GRUNDY, Va. -- K-VA-T Food Stores here has reduced maintenance costs 15% to 20% this year by replacing individual service contracts for certain equipment, such as slicers and scales, with a fully insured asset-management program based on time and materials spent on repairs.
The program is handled by an asset-management company, which combines all maintenance contracts under one insurance policy, thereby spreading the risk over a broad base of equipment. K-VA-T pays the administrator of the program a fixed fee, approximately 15% to 20% less than what it was paying for the individual maintenance service agreements.
"Like car insurance, if you keep having accidents with your car, your insurance will go up," said Steve Smith, president and chief operating officer of K-VA-T. "Under this program, if we maintain our equipment and don't unnecessarily use our suppliers, then we hope to save even more money in the second year."
The asset-management company, Electronic Warranty Group, Milwaukee, serves as administrator for the program. It audits and pays all invoices for repairs to equipment as well as prepares detailed reports. This information helps K-VA-T decide whether it's more cost-effective to repair or replace a particular piece of equipment.
However, EWG does not handle any service itself. K-VA-T, which operates stores under the Food City banner, continues to use the service vendors of its choice with this program, which was implemented this summer.
Covered equipment includes slicers, scales, saws and mixers in the deli/bakery departments, as well as telephone systems, intercoms, front doors and coin counters in the store, among other items.
Reports tell the retailer when the service person was there, what the individual worked on, how much time the person spent, what parts were replaced and any repeat calls for service on the same piece of equipment.
K-VA-T is also using EWG to track refrigeration repairs, which were already handled on a time and material basis. The administrator monitors costs and pays the retailer's invoices in this area.
The equipment maintenance cost-reduction/cost-containment program used at K-VA-T Food Stores is endorsed by the National Grocers Association, Reston, Va. American International Group, New York, and Fireman's Fund Insurance Co., a subsidiary of Allianz International Insurance Group, Munich, Germany, underwrite the program administered by EWG.