GRAND RAPIDS, Mich. -- In an effort to ease the flow of paperwork and reduce processing costs, wholesaler Spartan Stores, based here, has been working on a pilot test with several manufacturers to eliminate invoices by making payment based on the purchase order and shipping documents.
"We've had a pilot project with Ralston Purina since June 1, and we began an additional pilot with another manufacturer Sept. 1, and there are a few more waiting in the wings," said Jim Swoboda, director of strategic business development for Spartan. Spartan serves 450 supermarkets in Michigan, Indiana and Ohio.
Swoboda did not identify the second manufacturer to be involved in the pilot, but noted that the work with Ralston Purina, St. Louis, has been successful so far.
"So far, we've been able to identify a savings of about $4 to $5 per transaction by eliminating the invoice and making payment to vendors based on our purchase order checked against receipt of product documents," he said. "And that estimate is probably on the low side."
While electronic invoices reduce costs and labor compared with handling paper invoices, Swoboda noted that processing electronic invoices still added an extra step. "We felt the only way to achieve greater efficiency was to eliminate that step altogether," he noted.
The initiative, called Evaluated Receipts Settlement, is an example of Efficient Consumer Response at work, noted Swoboda. "Complexity is reduced and non-value added work is eliminated," Swoboda said. "We are able to lower our costs of doing business both for ourselves and for our trading partners," he added.
"It takes a great deal of coordination between ourselves and the manufacturer. Synchronized pricing between both trading partners is key for a successful program. Having the pricing coming through EDI and advance ship notices are key enablers," Swoboda said.
Besides reducing paperwork and labor, payments were received on time and without discrepancies, noted Jolene Magruder, manager of ECR initiatives for Ralston Purina.
"The pilot was considered a total success, with savings for Spartan Stores accounts-payable group and Ralston Purina's accounts receivables," noted Magruder. "Next steps are to roll out ERS to additional distributors and vendors within the grocery industry," Magruder said.