Supply Scan

Independent, Large Chain Retailers See Sales Growth

Supermarket industry sales increased 4.6 percent in 2005 and same-store sales rose 3 percent, the highest mark for same-store sales growth in a decade, according to the Food Retailing Industry Speaks, 2006, the annual state-of-the-industry report released by the Food Marketing Institute (FMI).

Independent retailers posted the largest gains in overall and same-store sales at 4.73 percent and 4.56 percent, respectively, followed by chains operating more than 100 stores at 4.57 percent and 2.56 percent.

Net income before taxes and extraordinary items increased to 2.1 percent of sales, up from 1.8 percent in 2004.

"The industry is performing with remarkable resilience and vigor," says Tim Hammonds, FMI's president and CEO. "The smallest and largest companies are meeting the challenges of fierce competition, spikes in fuel and healthcare costs and even the worst Mother Nature can deliver in last year's Gulf Coast hurricanes.

"The larger companies are succeeding with technology, efficiency and new store formats that cater to changing consumer lifestyles," he says. "Smaller retailers lead in sales growth because they are the epitome of meeting customer needs."

The results varied widely across the industry, as in years past, with some companies reporting double-digit sales increases and others decreases up to nearly 5 percent. Yet more companies are growing by meeting consumer demands for convenience and fresh, perishable foods.

The self-checkout lane is now a standard supermarket feature, with three-quarters of stores offering customers this option.

More retailers are offering shoppers a quick stop prepared-foods department where they can pick up dinner. Nearly four in 10 retailers now have quick-stop areas, a more than 10-point increase from the previous year. Most shoppers can also grab coffee to go with almost seven in 10 stores featuring coffee bars.

Welch's, Weber Distribution Sign Three-Year Contract

Welch's signed a three-year contract with third-party logistics provider Weber Distribution, Santa Fe Springs, CA, to serve as its West Coast distribution center.

From Welch's Lawton, MA, manufacturing plant, more than 100 different flavors and sizes of juices and jellies are shipped by rail to Weber's La Mirada, CA-based facility. The 203,000-square-foot distribution center contains six on-site rail doors where approximately 260 inbound loads, or nearly 450,000 cases, of Welch's products are received each month.

Some of the product is stored in a 75,000-square-foot section of the warehouse, while much of it is immediately processed and labeled for distribution to Welch's customers across 11 Western states. Welch's customers include mass retailers and grocery chains such as Wal-Mart, Costco, Safeway and Vons, as well as convenience, food/drug and specialty stores.

According to Bruce True, Welch's manager of distribution planning, Welch's hired Weber because of its expertise in handling grocery and its solid distribution network. "We closed our plant on the West Coast, so we needed to find a third-party logistics (3PL) company that could handle warehousing, order consolidation and delivery to our customers," he says. "Until Weber, we were shipping 95 percent of the product from our plant warehouses directly to our customers."

Weber processes, picks, labels and transports an average of 425 orders, or more than 350,000 cases, per month for Welch's.

As part of the agreement, Welch's is taking advantage of Weber's vendor compliance program, which manages all of the major retailers' specific routing, shipping and labeling requirements. At the heart of the compliance program is a custom-designed internal Web site that allows all of Weber's warehouses to quickly reference every major retailers' most recent routing and shipping requirements, without having to individually review and interpret routing and vendor guides.

Wal-Mart, Schneider Establish Import DC In Chicago Area

Schneider Logistics Inc., Green Bay, WI, has announced that its American Port Services subsidiary has signed a significant warehousing contract with Wal-Mart Stores Inc. Under the contract, American Port Services will provide Wal-Mart with full operating services in its 3.4 million square feet of warehousing space, creating a new Import Distribution Center in Elwood, IL, and bringing more than 300 new jobs to the area.

The American Port Services contract will support Wal-Mart's import business flowing from West Coast ports by rail to the Greater Chicagoland area. Products moving through the corridor will be forwarded to Wal-Mart distribution centers and stores throughout the Midwest.

American Port Services will provide warehousing services out of the CenterPoint Industrial Park, adjacent to the BNSF Logistics Park-Chicago. Operations at the facility will begin in mid-summer.

The Elwood contract comes on the heels of a major Mira Loma, CA, transloading and warehousing contract awarded to American Port Services by Wal-Mart earlier this year.

Report: Dynamic Distribution Improves Throughput

No longer confined within the walls of a distribution center, dynamic distribution networks are changing the way supply chain throughput is conducted, and early adopters have already experienced significant business opportunities as a result, according to a new study by AberdeenGroup, Boston.

The study, titled "The Supply Chain Integration Benchmark Report: Warehouse Without Walls," reported that best-in-class performers that adhere to a dynamic distribution philosophy reported the highest proficiency in reduction of cycle time and inventory within supply chains, along with providing high levels of customer service.

These best-in-class companies are experts in combining the skills of internal resources, service providers and suppliers to create a responsive and cost-effective network, it concluded.

Key findings in the report include best-in-class companies reporting:

  • Cash-to-cycle times that are 25 percent shorter than their peers;
  • On-time delivery performance and order fill rates that far exceed others responding to the survey;
  • Less company assets committed to the fulfillment process;
  • The ability to rapidly assemble or reassemble supply chain services to meet specific needs by using in-sourced or outsourced logistics and manufacturing services; and
  • A willingness to evaluate logistics service providers on both their operational and technical excellence. The majority of the top logistics enterprises include supply chain performance metrics as part of their supplier agreements.

"Departmental rivalries, misaligned goals and performance metrics and poor partner management policies all contribute to a company's inability to create more fluid and flexible fulfillment operations," says John Fontanella, senior vice president of research at AberdeenGroup. "Top performers have enough confidence in themselves and partner organizations to rewrite the book on how fulfillment in a global supply chain is done."

GMA, FPA To Merge

The executive committee of the Grocery Manufacturers Association (GMA) and the board of directors of the Food Products Association (FPA) plan to merge their two organizations at the start of next year, pending approval from their respective memberships.

If the merger is approved, current FPA president and CEO Cal Dooley will be the head of the new organization, which will be known as GMA/FPA for the first year and GMA after that. Current GMA president and CEO Manly Molpus has already announced his intentions to retire Dec. 31.

"This merger recognizes the unique strengths of each organization," Molpus says. "GMA/FPA achieves the long-sought objective of uniting the industry behind a common vision and agenda, with the resources and leadership to accomplish its goals."

"This merger brings together two very effective advocacy organizations and complements the exceptional public policy and industry affairs work GMA has conducted on behalf of its members since 1908," says Rick Lenny, GMA chairman and chairman, president and CEO of The Hershey Co.

"This merger will bring the best of both FPA and GMA into a single trade association, offering new services and expertise to all members and providing scientific, public policy and industry affairs representation to member companies," says Dooley.

"FPA's board believes this merger will create a powerhouse association working on behalf of large and small food and non-food companies, while preserving the science mission of FPA that has been the core of its existence since its founding in 1907," adds Reid MacDonald, chairman of FPA's board of directors and president and CEO of Faribault Foods.

GMA/FPA would represent nearly 300 member companies from every sector of the food, beverage and consumer products industry. The merger will harness the collective expertise of the industry's leading government affairs, scientific and technical experts and will continue to identify areas of collaboration with customers to promote new technology and supply chain efficiency.

Deal Or No Deal? Web Site Helps Consumers Decide

Consumers looking to save a few dollars on their next grocery trip can log on to a Web site and find out what's on sale at local supermarkets.

Mygrocerydeals.com, based in Ottawa, is a free site which is now live in more than 475 U.S. cities. It allows members to create a profile and search their local supermarkets automatically for the sale items that most interest them. Members can create a price-optimized shopping list of items, save it, print it, even e-mail it, and be ready to save big on their weekly in-store grocery shopping, all in a matter of minutes.

The site is targeted to heads of households, ages 25-54, passionate about the deals "hunt game," interested in health and nutrition and looking for a better way to save time and money in planning their grocery shopping.

The site is devoted exclusively to the grocery sector and boasts a database of more than 300,000 food products. New cities and stores are being added each week, as requested by members and visitors to the site. A grocery deal search engine is available for members to look up product information, sort by their favorite stores, product category or even by brand.

"Our goal was to create a search engine that eliminates the need for consumers to wade laboriously through the grocery flyers and circulars that are delivered to their doors via the weekly newspapers. We want to save people both time and money," says John Scott, executive vice president of mygrocerydeals.com.

National brand advertisers, such as Kellogg's, McCormick, Chicken of the Sea, Taste of Home Magazine and Red Baron have already shown interest in the new advertising opportunity mygrocerydeals.com represents, according to the company. The site offers advertisers the opportunity of influencing pre-shopping behavior through contextual advertising. So, as a member searches for sale items in the "cereal" category, as an example, an ad for a new children's cereal could be displayed.

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