SAFEWAY U.K. SEEKS TO ADD EDI PARTNERS

JAMES FALLON

BIRMINGHAM, England (FNS) -- Having tasted the rewards of a successful broad-based electronic data interchange project with one supplier, Safeway U.K., Hayes, is looking to broaden the program with other partners.

The chain established electronic communication links with Nestle U.K., Croydon, to exchange a wide array of transactions including purchase orders, order confirmation and invoices as well as advance ship notices, proof of delivery, forecasting data and payment.

"It provides speedy handling of data, speedy processing and advanced handling and product tracking," Richard Williams, Safeway's supply chain director, said during a conference called "Optimizing Supply Chain Performance," sponsored by CIES: The Food Business Forum last month.

He said many retailers have explored EDI in a limited way, "but the real benefits are achieved only if data are automatically transferred [directly] into retailers' systems," he noted.

Safeway and Nestle anticipate the program will reduce delivery lead times, improve forecasting, step up delivery frequency and flexibility and enable both companies to reap the productivity and cost savings that come with the elimination of manual processes.

"We made sure there have been clear and direct communication channels, a common language and measurements and a regular review of progress against set objectives," Williams said, adding the benchmarks include overall stock levels and profitability.

The success of the program and a drive to uncover more supply chain efficiencies have prompted the retailer to evaluate its supplier base and consider trimming it back.

Williams said Safeway is not only examining its relationships with suppliers, particularly those of private-label products, but also the business relationships that exist further into the supply chain.

"The quality of [business partners] in the suppliers' own supply chain will assume greater importance in deciding which suppliers we choose to work with," he said.

"There will be stronger relationships where the supply chains are integrated," Williams added.

He stressed a reduction in suppliers might not affect branded manufacturers, but may target producers of private-label products, which represent more than a one-third of Safeway's sales.

"We multisource on many of those items and we increasingly are looking at the effectiveness of the supply chain of those suppliers," Williams said.

"Inevitably, that could lead to a reduction in suppliers; shared facilities between retailers and manufacturers, or third-party distributors that promote the use of those shared facilities."

Williams shared the podium with Tim McGuffog, director of planning and logistics at Nestle U.K., who noted that many companies mistakenly believe EDI is an end in itself, rather than a means to improve overall logistics.

"We need to improve both speed and certainty," he said. "Uncertainty is the mother of inventory."

In an earlier presentation at the same conference, Sir Alistair Grant, chairman of Safeway's parent, Argyll Group plc, pointed to the chain's enhanced logistics practices as a key reason for the chain's success.

However, Safeway must now go even further in streamlining distribution practices to compete effectively against its rivals, who have also invested heavily in logistics technology, he said.

As a result, Safeway has implemented what it calls a "Safeway 2000" program for developing processes to help ensure that the chain is able to thrive into the next century, Grant said.

"The key perspective will be 'How can new or emerging developments in supply chain management contribute to total retail effectiveness?' " he said.