United Cuts Procurement Costs

LUBBOCK, Texas United Supermarkets here has realized cost savings across a broad range of not-for-resale spending since it began working with Braintree, Mass.-based TopSource three years ago, according to Scott Attaway, director of service and supplies procurement for the 50-store chain. They bring an aggregate element to our procurement, and that has been a big benefit to us, he told SN. TopSource

LUBBOCK, Texas — United Supermarkets here has realized cost savings across a broad range of not-for-resale spending since it began working with Braintree, Mass.-based TopSource three years ago, according to Scott Attaway, director of service and supplies procurement for the 50-store chain.

“They bring an aggregate element to our procurement, and that has been a big benefit to us,” he told SN.

TopSource is the not-for-resale division of the Topco private-label cooperative.

Among the initiatives that have yielded benefits for privately owned United Supermarkets in the past few years was a reduction in costs for processing interchange fees — the charges retailers pay on each credit- and debit-card transaction.

“That was one of our early big wins,” Attaway said. “We were in the 60% to 70% range in savings on that, and that was a significant amount of savings for the company.”

Some companies have estimated that interchange fees can total as much as 1% to 3% of total sales.

“It was the aggregation that allowed the savings,” Attaway explained. “You have small, medium and large companies coming together, and TopSource has the opportunity to see the good, the bad and the ugly in terms of the cost and the fees that are charged.”

Altogether, United has been able to reduce not-for-resale spending by about an average of 22% at the chain, which generated an estimated $1.3 billion in sales last year.

According to Attaway, supermarket companies generally spend about $100 million on not-for-resale items for every $1 billion in sales volume.

“If you are willing to refine your specifications over a 60- to 90-day timeline, and you are going to get a 10% savings on a multimillion dollar spend, then it's worth the effort and the wait,” he said of the not-for-resale process.

The most recent initiative United has undertaken through the aggregated services offered through TopSource has been floor care.

“Being a small company with 50 stores, we were using a hodgepodge of companies for floor care, who were doing different levels of quality and execution,” he explained. “TopSource helped us figure out what other companies were having success with — the frequency of service and even the type of chemicals they were using. So we are really adopting best practices, saving money and raising the look and level of care of our floors.”

The company shifted the bulk of its floor care to one provider, San Antonio-based ISS Facilities Services, a national provider of janitorial and maintenance services. Some stores remain with a secondary provider because of their more remote location, Attaway explained.

One of the greatest benefits of the floor care program was standardization, he said.

“If Store A and Store B have the same traffic and the same sales and the same footprint, while in the past they might not have received the same floor care, today they are getting the same level of attention at the right time and at the right cost.

“While changing suppliers is a real challenge for grocery companies in some cases, we are extremely pleased to date with the quality of the program we have put in place.”

Another big win for United through the TopSource membership has been corrugated recycling and the purchase of balers, he explained.

“We had a program that wasn't highly managed,” Attaway said. “We had a conversation with people at TopSource, and they said, ‘Here is what others are doing and here's why they are able to obtain higher pay for their recycled corrugated.’

“So we were able to take ownership of the program, and within a year we got a payback on standardizing our cardboard baler fleet.”

Savings have also been achieved in several other not-for-resale areas, he explained, including electricity purchasing, where costs have been reduced by about 10% on an annual basis.

Other areas of savings include office supplies, which had been acquired on a store-by-store basis and are now purchased from a list of about 100 items.

“We basically went through everything we bought and said, ‘Is it nice? Or is it necessary?’” he explained.

Significant savings have been achieved in even the most mundane items, he said, such as trash-can liners, where costs were reduced by about $150,000 by combining product specifications with other retailers as a group and procuring through a limited number of suppliers.