ABC SYSTEM FINDS ITEM PROFITABILITY AT SUPERVALU

LINDA PURPURA

MINNEAPOLIS -- Supervalu here will be rolling out an application that uses activity-based costing methods to determine the true profitability of products within a planogram shelf set.

The wholesaler will make the software available to its seven regions this summer, with the Northern region here scheduled to receive it first. Supervalu has already tested the system in six categories, including laundry and dish detergents and salad dressings.

"All our partners have recommendations of how to lay out a set, but many times the order that the brands or the subcategories are placed in is fairly subjective," said Mike Terpkosh, director of category management development at Supervalu.

To help rationalize the category management process, the application uses the principles of activity-based costing. In this case, ABC includes such variables as the profitability of branded items vs. private-label products and the labor costs of keeping certain product sizes stocked.

"Knowing the true profitability of those subcategories may allow retailers to rearrange that set a little bit, so the consumer sees the more profitable subcategories or brands first and buys those items," said Terpkosh. "It may also allow a retailer to eliminate brands that aren't really generating any profit."

The system, from Willard Bishop Consulting, Barrington, Ill., works in with space-management systems from Information Resources Inc., Chicago, and Intactix, Irving, Texas.