MEMPHIS, Tenn. -- An 18-month test of a continuous replenishment program at Fleming Cos.' northern California division succeeded in reducing inventory levels substantially but failed to produce many of the widespread benefits that had been expected.
Specifically, a number of critical logistical hurdles must still be overcome before CRP will be able to deliver fully on its enormous promise to streamline the distribution process, said Bruce Gordon, director of procurement systems for Fleming Cos., Oklahoma City.
"To date, we haven't been able to see all the benefits of CRP. We've had mixed results with different suppliers. While some suppliers have been able to achieve incremental gains in service levels and reduction in inventories, others have not been able to perform to previous levels," Gordon said.
Until continuous replenishment begins to yield more substantial, tangible benefits at Fleming, "the jury is still out on the viability of CRP," he added.
Gordon discussed Fleming's continuous replenishment program at a workshop titled "Success in Implementing Continuous Replenishment" at the Food Industry Productivity Conference here last month. The conference was sponsored by the National-American Wholesale Grocers' Association/International Foodservice Distributor Association and nine other industry groups.
The program succeeded in reducing inventory levels by one-third -- from $4.5 million to $3 million -- since being introduced last year at Fleming's Sacramento
Gordon pointed out that the inventory reductions resulted primarily from Fleming's discontinuation of forward buying and diverting. He did not comment further on the effect for Fleming of stopping those practices, however.
Complex logistical issues remain the largest obstacle to reaping the benefits of continuous replenishment, Gordon said. Efficient, accurate and rapid exchange of data is key to CRP, in which retailers share inventory and product movement information with their suppliers, who, in turn, generate a purchase order that more precisely reflects consumer demand.
The necessarily tight timeframes in which key data must be compiled and transmitted between CRP partners can be difficult to meet, Gordon said.
Time zone differentials, for example, can be particularly problematic for Fleming's northern California division, whose key information is often not available until midnight local time. "Many suppliers want the inventory position information by 8 a.m., or when their inventory analysts start each morning," he noted.
Communication of promotional needs presents another obstacle to successful CRP, he said. "Most suppliers are finding the plethora of ad groups supported by distributors more challenging than that of chain retailers. Nothing new to us.
"At Fleming, we prefer to communicate promotional product needs through the 852 [electronic data interchange] transaction set," Gordon said. "This procedure is much preferred over phone and fax communication. If CRP is to be successful, manual intervention must be minimized."
To further streamline the promotional cycle, Gordon said, Fleming is "working on ways to give [suppliers] more reason to give us advance notice. Previously we had very little lead time, but through some changes in marketing plans we've been able to convince them to give us the data a little sooner."
The complexity of working with multiple supplier computing systems and procedures can introduce further delays to the process, he said. Companies embarking on systems changes or upgrades should consider how those changes could affect their CRP partners.
Despite the challenges of implementing continuous replenishment, Gordon said, it's an important business process that Fleming will continue to explore.
Fleming currently is working with 14 suppliers across 10 divisions on continuous replenishment, but its most extensive activities are focused on the northern California division in Sacramento, where 27% of all purchases filter through CRP.
"We are now concentrating efforts to reach the 45%-plus range, or 'critical mass' so that we can more thoroughly evaluate the benefits of CRP," said Gordon.