Cut costs, manufacturers told at NACDS Distribution - National Association of Chain Drug Stores Distribution/Logistics Conference, Orlando, Florida

ORLANDO -- The message to suppliers rang clear at the NACDS Distribution/Logistics Conference, held here recently: manufacturers helping retailers slash costs will build their business. Vendors whose programs and service records lag behind will find themselves in a so-called second tier of providers.

"Wal-Mart has made demands as to what they are looking for from manufacturers," said Curtis Neel Jr., vp of distribution for Jack Eckerd Corporation. "They parted the waters so that we have an easier time making those demands."

Said Joseph Martha, an Andersen Consulting partner, who spoke at the third annual conference: "Retailers are getting tougher on suppliers. Their margins are too tight; sales help is expensive. They're counting on suppliers to reduce costs in other areas."

Some manufacturers are already aggressive in forging alliances. "Procter & Gamble and Kimberly-Clark spend a lot of time thinking about ways to improve service. They come to us with ideas," said Gerald Cox, vp of the distribution center at Thrift Drug.

On-time orders

Cox said that since Thrift isn't yet using EDI, the chain is FAXing orders to P&G to speed up the delivery cycle. That change was suggested by the manufacturer as a way to fill in technology gaps.

Chains' individual needs may differ, but the big issues are similar industry-wide. Dependable shipments that are on time and have short, consistent cycles can reduce their inventory costs. Reliable information, including EDI links, can also add to savings through better management of assets.

"Information can help us to control inventory better," said John Brown, senior vp of Walgreens. "When we know where everything stands in the distribution pipeline, we can do a better job scheduling merchandise [entering] the store."

Retailers want manufacturers to aim for orders that are so reliable, they don't need to be verified on receipt--a move they say will reduce receiving costs by 50 percent.

"It's cumbersome to check in merchandise," said Cox. "We want manufacturers to do a better job on their end so that we can just scan the boxes instead of counting pieces." The ability to do so requires a high level of trust between retailer and manufacturer and a good track record.

"Our first concern is that orders are on time and are complete, so we're working with our customers to find ways to make that happen consistently," said a P&G spokesperson. "We're also very concerned about damage, so we're trying to identify where it's occuring in the system and are beginning to plan around that."

Eveready and Johnson & Johnson are just two examples of vendors with a mission to reduce distribution costs. "We have made some drastic changes in our systems and management so that we can better serve our customers," said Dick Pocek, director of logistics at Eveready Battery Company, Inc.

At Johnson & Johnson, the quest is for the perfect order, according to Robert Edwards, director of logistics at Johnson & Johnson Consumer Products. "When time and quantity problems no longer need to be solved, we can enter the next level of working with retailers to help them sell the product," said Edwards.

PHOTO : At Upjohn booth (l to r): Frank Gable, vp-sales, Harco; Jack Marcacci, director-southeast region, and James Tesser, logistics service manager, both of Upjohn; and Terry Weber, distribution director, Harco.

PHOTO : Ron Peterson, executive vp-marketing and merchandising, Jack Eckerd Corp., said manufacturers must customize programs.

COPYRIGHT 1992 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
COPYRIGHT 2004 Gale Group