Big Savings Seen in Food Handling
Jerri Stroud Of the Post-Dispatch, St Louis Post-Dispatch (MO)
Just-in-time deliveries have let automobile assembly plants cut their stock of car parts to a few hours' supply.
A similar effort in the grocery industry could bring shipments of cereal to stores just when shelves need restocking.
The food industry effort - called Efficient Consumer Response, or ECR - could trim as much as $30 billion a year in costs from the processing, transportation, handling and sale of food, industry studies suggest. The savings could cut a dime out of every dollar consumers spend on food.
"Everyone who's involved in the food industry sees a benefit" from improving efficiency in the food distribution system, says David P. Skarie, corporate vice president and director of customer development for Ralston Foods, a subsidiary of Ralcorp Holdings Inc. Ralston Foods makes Chex cereals, Beech-Nut baby food, RyKrisp and Bremner crackers.
Consumer prices will stay lower if stores, distributors and food processors cut waste from the food distribution system, said Craig D. Schnuck, chairman and chief executive of Schnuck Markets Inc. Stores will be more likely to have what shoppers want when they want it. Many manufacturers, stores and distributors are dabbling in efficient consumer response, but few are using it throughout their business, said Richard Sherman, senior vice president of IRI Logistics of Chicago, a company that collects product sales information from grocery check-out scanners.
"Nobody is all the way there yet," said Ralcorp's Skarie.
About 60 companies are part of an ECR effort sponsored by the Food Marketing Institute and the Grocery Manufacturers Association. The trade groups are trying to come up with "best practices" standards for various aspects of ECR. The groups recently published results of its first studies.
For grocers, one of the most exciting aspects of ECR is category management - matching the assortment of products in each store to its sales and the needs of surrounding neighborhoods, Sherman said.
For example, a brand-name calcium-fortified orange juice may sell well in one neighborhood, while shoppers in another location prefer the lower-priced store brand.
If each store has the same amount of each type of juice, the store that sells a lot of the calcium-fortified juice may run out of that brand while the store brand languishes in the freezer. The store that sells a lot of store brand juice will run out of that while the juice with calcium sits unsold.
In either case, the result is unhappy shoppers and lost profits, especially if the unsold juice can't be moved before it goes bad, Sherman said.
At Schnucks, planners have made detailed plans for every shelf in each of the chain's 64 stores, said Craig Schnuck, who serves on a national food industry committee that promotes ECR. The computerized plans show how much space to give each product and which sizes to stock.
Schnucks' Frontenac store, for example, has a wider variety of gourmet foods, wines and other specialty products, he said. Stores in lower-income neighborhoods have more space for rice, pasta and sauces. …