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BF's PC ends DSD SNAFUs.

Would you spend $11,000 to get a better handle on 25% of your store's volume? Richard Bondareff did and because gross margin percentage on his DSD products increased three points, he's now getting .75% more gross margin points overall. On a volume of almost $7 million a year, that translates to more than $50,000.

What he did was t install a computerized receiving station at his back door to control direct store deliveries. "I doubt that there is any investment a retailer could make that would bring such positive results in such a short time," says Bondareff. "Our system paid for itself in less than four months. What's more, it proved easier to operate than we expected."

Bondareff stresses that he is no "chip head." He's a 43-year-old lawyer turned supermarket operator, who learned to put a computer to his personal advantage. "At first I didn't like computers. I was even a little afraid of them. That's a mistake. It isn't necessary to understand why they work, only how to use them. Certainly there's no need to do programming yourself, for example. You hire someone to do that. And you use your computer's abilities to better manage your business."

The Dumfries, Va.-based operator is installing electronic equipment in his four Bon Foods supermarkets and one small store as quickly--yet prudently--as he can. Two supermarkets are scanning groceries and meats and the two others will be soon. Electronic receiving, used in the 20,000-square-foot Dumfries store, will be extended to all four stores eventually.

Bondareff, who gave up the legal profession for retailing six years ago by buying out his father, has a keen appreciation of the need for smooth working relationships with his suppliers.

"Sixty-six DSD vendors are providing a quarter of our volume and an even higher percentage of our gross profits," says Bondareff. "We need them and they need us. It's to out mutual advantage to have an efficient method for handling their products."

When he instituted his system six months ago there was concern on the part of some vendors and delivery men. "This whole approach is going to slow us up," one driver said, summing up the feelings about the mandated receiving hours of 6 a.m. to 1 p.m. and the necessity of opening each case to expose UPC symbols for scanning at the back door.

"Their concerns proved baseless," says Bondareff. "The system is fast, it's accurate and it's fair. Our receivers and accounting people love it. And even the vendors prefer it. Only once was the system down, because of a problem with the scanning unit, and the vendors didn't like going back to the old way of delivery at all."

Receiving hours are not assigned, but have naturally evolved with little trouble. The receiving procedure is the same for all. Each driver brings his entire order into the backroom receiving area adjacent to the small computer station where he exposes the UPC symbol on one package of each item. The receiver scans each with a hand-held Telxon unit.

If there is no symbol, the item number is manually entered. Case counts, or in some instances, item counts, are entered. Returns, if any, are handled in the same way.

The receiver then connects the Telxon unit to the computer which automatically downloads the entire order, revealing on the computer terminal screen all details, with extensions and other calculations performed. Discrepancies, if any, are resolved by the receiver and driver before a printout is made that is signed by both.

Eliminated are errors in price extensions, acceptance of unauthorized items, loss of credit on returns, and failure to earn all discounts, allowances and rebates to which the store is entitled.

For Bon Foods, which does not price mark individual items--relying instead on shelf price tags produced by its supplier, Richfood--a somewhat unexpected advantage emerged: a reduction of non-scans at the checkstand. For example, recently an entire order of six-packs of soft drinks would not scan at the back door. The driver was instructed to price mark each six-pack before placing them on the shelf, thus forestalling confusion and delays at the checkstands.

By eliminating unauthorized items, the store has realized a similar benefit, as those items not in the store's price file will, of course, not scan.

Another plus is the savings in paper work required of Bon Foods and vendors. Because errors are eliminated before they get into the system, fewer credit memos, corrected invoices and corrected checks are exchanged. Bon Foods also saves because information is transmitted automatically from the backroom to the accounting department housed in an office nearby. No key punching is required.

There are times the system has pointed out undercharges, something the vendors appreciate. Explains Bondareff, "On balance, errors favor the vendors, if only because there are so many different deals in effect over so many different periods of time. Drivers forget. Or their substitutes do. Our receivers do, too. Nothing can keep track of these variables like a computer can.

"So when a vendor undercharges, the receiver quickly calls attention to it. This builds confidence in the DSD system and builds the mutual trust."

Whenever a question arises about an allowance or price, it is a simple matter to call u p details, such as the starting and ending dates for rebates and discounts. "Drivers generally take our word, but if a discrepancy remains, the receiver immediately calls our office and any corrections are immediately entered. When the driver leaves, the computer file is as current and correct as is humanly possible," says Bondareff. "We pay vendors based on our documents."

The store's main computer file of 16,000 items is maintained by Richfood, along with the DSD file of 4,500 items.

For years Bondareff has used receiving clerks--who solely handle receiving--in his larger stores and insists that the computerized system does not slow their work. "If you make the switch and it does take longer," he says, "I suggest that your people have not been doing the job properly under the manual method. I also believe that our receivers' jobs are now more interesting because they are more aware of what's going on."

For his part, Bondareff feels he is better able to make merchandising decisions. He can summon up, either at the backroom or in the office, five DSD reports. These are:

* Individual vendor delivery reports that list every item received from any vendor on a given day, including unit costs and selling prices, with all extensions, rebates, discounts and gross margins calculated. An accompanying recap shows totals for these, plus the quantity returned, gross margin percents, deposit returns and coupons.

* Summaries of profits by vendors. For individual vendors the performance of each is shown for any period (but usually by the week). Included are costs, retails, discounts and rebates, gross profits in dollars and percents, with and without allowances, cases or units sold, and the individual vendor's share of cost and profit for all DSD products.

* Summaries of returns that show for each vendor for a selected period the deposits paid and returned, along with cases returned, and the number and value of coupons.

* Receiver recaps by individual vendors that summarize a week's delivery by each vendor. These are used by Bondareff's service bureau to issue checks for payment. "We won't touch an invoice," he says.

* Profit reports by department, showing DSD totals, usually weekly, by eight different departments (See table.)

"The profit report by the department and the vendor recaps are printed out weekly and filed," Bondareff says, "but others are generated only when I want to analyze something. Then they get thrown away."

What he gets to keep, in addition to the savings inherent in the system, is more gross profit dollars. "Never before have we been able to understand with such precision where profits in DSD products were coming from. We are about to reset both our soft drink and snacks departments based on actual results achieved by individual supplier and item. We are looking forward to sharper decision making all along the line: displays, ad features, pricing and so on. There's no doubt we can improve on that .75% gain we have achieved so far."

What advice does Bondareff have for other retailers interested in receiving electronically? "You should buy your software first," he says. "We and our service bureau looked at the possibility of writing our own and discovered that what we needed was already available for less money."

Bondareff suggests that a list of software makers can be obtained from industry associations such as the National Grocers Association, the Food Marketing Institute and the National American Wholesale Grocers' Association.

Following considerable research, Bondareff chose the DSD program sold by TCI of Irvine, Calif., because, he says, "It is generic enough and flexible enough to use without modification."

He also selected an IBM personal computer, but adds, "Whatever make you buy, be certain it is compatible with your software. And dependable. It's going to have to operate in an environment with wide temperature ranges and quite a bit of dust. The same goes for a printer. A device to protect against voltage surges is also a good idea."

To prevent damage to the equipment he recommends housing it all in a simple enclosure: "Chicken wire fixed to two by fours will do." And for security, the computer itself should be housed in a lockable container that can be purchased at any computer store. "Therehs always someone who fancies himself a computer expert. You don't want him experimenting with your equipment," says Bondareff.

He also recommends a hand-held scanner capable of taking hand entries and being downloaded into the computer. "Obviously, you don't want an approach that is more time consuming than your current one," he says.

Training a receiver takes a week or so, and probably a month will go by before full efficiency will be achieved because vendors must also learn the new routines

"The nice part," says Bondareff," is that you don't have to be a Giant or a Safeway--two of my better competitors, incidentally--to benefit from such a receiving system. The're practicable and they're affordable. No store should be without one."
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Title Annotation:Bon Foods, direct store delivery
Author:O'Neill, Robert E.
Publication:Progressive Grocer
Date:Nov 1, 1984
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