A growing number of distributors are looking to take continuous replenishment program initiatives to a higher level of sophistication by bringing store-level data into the equation.
In the next year, several distributors plan to incorporate point-of-sale and other store-specific data into CRP orders in the hope of gaining greater order accuracies and responsiveness to changing market needs. Currently, most continuous replenishment programs are based on warehouse turns.
Greater reliance on store-level data comes as the latest step in CRP's continuing evolution from its origins in limited vendor-managed pilots to what industry observers predict will be widespread, distributor-managed programs.
A recent SN survey of 70 leading distributors found, for example, that while
about 70% of current CRP plans are vendor-managed, 57% of the distributors polled said they anticipated taking over their CRP plans in the future.
"We feel we've perfected [CRP] as it is used today with our distribution center movement," said Ron Waldbillig, assistant vice president of management information systems at Hy-Vee, West Des Moines, Iowa. "We're now ready to move beyond that."
Hy-Vee ultimately wants to aim for store-specific CRP ordering, he said. As an initial step, the retailer is now incorporating upcoming promotional information into its regular electronic data interchange orders as a way to improve its vendor partners' ordering accuracy.
"We let the supplier know what we expect and what our goals are," he said. "We're telling them what promotions we're going to have in the future and when we're going to have them, which I think helps both of us."
Sobeys, Stellarton, Nova Scotia, said creating more accurate orders using store-level data should benefit its manufacturer partners, who will no longer have to estimate store needs and run the risk of generating too much inventory.
"We're looking in the next year to use point-of-sale data from the stores," said Normand Girard, manager of inventory control. "We're convinced it's the next step that we have to get to in order for our suppliers to benefit."
G&R Felpausch, Hastings, Mich., hopes to eventually begin a two-tiered CRP initiative, where its wholesaler, Spartan Stores, Grand Rapids, Mich., will manage general long-term ordering while the retailer will be more actively involved in ordering high velocity items by supplying store-specific information.
"We envision the real continuous replenishment is going to happen at the wholesale level: they will be the ones who are trying to look four and six weeks out," said Michael Hubert, director of management information systems and electronic data processing. "We really want to keep the burden of that flow of inventory on the wholesaler, not on us.
"We want to provide our wholesaler with all the information we can give them so they can prebook intelligently, but we want to still wait and order until the last moment," he added.
Many distributors who have begun the drive toward store-level ordering have also begun considering whether having vendor-managed CRP inventories is ultimately in their best interest, industry observers said.
Spartan Stores, for example, ended its vendor-managed inventory programs last year. Felpausch, which will work with Spartan to begin a CRP project next year, said a key flaw of vendor-managed programs is the inherent conflict between distributor and manufacturer merchandising strategies.
"I'm more interested in minimizing my inventory than [manufacturers] are," Felpausch's Hubert said, adding that vendors "are more interested in maximizing sales and we want to optimize sales. They want to push product and we want to manage product."
Hy-Vee, which now conducts 50% of its grocery inventory through vendor-managed CRP, agreed: "I don't think we can ever let a supplier completely take over our inventory. We're responsible for our own success and our own sales," said Waldbillig.
Other distributors are still placing their faith in vendor-managed inventories, however, arguing that a vendor's more accurate knowledge of product availability ensures better service levels and fewer out-of-stock situations.
"We see a lot of benefits in vendors managing CRP," said Sobeys' Girard. "They have more information right now at the item-level than we do."
