BUFFALO, N.Y. -- Van Den Bergh Foods has embarked on its first effort at a broker-managed continuous replenishment program in this market.
Working with food broker DeRose Marketing here, Van Den Bergh went live with an unnamed local grocery chain this winter, said Greg Thomas, manager of supply chain integration at the Lisle, Ill., headquarters of Van Den Bergh.
"DeRose is Van Den Bergh's pilot with a broker," said Thomas. "We expect we will bring up the next customer [sometime in April]." Thomas and Dave DeRose, executive vice president of DeRose Marketing, described their new CRP activities in a joint presentation at the National Food Brokers Association Technology Forum held in New Orleans last month.
Van Den Bergh began its CRP activities nearly two years ago. It is presently active in CRP with 24 accounts, spread evenly across its five sales divisions, said Thomas. The activity covers both its shelf-stable lines, such as Ragu pasta sauces, and its perishables lines, which include several leading margarine brands.
"Most customers say they want us to do everything, not just one piece," he said.
DeRose Marketing is currently handling CRP for 14 manufacturers at retailers in the local area, said DeRose. The broker also has about two years of experience in this activity, much of it accumulated during a 16-month pilot program for Ocean Spray.
"We deliver critical mass in a hurry," said DeRose, who enumerated several advantages a broker can contribute to the CRP process, beyond providing the technical capabilities needed for electronic ordering.
"We have intimate knowledge and understanding of volume vs. production history by individual store," he said. "The broker also knows the local economic environment of the consumer. We are closer to the corporate environment of the customer. We know more about local weather conditions."
DeRose said that retailers favor the cash-flow benefits from inventory reduction, reduced warehousing requirements and reduced handling costs associated with CRP. "They get reduced out-of-stocks, which increases sales, and improved customer service. It reduces their administrative costs. There is less confusion in the warehouse as flow becomes more predictable and organized."
He added, "Working together with the manufacturer, we can provide a transparent customer interface."
Turning to brokers to help expand its CRP coverage may have important economic advantages for brand marketers like Van Den Bergh, Thomas said.
"The current environment makes it difficult for some manufacturers to accommodate all their key customers with respect to CRP," he said.
He explained, "Manufacturers see no real cost reductions until 40% to 60% of production is supplied via managed inventories. Nationally, there are not enough customers to support 30%."
Van Den Bergh is currently doing about 20% of its volume via CRP. "In 1996, that next 5% to 10% will be a lot harder to get to," said Thomas.
"Today CRP is an added cost. It requires increased staff and increased technology cost," said Thomas, who added, "Van Den Bergh feels long-term benefits are the real 'hard' benefits."
Said Thomas, "We're still a manufacturer saying, 'What is the right way to go?' We are still looking at what we manage vs. what DeRose manages."