EUROPEANS URGED TO USE EFFICIENT UNIT LOAD PLANS

JAMES FALLON

AMSTERDAM, Netherlands (FNS) -- European food retailers could cut their operating costs by up to 1.2% if they implemented Efficient Unit Load programs as part of their Efficient Consumer Response programs.

Food retailers and manufacturers believe such programs could result in cost savings of up to $1 billion a year, said Peter Mayes, supply-chain director at Nestle Europe, London.

"Efficient unit loads are a strong driver for supply-chain integration," Mayes said.

"These issues are key because they stretch through the entire supply chain." These conclusions formed part of the second annual ECR Europe Conference here on ECR activity among European food retailers. The issues in EUL include space use in warehouses, delivery vehicles and stores; handling efficiencies; product packaging for both delivery and in-store display, and pallet and packaging sizes.

Henner Klein, vice president at A.T. Kearney, Munich, Germany, told the conference that 12% to 15% of total operating costs are influenced by efficient unit loads, and that retailers would be the main beneficiaries of instituting such programs.

"Our research shows that 75% of the cost savings would be at the retailer and 25% at the manufacturer," Klein said. The savings would result from better warehouse handling, better use of warehouse space, improved in-store handling and better packaging management, either by the retailer or manufacturer.

A main area of improvement under EUL is in-store handling of products, which account for the largest single potential cost saving, or 0.47%. "These savings could even double if the partners were willing to totally redesign their supply chains," Klein said.

But there is a need for standardized unit loads in terms of types and dimensions to help realize these cost savings at the store end, speakers said. The lack of standardization results in unused truck capacity and adds costs both at the warehouse and store levels, Mayes said.

Robert Verhulst, ECR manager for Europe at Procter & Gamble, said the absence of standardized packaging means 40% to 50% of truck movements are now made with less-than-efficient use of truck space.

"We believe that up to 15% of truck movements could be eliminated with better utilization of truck height," he said. Better utilization of truck space would result in improved deliveries to stores and improved and faster shelf stacking. Verhulst estimated that shelf stacking accounts for 1.7% of the retail sales price of a product.

"A key opportunity for savings is shelf replenishment, but there is a need for more efficient unit loads to improve it," Verhulst said.

A team of European food retailers and manufacturers began working on EUL issues late last year following the first ECR Europe conference. Its work included the development of an EUL matrix to allow maximum efficiency in shipping of products from the plant to the shelf, the development of reusable transport items and standard sizes for disposable transport packaging.

Michael Tong, business development director at A.T. Kearney, said that typically a product is handled nine to 11 times from the production line to the shelf. The goal should be to cut this amount to as few times as possible. The current problem area, he said, is the retailer's regional distribution center, where the manufacturer's shipping systems meet the retailer's.

The difficulty in implementing EUL programs is that manufacturers must invest more than retailers, while receiving fewer benefits. Klein said that as a result EUL programs require some type of compensatory payments by retailers to manufacturers "so that it is a win-no loss situation for both partners."