SUPERVALU VP: HMR PUTTING LOGISTICS ON THE MENU

LINDA PURPURA

ST. PETERSBURG, Fla. -- The variety of product required to supply home-meal solutions is challenging Supervalu, Minneapolis, to find new ways to efficiently handle supply chain logistics.

The wholesaler is outsourcing some product from food-service companies that carry specialty items Supervalu doesn't, and is expanding its use of cross docking, according to John Vegter, vice president of logistics for Supervalu's Midwest region.

Vegter spoke at a workshop session on meal-solution logistics at the Grocery Manufacturers of America Information Systems and Logistics/Distribution Conference here last month.

Supervalu is in the process of developing a systematized approach to cross docking. Systems currently in use are not necessarily designed for handling cross-docked merchandise. With some specialty items, for example, the wholesaler must search the dock for hand-marked product, to be merged with other products for shipment to a retailer.

Supervalu also wants to improve systems that track home-meal solution orders for timeliness, invoicing, payment to multiple vendors and accounting, in order to track profitability.

These efforts should reduce operational inefficiencies, while helping to satisfy the demands of retailers who are seeking home-meal solutions for their customers.

"All of our retailers that we service are looking for something different; they want to be unique," said Vegter.

"As a distributor, it puts a lot of pressure on us as far as having a very wide amount of product available," he said. "We provide bulk products, ones that [retailers] will break down and use the ingredients to prepare meals in their stores," he added, noting that Supervalu also makes frequent deliveries of produce to ensure freshness.

But providing a wide array of products involves additional costs, including operational inefficiencies in slotting and selection of new items, and increased transportation costs from less efficient cube loads.

Vegter said he recently received a memo from the home-meal replacement department requesting space for slotting 150 additional frozen items in its frozen warehouse, 75 additional items in its perishable warehouse and another 75 in its dry warehouse. He said this would require up to 5,000 square feet in additional building space, representing a $500,000 capital investment.

"We're not going to do that," Vegter said. "But we're going to bring those products in and we're going to squeeze them into existing space, which affects our productivity within our distribution center and our cost structure.

"Every time we have to fit an additional item in the warehouse -- and the issue with a lot of these items is they are slow-moving items -- we have to find slots for them," he explained. "As we go through our distribution center to select the majority of our product, we're passing that product every single time we're going by, and that adds inefficiencies and costs to our system."

He added that some of the specialty items, such as individual jars of food, are hand carried to a rack, which is very inefficient.

Vegter said that frequent shipments, which are necessary for retailers to have fresh product for their HMR programs, also present additional costs.

"In the metro Minneapolis area, where the [HMR] phenomenon is occurring more rapidly than at stores in rural areas, we're doing more direct deliveries instead of combo loads of grocery, frozen and perishables," Vegter explained.

"Now we're doing [daily] shuttle runs of produce or perishables, where we'll put three, four or five stores' [orders] on a load. We're doing more and more of that. We're not able to cube our loads as well as we did in the past, so there are additional transportation costs there," he added.

Forecasting what products are needed and when is also an issue with servicing multiple retailers who have a variety of programs, Vegter said. He added that this becomes even more challenging since retailers frequently change their programs to carry popular items.

Vegter said category managers are working with a number of retailers to set out a planning schedule of the events that will be promoted over six months' time. He noted that Supervalu is then able to go back to its suppliers and coordinate having the products available when they are needed.