business day, we take a snapshot of the item file and extract information on quantities, what's on hand, what's received, sold, out of stock, additional demand and so on," Quinn said. "We transmit to Quaker, and they transmit orders back to us via EDI format. We hope to have six more manufacturers engaged in this by the end of fall so we can move forward."
On the retailer side of Spartan's program, a store technology test may lead to an initiative that will benefit many of the wholesaler's independents by 1996, Quinn said.
The recently completed five month-analysis sought to determine what the stores will require in information technology. The study was conducted by five Spartan associates and five of the company's retail accounts. "The ultimate goal of that group was to help us implement category management, space management, frequent shopper programs, new ordering processes and paperless communication, so it's a central effort for us," Quinn said. "Now that we completed the five-month analysis, we'll move ahead with a real-world test of the systems in five stores, to kick off in April of 1995. We're shooting for spring of 1996 to have systems ready to roll out to all of our retailers."
Spartan also considers activity-based costing, or ABC, an important goal, and it has just completed the first phase of gathering data using transportation as a pilot project, Quinn said. ABC, which is intended to provide a better gauge of total costs, will now enter the next phase at Spartan.
"We've completed many in-depth interviews with transportation associates, and pulled together related general ledger data," Quinn said. "Now taking it forward, we want to determine how ABC can be utilized as a decision-making tool and how to move it through the company and select appropriate software."
To bring its independents up to speed on technology, Spartan has stressed educating retailers on the importance of scanning and electronic marketing. The wholesaler has also arranged bank financing for customer scanning programs.
"In June of 1992, we had 187 stores scanning, and today we have 248, which is about 75% of our volume," Quinn said. "And we're adding about one store a week with scanning."
In promoting the virtues of electronic marketing, Spartan has convinced retailers that it's important to reward their best shoppers with frequent shopper programs.
"In June 1992, only one store had a program," Quinn said. "Today, 55 stores have them, and we'll have 100 within the year. I think electronic marketing is a natural for independent retailers."
Other systems in various stages of development for retailing programs include computerized store product catalogs for electronic ordering; paperless ordering and perpetual inventory systems; single point of entry for product and price data, and radio-frequency hand-held computers for price changes, inventory control and promotional issues.
In manufacturer programs, Quinn pointed to the gains from an arrangement with Sysco Corp. on cross-docking of perishables. Under the program, begun last year, Spartan's stores can order Sysco's products, which are then cross-docked at Spartan facilities and loaded onto trucks with Spartan's perishables. Combining loads makes it more efficient to service certain customers, and has decreased SKUs.