Associated Food Stores: Masters of Movement and Placement

MICHAEL GARRY

Unlike self-distributing chains or independent stores, wholesalers must be more focused on the logistics and distribution side of the supermarket business than on the consumer-facing side. To please its independent-retailer customers, wholesalers must become masters of efficiency in the movement and placement of products.

In the past few years, few wholesalers have made more of a commitment to using technology to master the distribution process than Associated Food Stores, a cooperative wholesaler based in Salt Lake City that supplies more than 480 retail customers, including 23 corporate stores, in eight Western states.

It starts, as it usually does for wholesalers, at the distribution center. Beginning in 2001, when Associated consolidated five separate Utah facilities and one Idaho warehouse into a one-million-square-foot distribution center in Farr West, Utah, it has invested in a slew of interconnecting applications to support its DC and transportation functions: everything from a new warehouse and yard management system to an innovative RFID (radio frequency identification)-based trailer tracking application. (Associated still operates two other DCs in Montana.)

Tied into the WMS, YMS and RFID systems are routing, mobile casting and dock scheduling applications, along with onboard computers. To round out the RF-driven architecture, Associated added voice-based selection in the past year. These enhancements have helped Associated integrate new business resulting from Fleming's exit from distribution to independents.

To streamline its communication with vendors, Associated has established a Vendor Link extranet and is now testing data synchronization with two major suppliers, Kraft and Procter & Gamble, having invested internally in Product Information Management. It has dramatically expanded the number of suppliers using EDI (electronic data interchange) for invoices and purchase orders to 995 via the use of several Web-based, third-party providers and is developing its own EDIINT (Web-based EDI) capability. Associated also has an extranet, Store Link, for communicating with retailer customers.

The wholesaler is focusing much of its attention on developing state-of-the-art space management and category management systems for those retailers. Its space management system is being groomed to generate planograms down to store level, considered the holy grail of space planning. Associated's goal is to make sure its independents are as fast to shelf with new items as chains — if not faster. "We're trying to be very cutting-edge on this," said David Rice, director of category management, Associated. "It's an amazing upgrade for a co-op."

For employing technology to make its warehousing, communication and category management practices models of efficiency, Associated Food Stores has been chosen as the winner of SN's 2005 Technology Excellence Award in the wholesaler category.

Associated's Far West DC may be one of the more RF (radio frequency)-driven facilities in food retailing. In addition to the standard RF-based putaway and replenishment processes handled by handheld-wielding forklift drivers, Associated is one of the few U.S. wholesalers to employ a real-time locating system (RTLS), from WhereNet, Santa Clara, Calif., to track the movement of trailers in its yard.

For its wireless networking applications, Infoworld magazine placed Associated as ninth on its 2002 list of 100 companies that have made the best use of technology, and Frontline Solutions named the wholesaler one of its Supply Chain Superstars of 2003.

In one of the first applications of RFID in food retailing, Associated's RTLS system uses active RFID tags attached to trailers that send out a signal periodically. When those trailers enter the yard, the tags' signals are received at the DC, providing full visibility within a few feet of the equipment's location, and indicating if it's loaded and what's in it. "It has dramatically improved our ability to use our fleet," said Tim Conner, distribution facility manager of the Farr West DC. "It gives us a tremendous advantage in knowing when our fleet is back and available."

Associated's experience with active RFID tags "gives us insights into what RFID can do," said Conner, adding that the wholesaler is still monitoring what is happening with applications of "passive" RFID tags by Wal-Mart and other retailers.

The RTLS technology works together with Associated's yard management system that, like its WMS, is from Retalix, Plano, Texas (formerly OMI). It also ties into an outbound transportation planning system, from UPS Logistics, Baltimore, which helps optimize cube utilization and consolidation of loads. Onboard computers from Cadec, Londonderry, N.H., work with a mobile cast system offered by UPS Logistics that allows Associated to use cellular communication to locate its fleet in transit. Finally, the DC incorporates a door scheduling system from BGI, Olathe, Kan.

A mainframe application called AIMS integrates all of these disparate applications and links them to Associated's procurement system, Advanced Warehouse Replenishment by E3, from JDA Software, Scottsdale, Ariz.

Even after the initial benefits gained from implementing the transportation-related technology at the Farr West DC, Associated has seen an additional 15% to 20% improvement in cube utilization and outbound miles reduction, said Conner.

This, he noted, translates into a reduction in trailers, tractors, drivers, deliveries and fuel consumption.

In the past year, Associated completed the RF equation by installing voice-selection technology from Vocollect, Pittsburgh, for picking perishables — frozens, deli, dairy, meat and produce — at the Farr West facility. Thus far, "we have achieved a better ROI than expected" with voice-based picking, said Conner. He said the system's ability to capture exact random weights has reduced costs and improved accuracy, with mispicks down more than 60%.

Perhaps Associated's most aggressive implementation of technology is taking place in the space planning and category management arenas for its member retailers. Last November, the cooperative upgraded its Intactix space planning tool, from JDA Software, from a 16-bit to a 32-bit platform. In January, Associated implemented JDA's Web publisher system, allowing it to present planograms to retailers on its Store Link extranet in a more robust and user-friendly format than previously possible.

In its next phase, Associated will be using JDA's Intactix Knowledge Base (IKB) to collect each store's specific planogram requirements, including floor plans for an entire store. "We will be able to ship them new items that meet their store-specific needs," said Rice, who is center store business unit coordinator, in addition to category management director. Associated's intention with the new space planning technology is to outperform chain competition in getting new products on the shelf, said Rice.

Associated plans to test IKB with two corporate stores in May, before rolling it out to all 23 corporate stores in the fall, said Rice. Eventually, this speed-to-shelf, or "Code Red," program will incorporate all of the co-op's progressive independents, including 118 "Fair Share" stores where vendors are allowed to reset shelves as planograms change. Using the new technology, those stores will handle category resets themselves.

Associated wants Code Red stores to be in full distribution of new products within 21 days of the wholesaler's receiving the products at its DC.

"This is what fresh means in center store — getting new items on the shelf and discontinued items off, just like in the produce department," said Rice.