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SUPPLIERS ARE HANDLING COSTS OF CROSS-DOCKING

BOCA RATON, Fla. -- Manufacturers take on increased handling costs by cross-docking products en route to supermarkets. But how these costs are paid for varies, said Judith Sprieser, president and chief executive officer of Sara Lee Bakery. In any event, the companies believe this practice provides a competitive edge. "Most of the savings are achieved on the wholesaler-retailer end of the supply chain,"

BOCA RATON, Fla. -- Manufacturers take on increased handling costs by cross-docking products en route to supermarkets. But how these costs are paid for varies, said Judith Sprieser, president and chief executive officer of Sara Lee Bakery. In any event, the companies believe this practice provides a competitive edge. "Most of the savings are achieved on the wholesaler-retailer end of the supply chain," she said. "Manufacturers may at least initially incur an increase in merchandise handling costs as they take on the responsibility for building store-configured pallets," she said.

Sprieser spoke here at the Food Marketing Institute's Midwinter Executive Conference. She was one of several speakers to update attendees on the progress of the Efficient Consumer Response initiative. Sprieser represented the physical distribution team. To deal with the "shift in costs," manufacturers have largely taken two different approaches, according to Sprieser. "Some manufacturers simply absorb the incremental cost, figuring that the ability to tie in more closely with their customers was worth the expense.

"Other trading partners," she continued, "have negotiated a sharing of the savings achieved whereby the manufacturer at least breaks even, but total system costs are still reduced."

Cross-docking aims to speed the flow of goods from the manufacturer to the supermarket by removing storage and handling steps in the supply chain. Basically, the manufacturer assembles full pallet units and moves them directly through the distribution center to store-destined trucks without breaking down the pallets. "Manufacturers and wholesalers believe that they can increase customer loyalty while developing systems and experience for other partnerships." "Wholesalers and retailers benefit from faster replenishment, reduced lead times, lower handling storage and administrative costs, reduced inventory and consolidated store shipments," she said.

However, Sprieser acknowledged that companies in and out of the grocery industry had difficulty precisely defining the savings from cross-docking. Some retailer-wholesaler participants, she added, have seen reduced labor costs and inventory levels that translate into as much as a third reduction in merchandise handling costs. Pilot testing this year by the physical distribution committee will try to substantiate this. "When grocery companies do implement cross-docking, it is usually with promotion items -- high-cube items which warrant full pallet shipments to individual stores," she said, "or with piece-selected pallets of small, low-volume products such health and beauty care and general merchandise."