SUPERVALU DETAILS 1996 RE-ENGINEERING PROGRAM

MINNEAPOLIS -- Supervalu here said it expects to make considerable progress in implementing its Advantage re-engineering program in 1996. After setting up a new organizational structure during 1995, the distributor has an aggressive agenda in place for this year. That agenda, outlined in a company report and amplified by executives last week, includes the following:Supervalu will expand its new pricing

MINNEAPOLIS -- Supervalu here said it expects to make considerable progress in implementing its Advantage re-engineering program in 1996. After setting up a new organizational structure during 1995, the distributor has an aggressive agenda in place for this year. That agenda, outlined in a company report and amplified by executives last week, includes the following:

Supervalu will expand its new pricing and category management programs to all of its Denver customers after a small test among a handful of retailers there last spring was deemed successful.

In March it will open the first of its upstream regional distribution facilities in Anniston, Ala., and in May it will begin implementing the new pricing and category management program in the Southeast.

Supervalu is close to securing a site in Illinois for its second regional distribution facility, which is set to open early in 1997.

The company hopes to introduce a paperless system for product distribution by the end of the year. According to Jeff Noddle, corporate executive vice president and president and chief operating officer of Supervalu wholesale foods companies, the distributor had conducted a test of its new pricing and category

management systems in Denver at five stores of different sizes and formats. "Our objective was to isolate the test and learn from the results before we implemented the program on a broader scale in the Southeast," Noddle told SN. He said Supervalu was encouraged by the early test results in five categories, "and beginning in the early fall we plan to expand the program in Denver to additional stores in additional categories, though it will take quite some time to cover all categories at the 85 stores there." The company said the new Advantage pricing system involves two components: a dead-net selling price that reflects Supervalu's actual cost and a three-part fee structure that reflects the distributor's costs for storage and handling, freight and product service. Supervalu ran parallel fee systems in Denver to show retailers the difference between its current fee structure and the new Advantage pricing system. Noddle said the company will also run parallel fee systems when it implements the program in the Southeast beginning in May, about two months after it begins shipping products from the Anniston facility. The Anniston regional center that will open in March is a 200,000-square-foot facility that will serve as a source of replenishment for both slow-moving groceries and general merchandise and health and beauty care products and as a cross-dock for five existing distribution centers: Atlanta; Quincy, Fla.; Indianola, Miss.; Hammond, La., and Anniston. Noddle said the pricing and category management programs will be expanded one facility at a time to customers at each of the five distribution centers serviced by Anniston, with all five expected to be using the new systems by next fall. Noddle said Anniston will be the first of four regional distribution centers set to open over the next few years, with the second facility -- in the Midwest -- due to open early next year at a site in Illinois that is still being negotiated. Noddle said the Midwest regional center will be the largest of the four centers and will serve 12 existing distribution centers. The Midwest facility will open in two phases -- general merchandise and health and beauty care and cross-docking early in the year, and dry groceries later in the year. Noddle said there is no specific timetable for opening the other two regional facilities. An existing facility in Perryman, Md., is likely to be the third regional center Supervalu opens, he said, "but there is no set schedule for converting it to a regional center." The Perryman regional center would service six distribution centers in Supervalu's Northeast region. The fourth regional facility, which would service five Western distribution centers, would be located in the Pacific Northwest, in the Seattle or Tacoma area, he said, although a site has not yet been selected. Supervalu is also contemplating opening an additional facility somewhere in the West "because of the cross-docking opportunities and the amount of product lines manufactured there, which might make it efficient for us to have a facility there," Noddle said. However, no final decision has been made on that matter, he added. To meet its goal for a paperless distribution system by the end of 1996, Supervalu said, it is seeking vendor cooperation in expanding its electronic data interchange capabilities. "Vendors need to do certain things to line up with and parallel what we and others are doing," Noddle told SN. "They must accelerate their investment in systems to move in the direction of Efficient Consumer Response, and that includes EDI."