Supply Scan

Supervalu Now In Sync With 500 Suppliers

Last month, Supervalu announced at the U Connect Conference in Nashville, TN, that it is successfully synchronizing supply chain data with 500 suppliers using the Global Data Synchronization Network (GDSN)-certified 1SYNC Data Pool solution.

Supervalu, Eden Prairie, MN, is now synchronizing data that represents almost 60 percent of its traditional supply chain services, non-perishable volume.

"We are excited to achieve this major milestone, and 500 suppliers in production sets a critical foundation for collaboration with our suppliers," says Mike Jackson, Supervalu's president and chief operating officer. "GDSN has rapidly become the standard way we do business with these suppliers. By integrating new item notifications from the GDSN with our SVHarbor portal, we have improved the accuracy of information entering our network, while decreasing the time to get new items to market.

"By leveraging data synchronization, we are removing friction from every step in the supply chain, creating internal efficiencies as well as benefiting our suppliers, retail customers and the end consumer. We look forward to leveraging this competency across our new, larger supply chain network now that we are coast-to-coast, border-to-border."

By implementing the 1SYNC Data Pool solution using the GDSN, Supervalu and its suppliers have reduced new-item set-up time, improved data accuracy, reduced logistics costs, reduced purchase order and invoice errors and increased speed-to-market for new product introductions.

Next, Supervalu intends to expand into synchronizing price and promotional data as well as item data. The company is also looking to expand data synchronization with all non-perishable suppliers by year's end.

Canadian Tobacco Firm Plans To Start DSD

Beginning in late August, Imperial Tobacco Canada (ITC), Montreal, will offer direct-to-store delivery of its products throughout Canada, a move that is likely to jeopardize several small and medium-sized businesses in Canada that specialize in the distribution to convenience stores, according to Canada's National Convenience Store Distributor Association.

"At this time in our history, this important initiative makes good business sense for Imperial Tobacco Canada. In recent years we have undertaken measures to become more efficient in an increasingly competitive and challenging environment," says Benjamin Kemball, president and CEO of ITC. "Direct to store delivery is the logical next step. DSD will enable us to be more effective at managing our products from manufacture to delivery and in protecting our competitive position.

"We will work through the summer with our retail partners and key accounts to ensure the flawless execution of this complex initiative," he says.

Kemball may, however, find a lot of resistance as his company moves forward with this initiative, the first of its kind for a tobacco company on a national scale.

"We are surprised and disappointed by Imperial Tobacco's decision. An important part of our distributors' sales comes from the distribution of tobacco products. Some of them will find it difficult to make good the important losses brought about by ITC's decision," says Marc Fortin, the president of the NACDA.

According to NACDA, ITC's decision is likely to result in the loss of thousands of jobs in the distribution industry throughout Canada, in addition to creating an upward pressure on the price of other products sold in convenience stores and grocery stores.

"The distributors ensuring the delivery of products to Canada's regions are likely to be affected the most. Ultimately, we are concerned that these regions will pay dearly for Imperial Tobacco's new strategy, since some wholesalers who serve remote areas may not be able to survive," Fortin adds.

Today, ITC products are sold to retailers through licensed wholesalers. Under the DSD plans, retailers who wish to receive products that way will place orders directly through a dedicated ITC account representative, or they can continue to do business with their current wholesalers.

Core-Mark To Acquire Klein Candy For $65M

Core-Mark Holding Co. Inc., one of the largest North American distributors to the convenience retail industry, has signed a definitive agreement to acquire substantially all of the assets of Klein Candy Co. for approximately $65 million dollars.

Core-Mark, based in San Francisco, will incorporate the Klein operations into its existing distribution network, creating a national distribution capacity. Klein and Core-Mark say they are committed to continuing to provide great service to Klein Candy's customer base. The deal is expected to close later this month.

"We are pleased to have this definitive agreement signed and be well on our way to the close of this very exciting next step in Core-Mark's evolution," says Michael Walsh, CEO of Core-Mark. "We believe this is a critical step in providing national service as part of our quest to be the leading distributor to the convenience industry in North America."

"We are thrilled to join Core-Mark, with its tradition of customer service dedication, and believe the joining of forces with Core-Mark will serve the Klein customers very well," says Steven Dressler, CEO of Klein Candy Co.

Core-Mark is a broad-line, full-service convenioence store and foodservice wholesaler serving 20,000 retail locations in 38 states and five Canadian provinces through 24 distribution centers, two of which it operates as a third-party logistics provider.

Klein Candy Co., trading as Klein Wholesale Distributors, is a convenience store distributor and currently stamps cigarettes, provides full service and delivers products to nine states, including Pennsylvania, Michigan, New York, New Jersey, Connecticut, Maryland, Delaware, Washington and Virginia.

Study Finds RFID Reduces Out-Of-Stocks In Fast Movers

RFID has the greatest impact on products that sell between seven and 15 units per day—according to further analysis by University of Arkansas researchers on the impact of RFID on out-of-stock (OOS) products at select Wal-Mart stores.

"This is a very important category," says Bill Hardgrave, founder and director of the RFID Research Center in the Sam M. Walton College of Business in Fayetteville, AR. "These items are fast movers and would be expected to stock out frequently. But they probably do not disappear from shelves frequently enough to demand close attention from store associates who are responsible for their replenishment."

In May, Hardgrave announced that RFID was responsible for a 30 percent reduction in out of stocks for products selling on average between 0.1 and 15 units per day. Deeper analysis demonstrates that RFID was responsible for a 62-percent reduction of out of stocks for products that sold between seven and 15 units per day.

For those rare products that sell more than 15 units per day, Hardgrave did not detect a reduction in out-of-stocks due to RFID technology. His findings for this category were inconclusive.

The study, sponsored by Wal-Mart Stores and conducted from Feb. 14, 2005, to Sept. 12, 2005, examined 24 stores, half of which were RFID-enabled and the other half of which were control stores. The stores involved werelocated in Texas and southern Oklahoma. Tests included 4,554 products and were controlled for things such as pack size of cases and shelf quantity.

For stores that were not RFID enabled, associates had to create manual lists of items that needed to be taken from the backroom to the sales floor. Although handheld scanners helped associates, the lists were based on human observation of shelves for items that were out of stock or soon to be out of stock.

For test stores, lists were created automatically based on RFID-generated knowledge of item location within a store backroom or sales floor and point-of-sale data.

Further breakdown based on sales velocity demonstrated that RFID reduced OOS:

  • By 32 percent for products that sold 0.1 to 0.2 times per week, which is the same as one to two items every 10 days;
  • By 32 percent for products that sold 0.2 to 0.3 times per week;
  • By 20 percent for products that sold 0.3 to 0.5 times per week;
  • By 36 percent for products that sold 0.5 to 1 times per week;
  • By 29 percent for products that sold 1 to 3 times per week;
  • By 32 percent for products that sold 3 to 7 times per week.

For products that sold less than 0.1 units per day, RFID made no difference in reducing OOS. Hardgrave says these are extremely slow-moving items.

Due to consumer buying behavior, an out-of-stock occurrence doesn't always translate into a lost sale, but it can contribute to significant financial losses. Nationally, retailers absorb about 42 percent of the impact of an out of stock, while suppliers absorb about 33 percent. For a store with a national average of 8 percent of its products being out of stock, the estimated potential lost sales are 3.4 percent, Hardgrave says.

Lean Provision Is Tesco's Secret Weapon In Wal-Mart Battle

The key behind the success of Tesco's loyalty card program is its lean provision system that efficiently delivers exactly what customers really want, exactly when they want it, and exactly where they want it, according to the author of a book on the topic.

"Tesco in Britain is a pioneer in lean provision," says James Womack, co-author with Daniel Jones of Lean Solutions: How Companies and Customers Can Create Value and Wealth To-gether (Free Press; October, 2005; hardcover).

The British retailer's lean provision system allows it to respond rapidly to the wealth of data collected from its 12 million Clubcards. It combines point-of-sale data, crossdock distribution centers and frequent deliveries to many stores along "milk-runs" to stock the right items in a range of retail formats. These include Tesco Express convenience stores; Tesco Metro (small supermarkets in cities); traditional Tesco supermarkets; Tesco Extra ("big box" superstores in suburbs); and Tesco.com for Web shoppers.

"The range of retail formats, plus detailed knowledge about specific consumers and rapid replenishment of each store, will progressively permit Tesco to offer each household convenient variety at lower total cost," says Womack, founder and chairman of the non-profit Lean Enterprise Institute (LEI), Cambridge, MA.

He says the strategy has worked "brilliantly," permitting Tesco to establish the lowest cost position among British retailers (including Wal-Mart's Asda chain) while posting progressively higher margins and steadily increasing its share in every format.

Tesco's has 31 percent of U.K. market share, nearly double the 16 percent held by Asda, according to a recent article in the Wall Street Journal. Last month, Wal-Mart abandoned an eight-year effort in South Korea by selling its 16 stores there.

Tesco, which plans to open a chain of small stores on the U.S. West Coast next year, has 39 Korean stores.

In other news, Tesco plans to move significant volumes of product from road to rail when it introduces purpose-built green trains later this summer. The estimated $6 million project will begin moving non-food products daily from its main distribution center in Midlands, England, to its regional Scottish distribution center in Livingston, Scotland, cutting an estimated 4.5 million road miles and around 6,000 tons of carbon dioxide emissions a year.

Laurie McIlwee, distribution director for Tesco, says ""Rail distribution has been around for many years, but this is the first time a large retailer has invested in a dedicated rail supply chain on this scale. It is an exciting move for Tesco, offering a faster route to Scotland, and a boost for the environment. It brings a whole new meaning to Tesco Express."

The first of these trains will leave Daventry for Scotland in August. If successful, Tesco will look to increase the volume of freight moved in this way and possibly to extend the trial to other areas.

Most Large U.S. Companies Unprepared For A Pandemic

Sixty-eight percent of companies with more than $1 billion in revenues are not prepared for a pandemic, such as an avian flu outbreak, according to a recent study by AMR Research Inc., Boston.

The survey highlights the fact that a majority of companies have not implemented a risk management strategy.

AMR Research identified several areas where companies could better prepare to lessen the effects of a pandemic. The following are brief descriptions of those strategies, as well as the percent of companies that have prepared for each strategy:

  • Supply risk planning (22 percent): How prepared are companies to re-source supplies and goods from other areas?

Understanding and optimizing the nodes in the supply chain in case large geographies are more affected than others is vital.

  • Home bound (38 percent): Companies must have the technology in place to support customers and employees that need to work from the safety of their own home.
  • Self-service (29 percent): Allowing employees and customers to transact business remotely and to create workflow will limit exposure.
  • Training (22 percent): Workers should be trained in multiple jobs, similar to the military, so that there are options should a colleague become disabled. Such cross-training not only helps in case of pandemic, but it also helps stem the ongoing brain-drain problem so many companies face as skilled workers retire or leave for other jobs.
  • Risk management (43 percent): Evaluating scenarios for corporate-wide financial risk for the present, the near term, and the future.

"Large businesses play a key role in delivering critical supplies and services in a global economy. Evaluating their ability to do so is vital to their operations," says Tony Friscia, president and CEO of AMR Research. "Ignoring the possibility of a pandemic or another low-probability, high-impact event is not a strategy—building a risk management framework is."

The report highlights the need for a supply chain risk management strategy notwithstanding a pandemic. In recent history, businesses have experienced significant event risks, such as port strikes, natural disasters, terrorism and outbreaks such as SARS, in addition to increasingly constrained logistics, longer supply lead times and more variable demand and supply. AMR Research found that companies with an operational risk management strategy have seen lower business impact than competitors.

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