ATLANTA -- Re-engineering product movement from the store receiving area to the shelf could result in potential savings of more than $14 billion industrywide, according to the Implementing Store Efficient Consumer Response study.
The full study, to be released at the Food Marketing Institute Convention next month, will make recommendations on how to improve efficiency and potentially save $14.19 billion in the areas of ordering, receiving, merchandising, labor scheduling and incentives, according to Milton Merl, president of Milton Merl Associates, New York.
Three-quarters of the potential savings would come from improvements in the areas of store fixturing, efficient shelf stocking, packaging, more sophisticated labor scheduling and optimization of store inventory. Re-engineering store fixturing, for example, could represent $3.79 billion in savings for the industry; efficient shelf stocking offers a $1.73 billion savings opportunity.
Merl said new types of store fixtures that accept prebuilt and recyclable presentation fixtures and racks can have a big effect on savings. In Europe, for example, quarter pallets can be slid onto the floor under gondola shelving.
More efficient stock shelving systems could add 50% more inventory and 30% more slots in the same space, as well as reduce store labor stocking costs by 65% and lower a store's percentage of unsalables.
Efficient packaging of products, such as "store-friendly" packaging that can be placed directly onto the floor, could also add significantly to savings, said Mike Heschel, executive vice president of Kroger Co., Cincinnati. Heschel is one of the retail participants in the Store ECR work group.
Labor scheduling improvements represent a $1.74 billion opportunity, according to the survey. These can be accomplished as retailers use standardized measures of how long specific tasks take.
To optimize store inventory effectively and realize a potential $1.41 billion in savings, the industry will need to implement numerous interrelated changes. These include making the back room part of the store's planned inventory; converting some inventory volume to vendor-direct delivery; organizing back rooms for easy access; making use of all inventory locations, including the store, distribution center and back room; and tracking total store inventory by computer-assisted ordering or an equivalent.
Kroger's Heschel said that these efforts will not come without rethinking the way business is handled. But computerized ordering's advantages include faster, more accurate orders as well as improved in-stock conditions.
Milton Merl Associates was the primary consultant to the ECR work group and responsible for the majority of the research and writing and was assisted by John Phipps, principal in Deloitte & Touche, San Francisco. The study's findings were presented at the Joint Industry ECR Conference, held here last month.