EDISON, N.J. -- Jim Donald, Pathmark's president and chief executive officer, said last week outsourcing to cut costs requires strong ties between the retailer and third-party outfits.
He made his remarks during a roundtable meeting of the Council of Logistics Management, Oakbrook, Ill., held here.
"We had a strategic objective to reduce overall distribution costs and improve the store-service level on mis-selections, load quality and on-time delivery," he said.
The only logical solution was to outsource to increase flexibility and lower the investment in distribution assets, he said.
"We didn't have a choice," he explained. "With rising costs and 150 stores, we had to outsource to gain efficiency."
The distribution function was given over to C&S Wholesale Grocers, Brattleboro, Vt., with transportation left in the hands of GHI, Brooklyn, N.Y.
While Donald had his reservations about ceding control of the warehouse, he believes that the arrangement has provided his stores with the necessary logistical tools to pull through.
That's where the stronger ties between retailer and third-party outfits comes in, he said. Pathmark and C&S hold weekly meetings -- without fail -- to ensure the proper flow of goods. Coordinating on lead time and shipping arrangements has provided his stores with a distinct competitive advantage, Donald said.
He attributes much of the company's current strength to the strength of the relationship between retailer and supplier.
In addition, Donald takes maximum advantage of direct-store-delivery options, and makes sure that his team stays on top of negotiations with manufacturers.
According to Donald, the dynamics of outsource relationships are undergoing a significant transformation.
In the past, an outsource retailer simply received the goods and paid the bill, he said. Now, these companies are exerting more control.
Donald has been president and chief executive officer since 1996. He has guided it through a restructuring after filing for a Chapter 11 resturcturing last June.