FRED MEYER BETS THE WAREHOUSE ON QR
Byline: Matt Nannery
ATLANTA — Fred Meyer Inc. has set aside precious little room for storage in its new distribution center. The move, according to Meyer senior vice president Mary Sammons, is a risky one that signals a no-retreat commitment to Quick Response.
The executive gave the keynote address Tuesday at Quick Response ’95, a three-day parley at the Marriott Marquis hotel here, detailing QR use throughout the retailing-manufacturing spectrum.
Sammons focused on the new center as perhaps the most telling example of the QR strategy of the Portland, Ore.-based retailer, whose net sales last year came to $3.13 billion.
“There are just two groups of retail businesses today,” Sammons said, “the quick and the dead.”
The 310,000-square-foot distribution center, dubbed the Retail Service Center, opened in March of last year. The center, which handles apparel as well as other goods bound for 107 of Meyer’s 131 stores, replaces three separate distribution facilities with a total floor space of 375,000 square feet. Remarkably, the “flow-through” facility was conceived only one year before opening. Another example, Sammons pointed out, of how quickly Meyer endeavors to go live with Quick Response initiatives.
“In 1993, we decided it was right to streamline our apparel distribution centers,” Sammons explained. “At that time, most merchandise spent an average of three days in the DC [distribution center]. We were almost-just-in-time replenishment to the DCs but wanted to move to just-in-time through the DC.”
Sammons said the gulf between the two positions was great. She said opening a flow-through facility forced Meyer and its suppliers to work more closely than ever on the logistics of replenishment, as there was almost no room to store merchandise. Manufacturers have been cooperative, according to Sammons — none of them wanted to be responsible for bringing a facility designed to run like a Swiss watch to a halt.
“We share information when it is needed and where it is needed,” she said.
The results have been impressive. “We raised the level of pre-hung merchandise from zero to 50 percent in just eight months,” she said. “And we want to up that to 75 percent this year. We had a large increase in pre-ticketed items, too. And with flow-through and cross-docking, our ability to track en-route shipments improved, also.”
Sammons said the emphasis on cross-docking and pre-ticketed and pre-hung merchandise is not an effort to displace costs.
“This is not simply a case of pushing cost up the pipeline,” she said. “Doing that would eventually bring costs back down to the consumer. We want to eliminate duplication of effort. We work with our suppliers to find the most efficient spot in the pipeline for work to be done.”
In soft goods, the success of cross-docking — vendors packing goods so they can move from receiving to shipping out to stores with a minimum of effort — parallels strong results in hard lines. “QR is applicable to a wide range of businesses, not just apparel,” Sammons said. In a cross-docking program implemented with 30 hard goods vendors on a total of 609 stock-keeping units, Meyer was able to “reduce our DC inventory by almost $1.5 million.”
A more advanced cross-docking initiative for hard goods was implemented with seven vendors who were able to pick and pack goods bound for individual stores before sending them to the Meyer distribution center. Though it involved less than one-fourth the vendors than the prior hardgoods initiative, it resulted in an inventory reduction that was almost as large: $1.1 million.
Cosmetics is another area where Meyer has squeezed savings out of cross-docking. “We reduced our DC inventory in this area by $350,000,” Sammons said.
Meyer sells groceries as well as soft and hard goods in stores that range in size from 145,000-200,000 square feet. And the retailer hopes to translate some Quick Response successes from the grocery arena into soft goods by letting able suppliers actually manage the flow of products to those stores. The retailer shares timely point-of-sale data with several grocery vendors, who then replenish as needed. The move saved considerable time and money for Meyer. “We will expand vendor-managed-inventory relationships to apparel and home,” Sammons said. “We’ll take our experience from grocery into that area.”
Meyer already relies on computers to track sales in its stores and replenish accordingly. It has used the strategy to great success with one jeans line, according to Sammons.