WHOLESALERS URGED TO USE CROSS-DOCKING EXTENSIVELY

MARC MILLSTEIN

LAKE BUENA VISTA, Fla. -- Wholesalers need to implement extensive cross-docking programs or risk losing much of their business to other, more efficient distribution systems, said Stephen Davis, executive vice president of distribution at Fleming Cos., Oklahoma City.

"The system requirements for cross-docking are extensive. We are trying to deal with that. We have projects under way. We're in the design phase with most of them right now. Even though we do not have the right systems in place today, we expect to develop them and take advantage of all the opportunities of cross-docking," Davis said.

"This is going to be very costly in our company, and I suggest it will be in yours, but it is something we just have to deal with," he said.

Davis made his remarks at the National-American Wholesaler Grocers' Association annual convention here this month. He spoke at a workshop titled "Efficient Cross-Docking Methods."

In particular, Davis cited the threat of other nontraditional distribution formats coming in and stealing business away from wholesalers if aggressive steps aren't taken soon to beat them back.

Wholesalers can and should fight to maintain their position as the key channel of distribution in the supermarket industry, he said.

"There are alternative sources of distribution, such as Non-Stop Logistics, consolidators and local cross-dock facilitators, that may very well fill the void if we do not. I don't think we ought to invite others [to develop more efficient distribution systems], when we

have the structure in place to do it ourselves," Davis said.

"I am a bit fearful of our competitors in the future. But I think we, as wholesalers, have the wherewithal to deal with that. I think it behooves us to develop [cross-docking] as part of our business.

"Our competitive position requires that we not just reduce costs in our distribution centers but take costs out altogether. Cross-docking does that. It addresses a major function in our operation where we remove costs altogether," he said.

Less than 3% of products at Fleming are shipped via cross-docking methods today. But the wholesaler is committed to changing that percentage. Fleming, Davis said, is prepared to invest heavily to expand dock space and implement new systems to make cross-docking a reality for a larger share of its products.

"We are prepared to make layout adjustments in our distribution centers to accommodate cross-docking. This will be a significant undertaking, but we have to do it. We not only see the need for additional dock space, but we also see a need to be able to store product for a very short period of time," Davis said.

"We don't think that we can ever get the holding area on the loading dock large enough to fully accommodate cross-docking. So we visualize having holding areas for products for very short periods of time," he said.

Other steps also will have to be taken to expand Fleming's cross-docking abilities.

"In some divisions we have 150,000 cases coming in and 150,000 cases going out the door. Quite frankly, we really don't think we are going to get much above 2% to 3% in cross-docking until we get the systems in place to handle it," Davis said.

Modifications in warehouse facilities and layout are essential. Also imperative is "an alliance with top management that places an emphasis on cross-docking," he added.

Although Davis emphasized Fleming's commitment to increasing the percentage of product involved in cross-docking, and urged other wholesalers to do the same, he also was quick to point out the difficulties of such a switch.

Changing anything substantially in the area of distributing and warehousing can be a challenging task. Moving to a system as radically different as cross-docking, in its most sophisticated form, can be dangerous.

"It shouldn't be any surprise to any of us if we have difficulty in this whole cross-docking area. Our warehouses were never engineered for cross-docking. It is a big issue to address," Davis said.

"We are talking about the nuts and bolts of the operation. The dock area is the Achilles heel of the operation. Many a company has had tremendous problems in this area, especially in managing it properly," he said.

"The [improper] management of this area can drive up costs and, in many cases, can bring an operation to its knees. So adding something as complex as cross-docking certainly complicates the issues and complicates the solutions," he added.

The benefits of cross-docking, and the need for wholesalers to step up and be prepared to institute aggressive cross-docking programs were also cited by Christopher Brown, executive vice president of procurement and marketing at Richfood, Richmond, Va.

"As we look to the future, cross-docking is going to be extremely important. If we look at how much we are doing today, it will be growing tenfold next year and maybe [double that] the year after," said Brown, who also spoke at the workshop.

"We have to be looking more at cross-docking today and tomorrow in order to compete with the aggressive retailers in our marketplace and keep our customers competitive," he said.

Wholesalers who haven't started introducing cross-docking systems thus far should start today, he said. "Because if you are waiting for the cross-docking Utopia program to drop in your lap from a convention or a book, it isn't going to happen.

"The technology out there today in this industry is far beyond everyone in this room. The challenge isn't technology. The challenge is educating ourselves, our employees and our retailers on how to properly and efficiently utilize it," Brown said.