New technology helps URM cut costs
Jan 1, 2003 12:00 PM, By Gary Macklin
Developing a new strategic plan at URM Stores requires close coordination between operations managers and information systems personnel. As this five-year plan has developed, URM has seen total operational expenses drop by $2 million in three years.
URM Stores is a cooperative and voluntary grocery wholesaler based in Spokane, Washington. It was founded in 1921 as United Retail Merchants. In its present form, it is one of the largest privately owned companies in the Pacific Northwest. URM serves 160 supermarkets, including 21 owned by the company, and a large contingent of convenience stores. An integral foodservice operation serves more than 1,500 hotels and restaurants in Washington, Oregon, Idaho, and Montana. The company also owns Peirone Produce, a fresh produce distributor operating from a separate location in Spokane.
The company operates from a 685,000-sq-ft warehouse containing 28,000 slotted line items. Weekly activity ships an average of 600,000 cases resulting in average annual sales exceeding $700 million. Current fleet size is 60 tractors and 150 trailers. The tractor fleet is split between Kenworth T800 heavy tractors for grocery and long distance delivery and KW T300s for foodservice delivery. The trailer fleet contains 46' 6" refrigerated vans for dairy delivery, 52' 6" multi-temp reefers for grocery distribution, and 53-ft single temperature trailers, also for grocery delivery. The trailer fleet also includes 30- and 34-ft multi-temp reefers for foodservice distribution.
In general, supermarket, convenience store, and foodservice distribution is handled with separate equipment in Spokane and the surrounding communities within about 50 miles. Outside the core metropolitan area, combination loads are built to serve all three customer groups.
Five union agreements
Negotiating the details of the new strategic plan required exceptional diplomacy, because the company is party to five separate collective bargaining agreements with its workers, says Bob Morgenroth, vice-president of operations. As a result, a redefined working relationship between the company and its unions topped the list of accomplishments needed in the new plan. Other goals within the plan include modified electronic order system schedules, replacement of aging equipment, reducing the number of line items and total inventory in the warehouse, re-slotting the warehouse, implementing a computer-driven routing system, placing the entire distribution center on a single warehouse management system, developing new engineered work standards, and preparing for voice-directed selection in the warehouse.
One of the most critical efforts has been migrating from two separate warehouse management systems to a single system that can handle the different demands of perishable and dry groceries as well as integrating the operational needs of supermarket, convenience store, and foodservice distribution, Morgenroth says. Making this project and others work smoothly has been helped by a staff of information systems personnel who have spent time in the company operations departments. In fact, Joe Jurich, vice-president of technology, headed the operations department prior to Morgenroth joining URM from a previous position with Fleming.
Although implementation of the plan required close coordination between operations and information systems, projects at URM are led by personnel from the operations department. Emphasis is on creating systems that are easy to use and that work as designed. “Productivity comes from the people using the systems, not from the technology itself,” says Jurich.
Rather than build all its own technology solutions, URM prefers to form partnerships with vendors, particularly on complex projects like a warehouse management system. This combines the talents of the company's experts with the knowledge of vendors who have worked with other distributors on similar projects. URM follows what it calls SMART goals as it pursues a new project. “SMART is an acronym that stands for Specific, Measurable, Agreed, Realistic, and Trackable,” Jurich says. “Stated another way, our goals help us design projects that work, because we know what we want, and, when we get finished, we can show what we have accomplished.”
Home grown routing package
However, the company is perfectly willing to develop its own technology. The new routing system is a perfect example. Over a number of years, routing, particularly for customers in outlying areas, was done more as a response to customer requests rather than as part of a unified business strategy, Morgenroth says. In fact, route dispatch was still done manually.
Morgenroth set out to pull the transportation department forward by applying lessons from his earlier distribution experience. The first step in defining a new baseline for delivery operations was to determine the needs of URM's owner-members. Those are the big customers that define route profitability, he says.
In general, the outlying supermarket customers get two deliveries a week with a full trailer load early in the week and a partial load a few days later. Consolidating orders into more compact routes required that foodservice deliveries be rescheduled to fit on trailers with the partial loads for supermarket customers, Morgenroth says. “We looked at the needs of our supermarket owner-members first and then negotiated new delivery schedules with foodservice customers in the outlying areas,” he says. “In the new system, foodservice delivery had to meet two standards. Each foodservice account had to generate a profit, and it had to fit a predetermined delivery schedule.”
As the new routing system developed, URM was able to improve utilization and reduce the fleet count. The trailer fleet dropped from 175 to 150 in the first year, and the tractor count dropped by seven to 60. All tractors are leased. As more consolidations are made in the coming year, tractor count will be trimmed even more, Morgenroth says. Changes in operations resulted in a $1-million saving in transportation costs in the first year of implementation, he says.
URM has implemented several new technology systems in cooperation with Integrated Distribution Solutions of Omaha, Nebraska. The two partners have implemented Power Warehouse 5.0 for warehouse management and installed Power Productivity as a part of an engineered labor standards effort. In addition, the two are in the process of building the interfaces for a voice recognition order selection system.
The keys to successful technology implementation are to provide employees with the tools needed to do their jobs and then to hold them accountable for making things work, says Jurich. “We see planning and communication as the basis for any technology change,” he says. “Set up a plan and make sure that every one knows what is expected. Constant communication is required to keep a plan on track. We also pay special attention to our rule number six, which is ‘Don't take yourself too seriously.’”
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