GIANT FOOD DIGS IN ON FORWARD BUYING

MARC MILLSTEIN

DALLAS -- Giant Food is not backing down on the issues of forward buying and diverting.

The Landover, Md., chain wants to work with manufacturers to streamline buying and distribution practices and eliminate waste. But if the price tag for embracing programs such as continuous replenishment is abandoning forward buying and diverting without receiving clear and equitable benefits in return, then the road to Efficient Consumer Response is going to be long and bumpy, if not impossible to travel.

That, in essence, was the message delivered by Alvin Dobbin, senior vice president of operations at Giant Food. Dobbin gave the keynote address at the first Joint Industry ECR Conference here. The three-day event drew close to 1,600 attendees.

"Obviously, we all want waste taken out of the system, and we fully understand the manufacturer's need to smooth out production cycles. But our people tell me that we cannot have effective implementation until, and unless, the manufacturing community fully comes to grips with the issues of diverting and forward buying," Dobbin told an overflow audience.

For one thing, manufacturers and retailers must still come to terms with the issue of trust -- and for Giant, that means, in part, knowing that the goal in implementing CRP and other ECR programs is to benefit retailers as well as suppliers.

"When we mention the issue of trust, probably no where is this more a factor than in CRP. For us, looking at having the vendor manage

facets of our inventory and purchase order management is revolutionary. In any business activity, problems can and do occur. And in CRP, the relationship must be one in which we can resolve these problems with them cooperatively, and with no doubt about their reasons or motives," Dobbin said.

Giant Food, he said, is ready to work on changing the parameters under which the practice of forward buying takes place today. But the chain is not willing to give up, unilaterally, an important source of revenue.

"Our people believe [forward buying] is a much easier point to address than diverting. "By setting retailer accrual funds, developing contract CRP everyday lower prices, or funding forward buying in more creative ways such as bill-and-hold arrangements, traditional forward buying will become history," Dobbin said.

"They believe this at Giant -- despite the fact that when a good retailer does good forward buying, it is a profit center. It makes in-house heroes out of the buying organization, and they don't want to give this hero status up. But if someone comes along and says they can reduce our inventory of their products by 20%, well, that is a lot of cases. Maybe we will listen and become interested.

"But if the stick to that carrot is giving up forward buying, then -- poof! -- this becomes history, and CRP dies. We don't want such a potential valuable practice relegated to the trash heap. "We want the best, most efficient distribution of products and the smoothest flow for everyone, and most important, we want to accomplish all of this fairly," he said.

Diverting, on the other hand, may be even more difficult to stop.

"The diverting network today is so sophisticated it has become a force with which to be reckoned. Information [on diverted products] now comes via Federal Express on computer disk. In some cases, it is direct mainframe-to-mainframe communication of retailer to retailer or wholesaler to wholesaler," Dobbin said.

"It is an activity with strong survival skills, and unless it is intelligently addressed by manufacturers, it will prevent many retailers from participating in CRP," he said.