PHILADELPHIA -- Hannaford Bros., Scarborough, Maine has reduced receiving time 15% to 20% and improved inventory turns 30% to 60% since implementing a consolidated ordering program.
In addition, by creating clusters of orders, the retailer achieved labor and operational savings of $40,000 to $70,000 on an annualized basis, said Gary Watson, vice president of transportation and supply side distribution at Hannaford.
Watson spoke at the "Consolidating Product for Competitive Advantage" session at the 1997 Productivity Convention & Exposition, held here last week.
Hannaford's savings were achieved via "labor savings in the distribution center, increased sales, reduced out-of-stocks and inventory turn savings, because we've increased the inventory turns on the categories involved," he said. Hannaford began the consolidated ordering program two years ago.
Given the opportunities consolidated ordering presents, Watson said, the industry needs to take a look at its current consolidation process and move it to the next generation, consolidated ordering.
Hannaford itself would like to more than double the number of manufacturers involved in consolidated-ordering programs in the Northeast, from the current total of 21 to 40 or 50 by the end of 1998, Watson told SN in an interview before the show.
The retailer sees opportunity for this program in frozen food as well as additional opportunities in grocery. Hannaford does not currently have any frozen-food manufacturers involved in third-party consolidated ordering programs.
Hannaford also has a "strong interest" in developing this program for both frozen food and grocery in its Southeast facility, located in Butner, N.C., Watson told SN. Currently, it has no consolidated-ordering program in place at this site.
With consolidated ordering, Hannaford orders products from multiple less-than-truckload vendors as one master cluster comprising, in essence, a full truckload. These less-than-truckload vendor loads are gathered at a third-party warehouse.
Hannaford then hauls these full truckloads to its distribution centers in Schodack, N.Y.; South Portland, Maine; and Winthrop, Maine.
Watson explained that in a consolidated-ordering program, the predetermined product flow has a positive ripple effect throughout the system of improved transportation execution, improved communications and improved product availability.
"Consolidated ordering allows [products from] multiple vendors to be ordered in a vendor master cluster, all having the same lead time, same arrival dates and all sharing in the efficiencies of shipping in a full truck," he said.
Consolidated ordering "ensures on-time arrival, allows fixed transportation from point to point, minimizes bracket pricing constraints and is relatively easy to manage," he added.
Watson contrasted this process with consolidation shipping, which is the process where individual orders are created independently, then go to a third-party consolidator who tries to match the orders to make a full truck.
"In this particular scenario, many of the orders have different due dates and in many cases never arrive on time or when expected by the distributors, leading to higher out-of-stocks and potential unnecessary inventory received earlier than expected," he said.