GRAND RAPIDS, Mich. -- "If you can't beat them, join them" has proven a profitable adage for Spartan Stores and Sysco Frost-Pack, both based here.
The two wholesale distributors entered into a unique cross-docking program that allows Spartan's retail members to order Sysco food-service items through Spartan's electronic data interchange network.
The project is beginning to produce impressive results. Spartan sales have climbed 10% in the last six months, and its retail customers have seen procurement savings of as much as 3%, said a source at the grocery wholesaler.
Although they may never have been direct adversaries, both Spartan and Sysco have long supplied the same supermarkets in the Michigan and Indiana area. Their product offerings overlapped at times, even though Spartan's forte is supermarket staples and commodities, while Sysco Frost-Pack, a subsidiary of Sysco Corp., Houston, specializes in food-service products.
About a year and a half ago, officials at the two companies started seeing how they could eliminate duplication and increase the efficiency of their operations, as well as improve the receiving efficiencies of their mutual customers.
The retailers are a primary beneficiary, officials said. Every time a truck backs up to a store receiving area, it costs the retailer time and money. Every time an invoice must be processed, it costs the retailer more time and money.
With the cross-docking system, Spartan and Sysco products are delivered to retailers on one truck with one invoice.
"I really like it because we are getting everything in one load," said Christopher Collins, deli and seafood specialist for Great Day Food Centers, Grand Rapids, a Spartan customer. "By going to a cross-docking situation, we have eliminated four or five vendors coming in two or three times a week."
Collins added that his employees now have more time to spend on what he considers important: making customers happy. "We are more productive. I want my managers out on the floor, talking to customers, cooking, tasting products."
Ordering is more convenient for stores, too. As a Spartan source explained it, the Sysco products have been assigned Spartan codes in the order book, "and electronically the stores just sit down and transmit one order. They don't have to order Sysco items separately."
From Spartan's point of view, the items supplied by Sysco are "low-turn items; it is more effective to cross-dock [them] than to slot [them] in a warehouse," said Len Steenbergen, bakery-deli team coordinator for Spartan.
What's more, many of the items supplied by Sysco are unique to food-service suppliers and probably would never have been carried by Spartan, said Steenbergen.
Sysco, too, has benefited from the relationship, said Ruben Ysasi, director of sales for in-store food service for Sysco. "Now we have a greater share of retailers to show our wares to. It's easier being recommended than not."
Ysasi added that any business lost as Spartan assumed all its commodities supplying has been made up through increased sales of other food-service products. "I think we have replaced our old business with food-service business," he said.
This particular type of "win-win" partnership is fairly uncommon in the supermarket industry, according to Tom Pierson, professor of food marketing at Michigan State University. However, Pierson said he expects such alliances to become more common as the benefits become apparent.
"It allows the stores to have more of the products that consumers are increasingly asking for, as supermarkets provide meals instead of ingredients," said Pierson. "And Sysco is not driving to retailers for relatively small drops. They're working through Spartan, which has the economies of scale of even bigger orders."
"It is a way for manufacturers to get a captive audience for their products, by building alliances," said Lou Cooperhouse, president of Cooperhouse Group consultancy, based in Manchester, Conn.
As supermarkets try to stake their claim in the growing food-service business, "gourmet" items and institutional sizes, the specialties of food-service suppliers like Sysco, are increasingly in demand.
"A big category is the institutional sized cans, of everything from tomatoes to taco sauce. We just didn't carry things like that," said Steenbergen at Spartan. "Now our retailers can order a 3-or 5-pound can of albacore tuna, instead of opening nine cans taken from the grocery shelves."
About 3,000 of the 12,000 items offered by Sysco are included in the Spartan Stores order book, according to Ysasi. Commonly ordered items include ingredient products, from diced celery to hard-boiled eggs to sweet and sour sauce. But prepared foods such as rotini pasta salad also are popular, said Ysasi.
"As supermarket operators do more kitchen activities on premises, they need more restaurant quality ingredients," agreed Pierson of Michigan State. "The supermarket industry increasingly is going after the prepared food and takeout food business."
Along with the products from Sysco come support services that some Spartan retailers consider invaluable.
"There are a lot of places to turn when you have a question," said Collins of Great Day. He noted that after eight months on the program, Great Day "is expanding our delis" thanks to the increased products and support offered.
The brochures for the Spartan-Sysco cross-docking program note the availability of cookbooks, training manuals, catering guidelines
and food-service seminars through Sysco.
The service also takes the form of power computing. "I can turn on my laptop and tell a retailer that this recipe costs $79 and serves 40 people," said Ysasi of Sysco.
Sources on both sides admitted that it took lots of work to hammer out.
"In January of 1994 we got into the nuts and bolts of it, and we put everything behind us operationally this January," said Ysasi.
"We at one time did a lot of business with retailers and it was tough for us to give up the commodities end of the business," said Ysasi. But he and others at Sysco came to realize that the cross-docking program was the best way to service Spartan members. For one thing, "Spartan members are very loyal to Spartan. They wanted Spartan to be everything for them."
A source at Spartan agreed that there were "some pretty strong hurdles to get over" in partnering with Sysco.
"We did a survey when supermarket delis first got into food service, when they began to think of taking some of that business away from restaurants. We pretty much had three choices: get into the business ourselves, or just ignore all that business and let someone else have it, or partner with someone who already knew the business and could do it well," the executive said.
The partnership has been so successful that Spartan Foods has started a similar program with Maplehurst Bakeries, Brownsburg, Ind., a supplier of frozen dough bakery products.
After one year, John Cheesman, director of sales for Maplehurst, said he has seen "nothing but growth" from the program.