The roster of supermarkets pursuing re-engineering or restructuring programs reads like a who's who of the grocery industry. These companies are following a variety of routes to the goal of increasing efficiencies and lowering costs. Following is a sampling of activities at some top companies:
bor hours per week per store; improving category management to reduce inventory, improve selection and enhance sales; increasing use of just-in-time product ordering for faster turns, and installing a satellite communications system that speeds checkout and more accurately captures product movement data.
FLEMING COS., Oklahoma City: It's introducing a new flexible marketing selling plan to provide goods at Fleming's net acquisition cost and passing on all forward-buying and diverting savings, as well as vendor discounts and allowances. It also is charging retailers only for the product supply and/or marketing services they use, and replacing its former geography-based structure with four business units: customer management, retail services, category marketing and product supply.
SUPERVALU, Minneapolis: The wholesaler is redesigning its distribution processes, including consolidation of facilities on a regional basis; realigning executive management team to redefine areas of responsibility to enhance focus on profitability. It also has restructured its retail operations, including the shutdown of two supercenters, and eliminated 10% of of its work force.
AMERICAN STORES CO., Salt Lake City: The company is initiating the Delta project, whose goal is to improve buying, accounting, distribution and merchandising systems. It will be testing various initiatives, with major benefits deferred to 1996 -- for example, making only limited use of electronic data interchange. It's also improving warehouse MIS systems to deliver substantial efficiencies and savings from inventory reduction, improved buying and more efficient distribution. It's also using more efficient accounting and financial systems to enhance margins and improve expense ratios.
SAFEWAY, Oakland, Calif.: The chain is in the second year of a five-year plan designed to enhance operating profitability through cost-cutting, reinvestment of cost savings in more aggressive pricing and better service and/or store standards and increased investment in the store base. It reorganized and downsized in May by eliminating 290 nonstore positions, with proceeds invested in lower prices and improved customer service to fuel sales growth. It is consolidating systems software to create a more efficient network that will more effectively pinpoint opportunities to reduce its cost structure.
FOOD LION, Salisbury, N.C.: The company is maintaining centralized buying but it decentralized certain aspects of operations in April 1994 by dividing the company into three operating divisions (North, South and Central) in an effort to move the company closer to its customers and improve flexibility in merchandising, promotions, advertising and product selection. It has shifted to category management, and is using EDI for 45% to 55% of volume, including 17% of non-direct-store-delivery vendors. It is testing use of store scanning data to reorder merchandise from distribution facilities, with the goal of having a completely automated replenishment system, designed to increase savings as inventories are pared down and reduce risk of out-of-stocks at store level.
VONS COS., Arcadia, Calif.: The chain is repositioning its stores to a more value-oriented concept, including lower pricing and increased store labor. It is outsourcing delicatessen and meatgrinding operations; reorganizing administrative and support functions to eliminate unnecessary positions and create a flatter, more responsive organization; increasing the number of DSD vendors who use its electronic receiving system; using EDI to process purchase orders; increasing the number of vendors who work on a continuous replenishment basis, and reconfiguring distribution facilities.
STOP & SHOP COS., Quincy, Mass.: The chain is testing automated ordering and using EDI for about 87% of its grocery purchases. It also has allocated $50 million for capital expenditures on systems and technology over the next six to seven years.
HANNAFORD BROS. CO., Scarborough, Maine: The company is imposing cost-cutting initiatives, including reduction in labor hours, made possible largely through re-engineering of work processes (for example, moving from scratch bakeries to bake-offs, and offering fewer labor-intensive cut-flower arrangements).
SMITH'S FOOD & DRUG CENTERS, Salt Lake City: The chain has introduced an employee training initiative in southern California to cut expenses, mainly through reduced shrinkage and improved productivity, which is scheduled to lead to sales growth.
CARR GOTTSTEIN FOODS CO., Anchorage, Alaska: It is speeding up deliveries to stores by selecting individual store orders as freight is received from vendors in the Pacific Northwest, then shipping orders directly to the stores rather than keeping them in warehouse slots for subsequent store deliveries.
