Frozen food retailers, wholesalers and suppliers have a common goal in mind when it comes to distribution: They want to cut costs and improve operations at the same time.
The paths being chosen to get there can be as complex as reshaping and computerizing the communications pipeline from one end to the other, or as simple as adding dry ice to the load.
Retailers are making moves like cutting stockkeeping units and redesigning warehouses. Manufacturers are scrambling to get electronic data interchange up and running in order to gain their own control on inventory in the system. And refrigerated public warehouses are jockeying for the positions they will take in the future distribution landscape.
The paths are so numerous and diverse that it's difficult to pinpoint just where the industry is headed, said industry insiders in interviews with SN.
What's more, Efficient Consumer Response, the supermarket industry's Great White Hope, may not have that much to offer frozens in the way of improvements to its distribution. Frozen food executives told SN the unique nature of frozen products will keep ECR from creating any drastic changes in the way frozen food reaches supermarket shelves.
"I don't see that many changes," said Robert King, director of frozen food and dairy at Richfood, Mechanicsville, Va., regarding the potential for ECR-based
change in the distribution landscape over the next few years.
"We're going to try to make it more efficient. But still, I don't see the direct store deliveries coming straight from the manufacturers to the retailers. The volume and the cases aren't there to do that. I think things will be similar to where we are, but there will be some real fine-tuning in certain areas."
That fine-tuning will result in reduced inventories, more use of EDI, and a possible increase in the use of sort-and-load centers, frozen distribution decision makers told SN.
When and if ECR does affect frozens, the most significant operational improvements are likely to apply to managing the department's major categories at levels of sophistication only dreamed about in the past.
"I believe the cost of [shelf space] is going to put a huge emphasis on the frozen food category, therefore causing this category to be a focus for true category management," said Michael Perry, category manager at Randalls Food Markets, Houston.
"The manufacturers and retailers must combine information resources to maximize profitability for both. There are huge opportunities in this area. Category management will let us clearly define our profit objective and help us determine optimum shelf allocations and product offerings," Perry said.
It remains to be seen how that emphasis on the shelf will, in practical terms, lead back into improved distribution. However that plays out, Perry and others suggested partnerships between retailers and suppliers, as well as an increased use of EDI, will be crucial to the process.
Partnerships and EDI have been edging into frozen foods distribution for several years, mostly within the link between manufacturers and refrigerated warehouses, said Ron Roach, vice president of customer services at Comstock Michigan Fruit, Rochester, N.Y., and chairman of the American Frozen Food Institute's Distribution and Logistics Council.
"A lot of companies are doing different kinds of EDI with purchase orders, invoices and shipping notices and such," Roach said. "The vendor-managed inventory portion of ECR relies heavily on good electronic communications to facilitate the flow of inventory information to allow the vendor to manage the inventory.
"I don't think EDI is a driving part of ECR, but you can't do the vendor-managed inventory portion of ECR without good EDI transmission capabilities and computer linkages," Roach said.
And the industry can't benefit from EDI fully until it runs up and down the line. Steven L. Lumsden, vice president of distribution and warehousing at wholesaler Nash Finch Co., Minneapolis, said it will be some time before EDI becomes standard practice.
"Some people might be making it work, but at this point not everybody has got the whole loop figured out yet," he said. "Once the EDI network is in place, and because all the standards that are being set on it, then it's a matter of getting everybody up to speed.
"We're doing pieces of it," he added. "We don't have the ability yet to take back EDI information from the carrier. I don't know whether that's so much that we don't have the capabilities, or the majority of the truck lines don't have the capabilities to give it to us."
Manufacturers and retailers alike are looking to shorten the time it takes to get frozen products from the plant to the store shelf, something EDI will help bring about.
"There is an awful lot of money out there to be saved if you can shorten the pipeline to the degree where you don't have the inventory levels in the system that have been there previously," said Andy Schuyler, vice president of sales at United Refrigerated Services, Atlanta.
"Obviously, the whole ECR initiative is doing a lot of things in terms of order size and the use of information that's available. The information to use it for replenishment of goods is just beeing tapped into," Schuyler added.
Talk of distribution cost savings brings up another question: Who benefits from the savings?
"Part of the issue here is that as retailers try to reduce their distribution costs, that often results in pushing the costs back upstream," said Comstock's Roach.
"Everybody says they want to bring the cost of distribution and logistics down. But what it means is redistributing a little bit of what's left," Roach said. He added that one hope at his end of the industry is that partnerships will help offset such occurrences.
Roach said he has seen two strategies commonly emerging among retailers looking to save on distribution costs.
"One is reducing inventory so they have less inventory carrying costs and less storage requirements," he said. "The information technology is really going to be the key to making that happen.
"The other thing is having more of the customizing of pallet loads, done as far upstream as they can. Certainly that's done in supermarket distribution centers, but in some cases it backs up all the way to the manufacturer," he said.
The ingredients comprising the cost-savings plans will vary from retailer to retailer, Roach said.
"Different retailers are trying to set up different programs. You have Kroger trying to consolidate their inbound moves from their manufacturers, so they can run single-source ordering out to their stores where they control the flow of goods. "I don't know how it's working for them. We were concerned it would bring an added cost to us and it hasn't. We've managed to come close to truckload shipments to their warehouses, so they can get the advantages of centralizing their ordering of their deliveries."
Within the last month, another retailer, Eagle Food Centers, Milan, Ill., has made a direct change in its frozen distribution. On a limited basis, the chain is using dry ice as a refrigerant.
Craig Rosenthal, Eagle's director of distribution, traffic and warehousing, said the use of dry ice allows the company to ship frozen deliveries with other types of perishable loads, which he said saves miles and stops.
"We're starting kind of slow. We have to learn to crawl before we walk, but eventually, we hope to get all our frozen foods, when possible, married with another outbound truck that's going to the store," Rosenthal said. "During the colder months, I don't see any reason why you can't marry it with your grocery loads."
After short trips, Rosenthal said, there is often plenty of ice remaining. That ice is used on subsequent deliveries.
Many new frozen food products have been offered over the past couple of years, creating another chore for warehouse personnel, said Jeff Barber, vice president of distribution and warehousing at Carr Gottstein Foods, Anchorage, Alaska.
"We've seen a greater proliferation of items coming through the frozen food facility and more requests coming from our retail side asking for frozen food items," he said. Part of the problem for Carr Gottstein was alleviated in March when the chain completed a reslotting of its frozen food warehouse. Barber said the company eliminated slow-moving items and was able to increase its frozen food SKU count by 10%.
While individual retailers search for ways to deal with distribution challenges, industry sources said that for the time being, the bulk of the changes in distribution are going to be driven, out of necessity, by manufacturers.