SOLVING THE PERISHABLES PREDICAMENT

MINA WILLIAMS

Retailers across the country are seeking methods to capture cost savings throughout the distribution pipeline. However, with the highly volatile perishables categories, it takes additional work to reap the rewards of a streamlined supply chain without compromising the quality and freshness of the product.

To ensure that perishables are delivered on time and in saleable condition, retailers are using cross docking at the warehouse and, in some cases, direct store delivery.

Wal-Mart Stores, a renowned logistics leader, is making headway implementing a vendor co-managed program with its perishables that has been successfully employed with other categories.

"One thing that works well is electronic interaction with our vendors," said Bruce Peterson, vice president for perishables merchandising for the Bentonville, Ark., giant. "Using our system, we help our vendors to be in the position to be able to do their sourcing, packing and shipping to satisfy our sales needs as opposed to being simply reactive. Using the information, vendors can anticipate our needs, look at daily replenishment and can actually see what the movement is."

Indeed, quick delivery of product from farm to table remains rooted in the distribution staff, industry experts say.

"When it isn't being done well it is because of laziness or a basic lack of understanding of how long various perishables will keep," said Jeff Fairchild, produce buyer for the Portland, Ore.-based Nature's Northwest group of Wild Oats Markets, Boulder, Colo.

Some retailers have been able to capture savings with produce items in particular by having merchandising and buying staff team with warehousing and transportation personnel.

"Produce and meat buyers and merchandisers have a great knowledge of the distribution end of the business," said Peterson. "They are close to the distribution folks and want to know what's on their minds."

"Good produce people get involved with the warehouse people," said Dick Spazano, a Monrovia, Calif.-based consultant. "By working together, opportunities for savings on both sides of the desk can be realized."

Some retailers have turned to cross-docking methods to streamline the distribution process.

At Bristol Farms, El Segundo, Calif., buyers shop the Los Angeles markets daily. The vendor pallets the products and ships to the chain's distribution facility. Perishable items are cross docked at the warehouse and repalleted if needed.

"In most cases perishable items don't even get slotted into the warehouse," said Charlie Bergh, vice president for fresh foods. "Turning the product is what's important to us." The chain does operate a cooler at the warehouse. However, slots in the cooler are primarily used when the retailer makes a buy on items with a long shelf life. With deli and food-service items, pallets are built for individual units. "At this stage in our development, this system is the most efficient in terms of cost," Bergh said.

Direct store deliveries are another means operators are employing to keep perishable items moving through the system so that they arrive at the units in peak condition at a reasonable cost.

Bristol Farms moves seafood exclusively through its system via direct store deliveries. Indeed, a full 25% of all perishables move DSD at Bristol Farms.

Wal-Mart is another operator that uses direct store deliveries to ensure perishable freshness. With perishables, the chain pinpointed a need to localize its assortments and fill regional and niche needs.

"Customers do not care how many stores we have, they only care that the one unit they shop in has what they want when they want it."

In many cases, particularly with localized items and those available during a short term, it makes much more sense to direct store distribute for the sake of the customer.

"The determining factor is the number of stores that carry a particular item," said Peterson. "Bread and milk are classic examples. There are a tremendous number of strong regional and local brands and preferences."

Andronico's Market, Albany, Calif., is currently in the process of shifting its distribution of perishables from direct store delivered to a central warehouse. A new 11,000-square-foot facility is currently being built to house a retail area and a central perishables distribution center. The produce area opened earlier this year, floral came on-line in late spring, with cheese, deli, meat and bakery expected to come on-line later this fall. A central kitchen facility, from which all prepared foods will flow to the chain's units, will be operational by year's end.

This move has given Andronico's the opportunity to analyze transportation options as well. The chain has opted for smaller trucks with refrigeration and frozen capabilities, according to Patricia Jordan, director of deli operations. Vendor-supplied, volume items will be cross docked at the facility.

"We looked for multipurpose equipment so that the produce deliveries could be made first in the day, with a second run made for bakery and food service."

New warehouse-management software is being employed to provide perpetual rotation. "Rotation is critical," said Jordan. "Our emphasis in on the product being delivered, manufactured and shipped within the same 24-hour period."

Nature's Northwest, spurred by expansion plans, has also been thrust into the process of putting together a perishables warehouse, said Fairchild. "Distribution is a dilemma with perishables," he said.

"With DSD, stores are forced to order in advance and can often be out of stock. In effect the store becomes a long-distance buyer. The advantage of shifting to a central warehouse is that if a unit is out of inventory the situation can be remedied. We may lose a slight degree of freshness within a warehouse system, but with our buying expertise that should be more than compensated with an increased product flow to the stores. We are expecting to gain some freshness as the stores will no longer have to buy long,"

Like Wal-Mart, Nature's Northwest does identify specialty items for DSD distribution. "We will continue to use DSD," said Fairchild. "We currently are working with a shipper in Florida who air freights items once a week directly to our units. We want to offer the best fruit and vegetables. We try to present product that is consistent with that buying philosophy."