Less is More
Bristol Farms has been outsourcing logistics management since 1996. The upscale specialty grocery store operator initiated logistics outsourcing to aid growth. But the retailer has since used it to improve delivery efficiency.
“In the mid-’90s, nobody had heard of the term ‘3PL,’” said Sam Masterson, executive VP operations, Bristol Farms, Carson, Calif., which operates 15 stores in Southern California. “But the owners at the time, who had purchased Bristol Farms from the original founders, had a rapid expansion plan.”
To support its growth, Bristol Farms started partnering with APL (at the time, the supply chain services provider was known as GATX Logistics). The plan required the retailer to move beyond cross-docking dry merchandise and produce, some of which had a shelf life as brief as 72 hours, from the pallet and container levels to the case and item levels, with as quick a turnaround time as possible.
APL modified the proprietary legacy warehouse management system to accommodate Bristol Farms’ unique requirements, resulting in an operation where the grocery store operator is able to ship and receive merchandise almost simultaneously.
The High Cost of Driving
In 2008, Bristol Farms faced a new distribution challenge. Faltering general economic conditions, coupled with sharply increasing fuel costs, bumped up the cost of distribution as a percent of sales well beyond historical rates. The company determined it would need to cut $372,000 annually from its distribution costs to reach its desired rate, and launched a project with APL to get there.
The project used total distribution cost as a primary success metric, with secondary metrics of truck fleet utilization, number of miles driven by the fleet and number of hours behind the wheel.
In addition, Bristol Farms sought to eliminate problems of a high in-store shrink rate of fresh prepared foods.
Bristol and APL determined the best solution to these various issues hiking up distribution costs would be to achieve a 20% reduction in delivery frequency by removing one day from the five-day delivery week.
As part of the distribution process overhaul, Bristol Farms began using a “single pass” ordering system where store associates go up and down the aisles scanning tags of items that needed replenishment. Orders then show up premoduled at the warehouse dock.
Less Truly Is More
As a result of successfully removing a day from its weekly distribution cycle, Bristol Farms has reduced the number of miles driven per month by 20% and the percentage of total driver hours paid as overtime by 45%.
In addition, distribution expense as a percentage of sales has fallen 18 basis points. Other “soft” benefits that have developed from the project in the past few years have included better planning resulting from having 20% less ordering opportunity, reduced receiving time at stores, having the fleet available for vendor pickups on Wednesdays and improved driver compliance with Department of Transportation regulations.
“Our stores get big chain distribution benefits without the big chain investment in warehousing and inventory,” Masterson said.
Postal Rate Increases
In the largest price increase since 2007, the U.S. Postal Service (USPS) is proposing a rate hike of 5.9%, a move that has catalog mailers scrambling to assess the impact of such an increase and also evaluating less expensive alternatives. The Postal Regulatory Commission (PRC) has up to 90 days to rule on the proposal, with the price increase going into effect as early as Jan. 27, 2014.
In an open letter posted on its site, the American Catalog Mailers Association (ACMA) further warned that the PRC can apply the increase differentially to each class of mailer, which could include a surcharge on Standard Flats used to send full-sized catalogs that could be as high as 10% to 12%.
For many catalog mailers, simply paying the higher mailing rates is not an option. Instead, early feedback suggests that many intend to reduce catalog circulation and send frequency; use less expensive forms of mailing such as mini catalogs; and even employ digital promotions, such as email, search engines, digital ads and social media.
“We will look at everything from page count, to mailing frequency and circulation, to online and mini catalog options if the proposed postal price hike is approved,” said Kerrie Thornton, a business analyst with National Ropers Supply (NRS), a Decatur, Texas-based catalog, online and store retailer of Western lifestyle decor and supplies.
The rate hike was recently proposed by the USPS Board of Governors as part of an effort to close a USPS $20 billion dollar budget gap. If approved, the hike “will do real damage to an industry still struggling to adjust to the exorbitant 2007 rate hike where many companies are struggling mightily, mail volumes are depressed, and the availability of quality names to mail is diminished,” wrote the ACMA’s president and executive director, Hamilton Davison.
In the face of the proposed postal rate increase, some catalog mailers are weighing alternatives. One option are so-called “mini-slim catalogs.” Despite having fewer pages, mini catalogs allow companies to cut production costs without sacrificing circulation or frequency. Though not considered a replacement for full-sized catalogs, mini catalogs can be used on a case-by-case or supplemental basis to fill the void of a catalog unsent due to mailing price increases.
“We expect that expanding what we do with mini catalogs should help us offset much of the proposed rate hike,” Thornton said.
Mini catalogs mail at the cost of a standard automated letter and provide up to 10 pages to promote products. They can cut mailing and production costs by a third, helping to offset the increase in mailing costs. They can also be as effective as larger catalogs in response rate, as well as driving customers to company websites.
Where a marketer is doing four to five mailings a year of full-sized catalogs, supplementing their schedule by doing three full-sized catalog mailings and two mini catalog mailings, for example, can significantly lower cost without lowering response rates. While mailing a full-sized catalog can cost 57 cents a piece at a million mailed, mailing these new mini catalogs can cost as little as 28 cents a piece at similar volume. This can make mini catalogs a cost-effective alternative even to postcards.
Driving Prospects and Customers to the Company Website
NRS needed an inexpensive way to drive customers and prospects to make purchases at their website. According to Thornton, the retailer had traditionally mailed out five to six full catalogs of more than 250 pages annually, costing about $1.50 each at their volumes.
To cut costs, they began substituting a few 84-page catalogs for the larger catalogs, but still found this a costly way to market to prospects. Another challenge was forecasting accurate inventory and sale prices in these catalogs, since the printed data could be out of date by the time customers went online to buy.
As a solution, NRS chose to mail out two full catalogs a year, supplemented by mini catalogs by B&W Press, a Georgetown, Mass.-based printer specializing in direct marketing, in between.
“We found that sales with the mini catalogs were as good as or better than with the 84-page catalogs,” Thornton said. “For as little as 32 cents per mini catalog, we’ve been able to get our key product groups in front of prospects and customers to drive them to our website, where inventory and pricing is up-to-date. For about the cost of producing and mailing a postcard, we’ve found this to be a much more effective direct-marketing approach.”
Western goods retailer National Ropers Supply switched from mailing out five to six full catalogs a year to just two, with the gap supplemented by mini catalogs.
Indoor Location Analytics Improve Retail Ops, Inside and Out
Jim Riesenbach, CEO of indoor location analytics solutions provider iInside, recently had a conversation with Chain Store Age about the numerous advantages both retailers and consumers can obtain from precise understanding and analysis of how customers move and shop inside the store.
How can both retailers and consumers benefit from targeted, accurate indoor location metrics?
Retailers have historically relied primarily on revenue data in varying forms to determine performance, gross revenue, same-store sales, average transaction value, revenue-per-square foot and more. While these metrics are critical, they are not nearly enough to satisfy data-hungry retail executives. Indoor location analytics provides a whole new level of insight regarding how many people shop, their behavior in the store, and ultimately how each store and each individual department performs. These tools use traffic and shopper behavior data to substantially improve store performance, and maximize the customer experience by giving consumers a more relevant, targeted experience.
How does indoor location analytics improve the omnichannel experience retailers provide?
Stores are becoming more mobile-connected, and retailers are incorporating accurate indoor location analytics to enable the omnichannel experience. Today’s consumer wants timely, useful, personalized, instantly accessible information. Shoppers use mobile devices to compare prices and products, research features, read reviews and to download coupons, often based on their specific location. With location analytics, retailers use mobile devices to better understand customer behavior and patterns, then provide targeted deals and promotions both in-store and after their visit.
How can indoor location analytics improve a retailer’s processes?
Retailers can now integrate predictive, accurate consumer traffic data into their existing operations, merchandising and marketing reports and process. Properly utilized, location analytics help retailers optimize individual department and store performance, identify otherwise obscured high and low performers in the chain or region, and benchmark performance against industry trends.
What specific analytical capabilities does iInside’s technology provide?
Department-level performance analytics, operations and staffing support, and a real-time location-based connection to mobile loyalty apps are a few powerful applications Interior Location Analytics provides. Our advanced platform delivers highly accurate traffic data, including traffic patterns, dwell times, first visit, departmental conversion, repeat visits, labor requirements, queue waiting times, showrooming behavior, and merchandising and marketing effectiveness.
Examples of common uses of location technology include tracking departmental performance, which gives retailers a data-driven basis to determine the percentage of sales versus visits at the departmental and even brand level, as well as determining how a change in store format or layout affects traffic patterns. This delivers almost instant feedback to gauge the effectiveness of change, and if customers visit more or less frequently as a result.
Retailers can also measure the effect of moving merchandise, including critical success measures, such as time spent in front of merchandise and what shoppers do after visiting specific locations, as well as interact with consumers via a store-based mobile app. In addition, they can measure how they manage queue wait times. Benchmarking this critical customer service metric maintains chainwide accountability to reduce wait times.
Real-time and historical data seamlessly integrates into BI platforms, HR scheduling applications and more. Because traffic analytics are collected anonymously, no personally identifiable information is ever captured or stored. By implementing iInside’s platform, retailers are armed with the actionable intelligence and solutions needed to enhance store performance and improve the customer experience.