The food industry ushered in 2001 with the first-ever Global Exchange Summit in Naples, Fla., and online, B2B exchanges appeared poised to take over the world. However, a more temperate enthusiasm has taken hold on the cusp of the New Year, and many operations are turning toward logistical efficiencies in an effort to cut costs and stay competitive in tenuous economic times.
As testament to the state of e-commerce, there will be no Global Exchange Summit in 2002, according to sources at the Food Marketing Institute, Washington.
In addition, Transora, Chicago laid off 24 workers this month, about 15% of the company's workforce.
In an interview with SN following the decision to cut jobs, Judy Sprieser, chief executive officer at Transora, said that speculation regarding a merger of the exchanges was premature.
However, pressure to consolidate from within the trading community has been building. Many doubt the industry can support three separate exchanges and consider multiple Internet entities fulfilling a common need to be an unnecessary drain on industry resources.
Besides Transora, the other two major exchanges serving the food industry are the WorldWide Retail Exchange, Alexandria, Va., and GlobalNetXchange, San Francisco.
At the Retail Systems 2001 Show in Chicago in August, Gerald L. Storch, vice chairman, Target Corp., Minneapolis, and a founding board member of the WWRE, delivered a bold admonishment during his keynote address. He called the situation redundant, wasteful and "stupid."
"I will be driving for immediate action on this. I would be very disappointed if we do not make significant progress on this by fall," he said.
While Sprieser was somewhat vague on the issue of a merger, she was quite clear on the need for greater collaboration between the exchanges.
"A link must be made to each other," she said. "We need to reach out to create interoperability, collaboration."
At the 2000 Global Exchange Summit, plans were announced for a joint enterprise among the three exchanges that would allow for interexchange communication, allowing members of one exchange to avail themselves of the services of another.
Yet this "megahub" has been slow in developing, industry observers said.
Moreover, many observers have questioned the status of these public exchanges in light of the increasing number of companies who are opting to create private online exchanges.
During a panel discussion at FMI's annual show in May, Stephen David, chief information officer at Procter & Gamble, Cincinnati, and a member of the Transora board, addressed these moribund forecasts, and said that the two will exist in symbiotic harmony.
"The smart companies are going to build private exchanges based on standards, and then they are going to think about rolling them into public exchanges as those service offerings become available."
David said that he didn't think it was a one or the other situation with the exchanges. He foresees room for a sort of peaceful coexistence.
Over the past year, Giant Eagle, Pittsburgh; Food Lion, Salisbury, N.C.; and Nash Finch, Minneapolis, began implementing private, Web-based services for the exchange of information.
Food Lion and Nash Finch are using systems designed for the exchange of product information such as promotional deals that are significantly impacting reaction time and speed to shelf.
At Giant Eagle, the exchange is used for the procurement of small wares used in the deli and fresh market section, such as bowls, knives, displays and racks.
A study prepared by the Advantage Group/U.S. Markets, Worthington, Ohio, for the Supermarket News/Executive Technology Summit on Internet commerce in March appears to have been a fair reflection of broad industry sentiment.
The report categorized progress toward B2B in the supermarket business as moderate, rather than rapid.
The report said retailers should be more cautious in this regard and panelists agreed. While confident that e-commerce would eventually find its place in the food industry, Jeff Noddle, president and chief operating officer, Supervalu, Minneapolis, advised patience. "I was glad to see that there was some caution in the study," he said. "People responded cautiously to their expectations of when they might get returns on this.
"A year ago, you would have had higher expectations because there was something of a fever pitch over what the exchanges could deliver."
Logistics Steps Up
While the mood governing B2B expenditure is decidedly conservative, the food industry has been aggressively pursuing new technologies in the warehouse.
Supply chain management is becoming top priority for many operators as they look to cut costs while combating Wal-Mart's lean, mean logistics infrastructure.
"For the first time, logistics has become top-of-mind for executives," said Richard Kochersperger, president of the Food Marketing Group, Wallingford, Pa.
"Now you have to look at logistics as part of your long-term strategy for growth. There is no doubt that in today's competitive atmosphere, you have to be good at logistics in order to survive."
According to an annual benchmark report on retail and wholesale distribution center activity, released at the 2001 Productivity Convention and Exposition in Houston in November, 22% of the retail and wholesale distributors responding reported a loss in volume from the previous year.
However, the report also revealed that new technological advances in the warehouse had led to increased productivity.
Perhaps a testament to the rapidly advancing importance of technology is the construction of a 3 million-square-foot distribution center in York, Pa., by ES3, Keene, N.H.
Es3 is a logistics company spun off from C&S Wholesalers, Brattleboro, Vt.
The new DC, set to open in June, is designed to be state-of-the-art. Es3 officials plan to provide outsourced logistics support for C&S and others.
Another key development has been the evolution of mobile and wireless capabilities in warehouse operations.
DCs nationwide have been installing radio frequency networks to handle inventory control, and have seen substantial increases in productivity and accuracy as a result.
The 802.11 RF backbone technology -- developed by the Institute of Electrical and Electronic Engineers and accepted in 1999 -- is fast becoming an industry standard. This new technology provides DC operators with a more reliable and more flexible platform from which to launch their wireless functions.
According to Paul Widener, distribution systems manager for K-VA-T Foods of Abingdon, Va., any distribution operation will be hard-pressed for success without the aid of an advanced wireless solution that operates on the 802.11 backbone.
Voice-activated, hands-free picking systems were one of the prime RF-enabled applications to enter the warehouse this year. With industry experts estimating that 40% of all warehouse hours go to the picking process, the increase in accuracy is a major boon. Some DC operators have reported a 99% accuracy factor with the adoption of voice-activated picking. Some satisfied customers include Giant Eagle, K-VA-T Foods, Kroger and Wal-Mart.
In polling several DC operators currently using an RF network to handle receiving and put-aways, SN found that all were looking into a voice-activated picking system for the very near future.
In another RF feat, Associated Food Stores, Salt Lake City, became the first in the grocery industry to install a wireless yard-tracking system in August.
The system, from WhereNet, Santa Clara, Calif., not only locates assets such as trailers and tractors, but monitors the temperatures of refrigerated units as well.
Technology will continue to transform the food industry, effecting broad and untold changes in distribution and at retail, observers said.
The following are some unfolding developments to watch as retailers and wholesalers continue to adapt:
Data mining: The emphasis on information gleaned from loyalty card programs is increasing, and retailers are looking for innovative ways to differentiate themselves in this arena.
M-commerce: Mobile and wireless communications will eventually allow retailers to engage consumers via cell phones and personal shoppers.
Labor: As the age of information infiltrates the warehouse, which requires at least a rudimentary grasp of computing, the demand for skilled workers on an already compromised labor pool is even greater.