NEWS & SOLUTIONS

ROCHESTER, N.Y. -- Many retailers are successful in cutting supply chain costs, but for Wegmans Food Markets here, trimming the back-room budget has become an integral part of the retailer's operational mission.The 52-store retailer, an industry leader in reducing supply chain costs, is gaining chainwide efficiency through the use of inbound fleet software, continuous replenishment programs and cross-docking

ROCHESTER, N.Y. -- Many retailers are successful in cutting supply chain costs, but for Wegmans Food Markets here, trimming the back-room budget has become an integral part of the retailer's operational mission.

The 52-store retailer, an industry leader in reducing supply chain costs, is gaining chainwide efficiency through the use of inbound fleet software, continuous replenishment programs and cross-docking initiatives.

In its latest streamlining move, Wegmans reportedly was set to implement last month inbound fleet software to consolidate vendor shipments of frozens and produce, in order to increase the number of full-truckload shipments it receives.

The software, which is replacing an older system, is expected to be more flexible and provide access to a more extensive database, allowing Wegmans to increase consolidated ordering opportunities.

It will also give Wegmans detailed information on the contents of all inbound deliveries, alerting it to opportunities for consolidating multiple orders on one truck.

With the new system, Wegmans will have the opportunity to put other orders on the same trailer, saving the retailer inbound freight costs. Wegmans began testing the software for its frozens and produce categories, but plans to use it to manage other categories, including dry grocery and general merchandise.

Fleet management, however, is just one area of transportation that Wegmans sees as a cost-cutting method.

"We identified our inbound freight expenses to be $40 million annually, so we thought if we could reduce our freight expenses, then we could further reduce costs in our supply chain," Tim Murphy, inbound logistics manager for Wegmans, said earlier this year.

Based on these expenses, Wegmans began building carrier alliances three years ago in order to control its freight costs. Murphy reported that Wegmans has not seen any increases in its inbound freight costs since initiating carrier alliances.

In order to further reduce its transportation costs, Wegmans implemented a drop-trailer program. According to Murphy, Wegmans arranges for its carriers to drop their trailers in the retailer's truck yard, to then be unloaded by Wegmans employees.

"By unloading the product ourselves, we are eliminating dock time and we can experience approximately a $50 savings per trailer," he told SN.

Wegmans is also decreasing dock time through its Carrier Appointment Program -- a compensation program encouraging the punctuality of inbound delivery carriers, while reducing the retailer's unloading costs.

If Wegmans' dock isn't able to accommodate a carrier within an hour of their appointment time, the carrier is credited $75. But carriers are charged a $50 penalty if they are not at Wegmans' distribution center within an hour of their appointment time.

"The program is a true sharing agreement that shows our commitment to our carriers," Murphy said.

The retailer is seeing further savings for its supply chain through continuous replenishment initiatives.

Wegmans, known as an industry leader in vendor-managed inventory, reportedly has between 60% and 70% of its total grocery inventory volume in continuous replenishment programs. This volume involves 55 vendors and 95 ship points.

Through CRP, Wegmans relinquishes control over purchase orders and inventory management to its manufacturer partners. The retailer uses electronic data interchange to send manufacturers daily status reports on inventory in the warehouse, including stock on hand and on order, the number of cases shipped to stores the previous day and out-of-stocks.

CRP enables Wegmans' manufacturer partners to create a purchase order and electronically send it to Wegmans for review. If there are no discrepancies with the order, it is filled by the manufacturer and shipped to Wegmans' warehouse.

Tom Adelsberger, manager of inventory management systems for Wegmans, previously said that CRP partners use Wegmans' sales data to accurately determine how much product is needed at the stores, eliminating the need for a large amount of backup inventory.

Through this process, CRP reportedly can cut warehouse days of supply, out-of-stocks and purchase-order lead time by 50%.

Wegmans could not be reached for comment on these reductions.

Wegmans also recently launched a test with Procter & Gamble, Cincinnati, to track and manage warehouse inventory through the use of advanced shipping notices and UCC-128 extended bar codes, called positive receiving.

When the UCC-128 code is used with an ASN, the receiver knows exactly what product is on each pallet, eliminating any discrepancies related to inbound orders, according to statements from Murphy earlier this year.

With positive receiving, as a receiver pulls product off the inbound truck, he scans the bar-code label which electronically enters the shipment as inventory on the warehouse-management system.

While ASNs and UCC-128 technology monitor inventory on hand, cross docking also allows Wegmans to eliminate excess storage in the warehouse.

Cross docking and prebuilt pallets eliminate product from sitting in the warehouse, while cutting lead time for orders, according to Jack DePeters, Wegmans' director of grocery, dairy, frozens and bulk food operations.

With cross docking, the retailer receives product at the warehouse, then ships it out to stores the same day, reducing storage in the depot.

By implementing ASNs, Wegmans can take advantage of using store-ready "rainbow" pallets -- or mixed pallets that have different goods packed inside.