Supermarkets have found two ways to improve efficiency and save money on transportation. Paradoxically, one gives them greater control, while the other takes some away.
In one instance, computer-based routing is giving management the power to map their own itineraries and even to monitor truckers' driving. Yet some supermarkets are leasing trucks from third parties, relying on others to satisfy transport needs. The arrangement can reduce logistical headaches and labor problems.
Both routes are proving to be the right choice for different retailers and wholesalers, each dealing with highly individual economic situations in an industry known for its thin margins.
"Using computers to route our trucks will give us maximum control over mileage cost," said Jon Fehrer, transportation manager at Hy-Vee Food Stores, Chariton, Iowa, which expects to computerize its routing system by the end
of the year. "The computers find the safest and shortest route between warehouses and stores so we save on fuel. We're also thinking about onboard monitoring systems, and there is the possibility we might install them.
"With outsourcing we would lose some control over delivery," said Fehrer. "I'm not against change. There are a lot of supermarkets outsourcing some or all of their transport and we might consider it in the future. It could also save us some money."
Hy-Vee has 160 stores in seven states in Midwest, two distribution centers in Chariton and Cherokee, Iowa, and operates a fleet of more than 100 tractors and close to 200 trailers.
Like Hy-Vee, many other retailers and wholesalers are adopting computerized routing and the systems have made considerable inroads in the supply chain. Industry surveys show some 64% of distributors now schedule using a computer. No figures were immediately available on retailers.
The routing systems make vital routing calculations based on store locations, restrictions on delivery times, construction, seasonal needs and load capacities, including quantity, cube space and weight count. The information is mapped on a grid, called a geocode, which locates stores in latitudinal-longitudinal crosshairs. Schedules are produced daily.
The systems ensure trucks are loaded to capacity as often as possible, thus cutting down the number of trips. They often are more useful in urban areas where roads are more frequently impassable.
Computerized routing programs often can interface with on-board driver monitors, which keep track of fuel consumption, speed and other variables. They're a headache for drivers used to independence, but managers love them because they produce significant fuel and maintenance savings. They cost about $2,000 apiece.
Hannaford Bros., Scarborough, Maine, recently installed a computerized routing system, but does not have onboard monitors. "We installed one computer to do all the [scheduling] analysis. Our payback period was planned for 18 months and we're on schedule," said Andrew Westland, vice president of distribution at Hannaford. "It helps our overall efficiency. It reduces mileage and we save on fuel, equipment. It's one more component of Efficient Consumer Response."
Hannaford's system not only routes traffic, but does billing, payroll and measures performance. Hannaford has 140 drivers, the same number of tractors and about 350 trailers.
Brookshire Bros., Lufkin, Texas, also has a computerized routing system. "When we put it in several years ago, we saved about 5% of the total miles we were running," said Greg Nordyke, Brookshire's director of transportation.
The software isn't for everyone, however. Supervalu, Minneapolis, doesn't use a computer to figure out its schedules, and that's because its routes are already quite consistent. "In a lot of cases you have very few stops and full loads are going to each store. You don't need a computer to tell you where to go," said Marty Thompson, Supervalu's transportation manager.
Computerized scheduling may be gaining in popularity because it assigns more control to management, but outsourcing is becoming more prevalent, even though it shifts control to another source.
One industry source estimates as much as a third of the industry outsources some or all of its transport needs. Most often it's done to ride out the peaks and valleys of seasonal demands. Some companies, however, have sold off their fleets and adopted full-service leasing arrangements, which include maintenance and other services for all of their trucks.
"For some, that [full-service leasing] may make sense," said Supervalu's Thompson. "Each company has to make its own decision. For us, our approach has demonstrated that it is best to buy our vehicles, and we have a replacement program in place to keep our fleet current."
The age of its fleet was clearly decisive in Norfolk, Va.-based Camellia Food Stores decision to lease. The second-largest wholesaler in southeast Virginia decided two years ago to sell its aging fleet of 80 tractors and 200 trailers and divert the money into its 48 retail stores, which it felt would deliver a higher return.
"Early in 1991, several issues came up that caused us to rethink our allegiance to fleet ownership," said Jay Bhatt, Camellia's vice president and chief financial officer. "First, virtually our entire fleet was in need of replacement and, because of its age, our maintenance costs were extremely high. Fleet replacement is a huge proposition, with big financial implications. Also, we had lost a major warehouse customer."
Camellia leased 45 tractors and 100 trailers initially. Later, it reduced the fleet to 32 tractors and 80 trailers. More equipment is provided during peak seasons.
In the first year of its lease, Camellia reduced its transportation-related costs by more than 20%, the company said.
"The key is when we owned the equipment we maintained the maximum number of units we would need at peak times of the year, but for the remainder of the year normal delivery didn't require that much equipment," said Bhatt. "That's why we saw such a dramatic decrease."
Outsourcing just some of transport needs can help with personnel arrangements. Hannaford's Westland said outsourcing "allows us to provide full-time drivers guarantees we probably couldn't otherwise," such as the number of hours and other working conditions.
For a different perspective, Save Mart Supermarkets, Modesto, Calif., actually leases its own trucks to ensure full loads. "We do it just to keep our trucks full in every direction," said Robert Piccinini, Save Mart's chairman. "Any time a truck is rolling on the road, the object is to have it full of product. That's how we got into third-party leasing."