BAG 'N SAVE BAGS MAINTENANCE SAVINGS WITH THIRD-PARTY PLAN

DEENA AMATO-McCOY

OMAHA, Neb. -- Bag 'N Save here is experiencing savings of up to 15% by switching from standard equipment- maintenance contracts to a third-party time and materials store equipment-maintenance program.

"Since we started using the equipment-maintenance program in our store last June, we have seen about a 13.5% reduction in our maintenance costs," said Jim Stoll, president and chief executive officer for Bag 'N Save. "In fact, we have saved 15%, though after paying a 1.5% fee to use the service, we calculated our savings to be about 13.5%."

Bag 'N Save uses an insurance policy offered through a third-party administrator that covers the "time and materials" repair and replacement of the retailer's refrigeration and electronic equipment, based on costs for parts, labor and travel. This service replaces traditional maintenance contracts in which equipment repairs are based on a percentage of the original equipment cost.

"By paying our vendors on a time and material basis in lieu of a flat rate, we are able to achieve these savings," he said.

Through the program, retailers still keep relationships with their service and equipment vendors. However, the bills are audited by the Electronic Warranty Group, Milwaukee -- the third party that insures the retailer's equipment, processes all repair invoices, evaluates the service rendered and, in some cases, pays vendors on behalf of the retailer.

"We are guaranteed quarterly maintenance inspections, as well as management reports that list and describe all equipment repairs and costs," Stoll said. "This list lets us monitor if the frequency of repairs is greater than the cost of replacing a piece of equipment."

Retailers gain complete coverage for all their store's equipment under one agreement, rather than dealing with several separate policies and expiration dates. The equipment that Bag 'N Save currently insures through its policy includes its refrigeration equipment, automatic doors, emergency generators, telephone system and meat wrappers.

"Rather than paying service vendors inaccurate maintenance costs on these and other pieces of equipment, the program allows supermarkets to monitor where maintenance costs are being spent yearly," said a source familiar with the situation.

As Bag 'N Save prepares for renewal of its maintenance contract with Electronic Warranty Group, the retailer plans to add additional equipment to the contract.

"We want to put as much on the asset-management program as we can, and ultimately I would love to get all of our electronic equipment covered, including our bakery equipment and eventually our photo-processing equipment," Stoll said.