SHINING EXAMPLES

LINDA PURPURA

Distributors that have taken to heart the call for greater supply chain efficiency use a variety of methods to accomplish their goals.

Leading edge practitioners such as Vons Cos., Arcadia, Calif., and Richfood Holdings, Mechanicsville, Va., are employing initiatives such as significant use of cross docking and direct plant pick up to revamp the supply chain and bolster business success.

For several companies, internal experience is the best teacher. Supervalu, Minneapolis, is using lessons learned at one regional facility to make informed operations plans at a new, larger facility scheduled to open next summer. Ralphs Grocery Co., Compton, Calif., meanwhile, has achieved greater transportation efficiency partly by improving employee training on its existing routing system.

In some cases, putting more information in customers' hands is the key to supply chain success. Certified Grocers of California, Los Angeles, has done just that with its interactive ordering system.

Following are examples of how five leading distributors are using information technology and advanced equipment to better manage supply chain operations.

Vons Commits to Cross-Docking Expansion

PLEASANTON, Calif. -- Vons Cos., a wholly owned subsidiary and division of Safeway Stores here, the second-largest U.S. supermarket chain, is driving costs out of the supply chain by cross docking promotional goods and working closely with vendors to shape and take advantage of the gain sharing programs they offer.

Vons cross docks about 25% of ad and display merchandise in the grocery, frozen food and dairy by-products areas.

"We've been increasing cross docking in promotional product steadily for the past three years, and I don't see the growth curve stopping," said Mike Francis, manager of logistics for Vons.

"Cross docking is a flow-through concept and we don't want product to stop anywhere, because space, brick and mortar is getting very expensive these days," he added.

Vons uses a proprietary software program to calculate cost comparisons between cross docking and conventional distribution methods.

Vons inputs stockkeeping-unit-level information about running actual product through a normal turn. This is compared with "costs without product ever going into the warehouse, the putaway, the letdown or the order selection phases," Francis said.

"The software program is based on direct product cost figures. We put in a lot of information about productivity rates in the warehouse, interest rates, the length of time product sits in the warehouse, the normal lead time and how long the cross-dock product will be in house.

"Then the program calculates everything, including transportation costs and warehousing costs, under both turn-stock and cross-dock scenarios. We take the difference and that tells us what we've saved in the process," he said.

In addition to cross docking, Vons is also actively working with vendors that have developed gain sharing programs and menu pricing to reward customers complying with certain Efficient Consumer Response initiatives.

"We are trying to help them develop the types of programs we would like to see, and we're taking advantage of several of them," Francis said.

Vons is currently working with Procter & Gamble, Cincinnati; Ralston Purina Co., St. Louis; and Kimberly-Clark Corp., Dallas, as well as having talked to Lever Bros., New York; and Kellogg Co., Battle Creek, Mich., about their programs.

Richfood Saves With Inbound Freight Control

MECHANICSVILLE, Va. -- Direct plant pick up of dry grocery product from manufacturing facilities has been central to revamping the supply chain at Richfood Holdings here, the fourth-largest wholesaler in the United States with $3.5 billion in annual sales.

By picking up dry grocery directly from manufacturing facilities, Richfood eliminates costs associated with vendor storage, and saves by getting a lower cost for direct plant pick up.

Richfood is working with six to 10 large vendors on direct plant pickup, and expects more to participate this year.

"What you've taken out of the supply chain is movement from the vendor's manufacturing facility to the vendor's distribution center, and then from the vendor's distribution center into us," said Gary Conrad, executive vice president of distribution and logistics.

"A direct plant pick up takes out an entire step of handling that product, and in effect, double handling that product. You handle it taking it into the distribution center and you handle it taking it out," he added. "It's a very important move for the industry."

Richfood controls 70% of all inbound freight, primarily dry grocery, coming into its 1 million-square-foot facility in Harrisburg, Pa., and 47% of inbound freight, largely dry grocery, at its 1.3 million-square-foot distribution center in Richmond, Va., said Conrad.

Richfood also handles some direct pickup of perishables, frozens and dairy items to its 6 million cubic feet of frozens storage space in West Point, Pa., and about 300,000 square feet of produce storage in Norristown, Pa.

Conrad said Richfood will handle approximately 1.5 million cases per week out of Richmond across all product lines, and about 1.6 million to 1.7 million cases a week out of Harrisburg. These are the wholesaler's two largest distribution locations.

Conrad said the sheer volume of product handled by Richfood makes the pickup programs viable. "The biggest thing that helps us is simply the sheer volume," he explained.

"When we start to speak about moving 1.6 million to 1.7 million cases a week, that volume helps you tremendously. We've got a huge flow of full pallets and full truckloads coming in.

"Where a transportation system can really assist is when you get away from full truckloads and start to look at less-than-truckloads," Conrad said. "Then it helps consolidate, to give additional savings there."

Supervalu's New Site to Facilitate Cross Docking

MINNEAPOLIS -- Supervalu's new regional site in Oglesby, Ill., scheduled to open next summer, is taking advantage of the company's experiences at its state-of-the-art Southeast regional facility (SERF) in Anniston, Ala.

The most significant lesson Supervalu here learned from operations at SERF is the decision to ship palletized, store-ready product from the new regional facility to downstream facilities, said David Israel, general manager of the Oglesby regional center.

While shipping product this way will sacrifice some cube utilization on trucks, it will allow product to be cross docked at the downstream facilities, said Israel.

"We considered shipping floor-loaded trucks, because you get less product on a truck when palletized as opposed to floor loaded," Israel said. "This is especially an issue when shipping to Oglesby's furthest point, Bismarck, N.D., about 700 miles from the regional site.

"But we believe it's better to have a little less cube utilization and have it arrive at the downstream distribution center ready to be cross docked," he added. "That way you're just moving the pallet from one truck to another. We feel this is more accurate and more productive overall for the downstream distribution centers."

The Oglesby facility's sortation system, which can scan 183 pieces per minute, will facilitate the creation of the store-ready pallets, he added. Installation of the sortation system begins in November.

Israel, who spent 10 months working at the Anniston facility, said that when that site began its operations, it both floor-loaded trucks and palletized orders, depending on the distance to the distribution center. Today, SERF palletizes all of its orders to its downstream distribution centers.

Israel said this is just one of many experiences that will help add efficiency to its operations in Oglesby. The Oglesby facility will have 308,000 square feet for general merchandise alone. Construction has not yet begun on slow-moving grocery and replenishment cross-dock areas.

Ralphs Reaps Benefits of Logistics Basics

COMPTON, Calif. -- Much attention is paid to cutting costs throughout the supply chain using new technology, but Ralphs Grocery Co. here, is focused on maximizing the benefits of existing technology.

"You get more out of your logistics and supply chain management by training people to understand the basics than you do having all the bells and whistles, and then end up having it operated by someone who doesn't understand the basic concepts," said Rod Van Bebber, group vice president of distribution.

Ralphs, for example, has increased its cube per load, a critical measure of transportation efficiency, by 10%. Van Bebber credits enhanced training on Ralphs' routing system, and centralization of the system for the purposes of both training and accountability.

The routing system, which is used at its Glendale, Calif., and Riverside, Calif., distribution centers for perishables and dry grocery, helps build more efficient routes, which minimizes hauling miles and subsequently driver time.

"Now that we've proven we can move the mark, it enabled us to justify the recent purchase of the upgraded routing system," said Van Bebber. The chain is in the process of installing the upgraded version now.

Another area where Ralphs recently put this supply chain philosophy to work is with the recent purchase of additional onboard computers. Rather than buy new computers, Ralphs chose to use computers that were identical to what was already being used on Ralphs' trucks.

Van Bebber said that while two-thirds of its roughly 330 tractors had onboard computers, the other third -- some acquired through Ralphs' merger with Food 4 Less two years ago, and 50 new ones it took final delivery on in September -- were not equipped with them. These trucks were primarily from its Riverside and Glendale distribution centers.

"We found a number of used onboard computers, which were the same generation we were using," Van Bebber said. "Rather than refitting our entire fleet and going forward with having to retrain everyone on the system, we saved a tremendous amount of money by buying and installing used units that everyone was familiar with.

"The payback started immediately. Our analysis showed that because the equipment was used, the payback occurred in less time than required if we chose a new system," Van Bebber added.

The onboard computers serve as a data collection device, recording driver habits, including speed control and shifting patterns, as well as actual stop time and delays. Ralphs is more fully utilizing the information it is collecting.

"We were collecting some data and using a small portion of it, but now we're collecting more data and striving to use more and more of it on a consistent basis," Van Bebber said. For example, the chain can pinpoint which of its 600 drivers are negatively impacting fuel economy through excessive idling or poor driving habits.

Interactive Order System Increases Certified's Customer-Service Level

LOS ANGELES -- Certified Grocers of California's use of an interactive ordering system has placed more information in the hands of its retailer customers. By doing so, Certified has decreased lost sales by 2%.

"It is an accepted standard that two out of every 100 items that customers order from a wholesaler are unknown," said Marty Simmons, director of retail information systems. "The only way a customer would find this out is we wouldn't ship it. It's that way all over the country."

Certified's interactive ordering system, however, lets its retailer customers know the warehouse status of an item -- whether it's in stock, low inventory or out of stock -- as well as what's coming.

To use the system, retailers collect ordering information via a handheld wireless device, which relays information to the store's PC. The PC is linked via modem to Certified's computer at headquarters, allowing orders to be transmitted directly to the wholesaler.

Certified has 1,625 members, of which 625 full cooperative member accounts order regularly. Currently, about 200 of the 625 are using the interactive ordering system, which has been in place for the last two-and-one-half to three years.

Simmons explained that when an item has been discontinued, the system will indicate there is no such item available. "Now the customer cannot order a product we don't know," he said.

The system also helps customers save on delivery fees. "If a customer accidentally ordered a little bit more than a truck, they would automatically be charged for the next quarter of a truck. This system tells them how much of a truck they're filling. It knows the dimensions of the items they are ordering."

The ordering system even provides suggested order amounts based on either warehouse movement or point-of-sale scan movement.