WEGMANS CRP CUTS INVENTORY, HIKES SALES

CHRIS O'LEARY

NEW ORLEANS -- Wegmans Food Markets, Rochester, N.Y., is slashing inventory levels through continuous replenishment programs that have grown to represent more than 70% of its grocery inventory.

The retailer, now conducting CRP with 50 manufacturers at 90 shipping points, has increased vendor-managed inventory by 20% since late 1994. An additional 10 manufacturers are currently receiving daily sales activity from the retailer as a first step toward launching CRP.

Such a high percentage of vendor-managed inventory -- the key to Wegmans' CRP partnerships -- distinguishes the chain as having one of the industry's most extensive CRP programs, retailers said.

"We are on fire about making inventory go away," said Tom Adelsberger, inventory management systems manager for Wegmans. He added that the retailer reduced inventory days of supply by about 38% since it began CRP.

Adelsberger spoke here Sept. 28 at the Replenishment Excellence Conference sponsored by the Food Marketing Institute and the Grocery Manufacturers of America, both based in Washington.

Speaking at a session titled "Growing Your Business and Bottom Line With CRP," Adelsberger said Wegmans' CRP partnerships have helped reduce its warehouse inventory levels while spurring category sales.

The retailer's ultimate goal for CRP is to reduce its out-of-stocks, days of supply and purchase order lead times by 50%, he said. "The easy starting point was the warehouse."

Since Wegmans began CRP

partnerships in late 1991, it has cut its inventory days of supply by about 38%. The number of days has dropped from an average of 27.5 in 1992 to less than 17 days in the last few months, Adelsberger said.

Adelsberger singled out one CRP program, with Quaker Oats Co., Chicago, which has resulted in successful promotions that greatly spur category sales while barely increasing inventory.

"It is a major investment in resources," said Dolores Holter, manager of efficient replenishment processes for Quaker. "But this is not a concept-of-the-month. This is the way we will continue to do business."

Wegmans' CRP partnership with Quaker has helped increase its market share in categories like hot and cold cereals by almost 4% this year, Adelsberger said.

"Wegmans' entire grocery department has had a sales growth rate of more than double digits [last year], and Quaker's is more then twice the sales growth of Wegmans," he said.

He credited much of the sales increase to a number of successful category promotions. For example, a promotion of Cap'n Crunch cereal increased sales volume by more than 21 times. But at the end of the promotional period, only nine days of supply was left in the retailer's warehouse.

"Our real target was [reduc-

ing] after-promotional inventory," Holter said. "Let's not allow a surge in business to create unnecessary costs."

For a promotion of hot cereals the manufacturer built 80 pallet modules, which were cross-docked at Wegmans' distribution center. While reduced product markups did cut Quaker category profit margins by more than 3% last year, the lost profit was more than made up by logistical savings, Adelsberger said.

One downside that Wegmans has seen from its use of CRP, however, is a drop in service levels.

In the last year, "our grocery depot remained flat at 1994 [service] levels," Adelsberger said. He said he believed this was because improving service has taken second priority to Wegmans' initial goal of cutting inventories.

"We started [CRP] at less than 97% service levels, so the fact we now operate at 94% doesn't make us feel terrible," he said. "But in the future this will be unacceptable."