Warehouses are becoming the industry centerpiece for reducing costs.
For retailers and wholesalers, the drive to increase warehouse efficiency and cut costs is a battle being fought on two fronts: reducing time and labor at the receiving dock, and trimming inventory levels. Among the most striking initiatives:
To cut receiving-dock time, distributors are forging alliances with manufacturers to begin or expand cross-docking programs.
To further speed up movement from vendor trucks to warehouse shelves and enhance efficiency, retailers and wholesalers are expanding dock facilities and turning to wireless communications systems.
To reduce and control inventory costs, distributors also are installing more efficient racking systems and
investing in new technology to trim employee hours and increase productivity.
"Warehouses are the essence for reducing expenses," said David Cooke, vice president of distribution and warehousing at Bi-Lo, Mauldin, S.C. Cooke summed up the feeling of a growing number of distributors who are striving to implement streamlined, more efficient warehousing and storage practices to achieve bottom-line savings.
At Smart & Final, new cross-docking facilities alone stand to result in over $100,000 in trimmed warehouse costs, according to John Goneau, vice president of distribution, traffic and warehousing at the 140-store chain based in Vernon, Calif.
In September, Smart & Final will begin a joint cross-docking venture at its Vernon warehouse with James River Corp., Richmond, Va. With cross-docking, products can be transferred from the manufacturer's truck to the distributor's vehicle without requiring long-term storage at the warehouse. The cross-docking program should help "eliminate all that inventory [storage]," Goneau said. "It should cut out put-aways. We'll receive about six trucks a day, and we'll put it right on the load going to the stores."
The chain hopes to streamline the process even further. "We eventually want to get to where [James River] will put a label on each pallet, so we'll know what's on each pallet by reading it with a bar code."
Bi-Lo recently reconfigured its Mauldin, S.C., distribution center to accommodate an anticipated rise in cross-docking. The chain widened its warehouse's dock door and loading space area. "We took [the door] from 50 to 75 feet and enclosed another area of the dock. We added 13 doors to the dock area," Cooke said.
Bi-Lo now is negotiating with several vendors to expand its cross-docking programs to include new product categories.
Robert Ebright, vice president of distribution and warehousing at Big Bear Stores, Columbus, Ohio, said the chain has implemented a dock-time reduction program as part of a companywide Efficient Consumer Response initiative. "The objective was to find a way to get receiving time down to a half hour per truck," Ebright said. "I know I can do one in a half hour, but I don't know about the other 95 trucks I have each day."
Working with manufacturers like Hunt-Wesson, Rossford, Ohio, and Quaker Oats' Pet Foods Divison, Kankakee, Ill., a cross-docking system was created that has helped reduce the amount of time merchandise sits on the dock.
Vendors also have been changing their shipping modules to allow Big Bear to put merchandise directly into its racks without breaking the product down. "Vendors are helping us to do more runoff loads whereby we can go into the truck, grab the pallet and never have to touch [the merchandise] with our hands. It can all be done by machine," he said.
United Grocers, a wholesaler based in Portland, Ore., also is negotiating cross-docking programs with manufacturers such as Procter & Gamble, Cincinnati, and Kellogg Co., Battle Creek, Mich.
According to Ronald Dove, United Grocers' director of warehouse transportation operations, cross-docking is only in the planning stages. But several retailers served by the wholesaler have shown considerable interest in the program. "It's a bigger project than people think," he said.
United Grocers' main goal now in terms of boosting warehousing efficiency, though, lies on another battleground: reducing and streamlining inventory. The wholesaler recently finished restructuring and expanding its three-warehouse complex, while investing in new forklifts and pallet jacks.
Dove said keeping inventory below a certain level is crucial for its warehouses to remain productive. "If we have less than a million cubic feet in the grocery warehouse, then the productivity at the warehouse level is much greater. If the inventory is over 1.2 million cubic feet, we're making foolish moves."
Following the warehouse restructuring and the introduction of radio-frequency forklifts and new pallet jacks, Dove said United Grocers has managed to reduce $8 million worth of inventory this year.
During a major renovation last year, United Grocers added 200,000 square feet of space to its grocery warehouse, while expanding its produce area by 30,000 square feet and its deli warehouse by 20,000. Dove said the added space has resulted in lower inventory and higher employee productivity.
"It's just given us more space and made us more efficient all the way around," Dove said. "We were in outside storage and now we're not. We're high-cubing the grocery warehouse."
Employees have gone from stacking 145 cases per hour to more than 200, Dove said. "We've put in all standards on the grocery side, narrowed the aisles and we gave the employees updated equipment to take their orders with." The use of a newly purchased pallet jack has doubled an employee's ability to move pallets, he added.
For United Grocers, the technology and structural investments have paid off in reduced labor hours. Dove said he managed to cut 1,500 hours worth of labor costs in one two-week period. That number, though, may be abnormally high. The real savings may be somewhere closer to 300 hours every two weeks on average, he estimated. "It's not apples to apples yet. My next pay period will etch it in stone."
Reduced labor needs have so far not resulted in layoffs, said Dove, adding that much of the savings has been offset by employee wage increases. "We've had a few raises, with the union raises, and our labor is still staying intact."
Some chains said reducing inventory storage alone will not completely streamline costs, though, because efficient storage procedures need to be implemented as well.
Affiliated of Florida, a 15-store chain in Tampa, is expecting its warehouses to require efficient racking as well as a smaller inventory. "My goal is more to consolidate everything and implement a better racking system to accommodate the inventory," said Ray Black, director of warehouse operations at Affiliated. The inventory Affiliated wants to reduce lies primarily in its small-item stock, which Black described as slow-moving merchandise that is costly to store.
"You figure 85% of your inventory is small, movable items, and 15% are your major items," he said.
"If I can get the 15% increased to 20% and the 85% dropped down to 80%, it's going to benefit the whole operation. It's a thought for the future, and we're constantly changing everything."