Distribution is rapidly moving from a process based on what one wholesaler described as "pens and whiteout" to a seamless science with a foundation in information technology.
Three large wholesalers interviewed by SN are each making major advances in their supply chain management by rolling out innovative technology-based initiatives that upgrade or replace many of their traditional operations.
Spartan Stores, Grand Rapids, Mich., is using activity-based costing programs to push for a greater amount of consolidated outbound truck shipments. The Phoenix division of Fleming Cos., Oklahoma City, credits its radio-frequency-based forklifts for inspiring new levels of employee productivity. And Associated Food Stores, Salt Lake City, is implementing a host of new software programs that will impact everyone from truck drivers to category managers.
Increased use of technology is absolutely crucial, distributors said, as retail stores demand more efficient, timely and less costly deliveries. If a wholesaler cannot fulfill its customers' distribution needs, many competitors and third-party carriers are eager to take its place, they said.
Following are three case studies showing how a trio of major, multiregional wholesalers are improving their customer service levels by investing in new technology.
Spartan Stores is convincing its retail customers the best way to ship product is through full consolidated truckloads.
The wholesaler is pushing to send only one consolidated truckload of multiple-temperature perishables daily to its retailers, replacing multiple daily deliveries of perishables. Spartan is also eyeing increased consolidation in dry grocery and other categories in the future.
"We've taken out more than 40 runs in our perishables area each week by running more combination trailers," said Pete Lima, manager of transportation and fleet maintenance. He estimated the wholesaler had reduced its deliveries by 45,000 miles each week this year.
The need to reduce the number of temperature-controlled shipments, which have a much greater cost to ship than dry grocery, is becoming essential among distributors.
Many of Spartan's retailers were receiving up to four or five perishables shipments of less than a truckload daily, creating major transportation costs. While the wholesaler's use of routing software showed numerous shipments could be consolidated, many retail customers were initially reluctant to adjust their operations and schedules to accommodate integrated shipments.
The real catalyst for change, Lima said, came with Spartan's commitment to activity-based costing. Because the wholesaler is currently unbundling its service charges and listing its transportation charges in greater detail, retailers now have concrete proof that receiving multiple truckloads a day is a major cost factor for them.
"When [distribution costs] were subsidized and hidden, I think retailers took it for granted that you were doing what you should at the best cost, because nobody really had a way to check," Lima added.
Spartan is concerned, however, that ABC may have opened a Pandora's box, since some retailers are now questioning whether it would be more cost-efficient to use a third-party carrier for their distribution needs.
"We are a trucking company, we have rates and they had better be competitive," Lima said. "We want to continue hauling. We think we can haul for our retailers better than they can."
The Fleming Cos.' Phoenix division credits radio-frequency-based computers on its warehouse forklifts for enhancing employee productivity, reducing clerical costs and improving customer service levels.
"I have RF units on every forklift in my entire grocery warehouse and frozen food facilities," said Robin Whitten, operations manager. "We are currently using them for on-line feedback of our replenishment and tracking all pallet moves."
The wholesaler has increased forklift operator productivity by up to 25% since it began using the radio-frequency transmitters, he said. He credited much of the increase to the removal of paper-based work orders. All information is now transmitted via RF from the warehouse office to forklift operators in the aisles.
Having direct electronic links between warehouse staff and management is enabling distributors to create a paperless environment where store orders can continually be fulfilled, thus speeding up store order replenishment times and improving service levels.
Real-time information on the status of warehouse order fulfillment enables Fleming to better plan its incoming freight deliveries, Whitten said.
"Once we pull a pallet out of reserve, and the forklift operator enters that in our receiving computer, we can immediately slot a pallet into that space," he said.
RF-based technology also provides a real-time link between Fleming's main warehouse in Phoenix and its other area warehouses. Forklift operators in the smaller facilities can receive orders via their computers to pull back-up stock that is needed to fill an order at the main warehouse.
In the past, Fleming treated the smaller warehouses as outside storage facilities; if product was needed, it would create a purchase order, physically send it to the warehouse and receive the product as if it were regular incoming freight. "That's all gone away with RF," Whitten said.
Associated Food Stores is rolling out software this fall that will enhance communication links among its distribution officials and greatly streamline its warehouse and fleet management.
By the first of the year, the wholesaler plans to have new systems in place to automate outbound routing and scheduling, warehouse and receiving dock management and driver payroll, among other areas, said Darwin Dewsnup, traffic and transportation manager.
"There will be a lot of systems intertwined here," he said. "We think it will speed up the [distribution] process and take some of the costs out. We feel there's a lot of waste in our manual systems" currently being used.
The new software programs will be integrated with one another, Dewsnup said. For example, data gathered from Associated's on-board truck com- puters will be transmitted to a new payroll management system that will use actual miles traveled by drivers as a basis for their pay.
For Associated, having direct communication links among the wholesaler's buying, warehouse and transportation officials should create more coordinated orders and deliveries, Dewsnup said. "We'd been so segregated in what we were doing. This software really ties us together."
Buyers, for instance, will gain real-time information on what product currently is stored in company warehouses; routers will receive input on which deliveries and vendor shipments have the highest priority.
"All of this should get us more on-time and achieve the best routing at the cheapest possible cost, while enhancing customer service," Dewsnup said.