SAN ANTONIO -- H.E. Butt Grocery Co. here is aggressively moving forward with a series of activity-based costing studies, in order to gather more detailed, serviceable information.
Activity-based costing and activity-based management projects have already yielded significant savings for the retailer, according to Kevin Moore, ABC/ABM manager at H-E-B, though he declined to identify the specific areas or amounts.
ABC -- the process of identifying the true costs of specific business practices -- has emerged as an important tool in the industry to increase efficiencies and cost savings. Information from ABC procedures can be used to implement ABM decisions.
Moore said H-E-B's interest in ABC has grown because it helps the retailer come up with information it didn't have before. "ABC gives us the information we need to more directly target our efforts to where the opportunities are.
"What we're trying to get to are the costs from when we order a product from a manufacturer to when a customer is getting into the car," Moore added. "It is overwhelming. That's why you have to take it in pieces at a time. That's one thing some companies don't do. They try to get it all nailed down perfectly and spend three years, and have no results and give up."
The retailer is currently working on ABC studies of its meat, bakery and deli departments, as well as its grocery and drug department operations. The latter studies are focusing on store activities, warehousing and transportation. All the studies are to be completed by the end of the year.
H-E-B had previously done ABC studies on its grocery and drug department operations chainwide, as well as on the pharmacies within stores. Drug departments include eye care, hair care and analgesics; the pharmacy is considered a separate department.
Moore said that each time H-E-B performs these studies it gets more detailed levels of information. He explained that the first time H-E-B did the grocery study, it focused on store activities because they tied up a significant amount of dollars and resources compared with warehousing and transportation.
In H-E-B's case, "a 1% opportunity in store activities generated a lot more dollars than a 1% improvement in warehousing and transportation because it makes up a bigger piece of the pie," he said. "But in this study we will put more information about warehousing and transportation into the grocery study than we did with the previous one."
Moore explained that elements of a grocery store ABC study can include going into the stores at night when they are receiving products, to time how long it takes to unload a frozens truck vs. a dry grocery truck. H-E-B also reviews how much time it takes to stock one type of product vs. another, and which packages take longer to scan or are more trouble to scan, he added.
ABC studies of the meat department, bakery and deli look at departments within a sample store.
"We've done a study of one meat store and we're going to do a second; we've done one bakery and we're doing our second bakery and the same with deli," said Moore. "But we're doing one store because you really have to focus in on the level of activities at the store level."